It often feels like a people problem—they aren’t motivated enough and they don’t seem to do what you need them to do. Your best people might even leave just as soon as everything seemed to be going right.
These problems can feel like people problems because that’s where they usually surface. And you cannot see the structure that predicts these problems arising because in service organisations that structure is mostly invisible. But it becomes easy to see once you know where to look.
To begin with, most founders start service operations because they do something particularly well. They may already have people who intend to be customers before the organisation is even incorporated. The service is valuable, the business succeeds and it grows. People are recruited into more junior positions and revenue increases. But those revenues don’t necessarily translate into more profit, and managing the business seems to absorb much more time at a disproportionate cost.
The work in service companies varies in quality and cost just as much as consumer products. However, as products are physical objects and can be seen and felt, their quality is easy to appreciate. You cannot readily see the years of academic or practical experience behind an expert opinion or the research that goes into forming their view for a customer. Services operations, like manufacturing, produce a mix of routine low-cost output and more expensive high quality or bespoke outputs.
Someone in charge of a production line knows the cost of materials, how much the plant and machinery cost, how many people are involved in the assembly, how long that takes. The physical shape of the operation is there to observe.
In knowledge work, the shape of the operation is harder to see. The work in progress is invisible, only apparent at all through reports. It can vary between highly complex and specialist or straightforward and routine. People arrive each day to complete the work. There are systems and processes in place, but they are concealed within computers or through formal and informal human behaviours. There may be something of a hierarchy between junior and senior employees, but that structure doesn’t resemble anything like a production line. Nevertheless, the operation does have form.
The structure your service operation should take depends on the nature of work that you do. If the operation predominantly does routine work that can be completed by people without much experience, then it will be triangular with a broad base. Lots of junior people on lower wages completing routine work supporting a smaller management tier and an owner or two. A typical example is a call centre. Where the work is complex and tends towards bespoke solutions for customers, there will be fewer juniors for every senior employee, and the triangle will be steep-sided. Broad-based Operations Triangles tend to deal with high volume work for low margin. Steep-sided Operations Triangles are suited to lower volume at higher fees. Steep-sided service organisations include architects, boutique marketing firms or specialist recruiters. Problems arise with profitability where a broad-based Operations Triangle ostensibly supports too much management above, or what should be a steep-sided Operations Triangle is actually broad at the base.
This model builds on David Maister’s theory for leverage in Managing the Professional Service Firm. My modified version applies to all modern service operations, including law firms in England and Wales whose fees are increasingly fixed by regulation—even for complex litigation. Where organisations cannot fix their prices, either because of competitive market forces, or because of government policy, the structure of the organisation does not change—but the ordinary mechanism for creating profit (increasing fees) does not exist.
The work varies in complexity. The fees cannot.
This example illustrates the problem that many service companies wrestle with. The complexity of the work flowing through the system does not match the structure of the organisation. Work that should be straightforward has hidden layers of complexity that cause operational stress and undermine profitability. The operation is designed as a broad-based Operations Triangle, but the complexity of the work requires a steeper-sided one. The resulting conflict is not merely diagrammatic. It is systemic, and it affects the business, its people and its customers.
A call centre dealing with enquiries may standardise responses and scripts for handlers. The work is deliberately processed to keep operating costs low. A small management layer deals with any referrals and human resourcing. But more customer enquiries fall outside the processed responses and scripts, and the small management layer cannot cope with the escalated calls. The nature of the work is more complex than the broad-based design and must be absorbed internally.
This operation is likely to have a high turnover of staff. It may feel to the call centre workers that they are unsupported in dealing with upset customers they have little hope of appeasing, but there is another critical problem that is less obvious. One that quickly erodes initiative and morale—the two qualities that might actually lessen the problem.
Not everyone wants progress from a company. Some people are happy being treated fairly and find fulfilment outside work. Others are content doing work that provides meaning with a comfortable degree of autonomy. But a lot of people do undeniably join a company intending to progress and a traditional broad-based operation provides little opportunity. For these people there is little incentive to try hard, because formal routes to progression are minimal. They may leave or, worse, rely on informal methods instead.
At the heart of this conundrum is the customer, who receives a poor service. The company is either losing customers or suffering reputational damage while carrying the revolving cost of replacing and training staff. All wasted cost, all depleting profits.
The solution begins with the customer and understanding how the organisation can meet their expectations. This will reflect the nature of the work with all its complexities, which in turn reveals the previously hidden Operations Triangle beneath. A steeper-sided Operations Triangle is not necessarily a problem. The narrower base presents an opportunity to create new roles that offer progression, which can reward the call centre operative with more meaningful work and customers with outcomes that satisfy their needs.
There is a simple question leaders can ask themselves that might reveal something about the shape of their Operations Triangle.
Stripping out standardisation, how long would a person take to become competent in a junior position so they can work unsupervised?
The longer the learning time, the more hidden complexity in the nature of the work.