Lean Thinking at Starbucks

August 5, 2009

The WSJ wrote an article about the recent adoption of “lean thinking” at Starbucks.  Lean thinking is a philosophy popularized by Toyota’s famous Toyota Production System (TPS) that emphasizes rooting out waste in its many forms.  At Toyota, waste might be excess inventory.  At Starbucks, waste might be baristas taking too many steps to travel from the coffee beans to the espresso maker.  After reading the article, I’m not optimistic about the process of Starbucks trimming down.

Scott Heydon has the title Vice President of Lean Thinking at Starbucks, and two of his quotes set off alarm bells for me.  The first suggests that the impetus for the change is to free up the time and space for employees to deliver a better service experience.  The quote:

Mr Heydon says reducing waste will free up time for baristas – or “partners,” as the company calls them — to interact with customers and improve the Starbucks experience.

But Heydon follows quickly with this quote:

If Starbucks can reduce the time each employee spends making a drink, the company could make more drinks with the same number of workers or have fewer workers.

At first glance, this may not sound like an impending disaster.  After all, who doesn’t want better service and lower costs?  The danger lies in the ambivalent framing of the initiative, which is often good enough for the C Suite, but doesn’t fly on the front lines.  If the objective is to enhance the service experience, then a set of activities will reinforce that goal, and the definition of success will be fairly straightforward.  Alternatively, if the objective is to reduce costs, then a different set of activities will be required.  Eventually, these activities will be at odds with each other, and employees will get caught in the tension.

This is a well-worn path that can easily lower performance and increase employee cynicism.  The typical sequence of events is as follows: A manager sets out to make changes with the stated intention of improving the service experience.  Compelling rationale is used, invoking the experience as a driver of premium pricing.  Then, under the banner of improved service, the same manager starts talking about the efficiency gains of the changes.  You’re a barista with more time on your hands? Serve more customers!  Say good-bye to your colleagues!

This is dangerous for two reasons.  First, if your employees believe your commitment to service and then watch you measure productivity gains, you sacrifice focus and trust.  Not only do you breed confusion, but as clarity emerges, employee cynicism is not far behind.  Second, when senior executives begin to prioritize labor productivity over service, they often start to erode the competitive distinction that led to the premium pricing.  It’s one thing to purposefully pivot away from a premium position.  It’s another to creep away from it without making a clear strategic choice.

To be clear, I have seen companies achieve great success through cost-cutting initiatives.  But they were internally branded as cost-cutting initiatives, as a competitive rallying cry for employees and sometimes even customers.  Similarly, I have seen spectacular success when companies commit to enhancing their service experiences — again, internally branded commitments with the requisite decisions and activities in alignment.  I have even seen success with initiatives designed to improve both cost and service.  These typically work when a company is performing poorly compared to its peers and can make improvements on both dimensions, or when a company is in an innovative phase and looking for breakthrough ways to do things.

The problem is the disingenuous internal framing.  By far the most common approach is to try to dress up cost-cutting initiatives as service improvements, which breeds disappointment among employees, customers and owners.  And a tell-tale sign of this charade is shifts in messaging, particularly for multiple audiences.  Starbucks contradicted itself within minutes for the WSJ, which doesn’t make me optimistic that they’ll be an exception to the rule that these initiatives tend to cause more harm than good.


United Breaks Guitars

July 13, 2009

United Airlines baggage handlers broke Dave Carroll’s guitar.  Google United Airlines these days and two links dominate:  United’s official site and a video of a song Carroll wrote called, “United Breaks Guitars.”  The video has been watched over a million times.

Carroll reports that he actually witnessed the instrument’s demise, when fellow passengers on his United flight looked out their windows and yelled, “they’re throwing guitars out there.”  He then began a fruitless campaign of trying to get the airline to reimburse him, a nine-month ordeal captured in the video by a parade of apathetic employees.  United’s explanation?  As reported by the Chicago Tribune, Carroll had made a procedural misstep by not filing a claim within 24 hours.  There was nothing they could do. Sorry.  And so Carroll wrote a song.

There is no question that the video is a PR problem of the worst kind.  As a friend of mine said, “I’ve seen more press about this song than actual United ads.”  Bad service and United Airlines are now powerfully linked in the minds of consumers. But United’s bigger problem is lurking in the hundreds of comments posted everywhere this story is being told, from individual blogs to pillars of the mainstream media.  These comments make a compelling case that indifference towards customers is business as usual at United.

United spokespeople now say that they’re going to use the video to help the company improve its service, and my prediction is that these efforts will fail.  The company’s language is tentative.  If Carroll’s experience illustrates a systematic pattern of failing customers — and the anecdotal evidence suggests that it does — then United’s leadership will need to do something much bigger than launch a superficial service initiative.  They will need to find the courage to return to the blueprints of the business model and take responsibility for the fact that they created a system that reliably produces mediocrity.

Having no direct experience with United’s service design, here’s my guess as to what drove the behaviors that infuriated Carroll:

1. A United call center agent in India turned down Carroll’s request for making good on the damaged guitar.  The agent was selected and trained to comply with an increasingly complex set of procedures, and he was likely measured by his ability to follow these procedures precisely and efficiently.  Did he do a good job?  The policy clearly states that claims must be filed within 24 hours, and he likely had no authority to override them.  His performance is probably also measured by the number of calls he can handle in a day and perhaps even the number of calls he can handle without passing them off.  Now put this individual —  probably the lowest paid employee at United — in a situation where customers are justified in yelling at him all day long, and it’s not difficult to predict the outcome.  In fact, the agent did his job well as the system’s architects designed it.  He followed the rules and handled the call quickly, without bothering his manager.

2. What about the baggage handler seen throwing the guitar?  It is not difficult to imagine his crew being told earlier that day that plane turnaround time is the most important driver of the airline’s success, that times had been creeping up, and that low employee effort was at least partially to blame.  What’s a reasonable response to these messages?  Getting the luggage off the cart and onto the plane as quickly as possible.  This would almost certainly require throwing bags, particularly if the time guidelines made it all but impossible to meet the turnaround goals by respecting each piece of luggage.

3. And the front-line service team on the planes and in the airports, the ones who likely fielded Carroll’s original complaint?  These teams are also responsible for all-important turnaround times, which in their case requires managing an incredible range of customer variance, from disabled passengers to families with screaming children and excessive baggage.  They probably regretted the damage to the guitar, but their jobs were on the line in a climate of declining resources to manage the problems within their direct control.  They were probably eager to return to the urgent challenge of getting passengers to their destination with fewer planes and fewer colleagues, to say nothing of fewer tools  (lunch, anyone?) to reduce the growing discomfort of  air travel today.

My point here is that if you’re committed to changing a service experience, try to understand why reasonable, well-intentioned employees are behaving in existing ways.  Only then can you expose the underlying causes of the service failure.  Most change initiatives come up short because they start with Carroll’s basic premise — that employees aren’t trying hard enough or don’t care enough.  In these situations, managers often conclude that inspiration, brow-beating and tweaks to the incentive structure will shame or motivate employees to perform better.  But employees are rarely the problem.  The problem is usually the service model in which employees are operating, which has set them up to fail systematically.

United’s leaders must take responsibility for their central role in frustrating their customers.  This means redesigning the system so that employees can succeed on a regular basis.  If the company follows Carroll’s lead and blames employees for the problem, I suspect that little will change, except the rising level of customer dissatisfaction.  For those with less musical talent than Carroll, this will mean voting with their feet not their voices.  In the absence of accountability at the top, United’s customers will desert them.


Employee Goodwill

June 17, 2009

British Airways has asked its employees to work for free for a month.  As CNN reported, the airline sent an e-mail out to its staff that “offered workers between one and four weeks of unpaid leave — but with the option to work during this period.”

How would this e-mail go over in your company?  What kind of relationship do you need to have with your employees for this message to be taken seriously?  In my experience, organizations spend a lot of time trying to measure the unmeasurable, trying to value concepts like culture and goodwill.  We know that these things often make or break the deal with customers and employees, but they don’t fit easily into a spreadsheet.  I would suggest that the organizational uptake on management’s offer to let people work for free is a very good measure of employee goodwill.

Employee goodwill matters in the best of times, particularly for service businesses.  As Heskett, Sasser, and Schlesinger argue in the Service Profit Chain, it is difficult to create value without employees, and so it helps to take great care of them.  But employee goodwill may matter even more in the worst of times, as the British Airways experience illustrates. The more that employees feel an organization is devoted to them, the more likely they’ll be to share the pain of adversity.  Strong relationships with your employees may help to buffer you against an unforgiving competitive environment.

On the flip side, antagonistic relationships between employees and organizations are never a good idea, but they may be disproportionately costly when the environment turns ugly. This dynamic is playing out around us with the widespread rise in layoffs and salary cuts.  Some of these wrenching decisions are being made a context of mutual trust and mutual regret. And some are happening in an environment of fear and anger, with untold costs to everyone involved, including customers.

We don’t yet know how the British Airways story will end, but I have a prediction. I think we’ll be able to confirm what we suspect, that employee goodwill makes an enormous competitive difference, particularly in hard times. And we may finally have a way to measure the size of that difference.  In the spirit of what-you-measure-is-what-you-get, this may increase the chance of its occurrence.


Leadership in Absentia

June 9, 2009

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The decision to lead is not particularly complicated, at least not on the surface.  It’s a simple, often quiet commitment to create the conditions for other people’s success. The NYT had a great illustration of this philosophy in its article on Clarence Otis Jr., the CEO of Darden Restaurants.  In Otis’s words:

…leaders really think about others first. They think about the people who are on the team, trying to help them get the job done. They think about the people who they’re trying to do a job for. Your thoughts are always there first…you think last about “what does this mean for me?”

I was particularly moved by one of his reference points, his predecessor’s response to 9/11:

…we had an all-employee meeting…One of the first things he said was, ‘we are trying to understand where all our people are who are traveling.’ The second thing he said was: ‘We’ve got a lot of Muslim teammates, managers in our restaurants, employees in our restaurants, who are going to be under a lot of stress during this period. And so we need to make sure we’re attentive to that.’ And that was pretty powerful. Of all the things you could focus on that morning, he thought about the people who were on the road and then our Muslim colleagues.

Otis went on to describe a sometimes trickier part of the leadership task — giving people the room to learn and grow, and ultimately to succeed in your absence. Sometimes this means stepping down not up, being passive rather than active, being silent rather than vocal. These are not the leadership acts we tend to celebrate, but sometimes they’re the most crucial. This balance is Otis’s current focus:

It’s less and less about getting the work done and more and more about…getting the right people in place who have the talent and capability to get the work done and letting them do it… you’ve got to give other people the chance to speak, voice a point of view. Some people are passionate, but it manifests itself in a different way, and so they’re more reflective in conversation. And so, you’ve got to leave some space for them to fill.


Control is Not Leadership

June 3, 2009

I stumbled across this quote from Dee Hock, founder and former CEO of Visa, when I was first starting to think about the transformative power of leadership in the organizations around me.  I was in my first real managerial role at the time, and the truth embedded in these words struck me with the force of revelation.  The quote influenced my thinking and behavior at the time, and triggered a series of events that profoundly shaped my life.  I’m now passing it along in case it’s helpful to someone else:

Control is not leadership; management is not leadership; leadership is leadership. If you seek to lead, invest at least 50% of your time leading yourself — your own purpose, ethics, principles, motivation, conduct. Invest at least 20% leading those with authority over you and 15% leading your peers. If you don’t understand that you work for your mislabeled “subordinates,” then you know nothing of leadership. You know only tyranny.


Leadership as Human Buffer

May 27, 2009

Ellison

Business Week recently described how Marvin Ellison, Home Depot’s newly-minted Executive Vice-President of U.S Stores, improved the store experience in the wake of Bob Nardelli’s infamous tenure.  Nardelli made several decisions that have been widely criticized, including some explicit cost/service tradeoffs that eroded Home Depot’s core advantage.  An earlier BW article described Nardelli’s run this way:

His military management style led to 100% turnover among his top 170 managers by the time he left the retailer in January. His cost-cutting moves replaced experienced salesclerks with low-wage students, devastating customer service and handing market share to rival Lowe’s.

Fast forward to today, where Home Depot’s service experience has been transformed by Ellison’s leadership: 

Sarah Larsen used to avoid Home Depot, having dealt for years with surly, hard-to-find employees and indifferent store managers. But about six months ago, faced with a major renovation project, the Naperville (Ill.) communications consultant gave the store another try. She immediately noticed the difference: Sales associates were friendly, helpful, and in large supply. Now, Larsen says, “it has become my go-to store.” 

Ellison made a number of crucial service plays, but I was most struck by his decision to limit the amount of communication that central managers could have with store personnel.  Essentially, Ellison told senior managers that they could communicate with him as much as they liked, and that he would be responsible for store performance.  But they could no longer communicate (read disrupt) store personnel directly.  In some cases, this meant reducing the number of daily e-mails and reports that store managers received from 200 to one.  He also gave his stores just three metrics to care about — cleaner warehouses, stocked shelves, and top customer service. 

Ellison made it crystal clear that managers’ most important constituents were the people in their stores — their customers and the employees who serve them — and not their corporate superiors pestering them from headquarters.  Ellison became a buffer between senior management and the front line, which created the time and space for his people to focus on what really mattered:    

More important, Ellison is enforcing a practice called “power hours”—weekdays from 10 a.m. to 2 p.m. and all day on Saturdays and Sundays—when employees are supposed to do nothing but serve customers. They can stock shelves, unload boxes, and survey inventory at other times. “We could not address customer service needs because we were too busy doing other things,” says Ellison.

The results? CEO Francis S. Blake explained Ellision’s rapid rise this way: “You could go blindfolded into two stores and know when you were in Marvin’s store.” Marvin’s stores, it turned out, had the sweet smell of success. 


The Employees You’re Slamming Are Behaving Rationally

May 11, 2009

It is difficult to find something written about change that doesn’t talk about how hard it is. My observation couldn’t be more different. I find that change happens in an instant — deciding what to change and finding the right levers for changing it, those are the complicated parts.

I’ll use culture as an example. I was recently working with some executives who were lamenting that their employees weren’t acting with a sense of urgency. And no matter how many times the senior management team implored employees to move faster, the needle on urgency didn’t move. The team concluded that employees just didn’t believe them that urgency really mattered.

They didn’t, for perfectly good reasons. When I asked the team to explain their employees’ behavior, they attributed all kinds of fundamental character flaws to these individuals they had carefully selected and trained — lazy, uncommitted, distracted, risk averse. I let them get all of that out of their system. And then I asked why a smart, well-intentioned employee would act without urgency in their organization.

It took a few tries to break the habit of judging and psychoanalyzing their employees, but eventually we got somewhere. It turns out that when employees made mistakes in this particular company, they were often pounced on by the most influential of the senior team. In some cases, it bordered on ridicule, a public hearing on someone’s judgment and intellect. Once we uncovered this pattern, we were 95% of the way towards change.

These employees were behaving rationally according to the dominant, if informal performance management system. Senior management could not have been clearer – only present polished work that you’re damn sure is right.  It was no surprise that few people revealed any intermediate progress. It made perfect sense to wait until every i was dotted, every t crossed, before making any sudden movements. That behavior looked like the absence of urgency. And senior managers’ actions were at the root of it.

The solution? It wasn’t to keep clarifying the importance of urgency. This team had to stop punishing small mistakes, particularly mistakes that were a consequence of working faster. And they had to start celebrating speed, with public acknowledgment that moving faster requires new behaviors like sharing unpolished ideas and building on each other’s work.

The lesson? Before setting out to change something, figure out why people might be behaving rationally in the culture and systems you’ve designed (or permitted). The least likely, least useful explanation is that good people have suddenly gone bad. The most likely explanation is that you’ve created an environment that is setting them up to fail. Now change your behaviors that are contributing to that environment. I promise it won’t take long.


Customer-Operators: Not Paying Them Doesn’t Mean They’re Free

May 6, 2009

People, it turns out, are desperate to be helpful.  Verizon has discovered this and joined the growing ranks of companies using what I call “customer-operators” to do the work employees used to do, everything from generating new product ideas to servicing other customers when those product ideas fail. Betting on the hope that all these customer-operators need in return are the intrinsic rewards of serving others and the status associated with becoming experts, Verizon is primarily making a cost play by inviting customers to perform routine customer service functions. The company has stumbled on some additional perks of engaging these “super-users,” like their knack for good improvement ideas, but this value is seen as peripheral.

At this point in the experiment, Verizon only sees the upside in recruiting and deploying an army of customer-operators. Before the company doubles down, I want to offer two points of caution:

First, customers are different from employees in ways that matter operationally. In general, they’re more difficult to manage, measure, recruit and fire.  Just because you don’t pay them, doesn’t mean they’re free. The price may be worth it to achieve radically higher levels of quality (Wikipedia) or a radically lower cost structure (eBay), but the tradeoffs aren’t as clear for traditional business models.

New management systems must be designed and maintained once you bring customers into your operations. And the effort may require more than a few “feedback stars” to measure and maintain quality. Reputation is a powerful incentive for good behavior, but it’s not all-powerful (see John Edwards). Have a plan for when the customer you’re relying on to provide good service doesn’t respond to another customer’s inquiry for days.

Second, those feel-good emotions of service and status may not be enough to compensate your most active (and valuable) customer-operators as time goes on. A lesson from many organizations is that when you ask customers to donate their labor, they often feel entitled to a seat at the decision-making table. Back to those feedback stars, I spent some time on the outrage of eBay customers when the color of their own stars was changed in an HBR case. Outrage may be too weak a word. There was an electronic revolt.

I’m with Verizon. I think customer involvement is a tremendous opportunity for many businesses. But I want to add a few caveats — customer-operators aren’t always easy to manage, and they aren’t always willing to stop at the operational boundaries you propose.  You may invite them on to the shop floor, but some of them are taking the elevator up to the C-suite.  Have a plan for what happens next.


Richard Anderson’s Guide to Tactical Leadership

May 2, 2009

We spend a lot of time here defining and illustrating leadership – less on the very tangible application of it. One thing I liked about the Anderson interview is that he offers some tactical advice. As a public service, I will summarize it here:

1. Never lose your temper.

2. Thank employees and customers in writing. He suggests hand-written notes, writes half a dozen a day.

3. Use interviews to surface the intangibles like ability to adapt to change. I found this one less persuasive, at least his operational advice:

I learned that from a C.E.O. I worked for. The C.E.O. wouldn’t really spend that much time on the résumé, but spent most of the time wanting to know everything about the person’s life, family, what they liked, where they liked to go on vacation, what their kids were like. And it gave you a really good perspective about who they were as people.

The social scientists have revealed our relatively strong bias for people who are like us. For example, it would take superhuman discipline for me not to hire someone on the spot who told me that his ideal vacation was hiding in a dark, climate-controlled hotel room with no sounds of children or pets. If someone who’d be a good poolside companion for you is also the best person for the job, bonus. In my experience, it rarely works out that way. “Cultural fit” can be an insidious way to ensure homogeneity of thinking and action, an increasingly reliable path to mediocrity.

4. Just say no to powerpoint. Make people communicate with subjects, verbs and objects.

5. And, finally, my favorite advice, quoted in full. If nothing else, this man can run a meeting:

Q. How do you run meetings?

A. One, get the materials out ahead of time and make sure they are succinct and to the point. Second, start the meeting on time. Third, I tend to be a stoic going into the meeting. I want the debate. I want to hear everybody’s perspective, so you want to try to ask more questions than make statements. I don’t think it’s appropriate to use BlackBerrys in meetings. You might as well have the newspaper and open the newspaper up in the middle of the meeting. So let’s stay focused on what we’re doing. Let’s have a really good debate, but it can’t get uncollegial. If it gets uncollegial, we actually have a bell you can ring, in the conference room.

Q. Tell me more about this.

A. If you are in a really hard debate and somebody veers off the subject and goes after you in a way that isn’t fair, you get to ring the bell. It’s a violation of the rules of the road. So you ring the bell if something wasn’t a fair shot, and we all laugh.


Service Excellence Defined (and Illustrated)

April 7, 2009

Service excellence can be hard to define — it often falls into the “know it when I see it” category of vague, but important distinctions.  Part of the challenge is the subjectivity of a word like excellence. Not all customers value service attributes in the same way. The intimacy you enjoy with a waiter who asks about your children and remembers how you like your burger may feel intrusive and jarring to me (hypothetically, of course).

I’d like to ground the definition of service excellence in the idea of reliability.  Service excellence is the consistent delivery of a high value/price experience, day after day, year after year, regardless of who happens to be on the front lines of the delivery process. It is the systematic output of a service model that is designed explicitly to produce it.  It is not the typical way we consume good service today, which is when entrepreneurial employees take it upon themselves to meet our needs in spite of the system.

In the spirit of know-it-when-I-see-it, I’m starting a highly subjective, incomplete list of service organizations that have reliably offered me (or people I know) excellent service.  I hope this brings the concept to life a bit. I also hope to learn from you. I would love to hear about other organizations you’d add to this list.

  • Lexus Service Centers – incredible that this level of service is possible and its competitors are choosing not to do it.
  • USAA – very difficult to find an unsatisfied customer
  • Zappos – very difficult to find an unsatisfied customer or employee
  • Wine.com – two-day shipping, scheduled at your convenience (including evenings and weekends), for $49 per year
  • Progressive Insurance – offers differentiated features such as Immediate Response vans and Total Repair
  • Four Seasons – unobtrusive excellence, if you like that sort of thing
  • J. Crew – straightforward excellence in the retail stores (thanks Kristin!)


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