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 be certain 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 very nasty infection…
That infection was variation
Not everything is predictable. Day by day things vary, and that variation will make you sick:
- The driver’s alarm clock won’t always work
- Different numbers of passengers will get on at different stops
- Those passengers won’t always have the exact fare
- Lorries making deliveries will block the road
- The traffic lights may be red, or they may be green
- Sometimes, heaven forbid, there will be accidents
Trying to predict when your bus will arrive at every bus stop, every day, is a fool’s errand.
Instead you have two options: either make your best guess, and except that sometimes you will be late, or put lots of slack into the time-table 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, if you make sweets, process credit cards, sell pizzas or insure ships there will be some variation in the system somewhere (believe me, I have tried to do them all).
Like a Disease, Variation is Infectious
The worst thing about variation is that once you have caught a dose of it, it will multiply through your business, making things progressively worse and worse. Let’s talk through another (purely hypothetical) example, forget the busses and imagine your business sells mobile phones.
The infection started with advertising
Your Sales Department had just decided to send out a new batch of direct marketing leaflets in the post, (junk mail, call it what you wish). The mailing was supposed to be sent out over a month as 20 evenly spaced mail drops, to 20 evenly chosen customers groups, to give you 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 quite right 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 serious, but because things weren’t quite as smooth as they could have been it was a bit of a rush to get the adverts into the post on time. Instead of a nice steady stream of mailings there were lumps, bumps and a great slew of mail was dropped all in one go at the end of the month.
Then variation infected 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, but because the letters didn’t get posted those temps sat about forlornly doing nothing for a fortnight. The printing company assured everybody that the mailings were going to plan (let’s just say they were economical with the truth), so management concluded that the advert was a flop and customer response rates were down.
In an effort to save money the Operations Manager laid off his temps (no point in paying for them, he had a budget challenge to meet) and 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 fulfill the orders. The buyers scurried about and found a job lot of similar (though slightly older) phones. The backlogs were horrendous, but eventually all the customers orders were met.
Then variation infected customer calls
In the “customer welcome pack” with each new phone there was a leaflet asking customers to “ring this number to activate your free first year guarantee”. Of course there is no such thing in life as “free”, this was simply 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 wanted 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 of those calls landed precisely 4 weeks after they were supposed to, when the call centre was geared up to sell insurance on lap-tops instead.
Then 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 lap-tops
Press 2 for tablets
Press 3 for mobile phones
Press 4 for…
But the routing changes just confused the staff schedulers. Nobody was entirely sure which agents should be trained to answer which type of call. Sometimes callers were left waiting for hours; sometimes the team managers asked the agents to do the minimum for customers (in an attempt to answer every call) and missed those valuable sales opportunities.
Then variation infected sales performance
The call centre agents weren’t entirely sure which call type they were supposed to be answering, so they couldn’t sell anything at all, or worse still tried to sell the wrong type of insurance. Sales rates were low, quality standards were poor and the Compliance Manager went into melt down.
To fix the situation the managers instigated new targets and incentives, to motivate the agents and improve their sales performance.
Then 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 team mates. (Why would they? There was money at stake.) So other agents got fed up with their poor performance, and they decided to quit, or were fired. Recruitment costs spiraled.
Finally variation infected management meetings
Crisis meetings were held, capacity was short, financial performance was poor, costs were high, and revenues low. Mangers 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. They 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 really insidious problem with variation is that most managers are blind to it. It is really difficult to tackle a problem that you don’t realise exists. However, once you can see it, you can cure it and then you can fundamentally change your business.
Let me give you a final real life example:
How long do you think it would it 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, 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 exactly 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. To find out which services are all important to your customers, and which are not, apply the pareto principle.
- Next learn to spot variation for what it is. Most variation is endemic in the system (think traffic lights) but some is sporadic (think accidents). To treat the disease you need to understand what type of disease it is.
- Finally apply a little problem solving and remove the causes of the variation.
If you want something more in depth…
You should also read this excellent leaflet by Myron Tribus, which triggered this line of thought on the first place, or try these links:
- The National Health Service: Statistical process control
- Wikipedia: Common cause and special cause variation
- Quality Progress: Understanding variation
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