Abaco Consulting's Derek Brown: Employees as operating costs vs balance sheet assets
How do you really view your employees, asks Derek Brown of Abaco Consulting? As a problematic high and fixed cost to the business or as the business’s biggest and most competitive asset? The dichotomy, he says, is that they are of course both at the same time. By Derek Brown, Abaco Consulting On the one hand, your employees represent one of your single largest fixed costs, and there is continual pressure to reduce that cost by reducing head counts, increasing productivity, the deployment of automation, robotising, process re-engineering, Lean, Six Sigma and Agile initiatives, and if all else fails, the outsourcing of operating functions. Yet, we often proclaim that our people are the differentiator for our company in the marketplace and that they are the company’s greatest single asset in our competition for business. So how do we reconcile these two potentially conflicting viewpoints?
Within many service industries, there remains ample opportunity to make a real and lasting impact by truly empowering your front-line employees to do the best job they can do. You may be surprised how eager most employees are to do just that.
There has been a mighty level of investment in recent years within highly competitive service industries, all attempting to become more efficient and competitive by improving customer service while simultaneously reducing operating costs.
A great deal of effort has been spent in trying to replicate some of the efficiencies seen in manufacturing environments within the services sector (think Toyota, Just-in-Time, Kanban, Muda), by setting up service operations in the form of a manufacturing production line, with stations performing single functions before passing work down the line to the next station, optimising processes along the way and running the operation like a factory floor. However, there remains a fatal flaw in this approach that lies in the core difference between manufacturing and services. Manufacturers produce goods for stock. Services providers process work for customers.
Employees in service industries cannot mimic their manufacturing counterparts by mass-producing piles of customer enquiries or credit applications in advance. They have to deal with incoming work that is random, variable and specific to individual customers that commonly require an interactive transaction to complete the tasks, and intelligent decision-making to resolve.
Of course, such work is natural and easy for human beings to manage, but rather difficult for machines to replicate. We are in danger of trying very hard to eliminate human contact from these day-to-day transactions by increasing automation, designing processes to eliminate choice and engineering a mental straight jacket for employees that encourages them to follow the rules slavishly and expect punishment for using their initiative in the workplace.
Our employees are intelligent, educated people who make complicated decisions every day of their lives in running a home, bringing up a family and balancing their own budgets. Yet once they walk through the office door, we often treat them like brainless automatons and do everything in our power to stop them making any decisions and track their every action and minutes spent at work, immediately signalling a complete lack of trust for their abilities and intentions.
How do we truly empower our front-line employees? How can we truly trust them to do the best job possible? One way is to create the right conditions that enable them to make the contribution that best serves the company. These conditions also encourage your employees to give their best too, which is all most of them really want to do for you.
Operational Efficiency - the Issues
One of the largest challenges within most service industries is the inherent imbalance between supply and demand. Here, demand represents the incoming work to the business, while supply represents the resources (your employees) who process that work.
Incoming work is variable. Mornings may be busier than afternoons. There may be a peak at lunchtimes. Mondays may be busier than Wednesdays. Month end may be busier that the middle week of the month. Demand may be higher in summer rather than winter. However, the resources you have available (your people) tend to be more static: the same people from the same teams come and sit at the same desks every day of every week, regardless of the flow of incoming work.
So sometimes, when it is busy, for an hour or two, or for a day or two, or maybe a week or month or two, you have more work than you have people available to process it. This challenges your service levels as people struggle with backlogs and target delivery times; challenges quality as people rush and take short cuts to delivery; increases your costs through the need for overtime and temporary staff; and induces stress among your employees who are working under undue pressure, leading to more sickness, absence and higher staff turnover.
At other times, when it is quiet, you will have more people at work than you have work available for them to process. This is again a bad situation, as people slow down (making the work fit the time available), lose focus and become bored. Again, we see quality suffer and motivation decline. On top of that, you are carrying the full cost of the people whether they are completing productive work or not (and they typically have little or no control over that situation at the front line).
How do we cope with this situation?
Typically, companies "muddle through" using "just-in-case" resourcing, which means having more resources than you generally need but carrying enough to cover busy periods and times when people are off sick or on leave. Even then, you still struggle to manage when times are really busy, and carry way too much cost at all other times.
Operational Efficiency - Some Solutions
Few services organisations have a structured operations methodology in place that is consistently deployed and used across all areas of their business. Shocking but true. Introducing a structured framework to enable front-line managers - that is Team Leaders, Supervisors and Departmental Managers - to consistently and predictably match incoming work with available resources has been proven to make a huge difference to the efficiency and costs of running a services operation.
Many companies have tried using Workforce Management tools as an extension of their contact centre technology to manage supply and demand in the operations of their business. However, these tools remain a blunt instrument in tackling the intricacies of day-to-day variability in a typical services operation - a bit like trying to perform brain surgery with a hammer and chisel.
A formal, structured methodology designed for service operations can offer a predictable, consistent framework for anticipating demand and managing supply (all in a very short timeframe for realisation, and all of which I have personally been engaged with for major services companies across Africa in the past 10 years), with the following proven benefits:
- Increased productivity - expect realistic figures of 20% plus
- Lower costs - 20% or more
- Sustainable increases in efficiency
- Better predictability and consistency of service
- Agile, motivated workforce
- Higher service levels to customers
- Higher and more consistent levels of quality
- Higher customer satisfaction
- Better customer retention
- Lower cost per transaction
- Speed to market
- Flexibility of pricing - market competitiveness.
So why not empower your employees to become true "assets" on your balance sheet rather than remain as a fixed cost drain on your profitability?