Prompted by a comment on an earlier post I pondered this for some time, not wanting to be close-minded, as the opinion that Max Pucher expressed frankly astonished me. I spoke to a number of other people and they were all of the same opinion as me so I thought, what the hell, let’s start an argument, they’re usually good fun and can elicit some really good discussions that can move the thinking on.
Skirmishing over here’s the first salvo:
Max says:
“Standardization is fine for manufacturing, but you can’t standardize people and how they interact.”
Oh Max, you couldn’t be more wrong. You absolutely can and more importantly you absolutely should. Let me however add a disclaimer: I’m not suggesting that we impose rigid, unchangeable processes with no flexibility or required variance for locality, product etc., simply that there is a best way to accomplish anything and that operating efficiency demands that we implement it.
It is true that “there is more than one way to skin a cat” however – ask any sheep shearer – there are only one or possibly two most efficient ways. Just because we’re talking about human interaction does not mean that we can’t standardize how things should happen.
As an example, we have a client who, prior to Nimbus’ involvement, had a huge problem in their complete customer service operation, ranging all the way through the customer journey from retail to contact centre to back office, (100% human to human interactions) with lack of standardization. By standardizing their operations based on the Nimbus Control platform they now have:
- saved hundreds of £millions in costs
- removed uncertainty of operation therefore increasing the amount of time sales focused people can sell, increasing sales by tens of £millions
- increased customer satisfaction scores in direct proportion to usage of the system
- dramatically increased the buy-in and involvement of the more than 7000 staff involved
This does not remove the requirement for humans to act as humans, is not making them robots, it is simply removing the basic problem that all companies have which is getting the right information to the right people at the right time. If you can solve that problem you can gain massively as evidenced above.
To push the argument further: how do you ensure compliance with external regulation, manage operational risk and business controls unless you have standardization of operation? Briefly; you can’t, and this is driving wholesale uptake of this thinking in heavily regulated industries as getting this right isn’t simply a matter of money saved or earned, it can make the difference between (company) life and death. I’ll deal with this in a later post.
Comments please, the more vehemently expressed the better!!
6 Comments
Mark, I completely agree with you and can see some immediate examples in financial services that further prove your point:
Last year, I had an insurance claim that had to involve both an auto body shop and a mechanic. 6 months after the work was done, I received calls from both shops letting me know that the insurance company (One of Canada’s largest) had still not paid them. Worse, the rep wasn’t returning their calls. I wasn’t being held responsible for the costs, but, because I want to maintain my relationships with my repair people, I got personally involved. It took a full year to finally get the payments put through to the shops. The insurance company offered no explanation but I know that this is due to some significant issues in their process. Having worked with several corporate clients in the insurance sector, policy and claims management is highly problematic and managers have been finding an uncomfortable amount of lag in claim closures. The cost to the company generally ends up being lost clients, since their service experience can become a nightmare (case in point: A tow truck company employee admitted to me that they deliberately put particular insurance companies at the bottom of the priority list for call response because they have such a hard time getting paid).
Other great examples of process variability costing $$$:
- A family fraud ring managed to defraud hundreds of millions of dollars from one of our largest banks after finding a loophole in their authorization and validation process; employees were, at times, using personal judgment instead of following procedures.
- Non-standardized qualification of loan applicants can add substantial risk into a bank’s lending portfolio.
- Likewise, non-standardized qualification of car insurance applicants can add more risky drivers into the portfolio.
Sure, standardization of people does change the way we do business together. Gone are the days where we hear from a bank client “he/she believed in my business idea, so they made an exception and gave me the loan”. Protecting the corporation from unwanted vulnerability while maintaining a personal service “feel” is a puzzle, indeed. The cost of non-standardized procedures, however, ends up costing the customer in the end anyway. Personally, I’d rather have less personal influence and intimacy with my banker if it means my rates and fees don’t go up so quickly.
I agree with you, Mark. There’s a level of standardization that has to happen before anything can be improved upon, and that means discovering how ‘it’ is currently done and then proposing, discussing and approving the better ways to do it. Without this approach, the idea of continuous improvement makes no sense. The way work is performed can absolutely be studied, captured, enforced and then improved.
If standardization does not refer to the flow of activities but to for example the terminology (i.e. trough a Business Architecture) that people use to communicate, then clearly it does make sense.
But the reality is that most BPM process standardization tries PRIMARILY to define in what sequence and by whom certain acitivities MUST BE executed.
Seocndly all that BPM is about – as you clearly admit in your post – is COST REDUCTION. And that is the biggest detriment to high-qiality customer service. You can’t predefine HOW A CUSTOMER WILL ACT and therefore standardizing process does not improve perceived service quality. It improves the quality of how the process is being executed which is often measured but has nothign to do with what the customer perceives.
In June 2007, Bloomberg Businessweek wrote in “Six Sigma: So Yesterday?: Austed Home Depot CEO Robert Nardelli was devoted to Six Sigma. … Profitability soared, but worker morale dropped, and so did consumer sentiment. Home Depot dropped from first to worst among major retailers on the American Customer Satisfaction Index in 2005. Now Nardelli’s successor, Frank Blake is dialing back on the Six Sigma.”
So yes: you standardize to cut costs and yes, I empower people to improve service quality as the customer wants. Let’s see what customers will prefer in the long run.
To Max’s point “Secondly all that BPM is about – as you clearly admit in your post – is COST REDUCTION,” I would disagree completely. It is not solely about cost reduction. Increased Revenues and Improved Service are equally important, as I think is clear from other comments. Anyone remember Gane & Sarson from the 1970′s, and the IRACIS concept? You have to pursue all three.
There can be no doubt that stimulating debate about the best way to do something will always produce the best result, but the customer experience will be dire if that debate is allowed to spill over into service delivery.
Once we agree the way that provides a balance of the best outcome for our customer, that allows us to succeed and regulatory needs to be met, it would be insane for those who disagree to be allowed to do things their own way. Ultimately, corporations cannot be totally democratic.
Paul, as I believe Aristotele already said: ‘Democracy is not perfect, but it has the least disadvantages.’ But in any case, I did not say that a business that does not rigidly define processes is democratic. Most businesses will thrive the most when they have a strong leader, and as Apple shows that leader can even be quite choleric at times. But the great leader EMPOWERS people. He does not tie them down in processes. IN any case, try to go out and sell a BPM project on increaased quality only – not impossible, but really hard.
The debate has to be with the customer and not just within the organization. That is the biggest problem and the debate must be ongoing and be allowed with each customer individual. In any case, I have said so often that empowerment is not anarchy, but clearly defines individual authority, goals and means. To me it also allows autonomy as to how the means are used to achieve the goals.
I just posted once again on the subject of emergence of hierarchies in complex adaptiev systems. There are further no scientifically founded studies that prove the long-term beneficial effect of BPM on a business. The rest is illusion:
http://isismjpucher.wordpress.com/2011/05/09/flowchart-this-economy-competition-expectations-and-innovation/
A couple of points. First, regarding Max’s statement about “But the reality is that most BPM process standardization tries PRIMARILY to define in what sequence and by whom certain activities MUST BE executed,” I would place emphasis on the word “most.” I can’t speak to other practitioners’ efforts, but a primary premise of BPM, as opposed to workflow automation, is “continuous process improvement.” Implicit within that, in my mind, is the people part. Period. If anyone’s not doing that, then they’re missing a major opportunity on client satisfaction and evangelizing the technology they’re purveying both.
That being said, BPM is about three things – people, process and productivity. That triad is what sells BPM, ACM, CRM, ERP or any combination of the four.
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