Featured Product
This Week in Quality Digest Live
Six Sigma Features
Harish Jose
Why and how vs. what
Scott A. Hindle
Why is it important to keep the process stable?
Shobhendu Prabhakar
The tool we love to ignore
Harish Jose
Lean inspiration from a short-story master
Dirk Dusharme @ Quality Digest
Being small, thinking big, catching on fire. We're sure they're connected.

More Features

Six Sigma News
Version 3.1 increases flexibility and ease of use with expanded data formatting features
The FDA wants medical device manufactures to succeed, new technologies in supply chain managment
Provides accurate visual representations of the plan-do-study-act cycle
SQCpack and GAGEpack offer a comprehensive approach to improving product quality and consistency
Customized visual dashboards by Visual Workplace help measure performance
Helps manufacturers by focusing on problems and problem resolution in real time
Ask questions, exchange ideas and best practices, share product tips, discuss challenges in quality improvement initiatives
Says capitalization gives false impression that Six Sigma is more significant than other methodologies
His influence on the methodology can’t be denied

More News

Mark Graban

Six Sigma

How to Design Poor Service

Expect 100-percent utilization of people or resources.

Published: Wednesday, August 11, 2010 - 07:20

I have as many bad customer-service experiences as the next guy, with health care and other businesses. As I’ve said before, unless there’s a broader lesson involved, I try not to be a “hack” blogger who just uses his platform to complain about the last bad thing to happen. However, I think the lesson here is broad enough to qualify.

Let’s say you hate your customers. Sounds unimaginable, but I’ve long suspected this is actually the case with American Airlines, having flown almost a million miles with them. OK, that’s a bit harsh, but it does seem to me that American falls into the trap that many other companies do: expecting 100-percent utilization of equipment or people—in the name of efficiency—while ignoring the fact that 100-percent utilization leads to long customer waiting times, in person or on the phone. I’ve also had similar experiences with Verizon’s fiber-optic network, FiOS. Bear with me, I’m not just griping and moaning here.

If you’ve studied queuing theory, industrial engineering, or Wallace Hopp’s and Mark Spearman’s Factory Physics (McGraw Hill, 2007), you know that 100-percent utilization of a resource is a recipe for long waits and lousy customer service. It’s a mathematically provable law of nature. Expecting to have 100-percent utilization of a machine in a factory means you’ll have lots of waiting time and lots of inventory (and/or poor customer response). Expecting 100-percent utilization in a call center means lots of busy signals or customer hold time.

Long story short, my wife and I took a vacation in June and American Airlines misplaced our suitcases for the first four days of the vacation. It’s hardly breaking news that airlines lose bags. My wife and I were more upset about:

• The finger-pointing that took place between American and Iberia airlines(our transfer was in Madrid)
• Failure to deliver on the promised response (American didn’t bring our bags to our hotel, as it had promised)
• The insincere “we care about you” form letter e-mails that American calls “personal communication”

So when we got back from vacation, we wrote a letter to American, complaining about the generally indifferent and surly service we encountered at every step of the journey. (Again, this isn’t a news flash. It’s more like a hack comedian complaining about bad airline food.)

An example of 100-percent utilization: American Airlines

Within about a week, I received a phone call from someone in the executive office of American Airlines. All right, that’s not bad. But I was on the phone for work, so she left a voice mail with her name and number. I called back later that day. No response.

I called back four or five times for two weeks and always got this person’s voice mail with the message, “I am already on the phone with another caller; please leave a message.”

Granted, it’s a limited sample, but is she busy making outbound apology calls all day long? Without being too obsessive and dialing nonstop, I find it hard to believe that somebody is so busy that she can’t return a call. Does she have time only for one attempt?

No amount of “we care” e-mails or “we received your letter and we care” postcards can gloss over the fact that American apparently doesn’t have enough capacity to deal with the number of complaints they receive. Instead of just hiring more reps, ultimately their goal should be to reduce customer complaints so fewer reps are needed. But that’s really pie-in-the-sky thinking for American and the other old legacy carriers.

The siren song of 100-percent utilization

Industrial engineers learn that 100-percent utilization is bad. According to the lessons of Factory Physics, depending on the system—i.e., how much variation you have—waiting times start to skyrocket when the system reaches 80-percent utilization or so. If your primary objective is to keep costs down, you’ll drive 100-percent utilization and customers will suffer. Looking at somebody being “not busy” is an obvious cost, but hating to see people idle is old Frederick Taylor thinking. If you really want to be responsive, you can’t plan for 100-percent utilization.

Lean thinking, going back to Taiichi Ohno, would want to do something about that factory part not moving. That’s a different type of waste and a different focus. In a service setting, if you’re really trying to be lean, then seeing the customer wait would be worse than seeing an agent idle. It’s easy to calculate the cost of an idle call center agent. It’s much more difficult to determine the cost of an angry customer caused by poor customer service.

It seems that general MBA thinking teaches managers to focus solely on cost, when the real problem (not just in my selfish case) is poor flow. You need slack capacity in any system if you’re going to have flow. However, American Airlines, like other airlines, is obsessed with 100-percent utilization of the planes, which works fine unless a flight gets canceled.

Another case of 100-percent utilization: Verizon FiOS

A few weeks back, I switched from my local cable company to Verizon FiOS for phone and internet. I could get a faster connection for a lower price, so it seemed like a great value. However, the wireless router that was included in the hardware was almost constantly fritzing out, requiring reboots. After a number of customer service calls over two weeks, I finally convinced a phone agent to send me a replacement box.

The decision to actually send the box required a second-level tech-support approval. The first-level agent I was on the phone with apologized for the delay waiting for the second-level tech to be ready to talk with her via Instant Messenger. (No doubt the second-level tech was 100-percent busy, being a more expensive resource and all, typical MBA thinking.)

After the wait, the first-level tech (1LT), the second-level tech (2LT), and I had a discussion like this:

1LT: What operating system are you using?
Me:  Well, one machine is Windows 7 Professional, the other is Mac OSX Snow Leopard. Why does that matter?
1LT: (IM-ing furiously)
Dead air—waiting
1LT: Have you tried changing the wireless channel?
Me: Yes, many times. That’s well documented from the previous calls.
1LT: (IM-ing furiously)
Dead air—waiting

This continued for a few more questions, with long waits before the next question. I asked 1LT what was going on. She said 2LT was always on IM with four different 1LTs, sorting out four customer issues at the same time. Due to the multitasking, we had to wait.

It seems the only reason you’d design a system like that is if your sole concern is 100-percent utilization. That’s a cost focus, and it makes me want to pull my MBA diploma off the wall. My call took at least four times as long as it should have, and it was 10 times as frustrating. Keeping the 2LT busy wasted my time and the time of the 1LT.

Can you imagine a system design like this in a physical setting? Does a grocery store drive efficiency by having one cashier run back and forth across four registers? Does a  hospital try to have one rep register four patients all at once, running back and forth between different desks? Why does this job and system design seem to make sense in a virtual setting? Are people truly allowed to take joy and pride in their work, as W. Edwards Deming would say, when they’re kept 100-percent busy like this?

The only conclusion I can draw is that these companies are more concerned about siloed cost than about keeping customers happy and having good flow. Thank goodness nobody is holding up either American Airlines or Verizon as a company that’s supposedly using lean principles. There’s nothing lean about a system that mandates 100-percent utilization rates.

Unfortunately, it’s far more concrete to measure the cost of an idle person than it is to measure the cost of poor flow. That apparently drives a lot of bad, short-term decisions.

For a really good read on the topic of slack, utilization, and flow, check out Slack: Getting Past Burnout, Busywork, and the Myth of Total Efficiency by Tom DeMarco (Broadway Books, 2002).

© 2010 Constancy Inc.

Discuss

About The Author

Mark Graban’s picture

Mark Graban

Mark Graban is an author, educator, and speaker in lean health care, through his company Constancy Inc. He is a faculty member for the Lean Enterprise Institute (LEI) and vice president of improvement and innovation services at KaiNexus, a technology company that helps organizations spread continuous improvement. He is founder of the Lean Blog and is author of Lean Hospitals: Improving Quality, Patient Safety, and Employee Engagement, Second Edition (Productivity Press, 2011) and, with Joseph E. Swartz, Healthcare Kaizen: Engaging Front-Line Staff in Sustainable Continuous Improvements (Productivity Press, 2012), both recipients of the Shingo Professional Publication and Research Award.

Comments

Comment via email

Received a good comment via email:

"I read your article "How to Design Poor Service" and it was a great article.

Always a BUT though. You might want to go read Fredrick Taylor's books (in particular "THe Principles of Scientific Management"), because he was NOT a proponent of 100% efficiency.

He talks at length about machining and the 17 ket sceientific areas and just keepin the machine busy and fastest run time is a mistake.

Good article otherwise.

James Abbott
www.EffectiveCallCenters.com"

I guess I stand corrected. I still would argue that modern "Taylorist" or "Taylor-ish" thinking focuses on keeping everyone and everything 100% busy and that's a problem.

I think John G has it right

As John G stated, blame the stockholders and ultimately ourselves. After all, it's your 401K manager and the analysts who work in his business that drive company executives to maximize financial performance - all for you. And they'll get fired if they don't do it. Seems like we've got a lot of power and attention as customers now, eh?
I'd love to see the reaction to an executive who says he wants to take the pressure off, decrease focus on financial performance for a while and focus on improved quality and service at a higher cost. As one of his stakeholders who expect your 401K to increase in value you'd be pretty skeptical.

Walmart

I LIKE the self-check registers at Walmart. If I have a problem, there is still a person there to help. I find that I get out faster than with traditional check-out. I know Walmart is keeping costs down, which helps keep proces down.

Poor Service

Mark,
If you have had to chance to shop at WalMart or Kroger's Fry's stores recently, you would see in fact, that thinking has taken a stranlge hold of their registers. In fact, the 2 sets of 4 self ringing registers watched by a single employee via cameras looking down as you scan your own stuff has just been doubled to 2 sets of 8 self serving registers, again monitored by 1 employee. Wal mart has cut personal, cut benefits, cut hours of employees, made waiting times horrible during hours past 8 PM with only 1 register that is not self serve. I want to blame the stock holders for pushing the managers to increase profits and hold overhead cost to the utmost minimum. In the end, we can only blame ourselves for shopping and supporting these very tactics that should drive us away from this "dis-service". I really do not believe Sam Walton wanted his stores to end up what they are now.
John G.

100% Utilization

The cost of an idle rep is easy to calculate but since we can't calculate the cost of an angry customer we just cross our fingers and optimize what we can calculate.

Sometimes you just have to do something because it is the right thing to do, not because you can calculate a cost savings.

Minimize costs or maximize profits - what's the goal?

Great article Mark. Your example companies are obviously trying to minimize costs but I thought the goal in business was to maximize profits. Cost reductions that drive customers away will help drive costs toward zero, but revenue will soon follow in that same direction. And we customers do have options that enable us to take our business to competitors of American Airlines, Verizon, and other companies that don't treat us as important.
This is just like my favorite Financial Planner (Ric Edelman) asking if I want to avoid taxes or grow wealth. I will avoid taxes when my investments don't increase in value but that won't maximize wealth.
As you stated and as we all frequently experience, 70-80% utilization instead of 100% is often the best approach to maximizing profits.