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March 3, 2016

The Dangers of Applying Mass Production Logic to Service Processes

Many organisations manage their service processes as if they were a mass-production factory. This is dangerous for the organisation as it can seriously damage customer relationships.

Mass production logic revolves around “efficiency” (meaning productivity and asset utilisation). This leads to customer demand being treated as a “transaction”, which is then standardised to become a “commodity”, and the organisation then goes about trying to find ever-cheaper ways of producing that commodity. This leads to outsourcing or the creation of large “service centres” (silos of customer service representatives).

It’s true that individual transaction costs become lower as we farm work out to low cost providers, but the number of transaction rise as the system fails to provide a solution that works for the customer, and overall costs increase. In addition, where providers are paid by the volume of demand, they have no incentive to improve the process to fix the consumer’s problem first time.

The result is stubbornly poor and expensive service; with numerous hand-offs and call-backs; and tremendous irritation for the customer. Customers hate this and become susceptible to competitors’ offers. The organisation’s reputation suffers and, longer term, profitability suffers too.

In many service processes the majority of the cost is in the time of professional “experts”. The plausible logic is that controlling their time controls the cost. This logic manifests itself in a focus on productivity and the length of appointments/ calls. Customers have to bargain their way through “gatekeepers” (call handlers) to get to these “experts”, and there are numerous hand-offs. Consequently, the service user has to repeat himself or herself over and over; feels frustrated at being passed around; and will often re-present repeatedly to the service since his or her problem has never really been addressed or understood.

Furthermore, focusing on productivity targets in service processes leads to staff cherry-picking easy cases (leaving complex cases in limbo); and closing cases as quickly as possible to generate a score (creating a revolving door for users whose issue is not solved). These undesirable behaviours result in dissatisfied customers and further pressure on the service as they call back again and again to try and get their case dealt with properly.

As John Seddon points out, “People do what you count, not necessarily what counts”.

Applying mass production logic to service processes leads to silos with many hand-offs, local optimisation over process optimisation, duplication and re-work, and quality problems as the root cause cannot be traced (or is too much effort to chase). The consequence is frustration for users and staff; extra cost for the system as a whole, and the embedding of poor quality.

All of these issues may be summarised in the 10 misconceptions of service management:
1. Professionals are expensive and scarce and should be “protected” from wasting time talking to customers/ users by a screen of call handlers etc
2. Splitting work into functional segments is the cheapest and most efficient way
3. Performance against targets tells us how well we are doing
4. Rewarding individual goals encourages efficiency
5. Quality checks and audits are necessary to monitor and control staff; and we must provide rigorous “feedback” (blame) to those who fail
6. Individuals who fail the checks should be punished since poor performance is their “fault”: the process is in no way dysfunctional!
7. Management have all the solutions
8. Management should focus on delivering short-term results, rather than committing to values and principles
9. Rewarding executives based on short-term profit and share price goals will deliver improvements for the customer
10. The primary driver for all actions is to avoid mistakes, and meet the minimum requirements, but don’t get involved in trying to improve things

These misconceptions are commonly held and are poison for the organisation. The way to manage service processes is to focus on the process as a whole, and to work to improve the whole process from the point of view of the customer.

In particular, service processes should be designed to ensure that people in the front-line feel equipped to make commitments to customers and can deal with the customer directly in the vast majority of cases. There may be special cases where additional support is needed and the front-line staff must have direct access to them (going through layers of management will kill prompt action). The whole focus must be in satisfying the customer correctly at first contact.