In 1984 two Harvard Professors, Robert H Hayes and Stephen C Wheelwright wrote a book entitled “Restoring our competitive edge: competing through manufacturing”. In this they set out a four- stage model
of how manufacturing operations could mature to the point where they provided their whole organisation with a competitive advantage. (Hayes, R.H. and Wheelwright, S.C. (1984) Restoring our competitive edge: competing through manufacturing, New York: John Wiley).
Clearly the focus of their work was manufacturing, but we believe that the model is equally valid to the back office function of major service organisations such banks and insurance companies, government organisations as well as shared service centres for a whole variety of industries.
Certainly, from our own experience in ActiveOps, of working in many operations and interviewing hundreds of senior managers, we have often known senior executives lament their ability to make the changes they would like to because they fear that their operations function would crack under the pressure. This has been the case in organisations pursuing such diverse strategies as: seeking to optimise profits from an outsource arrangement, trying to introduce new technologies, or looking at consolidating multiple locations into shared service centres.
Change is easier when moving from a stable platform but many CEOs will worry that their operations base is not sufficiently secure and in control to be confident that the anticipated benefits of the change will be forthcoming.
For this reason we argue that the operational improvements associated with Back Office Workforce Optimisation can be a source of competitive advantage with Service Organisations. This is particularly important to consider at a time when the service operations function is often treated as a Cinderella discipline – considered to be merely a cost centre to be minimised, off-shored, or automated; or treated as the “problem child” best outsourced to be someone else’s problem.
Far from being the Cinderella discipline – less glamourous than Marketing, with less bling than IT and without the authority of Accounting – Back Office Operations should be seen as the Belle of the Ball. Turning heads and catching everyone’s eye.
We will cover three theme here:
1. Hayes and Wheelwright describe four states of being for operations. We will offer an interpretation of this for service operations.
2. Being better at operations leads to delivering better quality, being quicker and more effective at adopting new technologies, delivering a great customer experience more consistently – and many other tangible differentiators. This is where the competitive advantage comes from.
3. Improving the operation – through Workforce Optimisation – requires improvements to the underlying production management system. Basic disciplines of production planning and operations control are what make a difference. The aim is to make it easy for the whole operation to do this well, do it consistently and do it passionately.
Back Office Workforce Optimisation and competitive advantage
Back Office Workforce Optimisation, as the name suggests, seeks to improve an operation’s performance on any or all of the competitive differentiators listed above.
The starting point for this is the introduction of new production planning and control disciplines, supported by modern technology and executed by well trained and well directed managers. The best WFO programmes take a fundamental look at the production management system (people and technology) and in doing so they can provide a key lever for competitive advantage.
It seems to us that Lean, Six Sigma and other marquee interventions have often fallen short of the hype. There is no doubt that they do deliver benefits, but all too often those benefits are short lived or just short of the target.
The emphasis – because of the costs of implementation perhaps – become project based: “one big push on the Lean Programme and we will be better”. After that almost everyone involved allows business as usual to reassert itself.
Of course, that is not what the Lean specialists propose. They will talk about systemic change, about the “Lean Way” being a new way of life but that seems to be an unmet aspiration much too often.
But we can learn lessons from history on this. Look at the most quoted example of all: The Toyota Production System. Sure, they did simplify process and yes they did focus on quality improvements but fundamentally they changed the production management system. They moved from the “push” style of manufacturing supported by MRP technologies to the “pull” style supported by Kanban. This was the paradigm shift that pulled everything else along in its wake.
Similarly, service operations that aspire to be world class or market redefining in the way that Toyota was will fix their production management system. This doesn’t mean copying manufacturing methods but it does mean looking for a solution to the same problem. Actively balancing customer demand with the capacity to meet that demand (human or RPA capacity) – in real time, constantly and relentlessly applying just enough resource at just the right time to satisfy every customer is the heart of good production management.
Having a system that helps to optimise the balance between workforce capacity and customer demand can therefore be a key differentiator. Why do we say system? Because it is not just about having a technology for forecasting demand or scheduling resources. (Remember: Kanban was vastly simpler than MRP but much more effective in the right circumstances).
Technology is necessary but not sufficient. Having a disciplined method followed consistently by all in the operation matters too. As does having the people in the right leadership and management roles, with the right skills exploiting the technology. And finally, having a culture of performance excellence, empowering people close to the customer to make critical decisions and engaging people who serve the customer so that they care about their performance, their customers and their organisation. All of this together becomes a system -a complex set of interlocking parts which reinforce one another making something so strong that it lasts longer than any piecemeal change.
So who will be the Toyota of Service Operations?
Rightly or wrongly Toyota is credited with reframing the world of manufacturing. Indeed, so great has been the influence that many service operations have tried to copy the principles – even where they don’t always fit that well. In our view, no one has claimed the crown for re-inventing the world of service in the same way. There are world class approaches to production management in service operations, there are great technologies, fantastic leadership training courses, but who has broken clear of the pack to make operations be an industry defining capability?
As part of our research, we have measured a large number of back office operations on a capability maturity scale that matches the Hayes and Wheelwright journey. Take a look at the chart below and you will see that the prize is still up for grabs.
Chart1: Showing frequency distribution of maturing scores
Neil Bentley has been helping organizations to improve their front-line operating performance for over 20 years. Originally qualified in Psychology, he went on to work at Lucas Industries in the 1980s, gaining experience in manufacturing production management, before focusing on financial services and the public sector, first with PA Consulting Group and then as a partner with specialist consultants OCP.
He launched ActiveOps with fellow OCP partner Richard Jeffery in 2005. Neil brings with him an unparalleled understanding of the mix of the human and the technical aspects of performance improvement.