Today we manage workers by headcount, jobs, roles, processes, and infrastructure. By viewing all work as a service we can define the service needs, match the service talent, and confirm the value exchange. The process empowers the worker to get the work done the way they want to work.
Let’s describe a typical employee named Charley. Charley has a 10 year job history as a software developer and has a variety of skills. He was hired two years ago to do C++ programming for managing robotic controllers. He is a member of a 15 person group managed by Mary. While his job is OK, his current passion is robotic vision system software that typically runs on Java. Most of his software career he was producing microcode for controller chips for cell phones. His Java experience was in the Lab at college prior to his work career.
Charley is part of Mary’s headcount, who in turn is part of Jeff’s headcount, VP of Engineering, who is part of Pam’s headcount, Senior VP of Operations. Mary had a headcount opening two years ago and selected Charley based on his C++ skills. Charley’s job description is titled senior developer and includes standard phrases that can be found on thousands of senior developer job descriptions. When Charles was hired his compensation plan was in line with company standards. He was given a set of HR policies and governance rules, and was provided company computing devices and a bundle of IT approved software. Charley was assigned to a cubical shared with another developer. The normal official work hours were from 9am to 5pm but the standard culture was to stay until Jeff, the VP, left the office - normally about 6:30pm.
The annual turnover in Jeff’s division was 20%. The Company uses recruiters to re-staff losses and acquire new headcount. HR did periodic surveys and interviews and the CEO had an “open door” policy for anyone who wanted to discuss their views – which rarely happened.
Charley spent about 40% of his time actually developing code. Because of shortages, for the past 6 months Charles spent another 40% of his 55hour week doing testing and QA. The remaining 20% was spent in SCRUM reviews, meetings, collaboration, email, and company sponsored activities. Charley had never looked at his job description since he joined the company. His skills were not being advanced at work so he participated in several open source projects, his favorite being vision systems. In spite of Mary’s excellent communication skills, Charley was not happy or challenged in a way that meant something to him. He hated the process of looking for a job but was starting to take calls from recruiters. After three months Charley was offered a micro-code developer position with a smaller competitor and left the company. Even though the commute was longer and risk higher, Charley was thrilled to make the switch and join his friend Joe.
In his exit interview this is what Charley had to say as to why he left:
- Much of the work was below his talent level
- He didn’t like the culture of working until his boss’s boss left work
- He wanted more flexible hours
- He had more talent to give but no clear way to provide it.
- He had ideas to improve processes but it was not part of his job
- The organization “was in the way” of doing the right thing and slow to adapt
- Too many decisions moved up and down, and some of them made no sense
- He did not see a future for himself to increase his value
Mary was very disappointed that Charley left and now had the problem of replacing him. It would take at least 30 days to replace Charley and she and her team must absorb those unscheduled hours of recruiting and selecting Charley’s replacement. Several of Charley’s peers are also looking for “jobs”. Mary is working many extra hours to minimize schedule delays and has begun her own job search. Jeff worries about missing commitments and losing his job. Pam pushes HR to reduce turnover and recruiting costs. HR hires a consultant who confirms there is a problem. [time to smile]
The problem: Jobs, headcount, and roles do not reflect the real person, their talent, and the actual work and yet this is way people are managed. The result is a costly ineffective model that will become increasingly suboptimal as work itself evolves into cloud-like services. The root cause is the traditional organization model of authority, roles, and headcount resource/financial management.
The challenge: How to convert the root cause into a solution that addresses the increasingly dynamic needs of both the organization and the worker.
Assumption 1. If we can observe a solution that fits the challenge and is adaptable to various cultures, we are on the road to a solution.
We can observe that the service economy has evolved dramatically in the past three years to the point where nearly any company function or project can be executed by a hired service, many of which are on demand. Today only a handful of entrepreneurs are needed to start a company with the remaining talent and functions purchased as needed in the form of services. For example Legal, HR, Marketing, Sales, Engineering, IT, Manufacturing, etc., can be purchased in whole or in part from a marketplace of service providers. Further, this market place of services is segmented by industry, geography, and purchaser. Large service provides such as Amazon, IBM, and Accenture provide large scale solutions for mid to large scales businesses while others service the SMB markets.
In addition to service businesses, a new class of service brokers have emanated from the consumer web to connect individual service providers to organizations or individuals. For example, developers such as Charley are available through service brokers like oDesk, Elance, and Guru.com. There are 45,000 developers in oDesk from global sources that can be found by location, skill, reputation, price, and availability. Many companies are now solving problems by using gaming theory and incentives where individuals and groups compete with their responses and only get rewarded if selected. A service called fiveer is a broker site that offers service solutions for just $5!
Assumption 2. These “micro-services” offer knowledge workers profound new sources for problem solving.
The Opportunity: Augment existing entities with the ability to internally create a marketplace for services that emulate the external marketplace for services without disrupting existing resource and governance management processes.
The Story: Charley’s professional friend Joe has worked for over a year for a rapidly growing competitor of Charley’s company. During lunch, Joe was describing his work environment and why he was feeling exiting about being there. Joe has worked with Charley in a previous company developing microcode for robotic controllers. Joe really enjoyed the precision of microcode and like Charley he could not find a suitable job for that talent so he joined as a Java developer. During this past year Joe’s company went through a transformation process in engineering where all work was defined as services. The objective was to significantly improve worker productivity AND worker satisfaction.
Each worker (including managers) made a list of services that together made up 100% of their work. Each service was described and categorized. The provided service was then further defined by the level of talent required to deliver the service, and the value attributed to the service as perceived by the provider (Joe). The results of this process were then shared among Joe’s peers and a consensus was formed as to the collective services provided by the group. Joe had a modest ability in Java programming but he was an expert in simulating the processes and workflow the code was supposed to automate. When Joe first defined his services, he indicated that 5% of his time was committed to simulate the code specifications. As part of the service Joe communicated to the project manager and marketing customer what to expect before any code had been written. While he gave himself a positive value to this service, his customers have him a very positive value response indicating that much time and iterations had been avoided from Joe’s service. Joe’s peers and management recognized this talent and within 6 months 60% of Joe’s time was spent on simulating code and improving requirements. While Joe’s job description and authority did not change, his talent level had been elevated from “core” worker to a key talent.
Joe was now considered an expert. He was provided a budget to spend on software and web-based resources as needed. While he needed to justify his spending, what and how he spent his resources were his decisions. As an example, via LinkedIn, Joe found a community of experts who simulated java code development. He offered $1000 for the best review of his simulation. As another example consider that about 20% of Joe’s time was spent in providing java code development services. He was struggling to solve a subroutine problem while meeting his other commitments, so he searched on oDesk and found a developer in Vietnam who was a Java expert. At an agreed price of $300 the oDesk developer delivered a solution and Joe was able to fulfill this commitments. Joe’s managers, customers, and peers grew to trust his decisions. He noticed that his manager spent much less time reviewing and reporting and more time understanding how to improve the value of his services and those of the group.
Joe’s company offered expert workers 10% of company their paid time to follow their passion provided the worker contribute 10% of their own time to learning, providing support to other projects of interest, experimenting on new services, or being an intern in new domains of service activity. As part of the process Joe described his past services such as microcode development for controllers and his desire to develop new service capabilities. While Joe had no experience in mobile device applications, he was able to intern 1 day per week in a model apps group of another division. To facilitate managing his current services while expanding his opportunities, Joe and all workers were allowed flex time except for certain predefined meetings.
Joe felt like he was in a start up where customer value creation and teamwork is king. While he had a boss, he also felt responsible for continuously improving his value contribution and he was recognized and rewarded for it. When Joe met Charley for lunch he could not contain himself. Two weeks later Charley interviewed at Joe’s company and was selected as a micro-coder. Two months later, Mary also joined the company.
As described in the Solution above, Joe transformed from a traditional employee in a traditional organization to a highly motivated worker where his talent was leveraged for greater value and he was given an opportunity to make more decisions, solve more problems at the provider-customer level, and further enhance his talent development. The Charley experience is increasingly prevalent in traditional command and control organization. The talent in these organizations will gravitate towards companies offering “the Joe experience” because those entities best their lifestyle and professional needs. There is always a shortage of top talent. The services model leverages and empowers top talent while grooming others to become top talent.
The figure on the left below summarizes typical practices of a well managed traditional organization. These practices have been very effective at resource management and automation. However, business strategy, financial plans, and execution from the top down, fail to leverage the innovation, leadership, and management strengths available from knowledge workers. With the accessibility of web services and communities, many of which are free, the average knowledge worker can produce far more value than workers framed in by processes and standards. The services model opens up a new layer of management where all workers manage the experience of their customers. The services model does not replace top down decision making. Instead, it improves the decision quality by reducing the number of top down decisions and replacing them with many smaller but important decisions right at the customer level. The rental car company Enterprise, Inc. is an example of distributed decision making where their service agents who directly engage customers can make decisions to best meet customer needs without seeking approval. The result is better service, improved customer satisfaction, and increased worker motivation.
The recommended approach is “walk before running”. Start with a pilot in one organizational division and select an initial group size of 15-20. IT or Engineering groups are good places to start since optimizing and motivating technical talent is vital and high turnover can be debilitating. The IT culture is likely the best fit for a pilot since they are considered a service organization and in many cases hire outside services to augment their internal staff. The second benefit of an IT pilot is that IT services are horizontal, affecting the whole company and therefore they are nature champion for the CEO to ask them to assist other organizations in the transformation.
The first step is to describe why the pilot is important, the process, and the desired outcomes. The second step is to define the services of all workers (managers included), to develop a consensus as to what services they provide, to whom they serve, and what value they produce. The next step is to communicate with identified customers of the services and understand their perception of the service and its value. The final steps are to understand, recommend and implement changes the improve service value.
Prime Hypothesis: Implementation of the services model will improve company operating margins by 5% or more. Assumptions in support of this hypothesis are:
Managing by services will produce greater worker productivity and worker satisfaction.
- In most organizations there is considerable “wasted work”. Workers interacting directly with customers are better able to understand the existing value of the service and improve upon it. The freedom to make more decisions and manage their customer’s experience leads to greater satisfaction of the customer and the provider.
- Outcome: Greater service value per worker for the same or less time spent
Talent alignment increases both worker value and satisfaction.
- By managing by role and job, many workers are asked to perform services that are below their talent level. Given the premise that higher level talent produces more value and return on investment, then not optimizing the use of talent reduces worker value by 30% or more. Workers are often dissatisfied in performer work below their talent level.
- Outcome: An increase in the percent of talent used by optimizing services instead of headcount.
Value based management augments resource based management by providing a basis for improved decision making.
- Roles, jobs, and org charts are static information and may have little bearing on the real work. Value based management is dynamic and defines what the worker does, to whom, and why. Decisions are made as close to the customer as possible.
- Outcome: Ability to understand the existing work and the expected consequences of changes.
Distributed management, leadership, and innovation represent a greater opportunity to achieve business objectives than typical command and control.
- Knowledge workers have far more capability to solve problems and make decisions than just three years ago – for example the use of community and web-based resources. In traditional organizations managers are expected to exert more leverage in meeting business objectives than workers. By making all workers responsible for managing, far more creative leverage and leadership are available to meet objectives.
- Outcome: Improved success metrics such as: Greater lines of quality code per worker per month; increasing the cumulative value of group services ;and increasing development and use of talent.
▪ Measurement: Service provider and customer surveys; increase in the value of services by worker and for the group; number of services improvements; number of increases in talent level; percent utilization of talent at the most valued talent level; number of decisions made at the provider-customer level; reduced turnover rates; improved operational metrics.
▪ Experimental subjects: The champion for the experiment is business unit leader such as an IT executive. Describe the trends that make traditional organizations suboptimal and describe the low risk approach of the process and the huge opportunity if the experiment succeeds.
▪ Control group: There are two ways to establish a control group. The initial pilot group can establish a baseline of services and talent usage. Once the process including change implementations are concluded the pilot group can redo the process and measure the changes in service value and talent utilization. Secondly, once the pilot group has completed their process, service provider and customer surveys can be conducted with pilot and non pilot groups – ideally in the same branch and leadership as the champion.
- Week 1 – champion meets with managers to the review the process and desired outcomes. The objective is to get the managers onboard and to select a 15-20 pilot group. Next the champion and manager (s) participating in the pilot meet with the group, review the process and desired outcomes. Workers need to leave the meeting with the understanding that the process is designed to empower them. The process is not another management exercise to squeeze out more work.
- Week 2 – managers and workers (both are workers) define the services they currently provide, to whom, and at what value.
- Week 3 – the results are summarized and a consensus is established reflecting the collective services of the group and the value delivered.
- Week 4 – customers are ask to validate or not the value of the service received from the provider. Service deletions, changes, and additions are identified and recommended
- Week 5 – decisions are made re service changes and implemented.
- Week 13 – the process is repeated and improvements are identified as the “control group”.
- Week 16 – the results of the experiment are summarized.
Thanks to Chris Grams and Alberto Blanco for their constructive comments.