New article- Audit services descriptions for service organizations

10 march 2019

We offer audit services for service companies using a combination of advanced techniques, including KPI services, assessment of the atmosphere (development culture) and identification of developmental pathologies (Adhesis methodology)

 

Service organization audit

In the modern market it is impossible to find companies whose managers would not like to see their service as a competitive advantage. It is the quality of service and the ability to work with clients that have brought companies such as Wildberries, Askona, Fabrika Okon into the leaders of the Russian market in just a few years. The founder of Wildberries has become the richest woman in Russia, became a dollar billionaire in fifteen years, although the online trading market in which the company works is very competitive, and companies like Yandex and Sberbank, having a huge audience, money and access to Big Data according to the laws of economics should have become monopolists here. However, Wildberries is thriving, as are many other online stores that have been able to provide their customers with quality service, competitive prices and a quick response to changing customer requests. These benefits are deeply connected with each other, as well as with the processes and culture of the organization. That is why it is so difficult for other companies to repeat the success of the leaders and copy their model. These connections are not always obvious. But with certain experience and tools, you can identify them, compare them with your company, and find your cons and pros. This knowledge is necessary in order to build its strategy, unique, with an eye on certain customers, but taking into account the successes and mistakes of the companies’ leaders who, being pioneers, spent millions of rubles and dollars on finding the right path.

First thing that should understand each manager is that each company in the modern world is a service organization. You wouldn’t be able to sell complex and expensive equipment, if you don’t have fair service. It depends on how good your service if, will the customer buy machine-tool from you or from your competitors. The equipment quality, manufacture production price working in the same segment of the market is becoming similar that the customers don’t see any differences. Big difference in construction means increase of cost and price and slightly different improvements and options, which clients are trying to be attracted by designers and markets often are ignored. Even if you sell not complicated equipment on the B2B market but selling chips via Internet, anyway you are a service organization. Because of how much is convenient your site, how your staff can (and want) to save client time, exceed the expectations and willing and meet commitments directly depends on your sales and suppliers discounts. Depends on your ability to work with different brands in better conditions, your profit and (consequently) your opportunity to motivate and train employees, improving all three indicators : service quality, product price and speed response to customer requests changes. Full circle.

If you want to start changes in the circle and bring the company to the new level, it will be easier and more correct to start on the service level. The ability to decrease the product price with saving the same profit level, as well as increasing clients loyalty and activity of the staff, who not only will stop to ignore non-standard clients requests, but will suggest solutions, exceeding the current demand – the natural consequences of service changing which don’t demand spending time and money. Service changes starting with service organization audit to understand weak and strong sides, opportunities and threats. To conduct audit usually are used three different approaches:

  1. Analytical. This approach is based on collecting analytics, statistics, evaluating the effectiveness of the processes and using the resources of the service to compare it with the ideal model, with leading companies or with competitors.
  2. Life cycle definition and pathology identification based on the Adesis methodology and Goldratt systems constraint theory.
  3. Assessment of the atmosphere (culture of development) in the service organization./li>

To obtain an objective view of the results of the audit and reduce errors in the development and implementation of a strategy for change, we use all three approaches, since each of them has its own pros and cons.

The analytical approach to diagnostics, which is based on the KPI system of service organizations is used in most modern international companies. It is suitable for companies of any size and provides an objective picture of deviations in terms of load, productivity, marginal profit, percentage of unproductive and productive time (efficiency). The collected statistics can be further used to estimate the amount and time of return on investment, develop a detailed budget, assess the correctness of the chosen strategy and adjust it. The disadvantage of this method is the difficulty of interpreting the results, which requires a lot of experience from the expert. The reasons for deviations of KPI from the ideal model or market standards can be a huge amount. It is extremely risky to build a strategy for improving the quality of service based only on numbers, without expert knowledge of internal processes and mechanisms of the service. But at the same time a properly assembled and interpreted KPI system allows you to get a kind of “control panel” by a service organization that many managers dream of. Using this “control panel”, for example, it is possible with an accuracy of up to 5-10% to predict the growth of marginal profits, which over a certain period of time will be provided by employee training, the purchase of a new tool, or an increase in loading standards simultaneously with an increase in employee bonuses. Accordingly, it is possible to assess the feasibility of these decisions, considering the financial situation of the company to reduce the likelihood of cash gaps. Deviations from KPI of more than 15%, as a rule, indicate errors in analytics, the chosen strategy or methods of its implementation at the level of tactical or operational goals. If the causes of deviations are taken into account and analyzed, then over time the number of errors decreases and management gets an even better connection between its decisions and the company's success in the market.

The approach to the diagnosis of organizations, based on the methodology of Adesis and GoldTrat TOS, as opposed to analytical, allows us to see not just numbers that need to be correctly interpreted, but the causes of deviations in the organization’s work, the so-called “pathologies”. This is a broader view of diagnostics, it is not desirable to use it in the context of only one unit (service), the organization as a whole should be considered. Adhesis theory claims (based on a huge amount of statistics and research) that all companies go through a certain “Life cycle” from appearance to death, facing certain problems at each stage. Knowing at what stage the organization is (and this can be said from a certain set of characteristic features), one can determine how “normal” the problems that exist now and what problems the company will face tomorrow. Accordingly, it is possible to determine “pathologies” that are not typical for this stage, to find and eliminate their causes (Goldratt’s TOS is used to find the true causes). The elimination of pathologies will lead to a healthy growth of the organization and the rapid achievement of the "heyday". The advantage of this approach to diagnostics is the opportunity for the manager to “see the whole picture” and understand how much the existing team contributes to the achievement of prosperity or, on the contrary, removes it from it. Since each stage of development requires managers to have certain professional competencies and personal characteristics, it may require training (and in some cases replacement) of department managers who did an excellent job at the previous stage, but cannot work effectively in the new environment. From our practice - in most cases, replacement is not required, there is enough training and support in resolving internal problems (a large amount of routine, low automation, no division of responsibility between departments, an ineffective motivation system, lack of knowledge of planning and analytics tools, etc.).

A diagnostic approach based on an assessment of the culture of service development. Determines the compliance of the management style adopted within the service organization with the expectations of the service staff and the accepted management styles in the company. In accordance with the concept of the evolution of organizations presented in 2014 by Frederick Lalu, depending on the management style of a company, it can be divided into several evolutionary stages of development. For clarity, adopted "color display" and each stage is associated with a specific color: from infrared to turquoise. Only eight stages. At present, amber and orange organizations dominate in Russia.

Amber companies (analogy - army, church) with a pronounced hierarchy and conservatism, whose employees strictly follow orders and are "cogs in the mechanism" for which constant management and control is necessary. Such organizations have relatively low efficiency and speed of response to customer requests, since all non-standard decisions must be made by management. “Bottlenecks” in such organizations are overloading managers, high production costs, a large percentage of unproductive time, and a lack of employee initiative. The quality of service in such companies should be constantly monitored and depends entirely on the competence of the manager, as well as on the relationship between the service managers and the company.

Orange companies (most modern international companies such as Nike, Philip Morris, Coca-Cola) have a clear hierarchical structure, but have a set of internal rules and procedures for executors “for all occasions”. Companies encourage internal competition and employee initiative. The main goal is profit. Widely used tools analytics and forecasting. There are plans for professional development of employees and clear criteria for achieving the next steps. More progressive and flexible model in comparison with the amber organization. The quality of service and customer orientation is much higher than in amber organizations. With investments in staff, production costs are lower than in amber organizations by reducing the level of control and the amount of unproductive time, the widespread use of modern CRM systems and the automation of all possible processes. The quality of service is less dependent on the competence and personal characteristics of the operational manager. Much depends on the effectiveness of the adopted procedures, which are regularly reviewed and improved.

Turquoise companies. Self-governing and self-learning organizations. There is a hierarchy and procedures, but managers are more likely to act as mentors and coaches, and procedures are constantly being improved. Responsibility for changes in the procedures and the result takes the employee who initiated them. Companies are very flexible, maximizing the strengths and initiative of their employees to increase competitiveness. The minimum percentage of unproductive time due to the involvement of employees at all levels in improving processes. Unique relationships with customers, their high loyalty. Low production costs by reducing the cost of control, the salary is at the level of the average market but at the same time the minimum turnover and training costs. There is no competition between employees, internal training is widely used. Ideal service organizations to a certain extent. Among the shortcomings - the difficulty with the recruiting. An organization like turquoise arises as a start-up at the first stage or it may be an evolution of an orange organization if its owners and management share “turquoise values” and are ready to give up some of their power and control, which is rare in Russia. In world practice, it is already quite common, including large companies.

The problem is often represented by a mismatch between the management style of the higher management and the service manager. For example, in an orange company with limited budget and low wages, the service manager may use an amber management style based on a rigid authoritarian system or, on the contrary, use the turquoise model to retain the most valuable employees. In any case, the use of different management models in one company often provokes internal conflicts, as it is a source of tension between the service and other departments. Management and service procedures and the rest of the company need to be adapted and harmonized.

In each case, the audit program of the service organization should be prepared individually in accordance with the problems and requests identified by the company's management. A description of audit services is available in the Consulting section. Fill out the feedback form or send an email to office@a0146768.xsph.ru

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