Category: Free post

The real lessons of Nokia

How are the mighty fallen. Once high-flying Nokia has sold its mobile handset operation to Microsoft. Computer maker Hewlett-Packard, a venerable Silicon Valley pioneer, has crashed out of the Dow Jones Industrial Index. It seems to be true, as a recent post on MIT Technology Review notes, that ‘the lifespan of great corporations is getting shorter and shorter’. Back in the 1950s, when a company made it on to the S&P 500, a roll-call of the corporate great and good, it could expect to stay there for 60 years. These days, on average it won’t get out of its teens. But why?

‘Technological disruption could be one big reason’, opines the author – and it’s a view common to the point of cliche. Thus, Kodak’s demise is always attributed to its being overtaken by the switch to digital; Palm, RIM and Nokia were leapfrogged by the iPhone and have never managed to catch up.

Yet let’s think for a minute. With a few exceptions – technology really has disrupted newspapers – blaming technology is no kind of explanation. It simply restates the problem. A more convincing, and down-to-earth, interpretation is that these companies failed to respond to changing markets because something in their internal organisation and culture didn’t let them.

One ex-Nokia manager cites a Finnish newspaper which points the finger squarely at the company’s stock option scheme for top and senior managers. In this narrative the options progressively corroded the culture from within, setting up debilitating competition between groups, people and platforms. Competition exacerbated divisions created when former chairman Jorma Ollila restructured Nokia’s business in 2003 into three separate groups, each with its own budgets and targets. The snag was that market/customer demand had to go through each of these divisions. By 2006 it was apparent that lack of trust and bad blood had caused a breakdown of cooperation between people and divisions that was directly affecting the company’s markets. But by then it was already too late.

In his biography of Steve Jobs, Walter Isaacson describes a strikingly similar situation at Sony in the run-up to the launch of Apple’s iPod and iTunes. By rights, that market should have been wrapped up by Sony, which unlike Apple already had both the technology and the content to make it its own. It failed to act because it was paralysed by rivalries between divisions, something that Jobs had expressly legislated against by insisting on a single balance sheet and P&L. As one Nokia manager described the result: ‘Everyone had two personal targets per year (defined by the hierarchy, top-down); [the result was] you only did your own things that enabled personal bonuses even when the business environment changed dramatically’.

Moreover, says the insider, at operating level Nokia’s work design faithfully mirrored the traditional reductionist thinking evident in remuneration. Complex tasks were systematically broken down into multiple simpler subtasks. ‘But knowledge work is very different from assembly line work… There was no flow in the work because every small decision had be escalated to multiple steering groups (or steering groups of steering groups of steering groups), and decision making wasn’t integrated with work. There could be weeks of waiting for the decision and for the time being, some other work had to be done to keep the “worker utilized”. Obviously, resource planning became a very complex task for the organisation’.

Another side-effect of this way of working became apparent when Nokia’s fortunes changed and it began laying people off. Highly reputed as it was, Nokia’s high-specialisation work design meant that engineers with 10 years of programming experience focused on, say, specific Bluetooth drivers in certain operating systems, and only used to following the specifications they were given, were not easily employable elsewhere.

In this light, the ‘technological disruption’ story looks like a lazy oversimplification. The real moral is more sobering. While rapid technological change means that more companies can ride the wave to the top, it also flatters managers (banking their huge option awards as they do so) into believing it was their own managerial genius that deserves the credit rather than the good fortune of being in the right place at the right time. The receding tide separates the firms that got the more boring but lasting things like reward and work design right from those that didn’t. In other words, the turning technology cycle just reveals how many companies simply weren’t that great, after all.

Facing the facts on 111

No apologies for returning to health this week. On BBC Radio 4, a Face the Facts edition by John Waite perfectly summed up the cul-de-sac we have run ourselves into with the NHS: having given a forensic description of what went wrong with the disastrous 111 number, the programme utterly failed to draw the conclusions of its own story and offered no hint of a way out of the vicious circle of rising demand and rising cost.

111 had its genesis in a 2010 decision to replace NHS Direct, in the official narrative an accepted, well-respected resource for patients, especially at night and at weekends when the rest of the NHS was closed, and for the NHS a means of relieving pressure on GP surgeries and A&E departments. The ‘problem’ was that it was expensive (about £123m a year); so the idea, no doubt underpinned by expensive consultancy advice, was to use technology to make efficiency gains by economising on highly-paid professional medical staff.

In other words, 111 was conceived of as a network of standard call centres of the kind that every customer loves to hate, manned by call handlers with no technical knowledge, reading a script from a screen, with professional expertise ‘on call’ behind. Just as classically, NHS England put contracts out to tender based on unit cost, or cost per call. The benchmark, according to Peter Carter, general secretary of the Royal College of Nursing, was £7 for a non-clinical call and £10 for one that had to be referred on to a clinician. Carter said: ‘The only way they [the contractors] can do it is by compromising the staff mix – they’re trying to do it on the cheap’.

When the system went live in April, the result was as wearily predictable as the 111 computer script. Technology malfunctions were the least of it. Lives have been endangered if not lost because neither patients nor computer programmes can easily distinguish between conditions that are really non-urgent and those that look it but aren’t (as a doctor noted, some conditions are almost impossible to diagnose over the phone but easy and instant for a trained physician in person). In other words, the system is unable to absort the presenting variety – a computer script is an utterly inadequate substitute for trained human judgment.

Meanwhile, as at any script-driven call centre managed for cost, call-handler morale was low and turnover consequently high. Staff felt undertrained and overworked and looked on in dismay as many colleagues treated it as casual work, clocking on for a few hours and then drifting away again. Call handlers left because they found it ‘just a really depressing environment’.

But as ever, cheap actually isn’t cheap: managing costs breeds more costs. Under the previous regime the original incumbent, NHS Direct, had been getting £24 a call, and its first bid for 111 contracts was too high. So it ‘reworked the figures’ to get under the hurdle and was duly awarded 11 areas, the largest provider. Unfortunately, its first calculations were nearer the mark. Calls were taking double the five and seven minutes estimated for unreferred and unreferred-on calls, for which it was paid from £7 to £10. It pulled out of two contracts even before the launch and now wants to give up the rest as financially unviable.

As depressing as the litany of failure is the response to it. NHS England claims that 111 provides a ‘safe, proven, consistent clinical assessment of callers’ symptoms’, and that 96 per cent of calls are answered within 60 seconds. Even critics assume that the issue is teething problems and poor execution. NHS Direct is blamed for ‘getting its sums wrong’, and the government for rolling 111 out too quickly and trying to cut corners on cost. Rising demand is taken as a given. Also taken for granted is that 111 is necessary – so the only solution is to do it better (read: more expensively).

In fact, everything about 111 was wrong from the beginning, including its purpose and starting point. But you wouldn’t know that. Nowhere is there a hint that the 111 story is not about doing things wrong, but doing the wrong thing. Nowhere is there a hint that the cost and time that matter are not cost and length of call, still less the time taken to pick up the phone, but the end-to-end cost of solving the problem so it doesn’t recur. Nowhere is there a hint that the only sensible way forward is to establish the real, as opposed to repeat and knock-on, volume of underlying demand and design a system to meet it, 24/7.

There being, in short, no sign that anyone has learned anything at all, the prospect is that we will do the same thing all over again and expect a different result. Which, as Einstein declared, is one definition of insanity.

Two cheers for Berwick’s report on patient safety in the NHS

There are plenty of things to approve in Don Berwick’s report on patient safety, as well as some to query. The fact that both good and less good are the opposite of what most people think they are says much about the state of public debate on the NHS as well as the difficulty of making the changes that Berwick recommends.

Overall response to the report has been lukewarm. It has been criticised as too general and short on particulars: no headline proposals for tough legal sanctions on individuals or regulation, no minimum staffing levels for wards (a ‘missed opportunity’, according to the nurses). In fact these reflect what’s good about it. Along with other clear principles – constancy of purpose in minimising harm, suspicion of numerical targets, the need to drive out fear and build pride and joy in work, attributing blame to a bad system rather than bad individuals, turning the NHS into a learning organisation – they come straight out of the Deming management handbook. Real cheers, then, for a report that recognises that the NHS is a system, so that change has to be systemic too.

In fact, that was one of Berwick’s most important points: awful though events at Mid Staffordshire were, he noted in a Newsnight interview, the fact that the NHS was a single system meant that when things went wrong there was an opportunity to do improve them system-wide – an impossibility in the fragmented US, for example.

The problem is that many people – inside the NHS as well as out – won’t get the radical implications of the system point. Without being exposed to them in action, they rarely do. We prefer easy solutions to hard ones, and sound-bite-obsessed media don’t help. And for them, the report will indeed seem general and even comforting. Learning organisation, ‘culture change’ – what could be softer focus, less contentious than that?

Paradoxically, one of the warning lights is the choice of patient safety as top priority. Of course, that’s what Berwick was asked to report on, and to be strictly accurate, it is ‘the quality of patient care, especially patient safety’, that the report singles out as the NHS’s most important aim. But safety and high-quality patient care, as Vanguard’s Andy Brogan, a keen and involved student of NHS affairs, points out, are ‘hygiene factors’, something necessary to achieve the purpose but not identical with it. Safety is a priority for air travel, too, but it’s not the purpose, and nor is it for the NHS.

‘When you have to make safety a priority, it tells you that the focus must have been wrong before’, Brogan reasons. ‘We ended up with a safety problem because we weren’t focused on purpose and value. A patient safety focus is not the same as a focus on purpose and value and therefore doesn’t remove the precipitating cause of the problem. It treats the symptom.’

The purpose of the NHS is to allow people to live healthy lives, in our own context. For Brogan, the big story in the NHS, nowhere hinted at in Berwick, is that it has conceived of its purpose from the wrong point of view: it is producer- rather than patient-centric, reducing patients to their conditions and then handing them out more or less standard medical packages – ‘push’ rather than ‘pull’. This is Fordist, industrialised, Model-T medicine – and the surface pressure and busyness conceals huge underlying waste and inefficiency.

‘Almost every improvement effort I see in the NHS assumes that it has a single-loop problem to solve – i.e. we are doing the right things, we just need to learn how to do them better’, says Brogan. ‘But the NHS has a double-loop problem – it is doing the wrong things. When you see people’s demands in the context of the lives they want to lead, many of the condition-shaped interventions are simply the wrong thing to do. Making them safer is just doing the wrong thing righter’.

Thus it’s all very well to call for the NHS to become a learning organisation – who could disagree? – but it can’t do that unless it changes how it measures. Measures can be used either for learning or accountability and control but not both (the argument is here). Broadly speaking, NHS measures are related to activity, not purpose from the patient’s point of view: number of GP or A&E visits, for example, all of which are assumed to be demand needing to be managed, which is done by rationing the available resource to match. No learning is involved; the measures are used for control, not to learn how to improve patients’ lives.

When measures are related to the purpose of enabling people to live healthy lives, on the other hand, the first discovery is that the more the organisation is ‘improved’ to increase throughput and cut costs, the worse it serves its patients. Take limiting GP appointments to 10 or even 8 minutes, or sometimes one problem at a time. This boosts throughput, but the price of failing to deal with the complete issue at first pass is multiplication of backed-up ‘failure demand’ as patients return for further consultations or present themselves at A&E instead. These pressures led to the setting up of first NHS Direct and now the disastrous 111 number – both unwitting factories for amplifying yet more repeat ‘demand’, the epitome of non-learning organisations.

Vanguard’s figures suggest that up to a terrifying 85 per cent of all demand into the NHS is failure demand. While much of it is medically justifiable, it needn’t and wouldn’t happen if it were dealt with properly the first time round. This is the nightmare treadmill that the NHS has to get off and that is the essential subtext to Berwick – small print that is more urgent and alarming than the report’s headlines. This is why the influential Roy Lilley, broadly a Berwick admirer, describes it as ‘the most exasperating and annoying report I’ve ever read.’ While not going that far, and accepting that ‘it’s important not to lose the political will,’ Brogan also expresses his frustration: at some point, he says, ‘someone will have to get up and call a spade a spade’.

How call centres get it wrong for both employees and customers

‘It’s the loneliest job in the world’. That would be a lighthouse-keeper, maybe? Firewatcher? Or a night security guard in an office or warehouse building?

Well, no, actually. In one of the saddest things I’ve read in weeks, tucked away in the ‘What I’m really thinking’ slot in the back of The Guardian, a writer described the bleak, affectless life of a call-centre agent.

‘You’re surrounded by people and talking on the phone all day, but you never make an emotional connection,’ wrote the anonymous agent, ‘either with your colleagues, who you barely get to know, or with the customers, who would rather have teeth pulled than talk to you… People are breathtakingly rude to me. I know I’m a convenient scapegoat to vent at, but I’m not a robot. It still hurts when the phone is slammed down. Every day is an internal wrangle. There are two voices. One is: ‘I don’t care what people call me. I’m doing OK; just keep plugging away.’ And the other is: ‘How can they talk like that to me?’

The tragedy is that many people reading the piece will probably have shrugged, ‘That’s the way life is. If you don’t like it, find a different job’. But the right response is not resignation, but outrage and revolt. People haven’t been put on earth, or if you prefer, humanity hasn’t evolved over millions of years, to be used cynically as disposable rags to soak up the rage and disillusionment engendered by practices that are a travesty of human relations, of customer service, and of management generally.

It doesn’t have to, and shouldn’t, happen like this on any count. What the writer describes is a full house of failure. Treating humans in such a way is degrading and wrong; but even if it could be justified in human terms it’s unacceptably inefficient as management; and instead of being cheap, as managers imagine, it’s actually uncountably expensive, although the costs are mainly hidden.

Putting technology in charge of humans, instead of the other way round, is wrong in principle. But employing computers to do things humans are better at, such as using judgement and helping others, and vice versa, is also a major cause of inefficiency. Whether responses are formally scripted or not (and many are), the aim of call centre activity like this is to force callers into predefined categories for which there are standard responses. In other words, the system is designed to deliver what’s convenient to the organisation rather than the individual. Preventing agents from solving individual problems not only stops the system from absorbing the infinite variety of demand, it demoralises workers and enrages customers, as graphically described in the Guardian.

The reason that call-centre work is designed like this is of course cost. Managers think that if they standardise responses they can keep call-handling times to a minimum and thus beat costs down. But this is an illusion. What they are measuring is the unit cost of a single activity – answering calls. When you measure the cost of resolving the problem from beginning to end, it becomes clear that ‘cheap’ is is not what it seems. Here’s the Guardian writer: ‘There are ways to beat the system, though. Bonuses are related to average call-handling time: ideally they should last for 35 seconds or less. So I ring my mobile for one second to bring down my average’. Agents can call on many other ploys to achieve the same end, including bumping cases up to the next level or closing them in one category and re-opening them in another.

Ironically, managers blinded by their obsession with activity costs usually see this as reflecting increasing demand rather than increasing inefficiency, so what do they do? – yes, they open another call centre, thus not only raising costs but locking them in for ever, or at least till the end of the outsourcing contract. There is plenty of anecdotal evidence that this dynamic – the recycling of ‘failure demand’ – is at least partly to blame for mounting pressures on ambulance services and A&E departments via NHS Direct and the equally misguided NHS 111.

More than 1m people now work in UK call centres, and although there are some exceptions, such cost-centred IT-driven systems are the norm. Although the industry dismisses the often-made comparison with the dark satanic mills of the Industrial Revolution, the comments below a BBC story on call centres chime exactly with the Guardian version. It may be that modern call centres are one of the most systematic destroyers of human wellbeing and happiness on the planet.

In this form they embody anti-management – another example of management betraying its fundamental principles and turning into its dark opposite. ‘Putting a smile in my voice despite endless rejections, not revealing what I’m going through when I feel sick with repressed anger’ – no one should be obliged to carry out such oppressive and counteproductive emotional labour, just as no one should be subject to zero-hours contracts, another facet of the creeping dehumanisation of work. Neither is compatible with management’s duty of care, and both will in time come to seem as indefensible as child or forced labour.

Calling corporate bluff on tax

Like distant thunder in a heatwave, the corporate tax debate rumbles on without any real break in the weather. In fact, if anything the temperature is still rising, so resolutely are the real issues being ignored by everyone involved, including the media.

Take the proposal, approved by progressives and conservatives alike, to allow the tax authorities to take action if they suspect companies are evading tax, even in the absence of technical illegality.

This is a truly bad idea that sets a terrible precedent. It is true that corporate tax rules are overcomplicated and unfit for purpose, but the remedy for that is to change the law. Giving an executive agency a mandate to override what Parliament has put in place, on its own say-so, is wrong in principle and dangerous in practice.

HMRC already benefits from an enormous amount of discretion. Despite scrupulously maintained accounts, a small-business owner of my acquaintance lives in utter dread of the annual tax inspection, the resulting demand seemingly dependent entirely on the mood of the inspector, with knowledge that the same individual will be back next year being an unanswerable disincentive to appeal.

To existing discretion to throw its weight around add the consideration that HMRC is a byword for dysfunctionality, a house of management horrors. Its ineffectiveness at the day job has been castigated over and over by Parliamentary committees, and some have questioned whether it is capable of carrying out its duty of care to its own hapless employees. Now imagine the consequences if an out-of-control organisation like that were to combine ‘discretion’ (which hardly seems the right word) with incentives. In fact, we know what they are already, from the writings of Orwell and Kafka and the experience of the old Soviet Union. You might as well entrust a fire service to a pyromaniac.

On the debate about the law too, the debate sails as wide of the mark as an Australian fast bowler at Lords. Thus, like everyone else, an otherwise fascinating BBC radio discussion on the history of corporate tax evasion signally failed to draw the conclusion that was staring it in the face.

Controversy over the subject goes back to at least the eighth century, when the Venerable Bede was apparently scandalised by bogus monks setting up monasteries to attract tax exemptions granted to subsidise the production of expensive illuminated books. The solution arrived (much later) through force majeure in the shape of an invasion of pillaging Vikings, in the face of whom even bent monks could hardly dispute an edict that they should contribute like everyone else to the common cause of survival.

Mutatis mutandis, the same is true today. The day is long past when corporations could claim exemptions that do not apply to the rest of society. We really are all in it together. For Vikings substitute global and financial warming, the latter of which of course was caused precisely by overexploitation of the privilege of not being in it all together that corporations had first grown accustomed to and then systematically abused.

In today’s world, pleading Corporate Social Responsibility as a sop for economic bad behaviour is scarcely more adequate than monks pointing to pious works in lieu of paying for defence. Now as then the solution is an edict that makes it clear that companies are not crude, one-dimensional economic organisations answerable only to shareholders but are inextricably part of society as a whole, from which they derive their rights, not the other way round. Although many business people appear to have forgotten it, free enterprise doesn’t stand as an end or even a virtue by itself – it’s only a virtue if it benefits society as a whole, which it is now more and more patently failing to do.

I know I repeat myself (well, no one else does): corporate managers take tax avoidance to the edge of the law because that’s what the shareholder-primacy ideology, backed up by self-interest and enshrined in corporate governance codes, tells them to do, just as they take it as a justification for short-changing customers, fleecing suppliers and offloading as many obligations as possible (pensions, welfare, risk in general) on to the rest of society. Ironically, the last revision of company law in 2006 actually increased the shareholder orientation of corporate UK, where shareholder influence is now the (misguided) envy of investors in other jurisdictions. Until this toxic nexus of law, ideological assumptions and vested interests built on them is unpicked, asking companies not to evade tax is as useless as demanding that sharks stop being carnivorous or pigeons give up eating peas.

Corporate leaders such as Google’s Eric Schmidt and Tim Cook at Apple have dared politicians to change the rules if they want companies to pay more tax, taking a calculated bet that they will have neither the courage nor the intellectual will to get to the bottom of the issue, and even if they did their own lobbying would be enough to snuff out any lingering enthusiasm. We should call their bluff. Go on, lead – have the guts to change the rules and spell out why, before it is too late.

Truth: easy to talk about, a hard way to manage, and critical in the long run?

Read my reflections on a Foundation Forum on truth (no less) here