Case Study: Customer Service Centre

The Case Study

The director of the Customer Services Division of a bank asked for help. In the invoicing department of his middle office he is facing several problems which he would like to get solved. The invoicing manager of the area doesn’t see any fault in himself. Everything is always fine when asked about problems or how the area is performing; in fact, his standard message is: “We always manage our workload”. Upper Management heard that customer satisfaction went down quite a lot recently and would want to get a grip of it.

Invoices are produced monthly, always towards the end of the month. The manager says this is important so they can all focus, even though some invoices don’t need to be dealt with that way. Staff is highly specialised in their work streams of producing invoices. Their responsibilities reach from creating LANFs, printing and sending of invoices, customer services in regards to invoicing, dunning.

The team is scattered across various locations, which is the reason why the manager installed a monthly meeting. The meeting is scheduled for 2 hours and every participant reports what he or she did and what the issues were. The team consists of 15 people.

The director is only on site once a month for 2 or 3 days. He has heard that there seems to be a problem with invoices, but he can’t prove anything. The site director is there daily, but doesn’t have a lot of time for the invoicing manager. He thinks the latter is long enough in the company to be able to manage the workload without big interrogation.

When asking the employees, their main problem seems to be the impossibility to go on holidays as there is no one around to cover for them. Their sickness rate seems higher than usual, also staff turnover. Employees range across all ages and seniority. Their interfaces are usually customers, the operations team for whose services they produce the invoices, the sales department, IT, and other specialist areas.

When looking at their Explorer environment, it seems a total mess. Procedures are everywhere and nowhere, and various versions float around erratically, if there are procedures at all.  

The director wants you to make his life easier and come up with a Six Sigma project.


----------------------------------------------------------------------

The DMAIC Cycle

Six Sigma Projects follow this cycle. The letters mean and show phases of the project: Define, Measure, Analyse, Improve/Implement, Control/Follow-up. Personally, I don't like the terms Improve and Control, so I came up with my own. I have run a similar project and changed the case study to a degree to keep matters confidential.


Define

In the definition phase I'd look what the key themes are, the headlines of work streams that would go on a project plan. In that phase the project structure would also be decided upon - project manager, team members, steering committee, meetings, risk analysis, ...; a project charter would be written. 

The themes from this case study are pretty classical. The major one is Operations Excellence and particular work areas seem to be invoice cycles and planning, flexibility of staff, processes and interfaces, meeting structures, KPIs. Other themes are management coaching, the organisation (locations and team structures), and Customer Service Satisfaction. All in all, it is mainly an Operations Excellence project.  


Measure

2 things need to be measured - project success and operational performance. They don't necessarily mutually exclude one another, but in theory it can be said that the latter measurements are for and will continue after the project. 

What would be interesting to know and have measures about may be the following:
- Amount of invoices per invoice cycle
- How many kind of different invoice types there are (and whether they are comparable in terms of effort to produce)
- Customer service satisfaction data and how it is compiled
- Worked hours of the invoicing team, with over-time.
- Outstanding dunning items (receivables)
- Customer queries: the amount per day, worked hours, also query types
- Staff sickness rates
- Error rates of invoices (pre- and post-sending to customers)
- current KPIs to see what is already regularly measured
- etc.


Analyse

In the analysis phase it would be good to get some thorough data analysis from the measurement phase (above). It helps to understand the nature of the business and also hopefully shows patterns of seasonality, peaks and troughs, etc. 

Further or analysis would be:
- Processes. It would be good to understand the invoicing process(-es), how those LANFs are created, till they are sent to the customer. This includes interfaces to other departments. 
- Management training records. It is important to see what the managers and directors already know and whether they apply their knowledge. There might be a confidentiality problem with HR, but management can be asked directly what kind of training they have received.
- Staff training records. There seem to be flexibility problems with staff filling in for one another.
- Meetings. Joining operational meetings and see how they are conducted and whether they are any effective and efficient.
- Customer Satisfaction. Root cause analysis on customer queries. Maybe customer interviews.
- Organisational effectiveness. Analyse locations and communication between teams of the current organisation
- Work procedures. How are they written, if at all. 
- IT infrastructure. What IT systems and how well they are installed. 


Improve/Implement

It is difficult to predict what exactly will be implemented. But the following can be said:

- Balanced Scorecard to include measurements of customer service, staff flexibility and satisfaction, financials and processes. This is especially interesting because the department seems to have problems in the first 2 areas. The other 2 are pretty standard.
- Flexibility Matrix of staff. Cross-training of staff and making the more flexible to cover themselves. 
- Standardised and efficient invoicing processes, including all interfaces. Also dunning processes. This has the potential for big change requests in the IT infrastructure, which needs extra time to implement usually. 
- Writing procedures for those processes that can be used as training manuals for new or existing staff.
- Management coaching.
- Create smaller teams, maybe manage to move teams together into one location.
- Implement efficient and effective daily or weekly planning and review meetings with action plan and KPIs.


Control/Follow-up

The follow-up phase is very essential, as in this one all implemented improvements will be fine-tuned and more important, behaviours aligned. This phase is one of intensive coaching. It must be ensured that staff and management are not falling back into old behaviours. Audits will be undertaken, not only by consultants but also by staff and management; these are so-called compliance tours. 

What are the right KPIs for my Operation?

That's one of the questions I mostly get when starting a project. And of course the answer depends on all sorts of things, mainly what kind of operations it is, but also, what the exact business model is for that operation. 

Kind of operation: Obviously, KPIs for a production department are different from the ones for sales or R&D. There are a few KPIs out which can be called "Toolbox KPIs", as they are standard KPIs which are applicable for every respective department (i.e. productivity, labour efficiency, machine utilisation, customer satisfaction, sales force saturation, ...). 

Other than Toolbox KPIs, there are also ones which reflect the exact business model of a company. Say, KPIs in a make-to-order production environment are different from make-to-stock. Mass production KPIs can differ from single-unit production; i e. a shipyard has different KPIs from a car manufacturer. 

Another dimension is the hierarchical level. A CEO has different figures from a front-line supervisor. 

It is already apparent, this question cannot be answered in absolute terms. I can even imagine that there are books out there only dealing with KPIs for all sorts of environments. 

Maybe, to answer this, I should elaborate a bit on what the wrong KPIs are, because that can be answered much easier. 

• Absolute figures are not KPIs. I have seen production companies that use volume (tons produced) as sole indicator to measure the whole of the operation. And I have seen sales organisations that only measure turnover in currency terms. Now this is really über-bad, but I have seen it exist!
  
• A next "no" is the dominance of financial figures. In general, many figures which end up in the P&L are operationally not meaningful. They are of course important, but not sufficient. It is also an indicator that the CFO seems to be either too dominant or other directors simply incompetent.
  
• Lack of cascade. Quite often I have seen daily KPIs on supervisory level, which is perfectly okay, but they are not aggregated upwards and the CEO does only get daily figures. This is not so bad, as he can easily add them up and do his own little calculations. What is worse though, far too often there are only monthly and other highly aggregated numbers available and nothing on an operational level. It is good to know what the monthly productivity is, but what exactly does this mean for the shopfloor on any given day or even as a whole?
  
• Dead KPIs are sad. Ages ago, someone decided certain KPIs are needed, so they were produced. Fair enough. This very someone then left his position, but the KPIs did not leave with him and are being produced and produced and produced - and nobody reads and uses them. What is even worse, nobody understands them.
  
• Meaningless KPIs are those that are produced regularly and even looked at, but not used to take action or analyse the operation. Say, an operations department measures stockout situations for production. They look daily at this KPI which tells them how many orders could not be produced due to raw materials not being present on time and in full. This is actually not too bad for a KPI. 
  What one really wants from an ops department is an analysis rather than looking at the numbers and having a common understanding how bad the situation is:
  - Which suppliers are the worst offenders?
  - Which raw materials were affected the most?
  - Which customers did we disappoint the most by not delivering on time?
  - Are there daily/weekly/monthly trends when raw materials are not coming?, etc...

Of course there are more, but these are the worst offenders and blunders in the realms of KPIs. As one can see, I do not differentiate between KPIs or simple PIs. Numbers are numbers, some are more important than others, hence have deserved being of key value, but that's a different story. 

Let's go back to the original question: What are the right KPIs for my operation? Let me answer this with a counter question: Did you have a good day yesterday? Normally I can tell by the answer whether there are good KPIs in place or not. Just think about it for a bit......  

Otto Bock - Balanced Scorecard (2)

I must congratulate Frank for his BSC implementation and development. He did an extremely good job thinking about that he did not have any experience with BSC. Neither of us really had. We had to get the original Kaplan & Norton book and implemented it the way it has been suggested there.

Implementing a measurement system was our daily business and we all knew how to do it, but linking those indicators to strategic targets was something we have never done. We and the client did not even know in those days what the short-, medium-, and long-term targets were. Those had to be defined first.

Implementing a BSC takes quite a while if doing it right and with the methodology suggested. But once it is done, it is amazing what a fabulous tool it actually is.

Anyone who wants to know how to implement it, please get in touch. Going into detail here on my blog would be too much.

On the photo is Frank again.

Otto Bock - Balanced Scorecard (1)

One other area for us was the Balanced Scorecard which we installed. A balanced scorecard is defined as this (Wikipedia):

"The Balanced Scorecard (BSC) is a performance management tool which began as a concept for measuring whether the smaller-scale operational activities of a company are aligned with its larger-scale objectives in terms of vision and strategy.
By focusing not only on financial outcomes but also on the operational, marketing and developmental inputs to these, the Balanced Scorecard helps provide a more comprehensive view of a business, which in turn helps organizations act in their best long-term interests."

We used the original approach as developed by Norton and Kaplan in 1992.

On the picture one can see Frank and myself (and no, I did not train to enter the army). Frank was responsible for the balanced scorecard implementation.