The lessons learned from the 1980s bloodbath in manufacturing can be adapted for the office.
Recession or no recession, more and more resources are getting poured into office work. Throughout this century there has been a steady increase in the proportion of the working population engaged in service industries and in office environments. Meanwhile numbers employed on the land, and as production workers in the manufacturing sector, continue to shrink. The trend is irresistible. It also has serious implications for business costs. Productivity increases of around 3-4% per annum have regularly been achieved in manufacturing - as in agriculture - whose workers can therefore be said to have "earned" their wage increases. The same cannot be said for many service employees - or for office workers in general. We are constantly paying more for work carried out in offices - but the money to meet the extra cost is not being met by higher productivity. In many service industries, lack of international competition has in the past made it too easy to pass on the cost of poor productivity in price rises. Now, as barriers fall in Europe, competition is on the increase in such markets as insurance, banking, retailing and leisure. This is one reason why the manufacturing bloodbath of the early '80s is now spreading to the service sector.
For those engaged in the management of office activities, therefore, finding ways of raising productivity is vital. At first sight it is no simple matter, given that office productivity has been virtually unchanged for decades in spite of the impact of information technology. Yet it can be done and is being done. One solution (as argued in The Office Factory, Management Today, July 1990) is to adapt certain of the lessons learned in manufacturing and apply them in the office. Just-in-time can be particularly effective at reducing waste.
The parallels between office work and factory work are indeed striking. Just as labour costs in manufacturing are traditionally divided between "direct" and "indirect", so office work too is readily divisible into two broad categories. One is repetitive work - processing insurance claims or tax returns, perhaps, or sales order receipt and entry in the offices of manufacturing companies. The other is knowledge work - designing new products or strategies, drafting legislation or regulations, professional work in law or accountancy. The difference vis-a-vis manufacturing is that both types can be highly "productive" - or unproductive - but it is important to appreciate the difference between the two.
There are three key questions which it is useful to ask when attempting to improve the productivity of office work. The first two are especially relevant to knowledge work and the third to repetitive work. But all three can be applied to both. They are: should it be done at all?; by whom should it be done?; and how should it be done?
It's over 30 years since C Northcote Parkinson noted the tendency of bureaucracy to breed more bureaucracy: "Work expands to fill the time available for its completion." The first thing to establish is whether the work being done simply illustrates Parkinson's Law or whether it actually serves some useful purpose. This is fairly easily accomplished through an activity analysis, noting the time spent on different jobs over a period of time, and analysing them for the value - if any - that they add.
Activities generally fall into one of four categories. They may be direct value adding activities, which can be as variable as calculating an insurance claim or drawing a new design. Or they may add value indirectly, like training or quality improvement sessions that are designed to improve the rate of value added. Necessary non-value adding activities are those which have to be done but which are of no value to the customer, eg completing Inland Revenue or Customs and Excise returns. Examples of the last category, unnecessary non-value adding activities, would include handling complaints caused by poor quality that should have been prevented at source, and compiling management information that no one uses.
The categories can usually be determined by asking "Should it be done?" In the case of unnecessary non-value adding activities, the first question invites others. How can it be stopped? Also how quickly? In design offices it's common to find that between 25% and 50% of the work being carried out involves duplication. If adequate designs already exist, rework can probably be stopped immediately although sometimes parts have to be redesigned because the original is found to be impossible to manufacture. Such rework cannot be stopped on the spot, but it may be eliminated by involving downstream customers or perhaps suppliers early on in the process.
Necessary non-value adding activities are by definition unavoidable. But how necessary are they really, and can they be done more effectively? What might the effect be of of doing them less often? The growth of regulation in financial services has added considerably to the sector's costs. More complex procedures have to be followed, with more checks, and new positions have been created in both institutions and regulatory bodies to ensure compliance. But in one insurance company almost every calculation used to be checked against the possibility of fraud or error. By moving to random 5% checks, and making allowance for the value of the calculation, much the same level of confidence could be established with far less effort.
With value adding activities - both direct and indirect - the aim must be to increase the value that's added in relation to the cost and effort incurred. Manufacturing industry uses value analysis to prioritise requirements and focus on things that add most value. The same technique can be used in offices. Clerical staff are often employed to produce huge volumes of one-off letters. Value analysis invariably reveals that many of these letters have no value at all in the customer's perception. Others can be standardised and their production automated.
Process analysis is another tool which can be employed in the office to classify repetitive operations. It is less suited to knowledge work, where the process is often unique to the task. But with repetitive work it can give graphic insight into complex procedures and distances travelled. In the insurance company already mentioned, it was found that work went through up to eight non-value adding operations before reaching the clerk who did the processing. By re-engineering the process it was possible to eliminate half the non-value adding stages at a stroke.
It has already been remarked that IT has in general had little impact on office productivity. There are two major reasons for this. In the first place service companies have tended to repeat past mistakes of manufacturers, and make inappropriate use of IT by automating existing processes. One organisational client was prepared to spend up to £500,000 on a complex system for handling office processes associated with sales orders production and materials management. A review showed that, in most areas, simpler manual procedures were entirely adequate. The need for the computer system suddenly disappeared.
The second reason why technology has failed to deliver productivity benefits in offices is that it has been used for doing more work while achieving the same result. These days design engineers conduct more design analyses, insurance workers make more checks, and so on. In short, technology is used to do more of the work that we always thought it would be nice to do and never had the time.
Having made sure that work needs to be done, we turn to the second question: who should do it? In recent years there has been a tendency to heap the administrative load on to service deliverers such as teachers and doctors. These people are specialists in education or diagnosis and care, not in administration. Nor, usually, are they very good at it. One hospital consultant spent a lot of time costing the various services with which he was involved. Not being trained in costing techniques, his approach was cumbersome and time-consuming. It wasn't difficult to devise a simple system which did the job better and faster.
Mixing knowledge and repetitive work in this way usually produces inefficiencies all round. Knowledge work demands concentration, and if this is constantly broken the quality of work suffers. In one design office, highly skilled engineers used to spend over half their time arranging prototype production, booking test facilities and updating documents. This work could easily be done by a clerical assistant. The "less skilled" staff could well become more productive at the same time, as a result of being allowed greater responsibility. The rule is that if work really needs to be done, it will be done most productively by staff who have been trained at the appropriate level.
If any one of the three questions gets asked, it is usually the last. However there is no point in asking whether work should continue to be done "this way" until you're convinced that it actually needs to be done at all. It has already been seen that process analysis can eliminate unnecessary work, and it is worth pursuing this approach one stage further. Asking how should work be done can point the way to many improvements. It led one financial services company, when reviewing its service to customers, to create a separate customer enquiries department consisting of several help desks and trained staff to field incoming telephone queries. Being able to deal with them there increased the organisation's responsiveness.
The three questions will help to "kick start" productivity gains. However sustained improvement calls for a special kind of management approach. Staff need to be made responsible for improving their own productivity: the job not only consists of doing the task, it includes thinking about it too. One department of a life insurance company established "focus groups" in which all staff were invited to put forward productivity ideas. These were then passed to individual sections to put into effect. Within six weeks over a 100 ideas had been implemented. Not only did they have a significant impact themselves, the effect on morale brought additional benefits.
That's what can happen when the spotlight gets turned on a dark corner of business life, where even the problems are apt to go unrecognised.