Before launching a new product it is necessary to research your potential market. Who will buy it, how will they use it how much will they pay, how much will they pay and why will they buy? You need to learn all of this and more. This is undisputed. Why, then, does noone do the market research before starting a company? They have an idea and feel that is enough.

Just because an idea for a product or service is good and useful does not mean anyone will use it. Just because and idea is trivial does not mean it will not make a fortune. If something is convenient and cheap people may use it rather than doing it better themselves. Is grated cheese worth buying when grating is so easy?

I will write further articles on some objective ways of evaluating your busines idea, but for now I will just re-state the necessity. I have seen so many businesses fail because their market did not want them, or simply did not exist. Please don’t create another simply because you have a great idea and everyone says it will work as a business.

Rufus Evison

Once upon a time there was a call centre. They had a problem. They were expensive and so the company that paid them was considering outsourcing them to a cheaper country. Perhaps it was India, maybe the Ukraine, the details do not matter. What does matter is that they did not want to go and so they organised an efficiency drive. The staff were to be incentivised to deal with each customer as efficiently as possible. They were to find what the customer needed, tell the customer as clearly as possible and finish the call cleanly.

Historically customers had been passed from one person to another as answers were sought. Now there would be a database of information and each staff member was to be measured on call volumes and hence speed to service. There was an incentive put in place. The top staff got bonuses and the slowest got written warnings.

For a while this appeared to work. Call centre turnover times fell to something that it seemed unlikely anyone external could rival. At first people did not like being having to live by how good they were and the initial staff churn was a little high but that quickly settled down as only those who were any good remained. The volume of people using the centre went down and web traffic went up. The plans to outsource the call centre were shelved.

Things were looking bright. It was not until an online satisfaction survey strayed into overall satisfaction that the lurking problem with the proxies being used to measure and reward the call centre were revealed as malign and dangerous.

This sounds a bit over blown for a metric, and this is just a story, right? Wrong.

Before I go into any more detail think about this for a moment. The situation has been described, see if the outcome is as obvious as it should be. Would a moment of stepping back and thinking made it clear what was about to happen? If so then that is all that was required. If not then that would have been the first step followed by imagining what the incentives were at each point.

The feedback from the website was that the call centre was poor and that while the website was not good it was viewed as being marginally better than the alternative. What was actually happening at the call centre was exactly what the incentives were suggesting.

The extreme ends if the spectrum will provide the best insight:

1. The call centre representative knew the answer or could find it easily: The answer was provided with minimal courtesies. Job done.
2. The call centre representative was new and did not know the answer: They looked up the answer in the database and took the time to find out.
3. The call centre representative took their job seriously and did not know the answer: They said “I am afraid I cannot handle that but you can get the answer from www.companyname.com”.
4. The call centre representative was greedy: They said nothing and hung up.

As you can imagine the greedy call centre reps were getting through calls pretty quickly and getting lots of bonuses. Anyone who tried to look up the answer was slower than average and got a reprimand. Those who were not willing to do a bad job quickly left causing the high initial churn. Pretty soon anyone working in the call centre was going to be pushing the customers away in order to hold their job and earn money.

The moral of the story? Step back and think about what a bad person would do with your incentive to cheat the company. Most people will not look at it that way but it is the only practical way to understand what you are incentivising.

Rufus Evison

It is said, and there is research to back this up, that people cannot hold more than seven things in their mind at any one time. It seems possible that this could be linked to the fact that as the number of people being managed goes over around seven (less for some) the quality of the management goes down and balls start to be dropped.

Once this level is reached there is need for delegation. When this happens one of two things occurs:
1. Work gets delegated
2. Work does not get delegated.
It is not rocket science but sometimes we can miss the obvious. When work is delegated there is a concomitant drop in quality.

When someone is no longer overseeing the work, someone else is and so it will not be exactly what they had in your mind. Chinese whispers introduces noise into the communications and things are lost in translation.

This seems bad until the alternative is considered. When things are kept instead of delegated the manager gets swamped and starts making bad decisions. Instead of the less important bits being delegated and losing a modicum of quality now anything and everything is subject to potential issues. A bad decision can be more serious than a poor performance and it is not longer confined to safe areas.

A good manager can concentrate on only the important things and delegate the unimportant ones so that the drop in quality occurs where is less likely to matter, but this only works if the manager is actually delegating.

So that explains the rule of seven, but what about the rule of 49? Actually it is the same rule mis-described. The principle is that when the next line down have more than seven direct reports they in turn have to delgate and another drop in quality takes place. People take seven managers with seven reports and say seven times seven is forty nine so it is the rule of forty nine. In practice this does not count the managers each of whom will themselves gain direct reports at different speeds. It is the principle that matters, not the numbers…

In practice this means that when you reach seven reports anywhere within the company you need to be prepared to delegate. This will involve a loss of quality as far as the person delegating is concerned (they are not always right). The loss of quality is more than made up for by the gain in productivity. I will describe in a later article why this loss of quality is more often than no temporary and sometimes is actually an optical illusion cause by the managers view point.

Rufus Evison

Efficiency is important in running any business, particularly in times of austerity and yet often companies waste resources by using manual labour where it is not needed. If it is important then why do companies waste time energy and precious reources by devoting paid staff to things that could be automated? It is almost as if they want to waste money. In fact it is quite the opposite; they are using a proven tactic to save money.

At any point automation requires an investment and automating something that will not justify the cost of automation is clearly a waste of money. For any given time something is done the cost of automating is going to be greater than just doing it. The ‘Just do it’ tactic saves money in the short term and loses it in the longer term.

So what are the factors to be considered when deciding whether to automate? What is the point at which they should be considered, and what is a good default position that can act as Standard Operating Procedure?

Deciding whether to automate
The point of automation is to save time and money. To decide whether this is worth while you need:

• A clear view of the amount automation will cost. This should include time, money, and the effects of lack of focus due to thinking about the automation.
• Understanding of what will be saved once the automation is complete.
  To determine this requires two things:

  1. How much the manual process costs
  2. What the running costs of the automated version will be.

The impact of delays due to automation should also be considered but only in the context of whether they are crucial. That is to said it is always easy to think that automation is impractical right now because of the requirement to get this (whatever this happens to be) out of the door. Because this is always easy to say a company can end up never automating anything. Clearly if the process were automated future versions would get out the door much more easily so do not let a one time thing put your company off forever.

Item 2 above is a difficult one as if the automation turns out to be unreliable it can waste a lot of time and effort. If it is not clearly simple to automate then some time must be spent understanding what the issues could be. This can mitigate in both directions. If it is a complex process it can be hard to automate and potentially unreliable. If it is a complex process it can be hard to do robustly in a manual fashion and human error can promote large costs.

When to decide
There are a variety of approaches to when the decision ought to be made and I tend to side with more than one of them. One approach is to have a regular sweep of processes and decide what needs automating based on how often it is being done. This works well for medium size companies who have a fair amount going on but do not really have someone with enough information to step back and spot what should be next in line to be streamlined. Another approach is to have someone who has that as their full time job. This is very efficient but is really only an option for largish companies as carrying someone to do just that is not so easy in a smaller firm.

Yet another approach is the ongoing process approach which can be implemented as standard operating procedure across the company. It will not replace either of the two previous methods as some things will always be missed, but is a good philosophy for minimizing the waste of people on boring jobs. It has the advantage of putting the power to make a job more interesting in the hands of the people who have to do the job. If you have a good workforce I recommend it. If you do not have a good work force then I recommend getting one or changing your company.

There are many other ways to approach this problem but here is one final approach before I put forward the SOP. A new company is probably small enough that instead of a full time role managing automation is a potential part time role for the CEO. If the company is small enough she ought to know everything that everyone is doing and so be able to step in and say “time to automate that”. Again, this is not a replacement for a standard operating procedure but is a way to introduce and SOP in the first place.

Standard Operating Procedure
1. Just do it
2. Do it and understand how you would automate it
3. Automate it and then let the automated process do it

A final thought
Clearly there is no hard and fast rule about what is and is not worth automating, so it is useful to step back at the end of step two and discuss the task with someone. If the company is large enough then the obvious person is the person automating’s immediate superior. If it is too small for that then it may be the person automating themself or any available co-worker who is to hand. In any case it is worth checking that the automated version will be significantly less work than the manual version before moving to step three.

Rufus Evison