THE £700 TAP

How organisations save money in one place and spend considerably more somewhere else.

The plumber arrived at the tenant’s house on a Thursday morning.

There were four taps in the house.

She didn’t tell him which one was broken.

She didn’t need to.

He walked straight to it.

He’d been there six times before.

This was his seventh visit to the same tap.

The tenant watched him examine it.

“Why can’t you just bloody fix it?”

“I’d love to fix it,” he said.

He took out his PDA and turned the screen towards her.

“Look. It says replace a washer. That’s all I’m allowed to do.”

“But you know what’s wrong with it.”

“Of course I do. It needs a new tap.”

“Then why don’t you replace it?”

“Because I’m not allowed to make that decision.”

The instruction came from something called the Schedule of Rates.

It’s a system used in housing repairs to specify activities and agree what each should cost.

Each type of repair has a code.

Replace a washer.

Repair a fitting.

Replace a tap.

The code determines what work has been authorised.

And the instruction on the plumber’s screen said replace a washer.

Perhaps somebody had made a mistake.

But this was the seventh visit.

Six previous attempts had failed to resolve the problem.

Surely somebody would have corrected the mistake by now.

Seven visits to the same bathroom.

Approximately £700 spent.

And the tap was still dripping.

Some years earlier, I found myself sitting opposite the directors of a company that made its money answering telephone calls.

It was a sizeable outsourcing business.

Organisations paid it to handle calls from their customers.

But the company had a problem.

Its clients were leaving.

Some were bringing their call centres back in-house.

The directors were worried.

For years, outsourcing had been the cheaper option. Now, increasingly, it wasn’t.

They talked endlessly about driving down their cost per call.

Competition.

Margins.

Efficiency.

They needed to become more competitive.

At least, that’s what they thought.

Something about the situation struck me as peculiar.

The clients generating the largest volumes of calls were among those taking their business elsewhere.

I asked the directors a question.

“Do you know why people are calling?”

“Of course,” one replied. “We’ve got scripts for all the different types of calls.”

“No,” I said. “That’s not what I mean.”

I tried again.

“Do you know how many of those calls are failure demand?”

There was a silence.

Failure demand is a term coined by John Seddon.

It describes demand created by an organisation’s failure to do something, or to do something right, for its customers.

A customer rings because a repair hasn’t been completed.

Because a promised letter hasn’t arrived.

Because somebody said they’d call back and didn’t.

Because they’re waiting for a decision.

The organisation answers the telephone.

The call is recorded.

Its duration is measured.

Somebody calculates how much it costs to handle.

And then, very often, the customer rings again.

The directors knew how much each call cost.

They knew how long their agents spent talking.

They knew how many calls they could answer in an hour.

But they couldn’t tell me how many of those calls existed because something had gone wrong elsewhere.

I suggested a different approach.

Instead of simply answering calls more cheaply, what if they helped their clients understand why customers were calling?

What if they could identify the problems generating unnecessary calls?

And what if they helped their clients eliminate those problems?

Their clients would spend less money.

Their customers would receive better service.

And the outsourcing company would have something much more valuable to sell.

I thought there was a substantial commercial opportunity.

The directors didn’t seem particularly enthusiastic.

But before I tell you what happened, there’s another call centre worth visiting.

David Keachie ran a local authority call centre.

David knew about failure demand.

And he wanted to find out how much of the council’s telephone traffic existed because something had gone wrong elsewhere.

So he went to the front line.

He sat with the people answering the telephones.

And listened.

And listened.

And listened some more.

A resident rang to ask about a decision.

Another wanted to know what had happened to an application.

Someone else had been promised a response and was still waiting.

David opened a spreadsheet.

He created a column for value demand: calls from people making legitimate requests for a service.

Then another for failure demand: calls caused by something the council hadn’t done, or hadn’t done properly.

And then a third column.

Where were these calls coming from?

As the calls accumulated, a pattern emerged.

One department stood out.

Housing benefits.

Around 70 per cent of the calls relating to housing benefits were people chasing decisions.

David listened more carefully.

The conversations were remarkably similar.

“I came in.”

“I submitted all my information.”

“I handed it to someone.”

“They told me I’d have a decision within 21 days.”

“I’m still waiting.”

There was one phrase that caught his attention.

I handed it to someone.

He heard it again.

And again.

Residents weren’t describing conversations with people who had made decisions.

They were describing handing over paperwork.

David wanted to know what happened next.

So he put on his coat and walked over to the housing benefits office.

At the front of the office were the people who dealt with residents.

David asked them what they did.

They received applications.

They checked forms.

They made sure the paperwork was complete.

Then they passed everything to somebody else.

Where did it go?

To the back of the office.

That’s where the more experienced staff worked.

They understood the regulations.

They knew how to assess applications.

And they were authorised to make decisions.

The people meeting the residents weren’t.

The arrangement had a certain logic.

Less experienced, cheaper staff at the front.

More experienced, expensive staff at the back.

Why pay experienced specialists to deal with customers when cheaper staff could collect the paperwork?

But look at what happened.

A resident came in.

Explained their circumstances.

Handed over their paperwork.

The person they spoke to checked that everything was complete.

Then passed it backwards.

The resident went home.

And waited.

The person who could make the decision hadn’t met the resident.

The person who had met the resident couldn’t make the decision.

And when the promised decision didn’t arrive, the resident telephoned.

Someone answered.

Someone checked what was happening.

Perhaps someone passed on a message.

And the resident waited again.

David had discovered where much of his call centre’s work was coming from.

It was being generated by the way another department operated.

He went to see the head of housing benefits.

The timing was interesting.

The manager had recently been told to cut his budget.

He wasn’t sure how he was going to do it.

David sat down with him and showed him the figures.

Seventy per cent of the calls relating to his department were people chasing decisions.

David described what he’d found when he visited the office.

The people at the front collected paperwork.

The people at the back made decisions.

And the call centre dealt with residents who were still waiting.

At first, the manager struggled to see what David was getting at.

Then David explained how the arrangement was generating calls.

The manager laughed.

“Those people at the back aren’t going to want to deal with customers.”

David didn’t argue.

“That’s your problem,” he said.

“I’m only here to give you the insight.”

He explained what would happen if nothing changed.

“I can keep charging you for these calls, and you can keep paying that price. But your seventy per cent will become eighty per cent. And before you know it, nearly all your demand will be people chasing decisions.”

The manager had been instructed to reduce his expenditure.

Yet here was evidence that his department was creating costs somewhere else in the council.

Every time somebody rang to chase a decision, the call centre had to deal with it.

And the housing benefits manager was paying for that service.

He thought about what David had said.

Then he replied.

“I’ll bite, because I have to.”

He paused.

“It’s not going to be easy, but tell me what to do.”

Remember the outsourcing directors?

I’d suggested they could help their clients eliminate unnecessary calls instead of simply answering them more cheaply.

They could use the information coming through their call centres to show clients where their services were failing.

Then help them put things right.

Fewer calls.

Lower costs.

Better service.

And a new source of revenue for the outsourcer.

The directors didn’t want to know.

They kicked me out.

David, meanwhile, stayed in his seat.

And he began doing something rather unusual.

Every week, he invited managers from different council departments to come and hear what their customers were telling the call centre.

He brought evidence.

Not a performance report.

Not a satisfaction survey.

The calls themselves.

What residents were asking for.

What they were chasing.

What they’d been promised.

And which parts of the council were generating the calls.

Housing benefits wasn’t the only department creating unnecessary work.

There were calls about bins.

Calls about repairs.

Calls about allocations.

Each department had its own problems.

And the call centre was hearing about them every day.

At first, managers were reluctant to attend David’s meetings.

Then something changed.

They began to see that the call centre knew things about their services that their own management information wasn’t telling them.

Before long, the meetings were packed.

Managers wanted to know what David had discovered that week.

As departments addressed the causes of failure demand, unnecessary calls reduced.

The council began releasing capacity.

Eventually, it had enough spare capacity to take on work from outside organisations.

Work that generated revenue.

The outsourcing directors had been offered the opportunity to make money by helping clients eliminate unnecessary calls.

They kicked me out.

David Keachie had done precisely that.

He’d started by listening to customers, followed their problems back into the council, and helped managers change the way their services worked.

Now, back to that bathroom.

The plumber is standing beside the tap.

He’s holding out his PDA.

Replace washer.

The tenant wants a working tap. The plumber knows it needs replacing. But the Schedule of Rates tells him which activity he’s authorised to carry out.

It’s a system designed to specify work and control the cost of individual repairs.

And therein lies the problem.

The landlord sees the price of replacing a washer.

The tenant experiences seven visits to repair a tap.

The same distinction David discovered in housing benefits.

When decisions are made from inside the organisation, managers can see the costs they’re trying to control. What they often can’t see are the consequences those decisions create for customers.

David reversed the perspective.

He started with what customers were trying to achieve, then followed their experience back into the organisation.

That’s the difference between inside-out and outside-in decision-making.

And it has consequences that extend well beyond customer satisfaction.

Leaders can be congratulated for savings that appear on a spreadsheet, only to find themselves scratching their heads when the costs turn up elsewhere in the accounts.

The lesson for housing leaders isn’t necessarily to abandon Schedule of Rates or rewrite every contract.

It’s to discover what their policies actually cause people to do.

And there’s only one place to find out.

In the work itself.

David found it by listening to calls.

A housing leader might find it by following a repair from the tenant’s first telephone call until the problem is resolved.

They might discover that the biggest obstacle isn’t the skill, effort or commitment of their people.

It’s the decisions that prevent those people from doing what the customer needs.

And that a tap which cost £700 in repeat visits could have been replaced on the first visit for £65.