The source of an idea: Front Office – Back Office

An officeI’ve read a number of John Seddon’s books over the years and they are ‘sprinkled’ with critiques of a range of conventional management ‘fads and fashions’. One of his key critiques is of a particular 1978 HBR article written by a Richard B. Chase, titled ‘Where does the customer fit in a service operation?’

The article title sounds relatively innocuous, but Seddon puts it forward as having been a catalyst for the splitting up of service systems into ‘front office – back office’ functions…because it will (according to Chase) make them much more efficient.

Now, whilst (I believe that) I’ve understood Seddon’s critique of the splitting up of service systems into a myriad of (supposedly) specialised components…and the hugely damaging sub-optimisation that this has caused1, I was never quite sure as to the level of ‘blame’2 that could be levelled at Chase’s article – mainly because I hadn’t read it.

…so, as chance would have it, I’ve just managed to get hold of it. And, wow, yep, it was quite illuminating. I thought that I’d write this post to ‘get behind’ the HBR article title and pull out the bones of what Chase was saying. Here goes:

In the first paragraph…

So I read the following in the very first paragraph of the article:

“…the less direct contact the customer has with the service system, the greater the potential of the system to operate at peak efficiency…”

On its own this quote reads very badly. My hackles are raised instantly, but I hold my nerve and carry on – perhaps I need to read it in context…so I take a deep breath and carry on…

Chase goes on to offer a ‘classification of service systems’ according to the extent of required ‘customer contact’ in ‘creation of the service’.

Chase defines:

  • ‘customer contact’ as the “physical presence of the customer in the system”; and
  • ‘creation of the service’ as “the work process that is entailed in providing the service itself”

He puts forward a table showing high contact services at the top (health care, public transportation, restaurants, schools….), low contact at the bottom (manufacturing) and mixed services in-between (banks, post offices,…). So far, so what.

service contact spectrum

He states that service systems with high customer contact are more difficult to control. Why? Because the customer can affect the demand – e.g. the time it takes, the exact nature of what’s being required, and their particular view on what defines quality.

I think that Seddon would wholeheartedly agree with these points regarding variety within customer demand (Seddon would say that “the customer comes in customer shaped”3). The difference between Chase and Seddon is in their polar opposite thinking of what this lack of control should lead on to.

Where did Chase’s article take it?

Chase went on to state what he considered were the ‘implications for management’:

“…a distinction should be made between high-contact and low-contact elements of a service system. This can be done by a separation of functions: all high-contact activities should be performed by one group of people, all low-contact activities by another. Such an adjustment minimises the influence of the customer on the production process and provides opportunities to achieve efficiency…”

In short, Chase is about breaking up the system (de-coupling the supposed ‘front’ and ‘back’) to make its components more efficient!

Mmmm, any systems thinking giant (or apprentice), even without knowing the details, might conclude that this isn’t going to end well.

Developing the idea…

developing an ideaChase then develops his proposed treatment by asking a set of questions and providing answers.


Chase asks about ‘gearing your operating procedures to your system’:

“Obviously, paying service workers according to the number of customers served tends to speed up service in the high-contact system. However…if the customer feels rushed…he is likely to be dissatisfied with the organisation.

Further, it makes little sense for a seller of any service that can be at all customised to measure system effectiveness in terms of total number of customer served when in fact one should be giving more leisurely attention to a small number of ‘big spenders’.”

Wow, there’s a lot to unpack within this lot!

  • The idea of ‘speeding up’ service by the use of incentives completely ignores the dysfunctional behaviour that this may cause, the failure demand likely to arise and the re-work to be performed. It is clear component-level logic at the expense of the system;
  • I have always hated the idea that a service organisation should smooch with the ‘big spenders’ (and thereby demote the rest as 2nd…and even 3rd class customers) so as to milk them of their cash!

The mind-set of the above is completely ‘inside-out’: the customer is merely a host to bleed money from. The attitude being portrayed is ‘what can we (the organisation) do to you?’ rather than ‘what do you need?’


Chase asks ‘can you realign your operations to reduce unnecessary direct customer service?

“Managers have long recognised the desirability of having ‘attractive’ personnel greet the public…while being more concerned with technical skills on the part of those individuals removed from customer contact…”

I’ve got visions of the ‘ugly people’ being hidden in the back office!

I guess that we should make allowances for the fact that he wrote this back in 1978 (a different world?) but, again, he’s trying to optimise components rather than improve (and remove) inter-dependencies between them.


Chase asks ‘can you take advantage of the efficiencies offered by low-contact operations?’

“Can you apply the production management concepts of batch scheduling, forecasting, inventory control, work measurement and simplification to back-office operations?…”

His suggestions seem laughable now.

Essentially, he is proposing the techniques that manufacturing used ‘back then’ to be applied to service ‘back offices’….and yet just about all of these manufacturing methods would now be seen as poor practise!

Just go into a well-run factory today4 and see the pulling (not pushed by forecasting) of units of work (not batches) through flow (not requiring inventory) on a production line able to handle variety (not simple), using measures against purpose (not narrow activity measurement)

…and you’ll also see those same manufacturing workers trying to get as close as possible to their customers so as to understand them and what they need.


Chase asks ‘can you enhance the customer contact you do provide?’

“If the low-contact portion of a worker’s job can be shifted to a different work force [i.e. a back office], then the opportunity exists to focus that worker’s efforts on critical interpersonal relations aspects.”

Boom! This gets to the nub of the problem – Chase misses the monumentally important point that interpersonal relationships are (worse than) useless if the ‘front of house’ worker can’t actually help the customer with their need.

In short: ‘I can smile sweetly, look good and even say nice things to you…but, sorry, I can’t help you with your need…I’ll just have to pass that on to someone else and hope for the best…but I’ll do so with a really great smile 🙂 ’

Not much customer satisfaction in that!


Chase asks ‘can you relocate parts of your service operations to lower your facility costs?’

“Can you shift back-room operations to lower rent districts…or get out of the contact facilities business entirely?”

And so we get to the eventual end game of this logic – outsourcing of the back office…because it’s (ahem) got no connection whatsoever with the customer anymore. Wonderful!

Not content with creating the unnecessary ‘front-office back-office’ interdependencies, the final nail in the coffin is to make these relationships even harder to handle by splitting up the location and ownership structure.

As Donella Meadows wrote: “Changing interconnections in a system can change it dramatically.”

To conclude:

variety of shoesYep, I see why Seddon has such a downer on this 1978 HBR article…and, sadly, I can also see that many (most?) service organisations bought it ‘hook, line and sinker’.

Rather than leaving it on this depressing note, I should take us back to a Seddon quote:

“Service differs from Manufacturing. There is, inherently, more variety in customer demand

…in service organisations, the problem is how to design the system to absorb variety [rather than frustrate it]” (Seddon)

If you want to understand what is meant by absorbing variety…then here’s a post I wrote earlier: “You keep saying that…but what does it mean?!”

…and I’ll write another post (to follow this one) that delves further into ‘Front Office/ Back Office’ and what a healthy alternative could look like.

Footnotes:

1. Seddon is standing on Deming’s shoulders in this respect.

“If the various components of an organisation are all optimised, the organisation will not be…” (Deming)

2. Regarding ‘Blame’: I’m referring to the article, not Richard B. Chase. I don’t know the man. 1978 was a long time ago – I suppose that he may think quite differently now.

3. Customer shaped: Seddon credits Taguchi with observing that we must first understand exactly what a customer wants (their nominal value) and only then can we aim at perfection.

 4. A well run factory: You know what I’m going to write next don’t you….yep, the ‘T’ word: You could understand what Toyota does 🙂

Correction, Clarification and Continual Learning

model-t-chassisI wrote a post some months back (July 2016) titled ‘The River Rouge – A divergent legacy’. If you haven’t read it, then it is necessary context for this post.

I received an interesting comment at the end of the post (from a contributor called Andrew) as follows:

You’re perpetuating an inaccurate myth about the Model T and production at Highland Park. The Model T was produced with tremendous variation – far more than a modern car. There were at any given time at least six different body styles of Model T, representing a lot more complexity than a simple color change. http://www.curbsideclassic.com/wp-content/uploads/2011/02/Ford-Model-T-line-up-1911ad-lg.jpg

As to color, the Model T was available in several colors – but not black – in its early days when the production rates were low. Black was introduced, not to minimize variation, but because black paint dried quicker and enabled faster, higher production rates. By 1926, paint science matured to the point that six additional colors were introduced to go along with black (and better compete with Chevrolet).”

I replied to Andrew’s comment and promised that I would add an addendum1…and then, as is usual, life carried on and time flew by. It is now, in this quieter Christmas/ New Year period that I realise that I have a hole to plug.

So here goes…

Correction

My original post, whilst (in my view) highly positive of what Henry Ford achieved, used the enduring “you can have any colour you like, as long as its black” line. I used this as the strap line to observe that “[Ford’s] manufacturing process was not designed to handle variety”, as explained in separate books by H. Thomas Johnson and Mike Rother.

My post then went on to contrast two very different approaches to handling the variety conundrum.

Andrew’s comment pointed out that the Model T was available:

  • in more than one colour; and
  • with different body styles.

He went on to suggest that “The Model T was produced with tremendous variety – far more than a modern car”.

coloursColours: Yes, I can see a number of sources that refer to different colours. However, I would suggest splitting the colour story into three parts (each of which Andrew’s comment eludes to):

The early years (1908 – 1914): From cross-checking a number of Ford related websites, it would appear that the Model T was available in a small variety of colours during its early low-level production years (grey, green, blue and red).


The volume years (1914 – 1926): This period corresponds to breakthrough improvements in producing at scale (and reducing the price)….and the only colour available was black.

In his 1922 ‘My Life and Works’ autobiography Ford refers to his salesmen wanting to cater for their customers’ every whim, rather than explaining that the product already satisfies their requirements…and it was this exchange that caused his “so long as its black” idiom:

“Therefore in 1909 I announced one morning, without any previous warning, that in the future we were going to build only one model, that the model was going to be “Model T”, and that the chassis would be exactly the same for all cars, and I remarked: “Any customer can have a car painted any color that he wants so long as it is black.”

Reference is made across a number of sources that black paint was used because its fast-drying properties aided speedy production. Other reasons suggested are the cheap cost of black paint, its durability and ease of reapplication (e.g. when repairing).


The end (1926 – 27): Colour choices were reintroduced…but this can be seen as an attempt to prop sales up and fight off the inevitable death of the Model T:

“Alfred Sloan [General Motors] began to offer inexpensive Chevrolets with amenities that the Model T lacked…..the market began to shift…styling and excitement suddenly counted to the customer.

 But Henry Ford refused even to consider replacing his beloved Model T…only one person persisted in warning him of the impending crisis: his son, Edsel…it was the first of many arguments that Edsel would lose.

 The Chevrolet continued to take sales from the dour Model T. By 1926, T sales had plummeted, and the realities of the market place finally convinced Henry that the end was at hand. On May 25th 1927, Ford abruptly announced the end of production for the Model T.” (Forbes Greatest Business Stories of All Time)

Body styles: Andrew’s comment usefully provides a link to an image showing a number of different Model T body styles, though I note that the title refers to 1911 which sits within the ‘early years’ pre-mass production period.

Breaking the body styles comment into a few parts:


The chassis: The Model T Ford was made up of the chassis (see title picture of this post) and then a body connected on to it.

From what I have read (including Ford’s words), the key point about the Model T Ford was that the chassis ‘moving down the line’ were all the same. Sure, they would differ over time as the design was (regularly) improved, but not ‘in the line’.

I find the picture below quite interesting – it shows2 a long line of Model T chassis waiting for a body (of differing styles) to be lowered on to it from a side process. Note the overhead rail coming in from the right.

model-t-production-line


Factory Bodies: Yes, I can see that different bodies were available – as can be made out from examining the above picture – but there was a limited range of standard designs (e.g. the Tourer, Roadster, Coupe and Sedan3).

You might ask “but what about all those other body styles out there?”


Aftermarket ‘engineering’: You can come across all sorts of weird and wacky looking vehicles all around the world that have been built on a Model T chassis. This is unsurprising given the sheer volume (and market share) of Model T’s that were out there.

A fair bit of ‘reconfiguring’ occurred, with owners hacking the car apart and customising it for their own needs. Many specialist aftermarket companies sprang up to perform conversions, even maturing to selling prefabricated kits for specific purposes, such as tractors. If you want a laugh at the sorts of conversions carried out then have a look at some of the images here (including a tank, a camper van…and a church!).

So, yes, I do need to correct my previous post’s implication that you could only ever buy a black Model T, and that one Model T was exactly the same as any other.

There was some variety, but does that mean Henry Ford had built a manufacturing process specifically aimed at handling this? And so I move on to….

 Clarification

clarificationGetting back to the point within my original ‘River Rouge’ post – that of handling variety in the line:

Andrew’s comment of The Model T was produced with tremendous variety…” might imply that Ford had indeed solved the variety riddle. I don’t think that this is the case and I’ll use a couple of passages from Ford’s own 1926 ‘Today and Tomorrow’ book to illuminate why I believe this:

“Whenever one can line up machinery for the making of exactly one thing and study everything to the end of making only that thing, then the savings which come about are startling.” (Chapter 5)

“The strongest objection to large numbers of styles and designs is that they are incompatible with economical production by any one concern. But when concerns specialize, each on its own design, economy and variety are both attainable. And both are necessary…

…we believe that no factory is large enough to make two kinds of products. Our organisation is not large enough to make two kinds of motor cars under the same roof.” (Chapter 7)

An underlying philosophy of Ford’s tremendous production success was a standard product (i.e. the opposite of variety)…which nearly became his undoing and set his organisation onto a path of catch-up with General Motors from the late 1920s onwards.

…none of this takes away from what Ford achieved and what then happened in American manufacturing and, in contrast, across the world in Japan. To summarise:

  • Henry Ford made amazing advances in respect of manufacturing, but the Model T’s homogeneity became its Achilles heel (a fact that he eventually conceded to his son Edsel and to his competitors);
  • In general, American manufacturing from the 1950s onwards went in the direction of scale and ‘unlearned’ much of what Ford had shown them; whilst
  • Toyota (learning from Ford) carried on in the direction of flow and worked out methods of handling variety in the line…thus achieving great things.

It’s worth reflecting that Taiichi Ohno credits Henry Ford with Toyota’s foundations:

“Taiichi Ohno…always spoke glowingly of Ford’s achievements…In 1982, Philip Caldwell, then head of Ford Motor Company, visited Japan. When Caldwell asked Eiji Toyoda, head of Toyota Motors, where Toyota had learned the production methods they employed so successfully in the 1970’s, Toyoda replied, ‘there’s no secret to how we learned to do what we do, Mr Caldwell. We learned it at the Rouge.’” (Johnson, quoting from David Halberstam’s ‘The Reckoning’)

Continual Learning

continual-learning-treeAndrew’s comment on my original post provided me with the impetus to learn some more.

  • I entered into a useful dialogue with Tom Johnson and Mike Rother;
  • I bought and read Ford’s book ‘Today and Tomorrow’;
  • I read around (and cross-checked) a fair bit of internet content; and
  • …I pondered what all of that lot meant.

I reflect on a wonderful Ackoff quote:

Although being taught is an obstruction to learning, teaching is a marvellous way to learn!”

i.e. it is in the act of attempting to explain something to others (e.g. via a post) that we can truly learn.

(I believe that) I now know more…but I’m even more certain that there’s much more to learn. A never-ending journey 🙂

Footnotes

1. Writing an Addendum: I am mindful that a number of you may have read my original post but not seen Andrew’s comment or my reply. So, rather than allowing this to remain somewhat hidden, I thought it only right (and respectful of Andrew’s fair and useful comment) to elevate my response* to a further post.

(* I am not a fan of the ‘gutter press’ splashing scandalous statements across their front pages, only to publish a unapologetic, one-line ‘retraction’ in tiny text somewhere buried on page 13)

2. Using photos: I am mindful that Ford’s production processes changed all the time and I have been warned to be careful when using a black and white picture of Model T production methods – such a picture shows how it worked at a point in time…and could easily have changed radically very soon afterwards!

3. Body Styles information taken from http://www.fordmodelt.net/model-t-ford.htm. It shows that each of the main body styles evolved over time e.g. the Touring car went from 2 doors from 1909, to 3 doors from 1912 and then 4 doors from 1926.

…and I just have to add a picture of (what I understand to be) a Model T chassis with a body style of a house – definitely ‘after market’:

model-t-motor-home

“You keep saying that…but what does it mean?!”

what-does-it-meanSo I recently had a most excellent conversation with a comrade.

I’d written some guff in the usual way and he wanted to push back on it…great! I need to be challenged on my thinking, particularly the more I verbalise (and therefore risk believing) it.

His push back:

I’d used the ‘absorb variety’ [in customer demand] phrase yet again…and he (quite rightly) said “but what does it mean?”

He went on to say that, whilst he understands and agrees with a great deal of what I write about, he doesn’t fully agree with this bit. He has reservations.

So we got into a discussion about his critique, which goes something like this:

“I agree that we should be customer focused, but…‘absorb their variety’???

You can’t do anything for everybody….they’d start asking for the world…you’d go out of business! There have to be rules as to what we will or won’t do.”

He gave an example:

“If a customer asked you to fax them their documents [e.g. invoice, contract, policy…], surely you’d say no because this is such old technology and it doesn’t make sense for people to use it anymore.”

Yep, a very fair view point to hold…and an example to play with.

So, in discussing his critique, I expanded on what I mean when using the ‘absorb variety’ phrase. Here’s the gist of that conversation:

First, be clear as to what business you are in

Taking the “you can’t do anything for everybody” concern: I agree…which is why any business (and value stream within) should be clear up-front on its (true) purpose.

However, such a purpose should be written in terms of the customer and their need. This is important – it liberates the system from the ‘how’, rather than dictating method. It allows flexibility and experimentation.

Clarification: ‘liberating’ doesn’t mean allowing anything – it means a clear and unconstrained focus on the purpose (the ‘why’ for the system in question). If you don’t have a clear aim then you don’t have a system!

Understanding the customer: who they are, what they need.

fredOkay, so the purpose is set, but each customer that comes before us is different (whether we like this or not). The generic purpose may be the same, but what works best for each unique customer and their specific situation will have nuances.

On ‘unique’: A service organisation (or value stream within) may serve many customers, but a customer only buys one service – their need. We need to see the world through their eyes.

“The customer comes in customer-shaped” (John Seddon)

Let’s take the scenario of an insurer handling a house burglary, with some contents stolen and property damage from the break-in.

The customer purpose of ‘help me recover from my loss’ is generic yet focused…it clearly narrows down what the value stream is about.

But, at the risk of stereotyping, here’s some potential customer nuances:

  • Fred1 is an old person that lives at home alone. He’s very upset and concerned about his security going forward;
  • Hilary is a really busy person and just wants the repair work done to a high quality, with little involvement required from her;
  • Manuel2 doesn’t speak English very well;
  • Theresa is currently away from the country (a neighbour notified the police);
  • ….and the variety goes on and on and on3

Each of these customers needs to recover from their loss…but the specifics of what matters differ and these can be VERY important to them.

If we (are ‘allowed’ by our management system4 to) make the effort up-front to (genuinely) understand the customer and their specific unit of demand, and then work out how best to meet their needs then they are going to be very happy…and so are we…AND we will handle their need efficiently.

If we don’t understand them and, instead, try to force them into a transaction orientated strait-jacket, we can expect:

…adding significant and un-necessary costs and damaging our reputation.  Not a great place to work either!

Do what is ‘reasonable’ for them

Right, so you may agree that we should understand a customer and their reality…but I still hear the critique that we can’t do anything and everything for them, even if it could be argued as fitting within the purpose of the value stream in question.

So let’s consider the ‘what’s reasonable?’ question. ‘Reasonable’ is judged by society, NOT by your current constraints. Just because your current system conditions5 mean that you can’t do it doesn’t make it unreasonable!

computer-says-noA test: if you (were allowed to actually) listen to the customer, understand the sense in their situation and the reasonableness of their need…but respond with “computer says no” (or such like) then your value stream isn’t designed to absorb variety.

And so we get to what it means to design a system that can absorb variety.

It doesn’t mean that we design a hugely complicated system that tries to predict every eventuality and respond to it. This would be impossible and a huge waste.

It means to design a system that is flexible and focuses on flow, not scale. This will be achieved by putting the power in the hands of the front-line worker, whilst providing them with, and allowing them to pull, what they need to satisfy each customer and their nominal value. This is the opposite of front-line ‘order takers’ coupled to back-office specialised transaction-oriented sweat shops.

How does that ‘fax request’ example sit with the above? Well, on its own, I don’t know…and that’s the point! I’d like to know why the customer wants it by fax.

  • perhaps they aren’t in their normal environment (e.g. they are on holiday in the middle of nowhere) and the only thing available to them is some old fax machine;
  • perhaps they didn’t know that we can now email them something;
  • perhaps they don’t (currently) trust other forms of communication…and we’d do well to understand why this is so;
  • perhaps, perhaps perhaps…

Each scenario is worthy of us understanding them, and trying to be reasonably flexible.

Forget all that!

take-a-lookOf course the above means virtually nothing.

You’d need to see the variety in your system for yourself to believe, and understand, it…and the way to do that would be to listen and see how your current system DOESN’T absorb variety.

How would you do that? Well, from listening to the customer:

  • in every unit of failure demand;
  • within each formal complaint made to you;
  • …and from every informal criticism made ‘about you’ (such as on social media)

I’ve got absolutely no idea what you would find! But do you?

 The funny thing is…

…if we allow front-line/ value-creating workers to truly care about, and serve each customer – as individuals – in the absence of ‘management controls’ that constrain this intent (e.g. activity targets) then:

  • the ‘work’ becomes truly inspiring for the workers, ‘we’ (the workers) gain a clear purpose with which we can personally agree with and passionately get behind;
  • we become engaged in wanting to work together to improve how we satisfy demand, for the good of current and future customers; and
  • the ‘management controls’ aren’t needed!

If I asked you, as a human being:

  • do you primarily care about, say, a ‘7 day turn-around target’? (other than to please management/ get a bonus)

vs.

  • do you really want to help Fred (or Hilary, Manuel, Theresa…) resolve their specific needs and get back on with their lives?

…how would you answer?

We need to move away from what makes sense to the attempted industrial production of service delivery to what makes sense in the real worlds of the likes of Fred.

Footnotes

1. Fred: The picture of Fred comes from a most excellent blog post written by Think Purpose some time ago. This post really nicely explains about the importance of understanding customer variety in a health care setting.

2. Manuel: A tribute to the late Andrew Sach (a.k.a Manuel from Fawlty Towers) who died recently. He wasn’t very good at English…

que

3. Variety in service demand: I’ve previously written about Professor Frances Frei’s classification of five types of variety in service demand and, taken together, they highlight the lottery within the units of demand that a service agent is asked to handle.

4. Allowed to: This is not a criticism of front-line workers. Most (if not all) start by wanting to truly help their customers. It is the design of the system that they work within that frustrates (and even prevents) them from doing so.

You show me a bunch of employees and I’ll show you the same bunch that could do awesome things. Whether they do so depends!

5. System Conditions may include structures, policies, procedures, measures, technology, competencies…

6. Bespoke vs. Commoditisation: It has been put to me that there are two types of service offerings. Implied within this is that there are two distinct customer segments: One that wants little or no involvement for a low cost and another that wants, and is willing and able to pay for, a bespoke service.

This is, for me, far too simplistic and misunderstands customer variety. Staying with the world of insurance…

A single customer might want low involvement when managing their risk (taking out a policy and paying for it, say, ‘online’) but to deal with a human if they need help recovering from a loss (i.e. at claim time).

That same customer may switch between wanting low involvement and the human touch even within a value stream – e.g. happy with low involvement car insurance but wants a human when it comes to their house insurance.

…and even within a given unit of demand, a customer may be happy with low involvement (say registering a claim)…but want the option of a human conversation if certain (unpredictable) scenarios develop.

The point is that we shouldn’t attempt to pigeon-hole customers. We should aim to provide what they need, when they need it…and they will love us for it!

7. Automation: On reading the above, some of you may retort with “Nice ideas…but you’re behind the times ‘Granddad’ – the world has moved to Artificial Intelligence and Robotics”. I wrote about that a bit back: Dilbert says… lets automate everything!