All posts by David McLachlan

Lean CX Score – Using The Waste Basket

Lean CX ScoreThis is an excerpt from "The Lean CX Score."  Get your copy now and start creating disruptors that completely annihilate your competition.

Oh and good news!  You'll be improving the speed, morale and engagement of your teams at the same time.  Get the Lean CX Score now.

Using the Waste Basket

If you’ve read anything about Lean or the Toyota Production System before, you will likely have heard mention of removing “wasteful” steps in your work to improve profit, speed, morale and more.  In the old-world Lean, there were eight Wastes listed for you to remove and improve your business.

We’re not going to use the traditional Wastes, because they often don’t fit in a modern business and there’s a good chance you’re not a car manufacturing plant from the 1970s.

Instead I’m going to give you something better.  Much better.

In our new method of Lean CX, we will look at waste from the Customer Experience point of view – remembering that customers are anyone that we, or our business, serves.  The new Lean CX Wastes are also more streamlined, simpler, faster, and guaranteed to improve your Customer Experience once they are removed.

So what are these so-called CX Wastes that we can refer to quickly, to see if our process is winning or lagging behind?  An easy way to remember them is with this handy acronym:  NEWER.

  1. Not getting what I want
  2. Excessive Steps
  3. Waiting
  4. Excessive hand-offs
  5. Rework

Let’s go through them in a bit more detail, starting with my favourite first.

Waiting

First of all, waiting is the devil when it comes to Customer Experience.  You are more likely to lose a customer before you have even begun if they can’t get what they want quickly.  With the rise of “digital natives”, those born into an era of technology and encouraged to use it from a young age, we have a whole generation of people used to “getting it now”.  And here’s a hint – they’re not going to wait around for you.

As you’ll see in some of the stories coming up, there are companies in traditional industries where waiting is the norm (like call centres or product deliveries) which are coming up with ways to give an amazing customer experience by using the Lean CX Score and removing this waste.

Excessive Steps

Part of working with customers who “want it now” means removing excessive steps or actions to getting what they want.  If something takes more than one “step” for a customer to get what they want, I can guarantee you that they will be looking for better alternatives.  Not to mention having excessive steps or actions paves the way for other wastes to creep into the process too.  Things like rework, hand-offs, queues or waiting are all things that drive your customer away.

Excessive Steps is also a closely related cousin of Excessive Hand-Offs, and it has just as high an impact on your Customer Experience.

Excessive Hand-offs

Have you ever played Chinese Whispers?  It’s an old schoolyard game, but the results of the game are usually well known.  For those of you who haven’t played it, you sit in a circle and whisper a message to the person on your right, who then whispers it to the person on their right – continuing until it comes all the way back to you.  The final message is usually quite distorted from your original message, because different people mishear and change the words ever so slightly with each hand-off.

It is the same with this Waste – if you have too many hand-offs or people, departments or companies being a part of your customer’s experience, then you risk losing things, misinterpreting things, queueing for things, having to redo things and much more.

If the thing they want is not done in the same place and time, there’s a good chance more CX Waste will appear to scare your customers away.

Rework

Have you ever filled out a form on a website from top to bottom, only to have the webpage time out so you had to refresh it instead of submitting it?  Then when you reloaded the page the form was empty again.  What a pain.

While this scenario is the cause of many angry cat pictures screaming at their monitors (and maybe some real-life angry people too), the effects of this kind of rework on your customer experience is devastating, and highly likely to send your customers packing (you guessed it – right across to your competition).

Rework also allows things like queues or waiting, excessive hand-offs and excessive steps to creep into your work.

Not getting what I want

Here is the final and most important one of all – your customer not getting what they actually wanted.  Even with the fastest, most streamlined, most friendly, incredible customer experience it’s all for nought if your customer didn’t get what they really wanted!

You could have the fastest shipping in the world, but if you’re not shipping what the customer wants, forget it.  And you simply don’t know if your customer got what they wanted unless you ask them.

Research shows that a full 96% of customers won’t tell a company they had a bad experience *17, they will simply leave and take their business elsewhere (and then tell all their friends how horrible that business was when they next meet).  This is absolutely crucial to remember.  If your customers are not getting what they want and getting it quickly, easily, without fuss and preferably in a way that makes them feel good, then they are just one cold-call away from leaving your company behind.

So there you have the Lean CX Wastes.  As you start to remove these CX wastes in your own business you will see a dramatic rise in customer and employee happiness, and both of those things have an impact on your bottom line.  Removing the Lean CX Wastes is exactly what the steps in this book are designed to do.

More chapters from The Lean CX Score book:

Lean CX ScoreThis is an excerpt from "The Lean CX Score."  Get your copy now and start creating disruptors that completely annihilate your competition.

Oh and good news!  You'll be improving the speed, morale and engagement of your teams at the same time.  Get the Lean CX Score now.

Lean CX Score – Good Customer Experience Engages Your Team By More Than 25%

Lean CX ScoreThis is an excerpt from "The Lean CX Score."  Get your copy now and start creating disruptors that completely annihilate your competition.

Oh and good news!  You'll be improving the speed, morale and engagement of your teams at the same time.  Get the Lean CX Score now.

Good Customer Experience Engages Your Team by More Than 25%

Good customer experience also engages your team, and increases retention and productivity of your team members by a significant amount.

Now you might be thinking, “Surely that can’t be true.”  After all, it’s easy to see how CX can affect the end customer, but improving our team engagement and retention too?  It certainly can.  If anyone you provide a service to is your “customer”, then that means the people you work with all have experiences that can be improved too.

Here’s a quick example.  One of the key steps in the Lean CX Score, as you will soon see, is “Check and Stop”.  Check and Stop means we get feedback quickly and we use it just as fast.  One report by the Gallup Business Journal found that a key factor of highly engaged team-mates was receiving feedback at least once a week *12.

It helped them to know if what they were doing was working; they could adjust where necessary, and it made them want to stay and do a good job.

Compare this with team members where there was no regular check-in.  The research showed they were 97% more likely to be disengaged in their work *13.

Increasing your team’s engagement doesn’t just benefit you if you’re a leader.  Having engaged team-mates has been a huge focus of powerhouses like Google over the past few years because engaged team-mates are happier, have more workplace friends, generally enjoy their lives more and also perform way better than teams that aren’t engaged.

You may have heard the study from Gallup International that found 70% of employees are disengaged at work *14.  But what you may not have heard is that disengaged team members are at least six times more likely to leave their job than team members who are engaged in their work *15.  If you think it’s expensive to acquire customers, it’s extremely expensive to find and hire good staff.  It’s much easier to keep them engaged in the first place.

Engaged team members will also make you more money.  A separate study by the firm Kenexa found that businesses with highly engaged employees achieved twice the annual net revenue on average than businesses with lower engagement scores *16.  That’s a 100% difference in percentage terms of revenue.

All of this comes from just one step in the Lean CX Score.  Can you imagine what will happen when you put them all together?

More chapters from The Lean CX Score book:

Lean CX ScoreThis is an excerpt from "The Lean CX Score."  Get your copy now and start creating disruptors that completely annihilate your competition.

Oh and good news!  You'll be improving the speed, morale and engagement of your teams at the same time.  Get the Lean CX Score now.

Lean CX Score – 80% of CEOs Believe They Provide Superior Service: Just 8% of Customers Agree

80% of CEOs Believe They Provide Superior Service

Remember how 85% of people think they are above average, and better drivers than everyone else on the road?  This effect extends to companies and CEOs too.  Bain & Co surveyed 362 companies and found that 80% of those companies’ CEOs believed their company provided a superior customer experience to their peers. *7

However, when customers of those companies were asked the same question, only 8% believed that the company provided a superior customer experience.  CEOs versus customers.  80% versus 8%.  That’s quite a difference!

The Lean CX Score will actually help you get an 80% score from your customers (who ultimately pay your bills by buying your product or service), and not just your managers at the next board meeting.

More chapters from The Lean CX Score book:

Lean CX ScoreThis is an excerpt from "The Lean CX Score."  Get your copy now and start creating disruptors that completely annihilate your competition.

Oh and good news!  You'll be improving the speed, morale and engagement of your teams at the same time.  Get the Lean CX Score now.

Lean CX Score – Good Customer Experience Is Worth More Than 140%

Lean CX ScoreThis is an excerpt from "The Lean CX Score."  Get your copy now and start creating disruptors that completely annihilate your competition.

Oh and good news!  You'll be improving the speed, morale and engagement of your teams at the same time.  Get the Lean CX Score now.

Good Customer Experience is Worth More Than 140%

If getting more approval from your customers isn’t enough, a study in the Harvard Business Review also found that customers who had the best customer experiences spent up to 140% more than those who received a poor customer experience *8.  This means that Customer Experience has a significant effect on your profit as a company, and your success as a team.

The same Harvard research found that customers who gave the poorest ratings for customer service had a much lower chance of staying as customers in the following year.  Fewer than half of customers who rated a company poorly stayed with that company, and overall they only stayed for a year on average *9.

On the other hand, customers who rated their experience the highest were way more likely to remain as customers the following year (31% more, to be exact), and on average had a likelihood of staying for six years *10.

A customer staying for one year, or six years.  Which would you prefer?

It’s not just about customers staying with you a long time.  Keeping customers can also significantly improve your bottom line and profit.  Research done by Frederick Reichheld (the inventor of the Net Promoter Score) found that increasing customer retention by just five percent, increased profit to the company by over 25% *11.

Isn’t that amazing?  Keep an extra five percent of your customers instead of letting them leave, and your profit could go up by 25%.  Most companies would be ecstatic with a 25% jump in profit.  Why was there such a difference?

Well, existing customers of a company tend to spend more over time.  The trust is already there – there is less of a need for the “hard sell”.  And the cost to acquire them as a customer has already been spent, a figure that for brand new customers can be quite large when adding up the cost of marketing, advertising, sales teams, service teams and more to get them on board.

Keeping your customers is even more powerful than you think, and good Customer Experience is the key that unlocks that power for you.

More chapters from The Lean CX Score book:

Lean CX ScoreThis is an excerpt from "The Lean CX Score."  Get your copy now and start creating disruptors that completely annihilate your competition.

Oh and good news!  You'll be improving the speed, morale and engagement of your teams at the same time.  Get the Lean CX Score now.

Lean CX Score – A New Way To Tell If What You’re Doing Works

Lean CX ScoreThis is an excerpt from "The Lean CX Score."  Get your copy now and start creating disruptors that completely annihilate your competition.

Oh and good news!  You'll be improving the speed, morale and engagement of your teams at the same time.  Get the Lean CX Score now.

A New Way to Tell If What You’re Doing Works

By now I hope you’re coming on this journey and you’re keen to improve your Customer Experience.  But how do we tell if what we’re doing works?  Well, let’s break it down.

What works?  You could say that if your product is selling, it works.  If customers are not complaining, it works.  If customers are coming back time and time again with a smile on their face, it works (that’s true for old bricks-and-mortar businesses and disruptive new products – they all need customers).  And, if your team is happy and productive, it works.  That sounds fair, right?

But how do we get there?  That place where customers are lining up to buy from us?  Let’s break it down further.

A Bad Customer Experience – Ever Had One?

Businesses that fail at Customer Experience make it complicated, slow, or difficult.  Which means that logically, good CX is exactly the opposite.

After all, have you ever had a bad customer experience?  Silly question, I know.  Of course you have.  Like that time you tried buying something, but the experience was so bad it just ended up being too much hassle?  These days it can seem as though many interactions we have are like this.  Maybe the store clerk was bored, or just didn’t care.  Maybe the call centre operator was particularly rude.  Maybe the website didn’t have enough information, or the wait time to be served was 10 times longer than you wanted.

So in our imaginary example, if you did manage to buy it, the experience was tainted and you would be unlikely to return.  Most people simply give up and go somewhere else (i.e. to the competition).

Now if you had a choice between these, which would you choose?

Simple, Faster, and Easy to Do

We’ve seen what good CX isn’t.  So let’s flip it around and look at what it is.

If something is simple and easy to do, then the natural path is for people to do it.  If your work process is easy to do, you’ll probably get it done.  After all, why wouldn’t you do something that’s easy?

If a product is easy to use, then people will use it.  If it’s easy to buy, then they are more likely to buy it.  In other words, if “slow and complicated” are a good reasons to leave a business, then “Simple, Fast and Easy to do” are good reasons to stay.

So that becomes our aim in creating an incredible CX.

We’ve already looked at simple, but why should it be fast?  Time is quickly becoming one of the most precious commodities on earth, with people used to getting instant gratification for the things they want.  In fact, time is so precious that people will pay other people to walk their dogs for them, go shopping for them, and would rather jump online to order something and have it delivered if it means they can save the time and effort of getting dressed and going out.

Another way of saying this is: If your product or service takes a long time, your customer will be looking at their watch and heading for the door (i.e. to your competition again.  Getting the picture?).  Simple, Fast and Easy to do are all equally important.

Sure, “Simple and Easy” Sounds Good, But How Can I Actually Put It Into Practice?

That’s a good question.  Like any of these new terms, the idea of “Simple, Fast and Easy to Do” can easily lose its meaning.

That’s why the Lean CX Score was created.

The Lean CX Score is a single score for your business or team, taken from the absolute best parts of the most customer-centric improvement system discovered in the past century.  It’s easy to do, and it’s fast.  You can quickly see if you’re winning or failing, and you can also see exactly what to do about it.

Because every business has customers, and you need them to keep coming back so you can stay in business, the Lean CX Score fits seamlessly over any company you can think of.

The Lean CX Score fits in any business

As we go through this book and you learn more about the Lean CX Score, you’ll see that by putting the steps into practice you will be making things easy for your customer to do, and easy for them to buy.

In fact, removing anything that is wasteful – that doesn’t add value to a customer experience – is our true aim.  As you will see in the coming examples and stories, by doing this we automatically compel our customers to work with us.

More chapters from The Lean CX Score book:

Lean CX ScoreThis is an excerpt from "The Lean CX Score."  Get your copy now and start creating disruptors that completely annihilate your competition.

Oh and good news!  You'll be improving the speed, morale and engagement of your teams at the same time.  Get the Lean CX Score now.

The Lean CX Score Story – The Wise Man And The Emperor

Lean CX – The Emperor And The Wise Man

Lean CX ScoreThis is an excerpt from "The Lean CX Score."  Get your copy now and start creating disruptors that completely annihilate your competition.

Oh and good news!  You'll be improving the speed, morale and engagement of your teams at the same time.  Get the Lean CX Score now.

By now you may have heard about the Lean CX Score, and are wondering to yourself “What’s all the fuss about?”  So let’s cut to the chase.  Below are the six separate, actionable steps in the Lean CX Score.  Each one by itself can create incredible growth, profit and scalability in your team, your startup, your business and your life.  But together, they are truly the greatest secret to creating disruptive products and services in any industry – new or old.

The six Lean CX Score steps can be remembered with the acronym ROVE CP (at least that’s how I remember it).

  1. Repeatable Process
  2. One Step Flow
  3. Visual (and Audio) Management
  4. Error Proofing
  5. Check and Stop
  6. Problem Solve for Exponential Growth

The steps also become six questions, which you can use to get your point for that step.  The questions look like this:

  1. Is my customer experience the same great experience every time?
  2. Did it take only one step for my customer to get what they wanted?
  3. Can my customer understand what to do first time, without having to ask?
  4. Is it impossible to make a mistake?
  5. Is there a check to see if my customer got what they wanted?
  6. (How) do we use feedback?

If they don’t make much sense now, don’t worry.  By the time you’ve been through the stories and real life research in this book, you will be an expert on them.

Which brings us to a quick note on reading this book.  Some people may be tempted to think that they know all about these steps just by seeing the headings, or to skip ahead to the last chapter and see how their business measures up.  That’s not necessarily a bad thing – different people learn in different ways, and sometimes getting an overview (such as in Chapter Seven) can help you learn more quickly.

Just remember that each chapter has the finer details you’ll need to take things to the next level, and in skipping ahead you may miss some of those things.  Also remember that these are not the same tools you may have seen before.  I’ve made the process simpler, faster, and easier to use with a few adjustments – adjustments I’ve made by seeing the results on the actual front lines of customer service and CX over many years.  If you approach this book with an open mind, you will see some amazing things begin to happen.

You may have heard the story of the Emperor who asked the advice of the wisest man in his kingdom.  When the wise man appeared he did not speak, and instead asked for a cup, together with a saucer and some tea.  He poured the tea into the cup with great poise as the court watched with amazement, but even when the cup was full he kept pouring until tea was spilling down the sides and onto the table.

Finally the Emperor could take it no longer and yelled “Stop, stop you crazy old man!  Can’t you see that the cup is full?”

It was then the wise man stopped pouring and said: “You are like this cup – I cannot pour my wisdom because your cup is already full.  If you truly seek my council, your cup must first be empty.”

Your cup must first be empty.

If you genuinely want incredible results, start this journey with a “beginner’s mind”, where you leave your pre-conceptions at the door and your cup is able to be filled.  In the beginner’s mind there are many possibilities, in the expert’s there are few.

So read the chapters to get a full understanding, read the stories of people who have done it before, and read how they used it to win.  At the end of the book you’ll see how to rate your own business or team, and start to see the incredible rewards that good CX can bring.

Let’s do it!

More chapters from The Lean CX Score book:

Lean CX ScoreThis is an excerpt from "The Lean CX Score."  Get your copy now and start creating disruptors that completely annihilate your competition.

Oh and good news!  You'll be improving the speed, morale and engagement of your teams at the same time.  Get the Lean CX Score now.

Get the Lean CX Manifesto here:

Lean CX Manifesto

Five Minute Lean – Introduction

Five Minute LeanThis is an excerpt from the book "Five Minute Lean", by David McLachlan - a wonderful book that blends teaching of the tools, culture and philosophy of traditional Lean with a modern-day Lean parable.

You can get the whole book on Amazon here and enjoy your own copy.

Introduction

This book was created for you.

In fact, if you are working either as an employee or as a business owner there’s a good chance you have run into your fair share of frustration over the past year.  A recent study found that nearly 87% of employees are “disengaged” in their jobs*, feeling unhappy and stuck with the work they do every day, and I know at times we would probably even use a stronger word for it than that.  With the average age of retirement currently in the high sixties and rising, that could be a very long time to spend doing something that you don’t enjoy.

This feeling is not just for the majority of employees in the work force either.  Small business owners often find themselves working 12-hour days in their business, with no clear process and no way to make things easier for the future.  Does any of this sound familiar to you?  Perhaps you know someone who is going through the same thing or even someone who feels the same way.  Have you ever come home exhausted because your job makes things more difficult than they should be?  Maybe you’ve been trying to do good work but seem to be blocked at every turn and you think to yourself, “If only there was a better way.”

Well here is the good news: There is a better way, and you’re about to learn it.

What you are about to learn will help make your job easier, faster, and more enjoyable.  It will give you an incredibly simple view of your job or your business and improve it so much that work becomes a pleasure again (or maybe even a pleasure for the first time).  It will help you to think like a leader, and people who think and act like leaders tend to get paid more on average than those who don’t.

Award winning research** has proven that the best of these leaders, in the most outstanding companies around the world, all have the following four capabilities in common:

  1. They know how to reveal problems & opportunities in their work
  2. They solve the root cause of these problems, building new knowledge
  3. They share any knowledge learned throughout the organisation
  4. They develop the first three capabilities in others

This book will give you the means to achieve all four of these leadership qualities.

It All Starts With a Standard Process

As you will soon discover for yourself, Lean transformations can see incredible results.  Process and delivery times can be cut in half (or more), and it is not uncommon for quality to improve in the area of over 100%.  But it all starts with a standard process.

Although it might be hard to believe at first, everything in life has a process, whether that process has been properly articulated or not.  And where there is a process, it can be improved.

Because of this, I am 100% certain this book can help you, no matter what industry or area you work in.

Top athletes train a very specific way each day to gain the success they enjoy in their field – they have a standard, repeatable process to get results.  Restaurants such as McDonalds have built themselves into multi-billion dollar businesses, and are run primarily by 16 year olds at the front line.  They can produce food the same way every time, because they have a method that is trained the same way each time to young people on the job.

But it also goes deeper than that.

Surgeons following a process checklist in a study from the New England Journal of Medicine saw death rates drop by almost half (47%).  Serious complications also dropped by around 36%.  A huge and positive impact, all by following a standard process.

How about music?  Surely that is a creative industry, and can’t be put in a “standard process” box?

Well, when Lou Perlman started Trans Continental Records in the 1990s, he studied a previously successful band called New Kids on the Block, and discovered that the use of five part harmonies in a certain way resulted in a large number of Top 10 hits.  He then used that very same process on the Backstreet Boys, *NSync, Take 5 and O-Town, creating a variety of boy bands from scratch and selling well over 200 million albums between them.  It was standard and repeatable and it made him many millions of dollars.

There are many ways standard processes help people to succeed.  Starting with your current process and using the methods in this book to improve it has been proven to be extremely effective.

This Book Itself is a Standard Process

To make your experience as easy as possible, you’ll notice that this book itself is a standard process, which you can reference quickly, depending on where you are on your journey.

Each chapter title is actually one of five individual steps that you can use and see at a glance, based on the five step Lean implementation process at the Lean Enterprise Institute.  These steps are “Specifying Value, Map, Flow, Pull, and Perfection”.  The five sections within each of these chapters are also titled as more detailed instructions for you to reference quickly.  Laying out the book in this way ensures that you and your team-mates have the power to learn and share Lean improvement methods in under five minutes, and it also makes it easier for you to get started and learn by doing, instead of spending time trying to find all of this information yourself.

Included at the beginning of each chapter is also an ongoing story – it is the story of someone improving their job so much that they enjoy it again.  As you read this story some parts may seem unusual at first, but please know that they have been carefully crafted to embed in your subconscious the Lean tools and practices.  Using a book in this way, with a summary and a story means that people with different learning styles can learn quickly and in the way that they most prefer.  Those who prefer a summary can read the summaries, those who prefer a story can read the stories, and those who want it all can read both.

While traditional Lean improvement tools were used in manufacturing companies, in Five Minute Lean we will also use them further in the world of office processes, food, finance, technology and dozens of other industries.  They can – and should – be used everywhere, from the home kitchen or work-shed through to building a home kitchen or work-shed, from a hotel doorman through to a hotel CEO.

Everyone has the power to improve their work, no matter what that work is.

Teach and Share to Build an Incredible Culture

Five Minute Lean is designed to make it easier for every one of your team-mates to improve their job.  This not only makes the job better and less burdensome on themselves, but it benefits customers with improved quality and delivery speed, and shareholders with increased profits and lowered costs as well.

By teaching Lean to all levels of a company, you can achieve amazing things.  This is because when management is on-board and well versed in job-improving tools, they can support and drive change.  When front-line team-mates learn these problem solving skills, they can often see quick ways to improve their job as they already know the process well.

Lean is the common language that when everyone has, ties this all together.

To quickly implement this common language, there is a key underlying principle of Lean, which is “respect for people”.  Respect for people means that we see problems as an opportunity to improve the process; we don’t consider it as a failing of the people.  Seeing it this way and improving a process also has lasting results – a legacy, even if people come and go.

While we are improving the process, we are also building our people.  This means growing the team-mates you work with and bringing them on the journey with you.  Every time you improve your work, you can share and teach these problem solving tools as well.  With more people around you who can discover and solve real problems quickly, work can become more and more pleasurable over time – even (believe it or not) fun.  This combination of front-line expertise and Lean problem solving ability cannot be bought with money, it must be grown within your business, which is why no one is ever “let go” as a result of a Lean transformation – only grown into new positions.

Finally, the steps in this book will give you and your team huge benefits in your personal lives.  Proof has emerged* that shows it is not always extrinsic rewards like money that increases motivation and happiness, but more intrinsic rewards or motivators.

These intrinsic motivators are:

1.  Autonomy

Where we are given free rein in solving a problem

2.  Mastery

Where we can work continuously toward mastering a worthy skill

3.  Purpose

Where we are contributing to something greater than ourselves

A Lean initiative, when taught to every level of a company, can give you all three.  By putting this book in everyone’s hands, you not only have the power to improve your job, but dramatically increase the engagement of your team-mates across the board as well.  Then, not only will work become a pleasure again, but great financial rewards will begin to flow.

Five Minute LeanThis is an excerpt from the book "Five Minute Lean", by David McLachlan - a wonderful book that blends teaching of the tools, culture and philosophy of traditional Lean with a modern-day Lean parable.

You can get the whole book on Amazon here and enjoy your own copy.

Check out these selected chapters from the teachings within Five Minute Lean:

Selected chapters from the story within Five minute Lean:

Five Minute Lean – The Power of Incentives – What is Measured and Rewarded Improves

Five Minute LeanThis is an excerpt from the book "Five Minute Lean", by David McLachlan - a wonderful book that blends teaching of the tools, culture and philosophy of traditional Lean with a modern-day Lean parable.

You can get the whole book on Amazon here and enjoy your own copy.

The Power of Incentives – What is Measured and Rewarded Improves

‘If you want to change how someone acts, change what you measure and reward to reflect it.’

When you’re effecting change in an organisation you should be aware of one of the most powerful influences of a person’s behaviour:

Incentives – but it’s not what you might think.

Billionaire Warren Buffett’s business partner Charlie Munger famously said that he continually underestimates the power of a person’s incentives.  Think about the global financial crisis in 2008 – it was caused in large part by institutions financing thousands of terrible loans – simply because their incentives were married to how many they sold and not the quality of the loans themselves.  Seems so simple now, doesn’t it?  But it made no difference to the salespeople if the loans went bad (which they eventually did), and it ended up causing widespread financial havoc.

So our last step when implementing a change in our company or organisation is this:

  • To change how our team members work and act, change how they are measured and rewarded.

This doesn’t have to mean monetary rewards either – it might simply be the difference between pleasure and pain in a task.  If a task is extremely difficult or painful to do the right way, it subtly makes the incentive for our team-mates not to do it.  If doing a task the wrong way is easier, the unspoken incentive is actually to do it that wrong way.

Changing what we measure has a similar result.  If you want team members to stop passing on mistakes or unfinished products downstream (to the next step in the process), then stop measuring them by the amount they do and start measuring them on the quality instead.  Make the focus on zero defects, and tie bonuses or Key Performance Indicators (KPIs) to quality or adherence to a standard process, with the amount they do as a secondary consideration.  The same works for any other process output you are trying to change, in business and in life.

If you want better customer service, create a standard process around your customer service interactions then change what you measure and reward to reflect it.  Feedback (both good and bad) for these things is best given as soon as possible – the longer you wait the less powerful it becomes.

Understanding the effect of incentives on team-mates’ every day decisions can truly change your business and your life.

Selected chapters from the story within Five minute Lean:

Check out these selected chapters from the teachings within Five Minute Lean:

Five Minute LeanThis is an excerpt from the book "Five Minute Lean", by David McLachlan - a wonderful book that blends teaching of the tools, culture and philosophy of traditional Lean with a modern-day Lean parable.

You can get the whole book on Amazon here and enjoy your own copy.

Five Minute Lean – Put it Together With Design for Ease of Use

Five Minute LeanThis is an excerpt from the book "Five Minute Lean", by David McLachlan - a wonderful book that blends teaching of the tools, culture and philosophy of traditional Lean with a modern-day Lean parable.

You can get the whole book on Amazon here and enjoy your own copy.

Put it Together With Design for Ease of Use

‘The most successful companies have products that are easy for customers to use, and processes that are easy to create them with.’

Design for Ease of Use (DFEU) is the idea that both our product and our process should be designed as simply as possible, so that anyone can use and understand it.

Truly, the more people that can use your product, the more opportunities you have to sell it.  And the more employees that can perform your process, the easier it will be to find quality, capable staff.

It is no mistake that an average two year old can find their way around an Apple iPad, and that Apple as a result has been an immensely successful company.

This is why Design for Ease of Use is so very important.

The first step is asking our customer, “What is it you are trying to do?”  The reason we ask, is because value is always determined by the customer (1.1).  Whatever their answer is, we can ensure that our process gets them to that outcome more easily, by answering for ourselves the DFEU questions below:

1.  How many steps are in the process?

Can these steps be reduced?

2.  Is Value added at each step?

Can we remove non-value added steps?

3.  How many wasteful activities take place at each step (3.1)?

Can we remove this waste?

4.  How long should each step take?

Can we make them faster, and does it meet customer demand?

5.  Why is the step necessary?

What would happen if it was eliminated?

6.  Are there any queues or stops?

How long does the process stop for, and can we remove these queues?

7.  What can go wrong at each step? Is it possible to make a mistake?

Can we use Error Proofing (4.2) to avoid mistakes?

8.  If the mistake cannot be prevented, can it be detected before it goes to the next step (4.2)?

And finally, the big one:

9.  Would customers be willing to pay for this step if they knew about it?

To quote a phrase that is attributed to Albert Einstein – “Everything should be made as simple as possible, but not simpler.”  Making things easy to use is the pillar behind any great product.

Five Minute LeanThis is an excerpt from the book "Five Minute Lean", by David McLachlan - a wonderful book that blends teaching of the tools, culture and philosophy of traditional Lean with a modern-day Lean parable.

You can get the whole book on Amazon here and enjoy your own copy.

Selected chapters from the story within Five minute Lean:

Check out these selected chapters from the teachings within Five Minute Lean: