Posted by Colin Weatherby                                                                         2200 words

John Seddon won the first Harvard Business Review/ McKinsey Management Innovation Prize for ‘Reinventing Leadership’ in 2010 for this paper. The prize was awarded for:

“ … the best story (a real-world case study of management innovation) or hack (a bold idea for tackling a critical management challenge) around … redefining the work of leadership, increasing trust (reducing fear), and taking the work out of work.”

As the title suggests it is a provocative paper. In his usual way, Seddon provides challenging ideas supported by practical evidence. The layout of the paper is interesting.

The first section links to the ‘moonshot’ themes for the Management Innovation eXchange (MIX)  – an open innovation project aimed at reinventing management for the 21st century. Each ‘moonshot’ was identified by asking 35 invited participants ‘what is the management equivalent of putting a man on the moon?’ at a conference in 2008.

Seddon’s paper is linked to redefining the work of leadership. The idea is that the ‘era of the all-wise, all-powerful leader-as-decision maker is over’. Leaders must be capable of building environments that engender extraordinary accomplishment. This requires a transition from “command and control” to “motivate and mentor”. Leaders must be capable of building commitment and alignment without resorting to the traditional tools of bureaucratic control. The goal is an organisation filled with leaders who make everyone else better and enable them to fulfill their potential.

This is important in understanding the significance of this paper. Seddon has been recognised for the essential ideas driving his work – replacing command and control management with systems thinking.

The paper has sections for the summary, context, triggers, key innovations and timeline, challenges and solutions, benefits and metrics, and lessons. It concludes with credits, materials, documents, images and videos to support the story. The story unfolds in a logical and informative way.

The context for the story is Owen Buckwell, the head of housing at Portsmouth City Council in England. Over 40,000 people rely on him for warm, safe and comfortable homes. Each year he is responsible for dealing with 17,000 blocked toilets and 100,000 dripping taps in the 17,000 council houses.

Owen has been managing housing for 6 years. Seddon describes him as a curious man who likes to get to the bottom of things.

 “In 2006, everything appeared to be going great for Owen; his management reports were stuffed full of encouraging numbers, he got good ratings from the Central Government inspectors and his customer survey results were among the best in the country. So what made him scratch his head? It was this: if the service he provided was so damn good, how come tenants were always complaining?”

The trigger for Owen was curiosity. He wanted to find out what was really going on. He chose the Vanguard Method to help him dig deeper because it made sense to him intellectually. I could relate to this and found it to be an interesting point. There are many business improvement methods available. Owen selected one that made sense to him given his understanding of the work he was doing. He knew enough about his work to know what would make a difference.

Seddon then describes the Vanguard Method – how it takes organisations from command and control to a systems approach to the design and management of work.

 “Command and control management is characterised by a top down hierarchy, functional specialisms, the use of targets and a focus on managing people and budgets.”

Seddon believes that command and control is the management logic at work in most organisations across the world. I think he is right. The first stage of the Vanguard Method involves managers listening to demands. For example, listening to phone calls from customers over a period of time. Managers are silent. They simply listen, to understand the reasons that customers call as explained in the customer’s own language.

After doing this, Owen learnt that his service was full of preventable or ‘failure demand’ – customers who kept coming back because the service hadn’t done something, or had done it wrong.

 “An example of Failure Demand would be a customer ringing to say, “A Plumber came last week but my tap is still dripping” or, “You’ve sent me the wrong form”. An astonishing 60% of all contact made by customers was preventable. “

The key innovation by Owen was the design of a new system around the kind of demand that Seddon calls ‘value demand’. Value demand describes the calls and visits from customers that are necessary – the type of demand that service organisations want and exist to meet.

 “For example, Value Demand placed on a hairdresser would be a person asking for a haircut, not someone complaining about yesterday’s haircut.”

Owen and his staff learnt that the main cause of failure demand was their efforts to meet ‘best practice’ aas determined by the Government. His staff were diligently following Government standards that guaranteed poor quality workmanship, missed appointments for repairs and half finished jobs. This led to repeat calls and visits by tenants to the council offices. In an enterprising move, Owen decided he would stop trying to please the Government and would instead concentrate on what mattered to his tenants.

In Victorian local government meeting standards set by the State government is becoming more of an issue. A set of mandatory performance objectives must now be reported against and more performance objectives have been foreshadowed. Mostly, these indicators allow the State government to compare councils, they don’t help the councils to provide better services. They meet the needs of the State, not the communities served by councils.

In Owens case, his new purpose for the system was to “to carry out the right repair at the right time” for the tenant, not to try and receive favourable reports from Government. Seddon believes that this change of purpose shouldn’t be underestimated:

 “It re-orientates the entire operation towards the tenant instead of towards Central Government. Measures are now linked directly to this purpose instead of to performance against arbitrary targets. Crucially, the data are now plotted in time series and used by the people doing the work on the job. In the old system, the data were reported up the management hierarchy months later when it was too late to do anything.”

The most exciting innovation is that Owen’s service does repairs on the day and the time when the customers want them and at half the cost. Seddon describes the system is a massive advance in understanding how to use demand data to drive service design. Understanding the predictability of demand volumes has enabled them to plan resources effectively.

 “The system works as single-piece flow; the tradesman gets one job at a time, they have a visual system showing the jobs with when the customers want them done; and another visual system showing when the tradesmen will come free from their current job.

If you just sit and watch you see tradesmen coming free and getting the next job in the queue. It works because of the next startlingly obvious (when you see it) innovation: When the tradesman arrives at the job, he tells the office when he expects to be finished”

This is the part of Seddon’s story that I like. According to Seddon, Owen has designed-out the perpetual problem with work management systems; i.e. they work to standard times. In these systems, as soon as there is variation, work management systems fail and the system gets out of control. In Owen’s design, every tradesman has his own van stock, which is worked out by taking data on actual materials usage over time, and the cost of van stocks is now less than 25% of the original cost and failures in van stocks are minimised.

This is basic operations management or work design but it is amazing how often you see simple problems persist to become major headaches when managers don’t have the skills to evaluate and improve work design. It has been the topic of a series of Local Government Utopia posts over the past 6 months (see here, here, here, here, here, here, and here).

Owen also improved his supply chain. When a tradesman needs material he calls and the materials are delivered to where they are needed.

 “They know that if you are taking out a bath, you want the new bath to arrive just as you take out the old one. And they measure against that nominal value. By studying both ‘early’ and ‘late’ variations they are able to further improve the system. For example, you soon learn that it takes only a few minutes to take off a door and more time than that to supply one, so it makes better sense for those tradesmen who will predictably need doors to carry them. As time goes by the van stock changes, things go in and out.”

Remember, Owen’s team delivers this amazing service at half the original cost. As Seddon says, it is extraordinary.

By now your eyes are probably beginning to glaze over (assuming you got this far). If they are, I am afraid you might be part of the problem. Failure to understand technical management concepts related to the design of work is widespread in local government. And it has consequences. If you have operational responsibilities to deliver services and you don’t know about predictability of demand; what value demand is; or understand the importance of customer purpose; know how to determine what is variation and what is not; know how to design a work flow; or understand what the nominal value is; or understand the impact of targets and activity measures on worker behavior; then you probably don’t know how to do your job really well.

Seddon describes the biggest challenge as changing management thinking from command and control to systems thinking. He says this is a challenge even when the consistent, proven and reliable results achievable through systems thinking are known. Unfortunately, it is normal for managers to design services with no knowledge of what is really going on for customers. He says the main solution to this is to get managers to listen to demand, as Owen did. It is a powerful lever.

Seddon says that even Owen wasn’t a fan of systems thinking at the start. It offended him because it went against everything he thought he knew about leadership.

 “Owen is known as a practical, common sense, no nonsense man – not easily persuaded. He is proud to say he has never fallen foul of ‘new fangled ideas’ or the latest management fad. Owen knew that to get a radical change in service he had to do more than just tinker. He knew his staff didn’t need coaching. There was nothing wrong with them. This was much harder than that. He had to change what was going on in his own head. The starting point for Owen, as it is for many systems thinkers, was curiosity.”

As Seddon says, systems thinking is a fundamental change and a challenge to the current management orthodoxy. It is the opposite of the ubiquitous command and control thinking. It removes functional specialization. You will no longer hear “that’s not in my job description”. It also removes procedures. Instead demand, value and flow become the focus. The relationship with customers becomes about what matters to them. Decision making is integrated with the work. Targets, activity measures, and standards are replaced by purpose and what matters to the customer.

 “The new measures relate to the purpose from the customer’s point of view. Staff now understand variation including how to differentiate between ‘noise’ and ‘signals’ in the data. Owen’s relationship with his suppliers is no longer contractual. It is a cooperative relationship which means good service for Owen’s customers. It also means good business for his suppliers.”

As Seddon describes it, the new leadership ethos is about ‘learning through taking action on the system’. It is not about controlling budgets and people anymore. The table below compares command and control thinking with systems thinking.

Seddon discusses the benefits and metrics of Owen’s changes at length with detailed information on improved service delivery times, increased tenant satisfaction and reduced costs over a four year period. He also discusses the social benefits and unintended consequences.

The paper concludes with the lessons.

Mankind invented management. Current management works but not very well; it needs re-inventing urgently

1. We can reinvent management from command and control to a systems approach. Owen Buckwell in Portsmouth and thousands of others are doing it
2. Forget your people. Real leaders act on the system. Real leaders redesign the system to meet demand. When leaders act on the system, customers cheer, costs fall and the culture change comes free.

Seddon’s advice to forget about your people and act on the system is paramount to heresy in local government in Victoria today. We say that our people are our strength, that we are a service business where people count, and we a lot of focus is put on people and their performance. I think if we really wanted people to perform well at work we would take Seddon’s advice and improve systems.

If it is a choice between great people working in average systems, average people working in great systems, or great people working in great systems, I know what I would choose. And I think I know what customers would choose.