Tuesday 19 December 2017

How to Switch from Legacy to Systems Thinking and Make the Work Really Work for Airlines and Passengers - My Interview with John Seddon

Despite incomparable growth in airlines size, system complexity, and operational dynamics, airline management styles, basic organisational structures, and performance measures haven’t changed much since 1950s. Decisions are still downloaded from the top without taking into account the natural, cross-functional flow of work and its impact on overall performance. 

Corporate reports are made of disjointed financial and operational figures and are unsuitable for supporting the system improvement. The result: poor service, decline in operational efficiency, and dubious financial results.

Rather than improving from inside, airlines sought relief in expanding through the non-core businesses and passing on responsibility for service quality on external service providers – strategies that only exacerbate problems of their core business. 

The question is, is there a better alternative to manage an airline, to bridge the gaps between system management and operations, to ensure adaptability of the system that is a part of a bigger system that constantly evolve, to bring clarity to that which appears fuzzy, and make the work really work for airlines and passengers. 

Being personally involved in designing the method that supports these values, I have always been on lookout for new ideas within and outside the airline industry, especially while writing the second, extended edition of my book ‘Beyond Airline Disruptions - Thinking and Managing Anew’. Not long ago I was discussing these issues with people working in financial and insurance sectors and was advised to look at John Seddon’s Vanguard Method which they were considering applying to their work on system improvement. After watching the suggested video ‘The origins of Vanguard Method’, I instantly recognised that this concept is applicable to airline organisations, but it was after I read his timeless books ‘Freedom from Command-and-Control: A Better Way to Make the Work Work’ and ‘I Want You to Cheat’ that it became clearer that the Vanguard method provides answers to most of the above questions, and that its general principles have much in common with my work.

I contacted John explaining my interest in his work, and was soon welcomed by him in his office in Buckingham. It was a real pleasure talking to John, experiencing the clarity of thoughts with which he explains things that many people see as complex and hard to comprehend. I was happy to hear that John spent four years working for British Airways in mid-eighties and has had an opportunity to feel the feel of life inside the airline.

John is a change-maker who proved through practice that there is a better way to make the work work than through the system governed by command-and-control mentality instilled in top-down organisational hierarchies. He has a rare ability to inspire people to change the way they think about their work and apply systems thinking in daily practices.

John is an occupational psychologist, researcher, professor, management thinker and leading global authority on change, specialising in the service industry. He is the managing director of Vanguard Consulting Ltd based in UK, with franchisees in Scotland, Ireland, Denmark, Sweden, New Zealand, Australia, Croatia, and The Netherlands. 

The following are the highlights from our talk and John's writing focused on   
Vanguard approach to systems thinking seen from airlines’ perspective. (JR-Jasenka, JS-John)

JR: When we look at airline organisational charts, everything looks orderly. Functions are sorted and linked vertically and horizontally so that managing numbers, controlling people and their activities comes easy from hierarchical perspective. In the real world, however, the work is cross-functional and interacts with changes in the external environment. Inability to understand and control these flows comes at a high price: it is the underlying cause of rise in system inefficiencies, complexity, costs, and the decline in service quality.
JS: We think of our organisation as top-down hierarchies, we separate decision making from work. Top-down, hierarchical, functional organisation might help us navigate our way around to answer the question 'who-does-what and who-is-to-blame?’, but it does not help us discover anything about how and how well the organisation achieves its purpose. The typical consequences of failure are: failure to achieve them, increased variability, more waste (errors and rework), higher costs, demoralisation of the workforce and, ultimately, disrespect for management.
We need to reject classical conceptualisation of the organisation. Taking a system view always provides a compelling case for change and it leads managers to see the value of designing and managing work in a different way.

JR: How does Vanguard address this problem?

JS: The Vanguard approach to systems thinking is a completely different logic to command-and-control. While all systems thinkers agree that a system is a sum of its parts and the parts must be managed as one, the Vanguard approach is unique in that it starts and ends with the work. It makes thinkers and doers cooperate naturally. It is about changing management thinking which is the key to changing performance.
Vanguard is a methodology for change and improvement that engages the organisation. Any change is based on an understanding of demand from an ‘outside-in’ or customer perspective, identification of the value work, adoption of relevant measures and then designing out the waste within key process. People who do the work must be engaged in these activities. It also provides the means to develop a customer-driven adaptive organisation; an organisation that behaves and learns according to what matters to customers. If the system is to have viable economics, it could only be understood and developed from this point of view.

JR: The special thing about Vanguard approach is that it cuts costs as service improves and increases profit. This is quite opposite from what traditional management is about.

JS: Most managers equate improvement in service with increased cost. It is because they have been conditioned to do it that way. They cannot ‘see’ where their costs really are.  When managers learn to see their organisation as a system, they see the scope for improvement and the means to achieve it. They can see the waste caused by the current organisation design, the opportunities for improvement, and the means to realise them.

JR: Understanding what ‘systems thinking’ is about seems to be too abstract for most people, which is why there are lots of different interpretations that fit in local contexts, especially when compared with command-and-control way of thinking.  I found the following comparison table from your book Freedom From Command-and-Control: A Better Way to Make the Work Work’ really useful for clarifying the differences:

JS: When command-and-control thinkers listen to system thinkers they hear the words, but don’t appreciate their meaning. If system thinkers point out the value of working outside-in, command-and-control thinkers just treat it as an example of what management should be doing in any event.  Should system thinkers point out that traditional, command-and-control measures were part of the problem and should not be reintroduced, the command-and-control thinkers will insist such measures to be the fundamental stuff of management.
JR: More and more often airlines expand their operations beyond airport capacity limitations and their own ability to handle the consequences. They invest in more aircraft, fly more kilometres and more passengers to more airports just to outnumber the competitors, and are later surprised by ‘unexplainable’ losses, rise in passenger complaints and compensation claims.
JS: The measures associated with command-and-control thinking tell managers nothing about the system because they are based on a resource-management logic.  This logic assumes that when capacity needs to be increased, it requires extra resources. In service organisation, especially the complex ones, waste is much harder to see. It is hard to see rework, it is hard to see work flow, and it is hard to see demand. They see the figures but are not in a position to reduce their costs and improve their service. The people-managers and workers alike are locked into dysfunctional system. But the better way to improve capacity is to remove waste: adding resource to wasteful system just compounds inefficiency.
Once the abundant waste inherent in the current design is removed, the capacity increases, lessening costs and providing scope for growth. Measures and roles need to make the system solution work. You have to be prepared to change the system, the way work is designed and managed; especially the way measures are used in management. 

JR: System decisions depend primarily upon information and measures surrounding decision makers. They often distort reality as managers don’t like bad news.

JS: Firstly, managers need to see for themselves the dysfunctional consequences of their current measures. Only then will they engage in devising measures that will be more beneficial. In the systems solution, measures are derived from purpose (not the budget) and are used by the people who do the work to understand and improve it. The benefits are significant.  People change what they do, something it is impossible to accomplish in a command-and-control design. Managers’ roles change from working in the hierarchy to acting on the system. It is important for managers to ensure they limited their actions to the things that would be important, and, at the same time, develop their understanding of their organisation as a system.
JR: Functional measures always cause suboptimisation because parts are optimised locally at the expense of the whole. What kind of measures should be used to ensure better system decisions?
JS: To measure work with functional measures might seem logical from a top-down perspective, but its weakness is that it tells you nothing about what is going on. It will only tell you what has happened, and then only from a functional point of view. Functional measurement is dysfunctional, creating fear, destroying teamwork, and encouraging rivalry. It drives short term performance of functions at the expense of the system.  Worst of all, it fosters politics. Political behaviour fills the void created by management detachment from the work. Controlling work through functional measures can only be harmful to flow. All work goes through some kind of flow, so we would be better having measures for it. Managers worry about this idea because they assume it may threaten costs. They cannot see the costs associated with the waste caused by functional management. Only by managing costs end-to-end, associating cost with flow, can you reduce costs in a sustainable manner.

JR: Every change in schedule incorporated in annual budget triggers changes in cost and revenue without managers being aware of it. Communication between operations and management responsible for monitoring causes of critical variations in operational performance doesn’t exist. 
JS: This is a typical example how we separate decision making from work. We expect managers to make decisions with measures like budgets, standards, targets, activity and so on. We teach managers that their job is to manage people and budgets. At the heart of this logic is separation of decision-making from work that come at higher costs and poor customer experience.
JR: My way of understanding what does and what doesn’t work at system level is to identify critical variations between planned assumptions and operational results. Measuring changes in cost and service quality of complex disruptions and associating them with avoidable cross-functional causes to understand how much they can harm the system in the future helps with narrowing the focus on things that have to be improved. Here, I can see similarities with your concept of capability measures.
JS: One way to begin is to take measures managers currently use and look at them in different way – to find out whether there is any variation. Learning from variation is fundamental to performance improvement. Managers need to know that the change, for better or for worse, is a real change and not natural variation. Capability measures will answer the questions - they point to the variation in the system to encourage managers to find out what is happening at work. When managers learn to manage flow, waste can be removed, increasing capacity in a sustainable way.
Capability measures are measures of the work that tell you about the predictability of performance. This means knowing about the predictability of demand the predictability of work flows that go beyond functions, and so on. The point is simple: using these measures to understand and improve performance will improve the bottom line. In the current management philosophy, it is assumed that the bottom line can be influenced by using functional measures, targets and standard performance. In fact, the only thing that can reliably be predicated is that managing in this way will worsen performance.
The better able an organisation to absorb variety, the better the flow, hence the lower the costs and the better the service. Capability measurement is essential in understanding about how well the system absorbs variety.
JR: How do capability measures compare with targets which, as you said, increase system disorder? For example, data may show that airline punctuality targets are achieved, but they won’t show the cost of additional resources needed to ensure high punctuality in the constrained system, nor the problems faced by passengers experiencing long delays, missed flight connections, flight cancellations, or inconvenience caused by poor service throughout their journey. This means that achieving targets can be delusional and generate more problems.
JS: Targets are arbitrary, capability measures are not – they are derived from the work. Targets increase disorder in systems, capability measures lead people to act in ways that increase order and control. Targets focus people on wrong things, the things they must do to survive within the system, not improvement. Capability measures encourage people to focus their ingenuity on how the work works. Targets have no value in understanding and improving performance; capability measures help both to understand and improve the work. Targets demotivate, capability measures motivate, because they put control and understanding in the right place: in the heads of the people who do the work.
JR: Lots of costs are associated with quality of service, the way people work and interact, but their impact is not recognised. 
JS: When you learn to look at any traditionally managed organisation as a system you find multitude forces working against the purpose. In service organisations, you may find excessive costs associated with poor service. For managers, this comes as a shock. Some of what you discover seems irrational – people do their jobs but create enormous harm to a system which they are unable to change because it is imposed and controlled by those who are remote from the work. People do wrong things sometimes without knowledge of the consequences.
Knowing about waste is not as important as understanding its causes. There are many. I call them ‘system conditions’. Structure, policy, procedures, measurement, IT – the factors influencing behaviour in organisation are many and complex.  Changing them might seem a daunting prospect, but the power of Vanguard model is that you only tackle the complex from the point of view of how these various elements impact the work.
JR: Effectiveness of IT services shapes a company’s overall performance in many ways. Investment in keeping the existing software up to the tasks or in getting a new ‘solution’ could be substantial and still, their usefulness is not guaranteed. This raises the question about clarity of airline requirements for these services and the ability of service providers to understand it and fulfil the airline’s need.
JS: Research on the effectiveness of IT shows that many IT projects never reach completion, the costs of implementing generally vastly overshoot what was planned, implementation often fails to deliver the expected financial benefits, and sometimes result in higher rather than lower costs. In short, IT is frequently not the saviour it is claimed to be.
Beyond failing to deliver or delivering at higher than expected costs, IT sometimes ‘entraps’ rather than ‘enables’ the way people work. Many features of IT innovations appeal to managers because they fit with the command-and-control mindset and managers wrongly assume that the features are benefits.
The problem with IT begins with the way we approach it. The normal way is for managers to start writing specification. The IT provider then takes the specification, creates its own version of the same thing, and delivers against it. When it fails, as it so often does, the supplier blames the managers, who after all wrote the specification. Even more incredibly, having failed to deliver benefits, the supplier will often succeed in selling more ‘implementation consultancy’ to put matters right.
Traditional IT implementation leaves ‘knowledge of the work’ to a mixture of business analysis (provided by IT specialists) and managers’ views – both usually reflecting a command-and-control perspective. The traditional approach to IT implementation is ‘push’ – here is the new IT system, now how do we get people to use it. In the alternative approach, the people doing the work understand the ‘what-and-why’ of the work and ‘pull’ IT applications in to parts of the work knowing what to expect. The traditional problems of implementation – incomprehension and resistance to change – simply do not exist. In short, a better way to approach the use of IT is: understand and improve – then ask if IT can further improve.
JR: There are so many courses and seminars on system improvements but things learned in classrooms do not seem to be effective in real life.
JS: Systems thinking is learned by doing; it is only by doing things that managers can unlearn – can find out for themselves that their current beliefs about the design and management of work are flawed. This is something that cannot easily happen in a classroom. In classroom presentations, managers often hear things they think they understand. They recognise words like processes, flow, and demand and fit them in things they already do. More than that, it is hard to persuade managers of the folly of their current measurement and/or inspection methods without data to prove it from their own system.  They ‘know’ the logic of their current methods, it is not easy to dissuade them of their merits. In the detached environment of the classroom, distinction in understanding and action cannot be easily explored. Presentations of system perspective on an organisation leads managers to argue, defend, rationalise, and do anything to preserve the status quo. It is natural human response.
Rather than have an abstract dialog in the classroom, it is vital to have a material dialogue where the work is done. How does the work work? How the current system conditions help or hinder the way work works? It is only by studying the work as work that managers can assess current methods and use new ones to build better systems. It is only in this environment that one can take a reliable view of what is currently done and with what consequences.
Command-and-control managers like to buy change by training and projects, unaware that change really requires changing the system and unaware that that means first being prepared to change the way they think about the design and management of work.
JR: From my experience most people feel inspired to do the work and cooperate once they understand the purpose of their work. But often this doesn’t happen because they have to put their departmental duties and interests first.
JS: Top-down method works against the system connectedness, undermines the core purpose and demoralises people. We design our organisations in functions and we give each function its own measures of work but work has cross-functions. So why we are surprised when people don’t cooperate? People respond best when they are doing meaningful work without being controlled and constantly thinking if they will be punished or rewarded for their work.
Adopting management approach where people who do the work have control with better measures, the waste is reduced and responsibility replaces blame. It's an approach that is proven, successful and relatively cheap. It is the system that governs people’s behaviour. You cannot change people’s behaviour unless you change the system.
And finally, learning to see begins with taking a different perspective. When you think about any organisation as a system, you start from the outside in. You think about the purpose of the system in customer terms. As you learn about the system you find out how and how well it transacts with customers. With this knowledge you can act, with foresight, for improvement.

JR: To wrap up our conversation, here are a few of my favourite quotes from John’s work:
“A central tenet of the traditional command-and-control mentality is management by the numbers; this is the basis and means for decision making. The numbers are largely financial and activity-related (what people do), which may or may not be of value to understanding and improving the system. With a proclaimed interest in ‘shareholder value,’ senior managers sit astride a system that they make more unstable and suboptimal through financial interference. Almost without thinking about it, the purpose of the organization becomes ‘make the budget’.”
“Command-and-control management has created service organizations that are full of waste, offer poor service, depress the morale of those who work in them and are beset with management factories that not only do not contribute to improving the work, but actually make it worse. The management principles that have guided the development of these organizations are logical—but it’s the wrong logic.”
"Cost management causes cost. Managing value drives cost out of the system and dissolves the need for budget management."
“Dysfunctional behaviour is ubiquitous and systemic, not because people are wicked but because the requirement to serve the hierarchy competes with the requirements to serve customers. People’s ingenuity is engaged in survival, not improvement.”
“There is a story of a Japanese guru working with a board of management on what to do to improve their organization’s performance. He drew up a flip-chart list of recommendations on which the first one was, ‘The board should resign.’ He got their attention. The point he wanted to make was that unless you change the way you think, your system will not change and therefore, its performance won’t change either. The question is, what thinking needs to change?”