Fi’s desk

When I got back to my team, Fiona, Dave and Suzy were in. Fiona however was running around frantically trying to organise herself.

I tried to sound chirpy; “Morning team! Trust you all had a good weekend.”

“Are you sitting at my desk Gordon?” Fiona liked order. Perhaps being that bit older, she was more set in her ways; she liked what worked for her and tried to keep it that way.

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“Yes, Fi, my PC has died and won’t be brought back to life for three days, so I’ll have to sit there. I moved a few items over there – they are in the same order as they were.”

“I’m supposed to be covering the phones in thirty seconds and I am still logging onto Meeshell’s machine. And all my notes and scripts aren’t where I am used to, I can’t find my calculator, Post-it pad, or my orange pen.” Fiona was panicking that she wouldn’t be logged on by 9 a.m. She dumped herself down on the seat and started adjusting it. “Can I swap this for my usual seat please, it took me ages to get it set up the way I like it. And I need my mobile phone charger as it’s about to die on me.”

I just about managed to keep up with the fast flowing monologue. Boy can she talk, which is of course one of the reasons she works in my team.“Yes, to the seat, and the charger. Here’s your pen; Apologies. Dave, are you logged on?”

“Jus checkin’ the email.”  He said, focused on the screen and tapping away at the keyboard.

“Never mind the email. Please log on to take calls for the first five minutes whilst Fiona has time to re-organise. And when Meeshell turns up, ask her to sit at the spare one over there.”

“Yes, boss.” Dave, always eager to please, duly logged on ready to take the first call at 9 a.m. “Guys, we have another dropped voicemail. Looks like someone phoned us about ten minutes ago. No message though.”

“Ah, yes that was Andy, my boss, checking to see if we were doing our job?”

Dave looked over at me. For a brief second, he looked curious as to why. “Okay boss, will delete it. I won’t record it”

“Fine. No wait. Mark it down as a lost call.”

“But it was from your boss, before 9 a.m.”

“I’ll explain in a minute”. Dave returned to the voicemail and deleted the call. He did however capture it as a missed call.

“Thanks Gordon, I’ll get on the phone as quickly as I can.”  Fiona now seemed to be sitting under the desk. I guessed there was a good reason so I let her carry on, and turned to Suzy.

“Suzy. What do you have to do this morning?”

“There’s a bunch of customer exit calls to make from last week. I just didn’t get time to do them. And you wanted me to review the wording on the letter we send out to those wanting to close their bank accounts. Should take most of the morning.”

“Right. Be flexible I may need you for an hour or so later on.”

“Something exciting?” Suzy smiled. She was often quite funny with her take on life, and she seemed to excel and making light of the more awkward situations our team had to deal with. And she did love to wear those bright pink and purple coloured tops in the middle of winter. We men tended to stick to the standard dark suit or dark pinstripe. Few of us dared wear even a bright shirt.

I laughed at her choice of words. Exciting was not the word I would have used. I sat down in Fiona’s seat, and started to adjust it more to my liking. Before bringing the team up to speed, I needed to sort it out in my own head. I opened up a spreadsheet and jotted down the key things:

• Caroline – Grp dep CEO – impressive.
• Andy – under pressure
• UK operations under scrutiny
• Short term pressure – four months to get back on target?
• Customer Services to deliver
• Anne, Jim, myself under spotlight.
• 8-8 customer service required by my team
• New customer service metric – need to answer phone quicker.

Dave’s phone rang; the first customer of the new week wanting to cancel. Dave started to take the details and trying to find out why they wanted to leave. I tried to block out the conversation but, to be honest, I was struggling. Perhaps it was something to do with the Australian accent. As I went over the meeting in my mind, I felt something was missing.

Fiona logged on and immediately got caller number two. Yet more noise, and more distraction! I wasn’t used to this open space and temporarily retreated back into my office.

So how do I put a positive spin on this? I’ll be asking my team to do some form of shift pattern, which they probably will hate, but that will get in the way of the other initiatives. And ultimately I’m not sure it will make a lot of difference to the customer.

I gazed off into the distance. A jumbo-jet gracefully turned for finals into Heathrow. I watched it line up and prepare for the end of the journey, flying over the rooftops, past Tower Bridge and, just visible in the distant haze, past the Houses of Parliament.

Having had a less than good start to the week, I reflected on the bigger world. The world keeps on going with people leading their purposeful lives around the globe, largely irrespective of what I, or my company, did. Answering the phone more quickly to a cancelling customer was not going to turn around Warrender. Those millions of Londoners did not care about service standards – just the standard of service they got.

How many of those economy or traveller class jumbo customers were happy with their flight to London? Had the in-flight meal met their expectations? Was the movie choice any good? Did the business fliers value the seat that turned into a bed? Or was it a feature that didn’t add value? How did an airline know it was doing well?

Time to break the news. I dithered briefly over whether this was better done in my environment or theirs? I returned to Fi’s desk.

Solution secret No 1: Control your workflow!

Key “Theory of Constraints” concepts:

Maximising Throughput

Elevate the constraint

Dangers of expediting and reprioritising

STOP EXPEDITING! I hear you asking “how can I possibly stop expediting or re-prioritising. I do it every day. How else would I get to my to-do list?”

Most of us will have been on time-management courses where we learn the importance of prioritisation, to-do lists and being extremely organised.  Reading “The Goal” it becomes abundantly clear that there are limitations to doing this.  Think of your workday as a process with tasks coming in, you dealing with them, and providing the service to the customer.  If you use the Theory of Constraints, then terms such as bottlenecks and Herbies are great ways to understand what is really going on.

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Don’t you just love it when you get to work from home?  You seem to get so much more done.  You decide what you want to do, you work in the order you want to do, and you progress through your list uninterrupted. 

So why doesn’t this happened in the office?  If you are lucky, you get to your desk and have a few minutes where you can get organised before the first interruption of the day arrives.  Increasingly – and particularly in service organisations – that interruption will come in the form of a telephone call or e-mail.  And immediately all your time management skills go out the door.  For now, you have to react to somebody else’s urgent issue. And like all good well-trained staff, you immediately adapt your to-do list to accommodate the change in priorities.  You have reprioritised and, if it’s a chaser, expedited!

In “The Goal”, the bottleneck is seen as a particular machine within a process.  In services, think, however unflatteringly, as you as that machine.  You are that bottleneck.  Despite what some people may tell you, there are only 24 hours in any one day.  You cannot store any of that time, you have the same amount as anybody else, and if you don’t use it you’ve lost it.

A number of things happen when you choose to reprioritise / expedite a request:

• Firstly, you lose time thinking about whether you can prioritise it, where you can prioritise it, and what delivery time to attach to it. 
• Secondly, you have de-prioritise items/ customers on your to-do list so that you can fit this new task in.  Due to the inherent variability in service provision, it will be very hard for you to guess accurately how long that task will take. 
• Thirdly, your decision starts to disturb the processes in the rest of the business.  Other people start missing their deadlines either because you will no longer deliver when you said you would, or other people start missing their deadlines because you now make additional urgent demands on their time.  In extreme situations, which I’ve found at Warrender Financial, you actually start employing somebody to go round managing all the expedited items and smooth the ruffled feathers of the now stressed-out employees.

Some examples to think about:

When you answer the phone instead of deal with the customer in front of you, you immediately de-prioritise your current customer and create a backlog (existing customer waiting to be served).

Now I know you would have never done that, so think of it from the customer perspective.  Where have you needed service, only to be de-prioritised because the person thought the phone was more important than you?  In the fast food take-away?  Meeting your accountant, lawyer or financial adviser?  Buying tickets in person?

Immediately that phone is picked up, you become backlog/work in progress/work in process/less important (whichever term means the most to you).  Unwittingly, the business now has that Inventory carrying cost.  They also run the risk of losing your custom both now and in the future.

Many services are provided at a distance, so we as customers don’t realise quite how unimportant we are to many businesses.  Having waited days or weeks for replies to very simple questions, we eventually resort to complaining.  As if a miracle happens, now we start getting the service that we wanted.  And the only way that has happened is because the business (someone just like you) has now re-prioritised you and moved you up the queue.  And every other customer has been demoted. 

By expediting and reprioritised in, in extreme cases, the business will end up with all its customers angry, disinclined to use them again, and delighted to bad-mouth them to their friends.

From the business perspective, much of the working day is now taken up with complaint handling, decision-making, list maintenance, tagging and expediting, and disrupting processes throughout the business.  This all costs money. This all costs reputation. This does not make sense.

Expediting within a company could be explicit or implicit in the way it works.  The research carried out at Warrender Financial highlighted both.  The customer trend was first that they would write, then after a week to 10 days they would write again, and then they would phone and then they would complain.  With backlogs already hitting twenty to thirty days, more and more management time was taken up dealing with reprioritisation.  Not only did you have the carrying cost of dealing with the extra pieces of mail and the extra phone calls, you also had to go and find and match up previous requests.  Then decide where to place in the queue, and communicate back to the disgruntled customer a new revised deadline.  Due to the regulated nature of financial services, those who complained also had to be treated following a particular regulatory process.  This is additional cost.  It adds Operating Expense and Inventory because Throughput isn’t working!

Within customer services, the result was a dedicated team of complaint handlers, a dedicated team of people who would deal with urgent telephone calls, staff employed to log and store incoming work, managers to oversee and monitor complaints, chasers, urgent cases, and the length of the backlog.  You can imagine the cost!

Realise also that an individual acts like a bottleneck when the volume of work they have to deal with exceeds their capacity.  Returning to the concept of Herbie as the bottleneck, the Theory of Constraints makes it easy to identify people who are struggling to keep the Throughput or flow of work flowing. In front of each person or Herbie you will find queue of work. That may take the form – say in Starbucks or a fast-food restaurant – with a queue of people waiting to be served (why is it more important to serve somebody their hamburger in their car than to serve somebody on the other side of the counter?).

If you work in an office, just think of your e-mail inbox: an endless supply of to-do items where you have little or no control on the impact on your workday. Carry out this test to find out how good you are at not expediting:

(1)  Look in your Inbox.

(2)  Look at the date of the oldest item. Need I say more? 

Why have you not got round to dealing with that item? Do you think the customer is still waiting for you to do something? And before you say “yes but…”, the only reason you have not dealt with that item is because you have not had the time.  Other items keep coming in that you feel are more important. And don’t use the excuse that it’s complicated. That just means it takes longer to resolve, and more important things take up your time. You keep expediting!

In simple terms:

• Expediting interrupts your to-do list
• Expediting costs you time
• Expediting interrupts other people’s to-do lists
• Expediting means you treat customers differently
• Expediting means missed commitments
• Expediting creates stress
• Expediting adds cost
• Expediting creates backlogs

So the secret is to stop expediting. How do I actually do that? Well, STOP EXPEDITING!  Here are 10 ways you can do this:

1. Always deal with the task at hand
2. Stick to your plan
3. Let the phone go on to voicemail
4. Set aside time each day to deal with predictable urgent requests
5. Make sure your boss knows how big your backlog of work is
6. Don’t deal with e-mail as they arrive, deal with when it suits you
7. Tell your customers that you do not expedite (explaining that if you give in and expedite their case, you will just do the same to the next person, thus negating the value to them)
8. If you have an electronic calendar, move your task list into the calendar.  You must schedule time to do your tasks!!!
9. Be assertive. Remember it’s your time not somebody else’s. Blank out your diary so that people can’t just book your diary.
10. Reward achievement, not those that fight fires by expediting. Fix the cause not the symptom.

Okay, so is easy to come up with 10 ways. But do I walk the talk? I wish! What I have done though is the following:

• Schedule my tasks as diary items.  That way I set aside time in my day to actually do them.
• I create a process and then stick to it. 
• If the phone rings and I’m halfway through something important then I will let it go on to voicemail.
• Whilst working in a processing centre, the team were being inundated with chasers and demands to expedite queries. Even though it wasn’t the most pleasant thing to do, I refused to bump people up the queue. To support this I also developed an accurate tracking mechanism so that I could say to the customer exactly when they would get their piece of work. It took a while, and I did manage to turn around a three-month backlog to same day service.  As the backlog came down, more and more resource could return to doing the work rather than storing the work.
• When I know I’m going into a busy period, I do block out days in my diary to stop other people deciding their urgent meeting is more important than my commitment to my customers.
• Where possible, I do not multitask. Just remember the bottleneck concept; in any given hour I only have 60 minutes. As soon as I do additional tasks, I reduce the amount of time left to do what I originally set out to do. The bottleneck (me) cannot change.

Chapter 2

“Theory of Constraints”

“If you want “real” performance you reach it by many, many little improvements everywhere. This is one philosophy. There is another one…the silver bullet”
Dr Eli Goldratt1

The “Theory of Constraints” is put forward as that silver bullet: the identification and elevation of the biggest constraint a company has. In doing so, it purports to point out why many organisations fail to achieve the expected results through more incremental quality or continuous improvement processes. Whilst elements of the Theory may complement Cost Accounting, Total Quality Management, Activity Based Costing or Just In Time processes, it is very much based on the belief that if you identify the key issue, the seemingly impossible becomes possible:

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“Give me a place to stand and I will move the earth.”
Archimedes, On the lever in Pappus Synagoge ²

According to Goldratt, he used the novel format for “The Goal” (1993) to allow the reader to work through the scenarios as they read them, and come to the same conclusions (hopefully) as the author4. This Socratic approach is continued in the sequel “It’s Not Luck” (1994)5, indicating that the lessons learned at the branch-plant level also work at the global level. “Necessary But Not Sufficient” (2000) continues this theme and style when applying it to today’s rapidly changing software industry6.

In the latter two books, the constraint exists primarily outside the company in the form of existing market constraints and future perceived constraints. “What is this thing called the ‘Theory of Constraints’ and how should it be implemented?” (1990) deals specifically with the Theory though it is written more as a discussion paper than either as an academic paper or as a novel. His two other books offer self-help via the “toolbox” element “Thinking Processes”.

The Theory centres on three key measures: Throughput, Inventory and Operating Expense. By using these metrics, and concentrating on the identification and elevation of either internal or external constraints (aptly identified through the bottleneck metaphor), Goldratt believes that companies can better identify:

What to change?

What to change to?

How to create change? 7

The measures

To be profitable, a company needs to produce products that customers want, and to sell these at above cost. How you define profit, cost and indeed the time frame clearly define whether or not you achieve the goal.  Go ask an accountant how difficult it is to agree how profitable a business really is!

The “Theory of Constraints” concentrates very much on elevating constraints to increase Throughput. The results will then reduce Inventory. Operating Expense is the last of the worries. By dealing with the three measures in this order the Theory presents a different focus – one that reverses ‘common practice’ where Operating Expense dominates:

“You are right,” Stacey agrees. “The entire bottleneck concept is not geared to decrease operating expense, it’s focussed on increasing Throughput”.
The Goal, p294

The definitions, and the metrics themselves are deliberately simple:

•   “Throughput: the rate at which the system generates money through sales

•   Inventory: the money that the system invests in purchasing things, which it intends to sell

•   Operating Expense: all the money the system spends in order to turn Inventory into Throughput.”8

In concentrating on the identification and elevation of the constraint, or “bottleneck”, arguments are put forward that this bottleneck controls the profitability of the whole company. Using the familiar hourglass to illustrate, the Theory argues that one can tinker with the hour-glass’ colour, shape, material and dimensions both before and after the bottleneck and it will make absolutely no difference to the time taken for the sand to run out. Only improvements at the bottleneck deliver results.  And if you think about it, he’s right.

In “The Goal”, these constraints – and solutions – are first uncovered whilst trying to get a line of Boy Scouts to walk and stay together. The only way this could be achieved was by placing the slowest person, Herbie, at the front. In this Boy Scout example, Herbie was easy to identify; there was a queue right behind him. Once Herbie governed the speed, it was vital that he travelled as fast as he could. So the contents of his day-sac were redistributed around the other non-constraining Boy Scouts. This elevated the constraint. If the bottleneck is so critical, there are significant ramifications for how managers work, the way they measure, how costs are allocated, and how staff are deployed.

“It’s only a novel”, I hear you say. Where’s the evidence? Where’s the proof that it works? How certain can I be that it adds value? Read on….

The primary source of analysis or overview in this area comes from Victoria J. Mabin and Steven J. Balderstone, both academics at the Victoria University of Wellington, New Zealand. In 2000 they published The World of the Theory of Constraints: A Review of the International Literature. In reading nearly 400 abstracts on the topic it becomes apparent that almost all academic study and practical examples come from the U.S. manufacturing arena. Whilst not unexpected, it is perhaps surprising that non-manufacturing and service sector examples make up only 5% of the available evidence. Equally it is surprising to find that there are very few examples of research resulting in negative benefits 9.

Mabin & Balderstone revisited their research in 2003 providing a wider, up-to-date analysis. Based on in depth of analysis of 81 cases, their findings were that ToC does appear to have measurable benefits. Many of these case studies used large national or multinational companies. Proctor & Gamble, Ford (electronics division), Avery Dennison Labels, Pratt & Whitney, G.E., Lucas Varity, United Airlines and Boeing have all reported combinations of increased revenue / Throughput, improved due-date delivery, reduced Inventory and/or lead-time. Out of a total of 82 case studies, only one reported a negative response (4% increase in Inventory)11. Even in this example, all other metrics were positive and the authors concluded that ToC had been beneficial.

Warrender Financial plc

 ”Warrender Financial”, like any company, is shaped by past decisions. Whilst this makes Warrender Financial unique, it should be able to be viewed in Throughput (T), Inventory (I) and Operating Expense (OE) terms. The research at Warrender Financial proved a valuable test-bed for the concepts, almost all of which worked well without adaptation. Using the ToC definitions and couching them in terms familiar to finance people, we end up with the following:

Inventory (I) has two elements:

A: Inventory to be Invested – money coming in expecting a return

B: Inventory Invested – money received and invested to generate a return

Throughput (T) is generating revenue from converting A into B (difference between interest rates charged and paid, plus related services) and

Operating Expense (OE) is the cost incurred in this process. Profit (loss) is the result. The incentive for a bank therefore is to maximise Throughput by matching money coming in to investment opportunities. If it is out of balance the following reduces Throughput:

1)     If not enough investment opportunities, some money can only invest at the risk free/base rate (i.e. on deposit), reducing Throughput

2)     If there are more investment opportunities than cash coming in, Throughput is limited by the company’s ability to attract the cash.

As a result of (1) and (2) there is an incentive to minimise cash sitting around doing “nothing”: the quicker you convert the incoming cash into loans the better.

Within the ToC environment (1) and (2) are couched in terms of “market constraints”: the bank needs to grow the market. The ability to convert quickly represents an internal constraint, with process re-engineering required.

Having two types of Inventory is not part of ToC Theory. In this example, the first one fits with the ToC ideal (minimise Inventory) whilst the second would suggest that the bank wants to have an ever-increasing Inventory.  I believe that new money awaiting investment (A) can be classed as Throughput. However, existing money invested (B) is more correctly termed an asset (indeed the investment industry often uses the measure “assets under management”).

The definitions therefore broadly hold:

•   Throughput: the rate at which the system generates money through sales

•   Inventory: the money that the system invests in purchasing things, which it intends to sell.

•   Operating Expense: all the money the system spends in order to turn Inventory into Throughput

•   Assets: all the client money or – more generally – clients you have

Using these definitions, maximising Throughput dictates that the company seeks to attract new money, whilst retaining as much of the existing as possible. OE includes Sales & Marketing, IT costs, and setting up the contracts. Throughput should be a net figure, reflecting losses as money goes out. Throughput as a net figure means that good on-going customer service plays a role in encouraging further investments whilst minimising the amount leaving the company.

So, how can we use this knowledge to run businesses better, more efficiently, and more profitably? And how can we run our own lives using ToC terms to guide us?

To purchase full text, please visit our Products page.

11th February 2008, Monday morning meeting 8:20 a.m.

“Morning Andy”, I enthused. “How was your trip to the States?”

“Morning Gordon. We’ll cover that in a moment. How was your weekend? Ready for all those unexpected challenges?”  Andy strode across the room, his energy and stature belied his years – he must be due for retirement in a few years, but probably wouldn’t – lots of good years left!  I responded to his light hearted question.

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“But of course, few things stay the same for long”.

“I’ve asked Anne and Jim to join us this morning, hence the slight delay. They’re on their way.”

“Oh, okay. I’ll make myself comfortable” I chose the seat next to Andy. I thought that a bit of power association wouldn’t do any harm. Anne ran Customer Services for the banking side, whilst Jim did the same for the insurance side. They’re both okay, though I was still unsure as to whether or not the three of us are really on the same page.  

Meetings involving us all usually got bogged down in analysis of minor fluctuations in customer metrics. And the underlying method of calculation was so dodgy that I suspect the fluctuations are more to do with clumsy data entry than real changes in the business. Still, a one-point change in staff utilisation is important to us all, as that impacts on our bonus. Anticipation of a bonus might be wishful thinking on my part, given the current nose-diving metrics!

I laid out my Post-its in front of me, and sat back watching Andy do a rather unstructured tidy of his desk. I prefer to file neatly, rather than empty one filing box and then chuck new stuff in to it, which is what Andy is doing. But then again, his way of working had got him further up the ladder than me, so perhaps I should learn not to be quite such a completer-finisher.

I glanced at the wall clock. Not good at all. I’ve been in for an hour and achieved pretty much bugger all. And now I sit waiting. The view is definitely better from my office. At last…

“Morning Andy, Gordon.” It was Anne. Today’s very buttoned up outfit was a sedate navy blue suit – with a skirt that covered her knees and most of her legs below that too.  Even her hair was conservative, mouse brown, short and never out of place.

Andy motioned for Anne to sit down. “Morning, hope you have a great story to tell me.” Anne glanced at Andy again as she sat down. So it was going to be one of those meetings.

Anne smiled; “So Gordon, your retention figures seem to be going the wrong way. You’re not making me look good. Maybe that’s why I am here this morning”. The meeting hadn’t even started and already they were jockeying for position.

Jim came into the room, slightly out of breath. “Morning all, apologies. Since I wasn’t expecting to be here, I wanted just to check the email and delay my first meeting. Anyhow, I’m here.” Jim’s style was smooth, polite and courteous, he looked the part, always a smart pinstripe and perfectly coiffured hair; you never saw Jim with ‘designer stubble’ and I had a sneaking suspicion that he had his nails manicured. No barbed comments came my way.

Andy stopped tidying, and went over to the door. Leaning on the frame, he leant out and had a quiet word with Sue. He returned and closed the door behind him. “Thanks for being flexible this morning. I realise that this will have mucked up your plans; that’s life in the big city.” He gave us an ironic smile and sat in his usual seat and looked at each of us. Clearly this was to be a tough meeting.

“Anne; utilistation down two percent. Peformance is one percent above where it was six months ago. Staff sick still running above the allowed 2.44%. More worryingly, complaints are on an upwards trend and you still have 103 headcount too many for your budget. When are you going to deliver real change?” Anne was no longer smiling. Secretly, I was.

“Gordon, why do you think Anne is not delivering?”

“Ouch” I thought. Right under the spotlight. Do I jump to her defence, play a political game or tell the truth.

“Andy, Anne’s experience and day-to-day running on the banking side means she is far more well placed to answer that than me.”

“Bollocks! I asked you. I want you to let me see that you grasp the enormity of the challenges you all face. What insights, if any, have you on why Anne’s banking side continues to – at best – flat-line?”

Well and truly cornered, my mind was racing. Anything I said would antagonise Anne, and likely to apply to Jim. Both of them were now watching me intently. I remembered to keep breathing and arranged my face into what I thought was a pleasant, but concerned, expression.

“I have some doubts about the quality of the management information we are using here. The Management Information, from a statistical viewpoint, is suspect. We are getting upset because of fluctuations….”

“Tell me something that I don’t know” Andy abruptly stated. “The MI is rubbish, and it is consistently rubbish so the trend probably holds. What other insights?”

My mind raced some more and I felt like the swan sailing along regally whilst paddling frantically under the surface.  I opened my mouth, hoping for inspiration and wisdom to emerge. 

“We, well. We – umm – our initiatives are not hugely bold. Don’t get me wrong. They are challenging, I am not sure that they will bridge the gap yet. For my part, I am trying to retain customers hell bent on leaving. So it’s hard.”

“So why are you Head of Customer Retention?”

Yes, I had just cornered myself quite nicely, so much for wisdom.  I made another attempt. “Because it’s important. It’s important that we limit the outflow and learn why they are leaving. Then we can do something about the root cause and change our ways”. Good save.

“Wishy-washy, Gordon. You get paid a lot of money and I want action, decisions, and progress. Not nice words. And I correct myself. I said it’s what I want. Well, it’s not me. It’s you. It has to be what you want. If it’s not, you have a problem”.

I do not normally go that shade of red. Anne, thankful that the flack was not aimed at her, was busy scribbling her argument down. Jim was just smiling. Probably in preparation for his turn.

“Andy, if I wasn’t interested in customers I…”

“ ‘INTERESTED’? What a word to use Gordon. It’s not about interest, it’s about PASSION! Commitment! Belief that the customer deserves better. Anne do you agree?”

“Yes Andy, absolutely on song there”.

“Bollocks. Gordon, where’s your passion?”

My mind was rapidly emptying. My list of pre-prepared conscious answers were exhausted. Right now, I wished I was still trying to get through to the IT help desk rather than sitting here. I closed my eyes, and listened. Silence descended. Without opening my eyes, I started:

“Last night I worked on the numbers. I highlighted trends and anomalies in the report and questioned whether I believed the figures were anything other than an abstraction. They don’t convey the emotions involved; the customer who gets cut off as soon as they get through to the call centre. The angry customer who told us they had moved and we updated their records incorrectly, and then sent their confirmation letter to the old address. Or the new business banking customer that had to wait four weeks before the account was open”. I looked at my post-its and then my colleagues.

“My ideas for improvements were:

• Route callers asking how to close to the retention team, not just those that said they wanted to close/cancel.
• Call those who stop their direct debits instead of sending an automatic letter.
• Discuss with the number crunchers if there is a way of reducing the premium for renewals further.

But today, this morning, right now, they are weak solutions. Sticking plasters that mask the real changes required. The problem is that I don’t think I know what they are, because for months now we have been trying to identify sticking plasters. What we – I – focus on is what the customer will get.”

I stopped and looked around.  Andy picked up the ball again.

 “Jim, your insights please into why customers are not getting great service on the insurance side.” Andy’s tone did not suggest that Jim’s ride would be any easier than mine.

 “Sure Andy. No problem. The way I see it, and it’s borne out through the figures, we are fighting increasing regulation, particularly from the EU folks and that’s eating up resources that could be delivering outstanding customer service. And on top of that, we are not market leading in terms of rates so I agree with Gordon on the need to reduce premiums further.”  Jim eased himself back in the chair, confident that he’d caught the ball cleanly.

 “But Gordon just said he now thinks that’s not enough”, chipped in Andy.

 “Well, in itself, its not. But it’s a great boost to the retention figures. And obviously the more customers we keep or gain, the better the staff utilisation figures will be, and we get bigger economies of scale.”

 “Jim, that’s basic economics, thanks. In the real world, lowering premiums hurts the profit margin and does not necessarily make for better customer service. That’s also basic economics. Do we keep lowering premiums until we can’t afford to stay in business? No, that’s not an option.”

 “What I mean to say is that Anne and I regularly look at the figures, and what’s happening in the teams and we can see that service is so much quicker now than it was, but customers are not necessarily remembering how far we have come. We’ve added features, made transactions available on-line, improved the speed at which we answer the calls…”

 “Jim. Let me stop you there. Service is 95% within four rings, correct?” Andy fixed his gaze on Jim.

Jim glanced at Anne and, for once, looked a little ruffled, “Yes, that’s the stated times, and we have been at about 94-97% for most of this month,” he said defensively.

Anne added: “The longest wait time was also an issue, so we have managed to reduce the worst case scenarios too. We’re not just dealing with abstract average customers, but real people. So far this year, the longest anyone has had to wait is about four minutes, and this month it’s 3 minutes 20 seconds I think.”

“Do we all agree that four rings is about 8 seconds wait? Somewhere about there? And we are achieving near 95% in that time?” We all agreed with Andy.

“Okay”. Andy went over to his desk, and started dialling. We all looked at each other.  He hit the speaker button so we could all hear.

Almost immediately, Andy was connected.

“Hello, and welcome to Warrender Financial, a division of Warrender Financial Inc of New York. Warrender Financial provides a range of cost effective insurance and banking solutions tailored to meet your needs. For more information, please visit our website at www.warrenderfinancial.co.uk. In relation to pensions and general insurance, we are regulated in the UK by the Financial Services Authority. Please have your policy number ready. Your call may be recorded for security and training purposes. Please choose from one of the following options. Press one for banking, two for insurance or three for any other queries”

Andy pressed two. “Forty seconds so far.”  He had his eye on the clock on the wall as the second hand swept round its face.

“Please press one for general insurance and two for life insurance”

Again Andy pressed two.

“If you wish to purchase life assurance, please press one. If you wish to renew your policy please press two. For changes to your banking details please press three. If you wish to cancel your policy please press four. For all other queries please press five. To return to the main menu, please press zero.”

I was pleased to hear that option four had finally gone live – now my team would get more calls and try to retain the customer.

Andy pressed four. “70 seconds” I went cold. The phone started ringing. The room was otherwise silent. It rang and rang. On the 6th ring voicemail kicked in. “Thank you for calling the retention team at Warrender Financial. We are open 9 a.m. to 5 p.m. Monday to Friday. Please leave your name and number and we will call you back”.

Andy hung up. The red colour rapidly drained out of my face, to be replaced with a more appropriate about-to-lose-job colour.

“Think carefully before responding. Jim, will this call be captured as answered in 6 rings, abandoned, answered and dealt with in one second (thus reducing your average), or what? Anne, if I had pressed banking instead, would I have had any different a message? Gordon, why is your team open different hours from the main call centre?”

We all looked at each other, fearful to speak. Andy sat back in his seat and waited. None of us spoke. Eventually Andy broke the silence.

“Resolve these by the end of today. Also, please adjust the measure you are reporting. Change % answered in four rings to % answered in 80 seconds. The new target is 100%. And decide how to get the 95% answered in forty seconds. And between the three of you get it fixed so that you are all open for the same hours!”

Everyone nodded in submissive agreement.

“Now, as you know, I visited Head Office Thursday and Friday last week with the CEO, Valerie. Our American colleagues love to highlight issues and then delegate the responsibility to their staff to resolve. Well this time they did a bit more. Key issues; group profits are likely to come in $400m less than target, which will dent stock values even more than they already are. The UK operation was supposed to deliver $35m profit, and we are now projecting at $27.6m for year end. That’s a hell of a bad start to the year”

Anne spoke up. “Andy we know it’s been quiet in January. It always is. Surely the year to date targets reflected this phasing?”

“They did, so the fact that we are already so far behind is alarming. Now before you say it is the responsibility of Sales to get the business, the new Group deputy CEO, Caroline Dexter, was very on the ball, and very focused on what Customer Services can do to stop money going out. Her speech at the end of the two days was powerful and compelling – and blunt.”

“Is Caroline the one that joined from some South American bank?”

“Yes Jim, well remembered: Banco Bolivia where she had overseen a radical shake-up of the business, including redundancies”.

“So what’s her blunt message?” enquired Jim.

“In no particular order, each regional office needs to deliver the agreed increase in deposits and profits, and show that they are on track by the half-year. If they are not, there will be a review of the viability of the unit.

“There is to be a headcount freeze company wide. So I think the Hong Kong office is OK, I saw their figures on Thursday and they seem to be on target. The North American operations are well below target. And we are in the firing line.

“I met with Valerie this morning to give her to a couple answers to questions she posed on the plane back.”

I imagined that must have been a fun air miles trip; coming back having had a kick in the rear from central command. Plenty for our UK CEO and Head of Customer Services to talk about, I guess. And now Customer Services was being asked to play its part.

Jim leaned forwards.  “So we need to rein in costs, improve customer services, not hire more people, and to do so that we are back on track within say four months?”

“Yes, Jim. Accurate, if somewhat sterile”

“With the threat of ‘review’ on top” Anne added.

“And fixing the call waiting metric by close of business tonight”, I chipped in. I was definitely going off this office space. Mine was much more, shall we say, tranquil.

“There will be more to tell you tomorrow,” Andy continued. “Valerie, myself, HR and Finance will be in a meeting most of today to work through some ramifications”.

“Andy, isn’t this a knee-jerk short-term fire-fighting exercise? We were all stunned by Northern Rock Bank asking for – and getting – emergency funding from the BoE, but we are much more reliant on our savers for our capital base than they were,” Jim enquired.

“Jim, you are good at fire-fighting, so it should not be a problem. As for short-term, perhaps it is. But it is what we have been tasked to deliver on, so we must. These are very uncertain times – last week’s near record one-day fall in the FTSE 100 tells us that investors are very scared at the moment. ”

There was a knock at the door and Sue popped her head in. “It’s nearly 9a.m. Andy, I have pulled the requested file. The meeting has been moved to the Boardroom, and your other meetings are cancelled.” Sue left the file on the desk, and closed the door behind her.

 “OK folks, I want a confirmation of the metric change before you go today. I expect to be talking with you all tomorrow.” And before we could get up, Andy grabbed the file and left.

Anne seized the moment. “So Jim, Gordon. How’s about we meet up, say at eleven, my office to work out how we deal with the metric thing?”

“Can we make it twelve noon, please, I have all my team managers at 11 a.m. I’d like to discuss with them to see if they have any ideas.”

“OK Jim, I can do that. Gordon?”

“Twelve is fine for me”. My head was spinning.

It’s also an ideal day or two to sell an airport-affected house, which is exactly what my parents are doing, having put their place on the market 3 days ago….

It’s always good to learn, a few choice notes from reading this (albeit) 10 yr old book are:

Private investor has some advantages – Wall Street/the City has to track the big ones, and doesn’t want to stick their neck too high above the parapet. Therefore, a lot of the upside of a small co is not captured by them.

If you don’t own a house, get one first before investing [historically, it’s often the best return/tax advantage (CGT free). It’s also leveragable. I wonder if his view has changed now that property became incredibly difficult to sell, prices collapsed, and dealing costs are high?]

P90-1

• Don’t overestimate the skill and wisdom of professionals
• Take advantage of what you already know
• Look for opportunities that haven’t yet been discovered by Wall St/City
• Invest in a house before a stock
• Ignore short term fluctuations
• Large profits can be made in common stocks
• Large losses can be made in common stocks
• Predicting the economy is futile
• Long term stocks are far better than long term bonds
• Most chatter is just influence/gossip/not real.