💾 Archived View for gmi.noulin.net › mobileNews › 5173.gmi captured on 2021-12-05 at 23:47:19. Gemini links have been rewritten to link to archived content
⬅️ Previous capture (2021-12-03)
-=-=-=-=-=-=-
All latest updates
Back to the future
Technology has revolutionised management over the last few decades and it will
continue to do so in the future
Sep 9th 2014
As we noted in this week's Schumpeter column, new technologies are becoming
ever more important in helping senior executives make management decisions. In
The Economist's first-ever management column, published in May 1990, we also
suggested that new technology would revolutionise the way managers make
decisions in the service sector. It is left to our readers to judge how far our
predictions 24 years ago turned out to be correct.
Serve them right
May 5th 1990
Our first monthly management column looks at the state of the art in service
industries. Like manufacturing, services are thinking again about how to manage
themselves
During the 1980s manufacturing industry was transformed by an alphabet soup of
new managerial terms. Techniques like JIT (just-in-time), TQC (total quality
control) and SPC (statistical process control) revolutionised the factory floor
and became management buzz-words. Service industries, a fuzzy term covering
everything from burger bars to credit-card companies, seemed to be missing out.
For years back-room computers have been used to do the donkey work in many
service firms. But few service businesses have experienced the top-to-toe
changes which have swept through manufacturing companies. Now, however, the
smartest service firms are bent upon their own managerial change.
In manufacturing, the product is all: it is made or broken by its functional
excellence, reliability, after-sales service and suitability to consumers'
needs. Services, however, are usually consumed at the same time they are
produced. Their value to the customer is created at this instant of contact,
then disappears cheeseburgers and telephone calls have no resale value.
The received wisdom in service industries has long been that the introduction
of the sort of technology-based techniques which have revolutionised
manufacturing may cut costs, but can he introduced only at the expense of a
more "dehumanised" and less flexible service. A new generation of high-tech
service businesses is proving this to be bunkum.
The signs are that economies of scale in service businesses stem from
identifying the smallest 'unit of service", which can then be streamlined and
replicated throughout the company. As Mr James Quinn and Ms Penny Paquette of
Dartmouth College note in a paper published in a recent issue of the Sloan
Management Review, many service firms still think that the smallest truly
replicable unit in their businesses is the individual store or office. Some
firms, however, are shrinking their reliable units to far smaller sizes. In the
case of pizza parlours, that might mean identifying and replicating cooking
cycles, measures and how toppings are put on the crust.
Mr Quinn and Ms Paquette coin the term "micro-management" to describe how
service firms can benefit from concentrating on ever-smaller units of their
businesses. The first payoff for micro-managers is a self-evident one:
identifying a large number of small, replicable units means reaping the
benefits of mass production and standardisation of every kind. And if a firm
does not have a comparative advantage in producing any particular unit, it can
subcontract the task to an outside specialist.
There are less-obvious gains from breaking down service tasks into ever smaller
units. By automating, computerising or contracting-out the most mundane or
repetitive tasks, service firms free employees to spend more time thinking and
meeting customers needs. Computers thus "rehumanise", not dehumanise. Such
service-support gadgetry, when well designed, helps inexperienced staff to
perform complex tasks with less training. It frees managers from drudgery, too.
By installing computers to handle everything from ordering and cashflow to
inventory control and marketing at its outlets, Domino's Pizza, an American
fast-food chain, freed managers from 20 hours of paperwork each week, leaving
them time for more valuable tasks.
Other gains can come from the flexibility offered by the segmentation of tasks.
The smaller the replicable unit, the greater the opportunity for micromanagers
to fine-tune services to customers' needs. For a burger bar, that might mean
offering customers a choice of different-sized helpings of ketchup, rather than
one like-it-or-loathe-it dollop.
But information may be the most valuable spin-off from micro-managing. American
Express, by analysing information about its customers and their changing
spending patterns in meticulous detail, can even tell when they get married.
Amex can target its special offers, travel and financial services more
accurately, and offer detailed breakdowns of customer-spending patterns to the
retailers with which it deals.
Assets that walk and talk
For customers of service companies, first impressions last. If employees who
are in direct contact with customers are ill-informed or incompetent, no amount
of diligent micro-management will undo the damage. This is a particular problem
for restaurants and fast-food chains, which employ school-leavers, part-timers
and casual staff to cut costs.
To make disaster less likely, some service companies are standing their
organisations on their heads, making everyone from the chief executive to
filing clerks "work for" customer-contact employees, helping them to make the
most of their brief customer encounter. Some firms take the concept further
still: the organisation chart of Toronto's Dominion Bank puts the customer at
the top, the chief executive at the bottom. This is fine in theory, but tricky
in practice.
Technology may be the key to making inverted service organisations work. Bank
tellers, for example, cannot know the answers to all the questions they are
likely to be asked by customers. But expert computer systems and interactive
terminals can make much of a bank's collective knowledge available to tellers.
If such systems are well designed, they inform tellers where to seek help
quickly if they cannot handle customers' requests themselves.
The best structure for a service firm may end up looking something like a
spider's web, with each employee able to tap into the firm's collective
knowledge and experience via networked computers.
Management-consultancy firms like McKinsey and Arthur Andersen are pioneering
such approaches in their own businesses. They have an ulterior motive.
Consultants, like employees of most other service companies, are assets that
are easily poached by competitors. Knowledge-support systems, which improve
individual employees' performances by giving them access to the company's
collective knowledge, encourage employee loyalty while making any individual
dispensable.