W ITH AN election looming, public services and their improvement – or lack of same – have climbed to No 2 on the political agenda just below Iraq. As with foreign policy, it promises to be a white-knuckle ride. For while there’s clear water between the two main parties on the public sector – the government’s focus is on improvement, whereas the Tories’ is on cost-cutting – ministers face a growing problem of evidence.

Basically, voters refuse to believe public services are improving as fast as the government says they are. Unease at the ‘perception gap’ is almost palpable. Nick Raynsford, the local government minister, has already puzzled over the fact that local authorities’ customer satisfaction scores are going down at the same time as their official performance indicators are going up. The same theme was a subtext to many of the presentations by Whitehall bigwigs at last week’s Economist conference on the public sector.

For every area of policy, the conference heard, almost all the government’s traffic-light performance indicators are green. There are more doctors, nurses, policemen and teachers. Crime is down, school achievements up, NHS waiting lists are shorter. Speaker after speaker told the conference that from where they were sitting, services were getting better – it was only the extent of the improvement that was in doubt.

What’s more, as the presentations documented, this is in the perspective of a government for which public services really are important. They are seen, rightly, as an essential component of a competitive economy and, at a guess, No 10’s performance management system, at least in form, is by some distance the most sophisticated ever put in place.

So why isn’t it delivering? Identifying answers has become a Whitehall industry in itself. One suggestion is poor expectation management: people expect too much. Another is a time-lag between the personal (‘the hospital treated me quite well’) and the general (‘the NHS is getting better’). For Raynsford, more bizarrely, it appears to be something to do with a lack of public leadership.

But there is a much simpler explana tion to hand. The signals ministers are receiving do not mean what they think because they are not transmitted by service users but by service managers. They reflect a corporate rather than a public experience, not the same thing at all. Yes, it’s the old problem of targets.

Last summer a borough chief executive predicted to me the divergence between his government and public satisfaction figures. ‘The targets and specifications handed down from the centre oblige us to do things the public don’t care about,’ he explained. A striking example is e-government – web-enabling public services. In the latest round of specifications, councils are encouraged to make it possible for citizens to browse their council tax online. ‘How sad would I have to be to want to browse my council tax payments online?’ mused another service director.

Across the field, public service managers are diligently ticking off and reporting what matters to government, not to citizens. This explains baffling (to the public) rankings like three-star NHS trusts or ‘excellent’ councils. ‘Improvement’ or ‘excellence’ is in the eye of the government, not the public. Hence the gap.

But this is in the very nature of targets. The particularly ingenious Catch 22 to which they are subject is so well documented it has a name. The social-science equivalent of the uncertainty principle in physics, Goodhart’s Law states that the instant a measure is used as a target, it loses all value as a measure.

This is because managers understandably devote their efforts to meeting the target, not what the target stands for. Targets, as Michael Barber, director of the Prime Minister’s Delivery Unit, helpfully reminded the conference, are ‘representations’, abstractions from the aim beneath. Indeed: and that’s the problem.

It’s sensible that all A&E casualties should be treated as quickly as possible consistent with clinical need. But as soon as that is represented as ‘all emergencies must be seen within four hours’, as currently mandated, doctors divert attention from juggling patients according to clinical need – which may mean operating on one person within two minutes and leaving another for six hours under observation – to cramming everyone through the arbitrary threshold to avoid a waiting-time ‘breach’.

Where the target and common sense are in conflict, staff employ a variety of recording ruses to reconcile them. As Goodhart predicts, the measures are no longer reliable – doubly so, since the target was an inadequate representation of a complex aim in the first place.

Compounding the problem, as Lucy de Groot, executive director of the Improvement and Development Agency, reminded listeners, is that ‘the target regime is derived from silos’ – individual departments or agencies, or even sometimes departments within departments. Being un-joined-up, they fail to coincide with the lived experience of citizens.

At worst, as documented in a previous column, that leads to a situation where a water company has measures in place for how long it takes to answer the phone or make an appointment, but none for the end-to-end time to fix a burst main. It can meet all its service standards – and thus proudly claim ‘excellence’ – while it leaves the water running for weeks.

The government is now well aware of some of the shortcomings of target regime. It has cut their number from about 700 to 100 departmental Public Service Agreement targets, according to Barber. A full-scale assault is being launched on the pounds 11 billion regulation industry – an initiative welcomed by Audit Commissioner James Strachan, a champion of the need for regulatory value for money.

And it is saying all the right things about getting away from top-down control and giving service deliverers the freedom to deliver ‘personalised’ services. Former Treasury adviser and prospective MP Ed Balls suggested that the Bank of England should be the model for future public sector reform, offering a stable framework within which specialists could make decisions unencumbered by short-term politics. ‘One of the things we’ve learnt is that we need to get systems, rather than individuals, right,’ he said.

But the government still cannot help getting targets in a twist. Witness the new goal of halving MRSA infections in hospitals in the next three years. Think what this looks like from the patient’s point of view: in three years’ time, I will have half the chance of being killed by going to hospital than I do now. The only acceptable ‘target’ here, as in all such cases, is perfection, and the only acceptable measures those that show both public and providers how progress towards it is being achieved, year by year.

The Observer, 14 Noember 2004

THIS IS the year the employee went missing. On a notorious weekend in August, BA almost imploded for the feeblest excuse of all, staff shortages. Meanwhile, Royal Mail was incentivising postmen and women to deliver the mail rather than stay in bed by entering good attenders in a prize draw to win a car or holiday vouchers. And last week the Cabinet Office admitted that civil servants had stayed at home an average 10 days each in 2003, defeating attempts to reduce Whitehall sick leave to private-sector proportions.

In business, absence doth definitely not make the heart grow fonder. Absenteeism costs business pounds 11.6 billion a year, according to the CBI. In its 2004 survey, the Chartered Institute of Personnel and Development (CIPD) found that average sickness absence last year was 9.1 days per employee, fluctuating around 4 per cent of all working days, as it has done for the last few years.

‘Absence management has been going up the agenda as companies – and the Chancellor – see it as a way of improving productivity and cutting costs,’ notes CIPD employment relations adviser Ben Willmott.

Kneejerk reactions to all this are evident everywhere. Companies instinctively tighten up sanctions or institute incentives (bribes). Heart-sinkingly named ‘integrated absence management packages’ are something every well-equipped HR manager’s gotta have, like gunbelts in the Wild West, and for much the same reasons: track down the offenders, persuade them to see the error of their ways, and if not, use force.

Seems reasonable? Of course, absenteeism matters, but it doesn’t follow that the best, or even a sensible, way to manage it is directly. Absenteeism, like unhappiness, is an epiphenomenon, a by-product of a system. Managing it directly is like trying to manage a dog by holding its tail, yielding little purchase, or insight, on the behaviour of the rest of the animal. Indeed, yanking its tail has a good chance of making it forget its previous grievances and bite you instead.

Obviously, absenteeism equals people not wanting to come to work. What makes people so unhappy with their jobs that they don’t turn up, with all the knock-on effects for colleagues and customers? Apart from coughs and colds, the answer, attested by the CIPD research, particularly for white-collar workers, is stress related to workload, management style, organisational change and the need to meet targets.

Stress-related dissatisfaction and absence are increasing. Apart from the CIPD figures, research from the University of Kent has identified a 10 per cent drop in job satisfaction over the last decade – at first sight surprising, since wage and employment levels are buoyant. But those advantages may be outweighed by perceived intensification of work and diminishing levels of control over the job.

Remind you of anything? These are exactly, and depressingly, the same complaints made against the factory system from the 1920s onwards. Offices, particularly in the target-obsessed, low-paid, inflexible public sector, are today’s alienating, top-down mass-manufacturing plants. Recent concerns about bullying as a factor in absenteeism, confirms Willmott, are not coincidence, though there is a fine line between legitimate and illegitimate pressure: ‘Where managers are themselves under pressure to meet quotas or targets, it’s all too easy to pass it on down the line.’

The conventional HR response is to say that absence management, while no panacea on its own, is needed as part of the bundle of practices – clear aims and roles, training, reward, etc – that make up the ‘high-performance workplace’. A more radical approach is to say absenteeism is a form of waste, and, as with any other waste, the only real answer is to design it out of the system.

A straw poll of the staff who work for Observer Business revealed that absenteeism here is a tiny fraction of the national average. How so? A combination of high adrenaline, crystal-clear expectations (miss a deadline? I don’t think so), extreme flexibility in meeting them, peer pressure and dependence (‘teamwork’ in the jargon), and the instant gratification of seeing your work in print at the weekend, means that, despite routine grumbles, the attractions of playing hooky are not as great as those of doing the job.

An exception? Well, no. It’s true that media and telecoms have low absenteeism nationally, as does consultancy. But most work has some of the same elements, and all work can be well or badly designed for its purpose. According to recent figures, employees at Lincoln City Council took an average 18.2 days – more than three weeks – off sick last year, a staggering four times more than the best performer, Hampshire’s Hart District Council, where employees were absent just 4.7 days. Even assembly-line work can (no, should) be designed to give employees control over what they do. Car workers at Toyota can stop the line if there’s a problem they cannot solve, but that’s not a people issue – it’s to do with ensuring that the job is done right in the first place.

Absence management, like appraisal and bureaucracy in general, is part of the heavy cost of a badly designed work system. It adds complexity to management and no value to the customer. The solution is therefore not to manage it better – a classic case of doing the wrong thing righter – but to get rid of the need for it altogether. The best kind of absence management is conspicuous by its absence.

The Observer, 2 November 2004

ARE THE wheels coming off the luxury German charabanc? For a long time as closely identified with quality as sauerkraut was with wurst, the exclusive image of German cars is taking a battering in the area it can least afford.

* DaimlerChrysler recently admitted that quality problems at Mercedes had kicked a hole in group profits this year and would do so again in 2005. The three-pointed star has tumbled from top of the influential JD Power US reliability rankings to 28th in a decade.

* Volkswagen, once a byword for reliability, has sunk to 33rd in JD Power. The VW division, with fleets of unsold cars, is in ‘a clear loss situation’ and faces labour unrest at home as it seeks to slash costs by a third.

* Uber-aspirational BMW, too, is not immune to quality woes. ‘If only everything in life was as reliable as… a Japanese car,’ quipped the Which? headline on its annual reliability report in August, noting that the Munich firm and Audi had joined VW among the least reliable makes.

* Even Porsche, the best-placed German marque, was only average in the Which? ratings, while in another hefty dent to German bodywork, the VW Polo, the old-model Mercedes E-class and super-trendy Audi TT had the worst record of all new cars for breakdowns in the first two years.

The common quality dip in German cars is no coincidence – and it may be serious. ‘It’s attacking the German manufacturers at the core of their brand and business model,’ says Mike Sweeney, professor of operations management at Cranfield Management School. ‘It’s a real challenge.’

The Germans face not one but two testing issues. The first is how to manufacture increasingly complex and sophisticated products. Traditional vertically integrated operations – doing everything in-house – have served German firms well in the past but are increasingly difficult to do cost-effectively as complexity outstrips even the capabilities of a legendarily well-trained workforce. So firms are outsourcing sub-assembly to ‘prime suppliers’, which instead of delivering individual parts now send whole modules – a complete power-train, for example – to the production line.

For the final assembler, says Sweeney, modular build has the advantages of simplifying production, shifting responsibility for managing the supply chain to first-tier vendors, and dramatically reducing investment needed in its own plant and equipment.

In the long term, it should yield substantial cost and quality gains. In the short term, however, there are big transition problems as suppliers grapple with unfamiliar tasks of managing global supply chains and advanced manufacture, while final assemblers come to terms with concomitant loss of control. ‘There’s a big decision to make now,’ notes Sweeney. ‘Do they go in and sort things out or wait for the suppliers to get it together?’

But systems engineering is only part of the problem. Anxious to underline their reputation for cutting-edge technology, German manufacturers have eagerly embraced electronics in everything from engine management to navigation. But if integrating and managing mechanical systems is difficult enough, in electronics it is a nightmare.

‘Of course, technology is part of their marketing strategy,’ says Dan Jones, co-author of The Machine That Changed The World and chairman of the Lean Enterprise Academy. ‘But they went beyond the capability of the electronics they were using. There are some red faces at the likes of Bosch – the systems were just not robust enough for the auto environment.’

To get the reliability ratings back on track, German carmakers are now hastily backtracking on electronics. But having built their reputations on advanced technology, will they continue to be in a position to demand today’s high prices after the debacle?

This links to a third question. ‘There’s a big debate in Germany about diesel,’ notes Jones. ‘While they’ve been concentrating on diesel, everyone else is looking at hybrids’ – notably Toyota, whose second-generation electricity and petrol-powered car, the Prius, is well ahead of the competition. Hybrid, says Jones, promises ‘guilt-free motoring’, an especially alluring message in the US, land of gas-guzzling SUVs and pickups. Toyota’s next hybrid is a top-of-the-line SUV Porsche has adopted the technology for its Cayenne.

Until now, with a few niche exceptions, German carmakers have hogged the autobahn with high-tech, high-margin cars. But this may be changing. Thomas Bayne, chairman of ad agency Mountain View, who has worked with several motor industry clients, points out that competition is much greater at the top end of the market than it used to be. With cars in oversupply, the real issue now is differentiation, he believes, not quality as such – witness the Mini and Audi TT, both of which have become cult cars despite reliability ratings that would have taken less sexy designs straight off the road.

In this context, he speculates that the problem for firms like Mercedes and Volkswagen may be a loss of status and desire: ‘the badge may not mean what it used to’. In which case, better quality is not the answer. As for BMW, having introduced an entry-level 1-series, how far can it stretch the brand in search of volume without destroying the aspirational qualities that drove its success?

German manufacturers can thank their stars that they currently face little threat from the cash-strapped US Big Two: both Ford and GM lost money on cars last year, and some observers think Chapter 11 is a possibility for at least one of them.

But that still leaves the juggernaut bearing down on everyone: Toyota. The Japanese firm, which announced its own results last week, has money to burn, in the last half year overcoming tough conditions to record an operating profit of $8bn. Up until now, the company has been thought of as a cautious copier rather than high-tech innovator. But with its superior engine technology, its upmarket Lexus marque adding style to its formidable build quality and its adoption of electronics to add to its peerless manufacturing prowess, it is now poised to offer a serious challenge in the luxury sector. Toyota’s next-generation cars will be simpler, smaller, smarter, cutting out a new layer of cost as well – the opposite of the German approach. Roll over, Beethoven?

The Observer, 7 November 2004

I F YOU DID a psychological profile of the corporation, what would it look like? Self-interested, manipulative, avowedly asocial, self-aggrandising, unable to accept responsibility for its own actions or feel remorse – as a person, the corporation would probably qualify as a full-blown psychopath.

Sensationalist? Joel Bakan, whose provocative film documentary, The Corporation , is due out at this month and whose book of the same is in the shops (Constable, pounds 9.99), doesn’t think so.

The opposite of a blunderbuss-wielding Michael Moore, Bakan is a Canadian law professor whose brief is as well- ordered, concise and sober as the accusation is grave: behind its benevolent face, he argues, the most important institution of modern capitalism is a Frankenstein’s monster that has broken its chains and is now consuming the society that created it.

Three key legal interventions have made the corporation what it is, Bakan says. The first two were the innovations of limited liability and the granting to the corporation of a legal personality. At a stroke, ‘the corporate person had taken the place, at least in law, of the real people who owned corporations’. And the company, previously dependent on government grant and charter, could now be seen as an independent being, a ‘natural entity’ with the same rights to exist as an individual.

The corporation turned out to be a work of genius, a brilliant amplifier of capital and effort that has made possible the sensational improvements in living standards (in the developed world) of the past 150 years. But it is a flawed genius, and the flaw, perhaps fatal, is the third enabling condition: exclusive emphasis on profit.

This is expressed in the book’s subtitle, The Pathological Pursuit of Profit and Power. On the basis of case law, Bakan insists, ‘managers and directors have a legal duty to put shareholders’ interests above all others’ and no authority to serve any other interests – the ‘best interests of the corporation’ principle.

The combination of these three conditions (Bakan could have added a fourth, which is that, unlike a human being, the corporation has no natural life span. It can in effect live and get bigger for ever) has far-reaching consequences.

The first is that among the interests the corporation has no business serving are those of the society that framed its governing rules. In the interests of shareholders, the corporation is not only entitled but obliged to offload on to others as many of the costs of making profits as possible.

In short, says shareholder activist Bob Monks, quoted by Bakan, the corporation is ‘an externalising machine, in the same way that a shark is a killing machine’ – not because it’s malevolent but because that’s the way it is designed. This in turn makes the whole notion of corporate social responsibility a logical nonsense, permissible only when it is in the best interests of the corporation (in which case it’s not corporate social responsibility) or when, ironically, it is insincere (ditto).

CSR, says Bakan baldly, ‘is an oxymoron’. You might just as well ask a great white to be nice to fish or a fox to go vegetarian. When it comes down to it, responsibility always takes second place to shareholder interests, in the name of which corporations constantly test the edges of legality and far overstep those of morality.

This truly is a world where, as he says, legal compliance is just another cost-benefit analysis. Bakan has hair-raising and gruesomely entertaining sections on spying, cheating and amazingly unethical marketing devices. He also notes three pages of alleged legal breaches by corporate role model GE sweatshops turning out goods for Nike and Wal-Mart and American companies’ reluctance to cease their involvement in Nazi Germany because it was good business for their shareholders.

Extraordinarily, Bakan recounts a fortunately inept but serious (and authenticated) business-backed plan to depose Roosevelt and install a fascist regime in the US in the 1930s.

The corporation has been much more successful by persuasion, to the extent that swathes of what used to be the public sphere and interest have been surrendered to it. And it still wants more.

But as the dominance grows, so do the flaws. In a nightmare version of the effect of the invisible hand, everyone pursuing their own self-interest increasingly produces results no one wants or intends (in the extreme, planetary collapse), but for which no one is responsible. And the pathologically narrow and materialistic view of human nature that underpins today’s corporate form not only dominates economic activity – it is also altering humanity.

‘In a world where anything or anyone can be owned, manipulated, and exploited for profit, everything and everyone will eventually be,’ Bakan warns. The sorcerer’s apprentice is running amok the corporation is remaking us in its own stunted and undersocialised image.

This lucid and urgent book does leave a couple of stones unturned. It perhaps overestimates the global hegemony of the US model (although not its fundamentalist zeal for hegemony) shareholders certainly own rights in companies, but the assets themselves?

Then again it underestimates, or rather does not address, the formidable extent to which the model is underpinned by dominant academic theory. And, perhaps not surprisingly, Bakan’s remedies are less well thought-out than his cool and authorititative analysis.

He is, though, undoubtedly right that it’s time to destroy the pernicious and self-serving idea of the corporation as a ‘natural entity’. It’s not. It has a right to exist because society gave it one.

The corporation was created as an instrument of public policy, and its licence can still, theoretically, be revoked. The presumption of freedom from regulation is otiose. The corporation needs to be re-made in our image – in law, in theory and in practice.

The Observer, 24 October 2004

ONCE UPON a time, all of, oooh, 20 years ago, the press was full of strident headlines about site closures, the decamping of jobs to Asia and the inability of the West to compete with low-wage countries in the East. Business Week dubbed the phenomenon ‘the hollowing of the corporation’ and wondered if the US economy would survive.

Then, of course, the subject was manufacturing. We know what happened: manufacturing survived, but metamorphosed, with Dell, Cisco, Microsoft and Intel replacing General Motors, Ford and GE as the motor of the US and world economy. Out of the new order emerged an unprecedented phase of expansion that was only reined in when the dotcom boom toppled over its own exuberant overconfidence three years ago.

We should do well to bear the parallel in mind when thinking about the current outsourcing/offshoring boom. On the one hand, ‘[Offshoring] is nothing new,’ notes Ananda Mukerji, chief executive of fast-growing Indian outsourcing service provider ICICI One-Source (I-OneSource). Twenty years ago, multinationals discovered the advantage of global sourcing of physical goods now the technology exists to do the same thing with business processes, ranging from payroll processing and account handling to customer service.

On the other hand, it’s pretty clear that after the current reconfiguring of comparative advantage is done, it won’t be business as usual. The potential for fresh combinations of resources being created will almost certainly see to that.

Mukerji’s company, astutely set up by a leading bank in 2002 to specialise in ‘business process outsourcing’ to UK and US firms, mainly in financial services, is a good example of this potential. Now boasting a workforce of 4,800 and six processing centres, I-OneSource grew by 134 per cent last year and is projecting annual expansion ‘faster than the industry’s 50 per cent’ for the next four or five years.

The Indian outsourcing sector will employ 1 million Indians by 2008. The same number of IT professionals will be writing software and running offshored IT contracts. And if you thought their advantage was just low cost, think again.

‘In practice, the cost proposition only comes into play if quality is up to scratch,’ Mukerji says. ‘As an offshore vendor, you have to be even better before people will consider you.’

Typically, I-OneSource is seeking to hop quickly up the value ladder from commodity transaction supplier to fully fledged business partner, offering not just an end-to-end service but also advice and consultancy in the mould of an IBM or Accenture. In a nutshell, firms such as I-OneSource are positioning themselves squarely at the leading edge of the knowledge economy.

Given India’s output of more than 2 million graduates a year (although not all of the highest standard), this is not far-fetched. A year ago, says Mukerji, the choice of location for a world-class processing centre was down to Mumbai or Bangalore now eight or 10 cities are jostling to be chosen.

It is a different story in the UK, where service companies should be preparing for a shake-up quite as fundamental as the one that hit manufacturing for six two decades ago.

UK manufacturers in particular were slow to react to the threat of global sourcing at first, then rushed pell-mell into out- and offshoring. However they took time to register (some never did), that there’s nothing inevitable about this. As the performance of many, often small or medium-sized, companies has shown, it’s perfectly possible for manufacturing to prosper in the UK – on condition that companies rethink all their processes from end to end and go lean.

Lean is a lot more than the tools and techniques it is sometimes sold as, since it involves reversing the top-down flow of influence and information – from manager-push to customer-pull – something that does not appeal to most managers. This is one reason why take-up was so half-hearted.

As specialist consultancies such as Vanguard, and now mainstream outfits such as McKinsey and AT Kearney, have shown, the lean logic applies equally well to providing service as to making things. AT Kearney, for instance, says the ‘lean leap’ can take 30 to 40 per cent out of the cost of transaction or other processes – after which the offshoring equation takes on a different complexion. It may still be a sensible option, but it is then about something more sophisticated than cost advantage, which is rapidly eroded when competitors follow suit.

Almost all service companies are where manufacturing was 20 years ago, stuffed with waste and offering poor service and value for money. To get beyond the mass-production attitudes that prevent them moving up to the higher-added-value uplands where most people think the UK’s economic future lies, they need to clear out the clutter – irrespective of outsourcing.

The lesson of manufacturing (and of comparative advantage) is that outsourcing to each other’s strengths can and should be a positive-sum game: each party can gain. But to reap that benefit, UK service companies will need to be much cleverer in improving quality and cutting cost than their manufacturing counterparts. Otherwise, Indian companies – which, after all, know a lot about UK tastes – will turn them into, well, curry.

The Observer, 17 Observer 2004

THE GREAT Australian fast bowler Glenn McGrath once noted that cricket was a straightforward game that people were constantly trying to complicate. ‘The hardest part,’ he said, ‘is keeping it simple.’

The same is true of management. Not that management is any easier than getting your bat near, or yourself out of the way of, a 95mph ball. It’s not. But keeping sight of the context is just as hard as laying bat on ball.

Do you hook the bouncer or not? That requires a simultaneous evaluation of the condition of the pitch, the balance of the battle between bowler and batsman and the state of the entire game.

Most management is a vast superstructure of complication erected on a small, simple base: the requirement to deliver a product or service to a customer at a satisfactory quality and price. But the superstructure is now so overgrown that it’s almost impossible to see the true context.

When you get down to it, 95 per cent of ‘management’ is about managing complexity and 5 per cent about doing the simple things that really matter.

Hence the feeling of infinite regression so characteristic of the field: managers pounce eagerly on the latest dragon-taming device (usually IT), only to find that the ‘solution’ is as frustratingly distant as ever.

The answer wasn’t IT after all. But nor is it marketing, strategy, HR or any other single element. It’s to stop obsessively ‘doing the wrong thing righter’ (Russell Ackoff) and strip the organisation back to the original simple idea.

Think of simplicity as a strong force whose unifying principle is ‘pull’. This is in relation to its opposite, the weak force of complexity whose governing principle is ‘push’. Both are self-reinforcing spirals but traditional, complexity-based push management drives a vicious circle.

Most companies make a product or service and then sell it to the customer with a big sales push.

Because they’re manufacturing a guess of what the customer wants, they have lots of product variants in reserve ‘just in case’. This inventory now has to be stored and managed.

As well as IT to track their inventory, companies need computers, specialists and managers to predict demand, order materials and parts and schedule manufacturing for the products they guess the customers will buy.

When companies guess wrongly they must dream up incentives for both their salesforce and customers to get these expensively made and stored mistakes sold. These schemes often cancel out any profit and forced sales also obscure what customers really want.

Push is so ingrained that we don’t notice it any more. Internally rather than externally mandated, it requires forced circulation through the system. Decisions (guesses) and commands about customers, products and quantities are pushed down from the departments where they are made. Communications departments are set up to circulate the information.

Jobs are pushed too, their shape determined by computer-derived abstractions that drive (another significant word) production.

So is much of the training on offer but, as psychologist Abraham Maslow put it, ‘A job that isn’t worth doing isn’t worth doing well.’ These jobs aren’t worth doing well and people know it. So to smooth their edges and cajole performance, managers resort to incentives, palliatives and sanctions, administered by an army of human resources executives.

Now reverse the logic. Suppose the customer pulls the product or service required through your system. Because you’re making what someone has actually ordered, you don’t have to guess or predict sales and production. You don’t have to add extra features or colours to tempt people to buy. If you’re not making things on spec, you don’t need the space, computers or people to store and track the inventory.

Within the factory, computers for complex scheduling and ordering are redundant because the work itself carries the necessary information. The order automatically triggers demand for parts the work triggers the next stage in the process. So jobs also have a clear and present focus: to do just what is needed to satisfy the next internal customer.

Because the information is validated by the customer and inherent in the work, companies need fewer managers to second-guess it or make arbitrary decisions and then correct them. Managers’ jobs change from giving orders to helping others do the job of satisfying customers.

Another of Maslow’s sayings was: ‘If you want people to do a good job, give them a good job to do.’ People doing a good job don’t take sickies, so firms working this way can do without absenteeism measures (absurd and disastrous bribes for people to turn up to work), nor do you need complicated incentives or other sanctions. Pull easily defines appropriate training, information and pay: whatever it takes to enable people to do a better job of satisfying the cus tomer. Decades ago, author and consultant Richard Schonberger termed this virtuous circle ‘frugal’ management. The more smoothly work is pulled through the system, the less wasted time, effort, space, inventory, rework, duplication, computers – and cost.

Oh, yes, and management too. As Peter Drucker once lamented, ‘So much of management seems to be preventing people doing their jobs.’

A better aim for managers is getting out of the way. The best kind of management is no management at all. Simple, or what?

The Observer, 10 October 2004

THE CASE of Corinne Maier was one of the media events of the French silly season. Maier, an economist at Electricite de France (EDF), a pillar of the French corporate establishment, wrote a book called Bonjour paresse (‘Hello Sloth’) which landed its author in a bathful of eau chaude when it was splashed on the front page of Le Monde

Billed as a slacker’s manual and subtitled ‘of the art and necessity of doing as little as possible at work’, Bonjour paresse was a publishing sensation. But it also brought the author a summons to a disciplinary hearing on the grounds of damage to EDF’s prestige and the self-esteem of her colleagues.

Would she, wouldn’t she be sacked? In the event, having been given time to reflect by Maier’s defiant departure for a nice holiday (‘Everyone knows you can’t have a disciplinary hearing in France in August,’ she snorted), the company let her off with a warning, an outcome she accepted with remarkably bad grace, muttering darkly about ‘harassment’.

It’s not hard to see why EDF was cross. A nod to Francoise Sagan’s dark existential 1954 novel Bonjour tristesse (‘Hello Heartache’), Bonjour paresse does a rather more direct job on the existential void at the heart of business.

Stingingly written by a formidably well-read intellectual (Maier’s other subjects are literature and the famously abstruse psychoanalyst Jacques Lacan), her anti-business polemic pulls no punches. Much of corporate life, says Maier, is quite literally absurd, consisting of empty rituals and arbitrary actions whose only function is to provide the illusion of purpose.

Underneath is stasis – ‘everything has to change so that everything remains the same’ – in which the job of executives is to fill the time between pay cheques by doing nothing as actively as they can.

This hollowness is perfectly reflected in corporate speak, of which Maier produces several choice examples, some from EDF. ‘Rester leader implique securiser le sourcing et/ou le positionnement du groupe sur le midstream gazier, de meme qu’identifier un mix/portefeuille de production optimal en fonction du mass market,’ gives a flavour, its posturing self-importance even more offensive for its linguistic barbarity (‘no man’s langue,’ as Maier neatly dubs it).

Maier’s wrecking ball scores many bruising hits, for how could it not? But although she mercilessly exposes the unsayable – the gulf between the seriousness with which top managers regard their activity and the triviality of the object of their pretension, between the claims of flexibility and cool and the stultifying conformity beneath, between rhetorical benevolence and the reality of control – in one crucial respect Maier doesn’t go far enough.

She shares with the cartoon strip office worker Dilbert, whom she quotes, the unquestioned assumption that corporate existence is inherently meaningless. Hence the advice at the end of the book, which got her into trouble: to sap the business from within by going through the motions while doing as little as possible.

But – and this actually doubles the absurdity of today’s reality – there is no practical or intellectual reason why business should be like this.

Historically, business and trade were civilising influences. As Jane Jacobs has shown, ‘le doux commerce’ required honesty and trust as well as numeracy to flourish. The first use of writing was to record inventory – crudely, business made literature possible. As Maier herself notes, capitalism’s beginnings have been closely linked to the Protestant work ethic.

The original sin of modern business, if one can call it that, is not to do with its nature but the practical matter of its organisation. Back in the early days of mass production, standardised products seemed to demand standardised work to churn them out. Hence Fordisation, the defining characteristic of which was command and control and specialisation – the hiving off of thought, management and decision-making from frontline work.

Command and control may have enabled huge increases in productivity at the time, but with every day that passes we pay a heavier price for its continuing legacy, the evacuation of purpose from work. One result is the colossal inefficiencies that disfigure almost all organisations in both public and private sectors, with consequences that Maier so clinically describes.

She is right to be outraged. But the answer is not passive resistance. In a jokey aside earlier in the book, she fantasises that taking a leaf from French history and chopping off a few heads might be a step forward, a prelude to a new settlement that would at least bring a fairer division of the spoils between the industrial classes, if not a more meaningful existence.

Regime change, however, is exactly what’s needed. In effect, large companies are the ancien regime , the last surviving practitioners of central planning, as rusted, dysfunctional and archaic as latter-day Soviet Russia. But there’s no point in guillotining a few of today’s chiefs and replacing them with others of the same ilk. The whole apparatus of command and control must go.

So ignore the call to cultivate sloth. Instead, sweep away the entire top-heavy company superstructure, together with all the highly paid courtiers on the executive floor who do nothing but complicate the issues and weigh the company down. Liberate purpose. Put decision-making back into work. Adieu paresse , bonjour la revolution !

Simon.Caulkin@observer.co.uk

French lessons

‘The supreme goal of the organisation is to induce the employee to internalise the things that would otherwise have to be imposed on him or her from the outside,’ writes Maier. To combat this you must:

*Remember that white-collar work is today’s slavery: you work for your monthly pay cheque, nothing else.

*Bear in mind that trying to change the system is futile.

*Since your job is pointless – any idiot could do it (and will, given the chance) – spend time cultivating allies rather than working.

* Avoid responsibility, which brings extra work at small reward, and operational assignments like the plague. Give preference to ‘staff’ jobs (research, internal consultancy, communications) whose contribution is impossible to measure.

* Talk the talk but learn to recognise fellow doubters.

* Be courteous to temps, contractors and others brought in from outside. After all, they are the only ones who do any real work.

the Observer, 3 October 2004

IT’S PAYBACK time. As the election approaches, the government is demanding returns on an unprecedented period of IT spending. Massive programmes in health (the national programme for IT – nearly £2 billion this year), education (£2.6bn), local government (£3bn), defence (£1.9bn), justice (£1.2bn) and central government departments (£2.7 bn) take total public-sector spending on information technology up to £12bn this year, making the wider public sector the computer industry’s biggest customer. According to Kable, a research company, by 2006/7, the public-sector IT market will be worth more than £16 bn – 72 per cent higher than 2001/2.

The result of this huge modernisation expenditure (‘no investment without reform’) is expected to be the automation of 100,000 civil-service jobs, removing 16.5 per cent from central-government running costs and ploughing more than £20bn back into frontline services such as hospitals, schools and criminal justice.

In the 21st century, for example, the government believes there’s no reason why every central department should have its own separate payroll, HR, finance and property management systems, or why the public sector as a whole should have 30,000 back offices collecting and processing information. There are similar opportunities, it believes, for rationalising front offices where officials transact with citizens face to face.

There’s no doubt about the spending. There’s no doubt also about the scope for improvement. But will the computers that are supposed to link the two actually live up to the government’s expectations by improving efficiencies and helping it win the next election? There are two reasons why this is, as they say, a big ask.

The first is history. The spending programme includes a number of huge and complex projects – NPfIT (for the Health Service) merging the Inland Revenue and Customs and Excise computer systems Department for Work and Pensions Criminal Records Bureau a 10-year Defence Information Infrastructure project, with identity cards and the unification of the justice system on the horizon – in which the UK’s track record is mixed, to say the least.

Figures quoted by the British Computer Society suggest that just 16 per cent of large UK projects meet all their goals. Other estimates are lower. Hence the steady stream of computer disaster stories: the 18-months-late £400m Child Support Agency computer, for example, or the £318m (so far) system for the magistrates’ courts, referred to by the chairman of the Public Accounts Committee as ‘one of the worst IT projects I have ever seen’.

When the Audit Commission looked at the well-publicised episode of the Passport Office computer, it found that the new system had raised unit costs by 30 per cent. The National Audit Office is now preparing to take a look at NPfIT.

The second reason for scepticism is method. Although the failure rate of such projects is partly to do with poor project management, more importantly their rationale is flawed from the outset.

When Michael Hammer wrote his celebrated ‘re-engineering’ manifesto, ‘Re-engineering Work: Don’t Automate, Obliterate’, in 1990, the kernel of the idea was the need to recast the way work was organised. He saw, from examples in Japan and elsewhere, that by abandoning a system in which work (processing an order or paying a bill, say) was passed sequentially from one department to another and instead managing it as a seamless process from beginning to end, huge improvements could be made: a bill could be paid (or housing benefit processed) in days rather than the months it traditionally took.

Hammer got many things right. He emphasised, for example, that the ‘re-engineered’ process worked by putting the decision point where the work was carried out. ‘The new principle suggests that the people who do the work should make the decisions and that the process itself can have built-in controls,’ he wrote.

In other words, re-engineering would reverse the fragmentation that made assembly-line jobs, whether in a factory or local or central government office, so soul-destroying. And by putting decision points in the flow of work it could get rid of suffocating bureaucracy and layers of management control.

Unfortunately, organisations overlooked these humanistic subtleties in favour of Hammer’s other prescription: that computers were an essential component of this large-scale reorganisation. The result was the exact opposite of his brave new world of work. Instead of obliterating departmental functions and boundaries and re-engineering work in an end-to-end flow, companies queued up to buy IT ‘solutions’ that not only preserved the bad old systems in aspic, they actually disabled further improvement by locking in the old methods in. Hence the subsequent finding that the majority of re-engineering attempts failed.

Unfortunately, in the public sector this tendency is only now reaching its apogee in the government’s current spending review. Almost all public services are ripe for reshaping and streamlining as a process from the customer’s point of view. But the current regime of specifications and targets, completely functionally and activity based, is utterly antithetical to any such project. One ex-civil servant remembers being instructed how to pick up a pencil faster in a desperate attempt to squeeze efficiencies out of the existing system.

In a travesty of ‘reform’, what is now being proposed is giant automated information-processing factories for mass-producing transactions – procurement, information collecting and processing – which will at the same time institutionalise the waste inherent in existing systems and perpetuate the dehumanisation of separating work from decision-making.

A classic example of the specification cart preceding the improvement horse, thus effectively bolting the latter in its stable, is e-government. The government mandate that all possible public services should be deliverable electronically by the end of 2005 will cost around £7.5 bn. But as departments and local authorities rush to meet the deadline, public takeup of the spanking new e-services is so disappointing that the government has launched a marketing campaign to boost it. A local authority or agency website, after all, is only another way into the shop. By specifying e-government without any idea of what matters to an e-citizen, the government will have simply added an expensive new entry channel to existing ones. Unsurprisingly, Kable estimates that on current trends e-government will never remotely cover its costs, let alone free up resources for the front line.

Mere pen-pushing to specification (‘reply to all queries with two working days’) and control is indeed demeaning and demoralising work. But that’s because of the way the work is designed. Contrary to the political discourse about bureaucrats and time-servers, the truth is that working to improve back-office support for front-line public service is both worthy and essential, work anyone could be proud of.

Improving public services could and should form part of the job of all civil servants. The tragedy of the current regime – assembly-line work driven by targets and specification – amplified by what’s now being proposed, is that it will make improvement impossible, alienating public service workers and lifting service levels only on the margin. The truth is that the real ‘reform’ that’s needed is that of the government’s approach.

Otherwise today’s IT bonanza will benefit the IT and consultancy industries more than those at the front end, whether citizens or those who deliver the services.

The Observer, 26 September 2004

HERE’S WHY service doesn’t get better – systems that managers install with the aim of improving service actually make it worse, as in the case of interactive voice response that we highlighted last week.

Take the case of a leaking water main experienced by an Observer reader. Repairing a leak (or anything else) is a common and straightforward type of service – something breaks, the customer asks for service, the company fixes it. But it’s frequently not that simple. In this case, a new customer rang the water company to ask it to mend a leaking main (she knew it was leaking because the meter kept spinning when the stopcock was shut).

The company replied that someone would phone her back (within five days according to the customer, two according to the company) to arrange an appointment. No, she told them, it’s an emergency: having just moved into the house, we don’t know where the main lies and the leak may be damaging the foundations. Anyway, aren’t we supposed to be conserving water?

No, replied the firm, an emergency is something like Boscastle it doesn’t apply to domestic repairs. We’ll phone you back to fix an appointment – which we guarantee will be within the following five working days. In other words, there could be a seven- or 10-day wait, depending on the versions, between reporting an incident and the first visit.

The first visit, because when the man from the water company arrived after what most of us would call two weeks (these are working days), he was a surveyor, not a plumber: a second visit would be necessary to fix the leak. In any case, he thought the leak was underground and outside. Underground meant excavation, and excavation required another operator. So… you need to ring the company. They’ll ring you back to make an appointment. That’s right, within five days (or two). And the excavator? Five days. Guaranteed.

By this time, with the meter still running more than two weeks after the leak had been reported and, she thought, potentially another fortnight in the offing, the customer quickly had the leak – which turned out to be under the house – fixed by another plumber.

Let’s be clear what this story is about. It’s not about incompetence or ill-will. There’s no reason to doubt the company’s worthy intentions about water conservation and customer service on its website. What interests the customer – and me – is the extraordinary discrepancy between what the company insists is ‘good service’ and her personal experience that it is not.

How can a company construct a system that allows it to live with such opposites, claiming in good faith excellent customer service and conservation at the same time as it leaves the water running for a month, give or take a few days? That requires a minimum of four transactions with the company, up to six if the leak is underground (work it out), to fix a domestic leak?

The answer is, very easily. This is the norm, rather than the exception, in service companies. You do it by managing the trees and ignoring the wood, in the name of efficiency breaking up the process of serving the customer into individual activities (phone the customer, send a surveyor, send a plumber) and managing the activities according to detailed specification. The underlying purpose gets lost in the process.

The purpose of a water company is, presumably, satisfying customers by delivering water as reliably and economically as possible. The repair ought to serve that purpose, so the quicker the better. That’s certainly what matters most to the customer.

You’d think, then, that the company would measure and manage the process from beginning to end: the complete repair cycle time from first phone call to the plumber’s van pulling out of the drive. But you’d be wrong. Not only does the company not manage overall repair times, it doesn’t even know what they are. It can tell you how well it meets the specifications for making an appointment or sending a surveyor or plumber, but not how long the overall process takes.

In other words, it has no way of measuring how well it is meeting its purpose of carrying out the repair. Result: it is perfectly possible, as in this case, for an urgent repair to take the best part of a month and everyone to meet their specification. So, again: because everyone is meeting their specification, service is impeccable – we can prove it. The customer must be mistaken. No one knows anything is wrong.

Does this sound familiar? It should. Fragmentation and specification are everywhere, and everywhere they have the same dire effects of building in inefficiencies and waste. Because of the inefficiencies – think of the wasted time, transactions, phone calls, mileage, not to mention water, and the large possibility of error in the multiple hand-offs – poor service is always more expensive than good, although managers (and politicians) can’t see this either.

Specifications and targets put in place to improve service are in fact incompatible with it, because they subvert purpose. Instead of minimising customer inconvenience, water company employees strive diligently to meet the specification – phone back or get someone out within the specified time. This isn’t their fault: they are doing what they are told. To a degree, this is true of the company as a whole. Incredibly, among the water regulator’s eight indicators of service levels, one is the time companies take to answer the phone – but not how long it takes to fix a broken main.

As always, there is an alternative. Stop measuring activities that are part of the whole, get rid of the accompanying specifications and targets, and manage the work as a piece from beginning to end. Put people to work solving customers’ problems rather than meeting specifications. Keep the water flowing – and staunch the flood of leaking customer confidence.

The Observer, 5 September 2004

LAST WEEK ‘the UK’s leading Orange dealer’ texted me the offer of a free mobile upgrade. I phoned back – and got its IVR (interactive voice response) system.

Oh God. First a long promotion spiel, then four options to select from: ‘If you are a pay-monthly contract customer whose phone is more than 11 months old and you would like to speak with a friendly upgrade adviser about upgrading to one of the new generation of colour camera phones entirely free of charge, press 1. If…’

I pressed 2 – only to get a second level of recorded response: ‘To enable us to give you information on our latest phones and tariffs, please state your name, your phone number and the expiry date of your contract so that…’

No – definitely not. Life’s too short. I want to talk to a person, not be patronised by a machine. The company approached me – there’s a limit to the amount of time and effort I’ll spend even for a free offer. And I haven’t thought about the contract for years. I haven’t a clue about the details. That’s their job!

This is a small example, but it sums up why IVR is the most hated management invention of modern times, despised by everyone including, no doubt, when they experience it from the other end, the managers who eagerly install it in their businesses. It is also one of the most misguided and counterproductive.

So how come managers are so keen to use it? The short answer is that they believe automation will cut the cost of providing service. By having customers auto-sort and filter calls as they come in, they think they can minimise the amount of expensive people-resource devoted to answering questions, and maximise the time they spend selling.

But the calculation is wrong in every respect. IVR is sold as an IT ‘solution’, and like any number of such ‘solutions’ the main thing it solves is the IT firms’ need to make sales. Far from containing costs it generally raises them – and worsens service. Companies, and certainly customers, would be better off without it.

Let’s go back to the beginning. What is the problem that IVR is supposed to be a solution to? The key issue in service is dealing with variety – amplified by the fact that the service is ‘co-produced’ in real time with the customer. My mobile query could have to do with any number of phone makes, types and tariffs, and I have no idea what my contract is. And I don’t want a colour camera phone, I want a headset. Although I might check the tariff too while I’m about it.

It’s impossible to sort calls according to all the possible variables – nor should you try. Arbitrary categories, as in this case, simply create confusion (what do I do if none of the options fits my query/queries?) or resistance (I’m buggered if I’m doing any more of this). In the first case the result is unnecessary work (I press any old button, explain my query to the wrong person who has to pass me to another), which means extra cost in the second, non-completion – I drop out. This means lost sales, which of course managers can’t see.

All this happens because the menu options are invariably not designed according to demand – what matters to the customer – but according to supply – what matters to a remote marketing department. Using a device that customers hate is already courtroom evidence of a producer’s rather than a customer’s mentality.

The irony is that we both want the same thing: smooth service that helps me get most value out of my mobile phone. But you wouldn’t know it, because the robotised menu sets up an artificial opposition between the two: it prevents me getting the service I require.

Computers are great at routine and hopeless at variety. People, on the other hand, are wonderful at variety and bored and demoralised by routine. So what does IVR do? With the utmost perversity, it uses both people and computers for what they are worst at. It is therefore not surprising that it irritates the hell out of customers too – a full house of dysfunctionality.

What matters to me is having my questions answered and my order taken in the shortest possible time, in one call. The best way for the company to do this is to reverse the usual thinking, get rid of the IVR filter and put its best ‘upgrade advisers’ on the frontline phones, where they belong.

For most companies, this is counterintuitive, because they are obsessed with people-costs. They measure people to death with activity measures like time to respond, call duration, numbers of calls a day. But these are unrelated to the purpose of the activity – in this case selling phones, accessories and minutes – and therefore offer no guidance on how to do it better.

Meanwhile, they ignore the other costs – for example, of non-completers (like me) and customers who consume extra resources by having to ring a sec ond or third time. These are often substantial.

Unlike computers, people can relate to customers and pick up on these things. They can report back and adjust the offering accordingly. By stopping callers dropping out, they increase chances of making a sale by answering their questions first time, they prevent unwanted follow-on calls. The first increases revenues, the second effectively increases capacity. And you can further reduce costs by ending the IVR contract that you no longer need.

So – select from the following options: if you want to improve service, increase sales and cut costs, press button one and delete your IVR…

There are no further options.

the Observer, 29 August 2004