Imagine you ran a bus company for a living. Your job was to pick up passengers in local villages and take them to work in the nearby town. It was a simple job. All you had to do was make sure that the bus arrived when it should. So you wrote out a timetable and tried to make sure you hit it 100% of the time.
It was all going well until you caught a nasty infection.
That infection was variation.
Not everything was predictable. Day by day, things varied, and that variation made you sick:
- The driver’s alarm clock didn’t always work.
- Different numbers of passengers got on at various stops.
- The passengers didn’t always have the exact fare.
- Lorries making deliveries blocked the road.
- The traffic lights turned red or green; you were never quite sure.
- Sometimes, heaven forbid, there were accidents.
Trying to predict when your bus would arrive at every bus stop every day was a fool’s errand.
Instead, you had two options:
- Either make your best guess and accept that sometimes you are late.
- Or put lots of slack into the timetable and live with the inefficiency.
Of course, this isn’t just a problem for bus companies. It doesn’t matter what you do for a living. There will be variation somewhere if you make sweets, process credit cards or insure ships. (Believe me, I have tried to do them all).
Like a Disease, Variation is Infectious
Once you have caught a dose of variation, it will multiply through your business. It is progressively making things worse. Let’s talk through another (hypothetical) example. Forget the busses and imagine your company sells mobile phones.
The infection started with advertising.
Your Sales Department decided to send out a new batch of direct marketing leaflets in the post. Junk mail, call it what you wish. They should have sent out the mailing over a month. 20 evenly spaced mail drops to 20 evenly chosen customer groups. Giving a nice steady flow of sales back into your business.
But there were a handful of problems:
- The Marketing Manager was on holiday, so authorisation to print and mail was late.
- The alignment of the ink on the paper wasn’t entirely correct, and it caused the printers to jam on and off.
- One of the mailing machines broke down for a couple of days.
None of this was too severe. But things weren’t as smooth as they could have been. It was a bit of a rush to get the adverts into the post on time. There were lumps and bumps instead of a nice steady stream of mailings. Finally, they dropped a great slew of mail all in one go at the end of the month.
The infection spread to application processing.
The planners had hired an army of temporary staff to cope with the sales push. They were all ready to send out phones to happy customers. Unfortunately, the temps sat about as the letters didn’t get posted. They did nothing for a fortnight. The printing company assured everybody that the mailings were going to plan. Let’s say they were economical with the truth. So managers concluded that the advert was a flop and customer response rates were down.
To save money, the Operations Manager laid off his temps. There was no point in paying for them; he had a budget challenge. Then purchasing scaled back their order of phones. They even managed to offload some on e-Bay, when:
Wallop, all the orders came in at once. It was pandemonium. The recruiters were busy hiring anybody with a pulse to help fulfil the orders. The buyers scurried about and found a job lot of similar (older) phones. The backlogs were horrendous, but you met all the customer’s orders in the end.
Then variation infected customer calls.
There was a leaflet in the “customer welcome pack” with each new phone. It asked customers to “ring this number for your free first-year guarantee.” Of course, there is no such thing as “free”. This was just a ruse to get customers to phone in so they could be up-sold a lifetime guarantee.
Unfortunately, the customers didn’t want to buy guarantees. They tried to complain that their phone was late, that the model was wrong and that they wanted a refund. If that wasn’t bad enough, all those calls landed four weeks later than planned. Now the call centre was geared up to sell insurance on laptops instead.
Next variation infected call routing
The managers of the call centre got wise to the situation. They added some call routing to help get the right call to the right agent.
Press 1 for laptops
Press 2 for tablets
Press 3 for mobile phones
Press 4 for…
But the routing changes just confused the staff scheduler. Nobody was sure which agents were trained to answer which type of call. Sometimes callers waited for hours. Sometimes the team managers asked the agents to stop selling so they could answer every call. They missed those valuable opportunities.
Then variation infected sales performance.
The call centre agents weren’t sure which call type they were answering. They didn’t sell anything at all, or worse still tried to sell the wrong kind of insurance. Sales rates were low, and quality standards were poor. The Compliance Manager went into meltdown.
To fix the situation, the managers instigated new targets and incentives to motivate the agents and improve their sales performance.
Eventually, variation infected agent turnover.
Some agents learnt to cheat the system. They realised which call groups they should log into to sell the most guarantees. They hit their sales targets, grabbed their incentives and made the most money.
Of course, these agents didn’t share the information with their teammates. (Why would they? There was money at stake.) So other agents got fed up with their poor performance, and they quit or were fired. Recruitment costs spiralled.
Finally, variation infected management meetings.
Directors held crisis meetings. Capacity was short, financial performance was poor, costs were high, and revenues were low. Managers worked weekends trying to rectify the situation. They introduced:
- New incentive plans
- New targets
- New adverts
- New routing patterns
But all they did was add more variation to the system. Managers were blind to the real problem throughout their organisation. The variation that had infected their business was crippling it.
All That Variation Costs Money, but We Don’t See It.
The insidious problem with variation is that most managers are blind to it. It is challenging to tackle a problem that you don’t realise exists. But, once you can see it, you can cure it and change your business.
Let me give you a last real example:
How long do you think it would take to build a 30 story skyscraper? From the first spade in the ground to its first occupant? From time to time, I work in the City of London, and I see them building skyscrapers every visit. In London, they take years to go up.
But you can build a skyscraper in 15 days if you tackle the variation:
- If every panel is the right size
- If the ventilation shafts fit precisely where they should
- If the lorries turn up on time
- If the windows are a perfect fit
Watch the video and see for yourself.
What would it mean for your organisation if you could remove the infection and run like that?
How do You Remove the Variation?
It isn’t easy, but here are a couple of pointers to get you started:
- First, strip the complexity out of your organisation. Most of your products and services add little or no value and are open wounds for the variation to enter. Apply the Pareto principle to determine which services are essential to your customers.
- Next, learn to spot variation for what it is. Most variation is endemic in the system (think traffic lights). Some is sporadic (think accidents). To treat the disease, you need to understand it.
- Finally, apply a little problem solving and remove the causes of the variation.
Homework
The first step is to understand how much variation you have in your organisation. It is only when you can see a problem that you can act on it. So your homework is to find the variation:
- Identify the processes or issues that really affect your organisation. If you work for a bank maybe it is your ability to collect outstanding debts. If you work in a hospital, perhaps it is the downtime in operating theatres.
- Find a way to measure the variation. How much debt does each collector collect? Does it vary by product or process? How much time is there between operations? Does it vary by procedure, time of day, day of the week, clinician or operating theatre?
- Work out how big the prize would be if you could cut the variation by three-quarters. It should be an interesting number.
- Ask yourself what would have to be true to achieve that aspiration.
- Have a conversation about it with somebody important. You might catch their attention.
Related posts:
- Process noise and coffee sticks: What does variation look like?
- The stick is mightier than the carrot: What does variation do for your management style?
- Standardisation and climbing ladders: Why a standard way of doing things is so important.
More information:
- The germ theory of management: Myron Tribus’ original article.
- The pit stop #1: A video that shows why reducing variation is so important.
- The pit stop #2: Another video that makes the same point in a subtly different way.
- Understanding variation: a 1990 Quality Progress article that explains some technicalities.
Postscript
Did you get here from a link from a friend, Facebook, or Twitter? This lesson is part of a 16-part free e-mail course. Learn more about it and sign up here.