The Good Intentions Trap is Costly
If achieving a big result looks too easy, it probably is and will probably be a costly venture. It is a trap we are all vulnerable to. I write about two traps and then share a real-life example that happened to Sente almost 20 years ago. It has forever reinforced to me the notion that all significant asset management costs are the result of ineffective human behavior as written about in, “Asset Management Success Factors: It’s the Human’s Stupid”.
- Trap 1: Someone makes a more valuable offer to you than ones they’ve made before, you accept, they aren’t competent and they fail to fulfill their promise. Trust is broken and it costs both of you.
- Trap 2: You make a request for a more valuable offer and, the person accepts. When you receive it, you decline certain additional costs and obligations they believe are required to keep the promise. You both move forward and “will monitor the situation closely”. The value is never delivered because, as it turns out, those costs and obligations were required. Costs actually increased with the “more valuable” offer. Trust is broken and it costs both of you.
Trust is critical to teamwork, collaboration, speed, and innovation. It is both the foundation for speed, as we write about in the linked article, and the first step in our Culture Change Algorithm Sente has pioneered and we’ve written about in, “Are Your Team’s Designed for Speed? We Accelerate Results With our Culture Change Algorithm.”
Good Intentions Trap 2: Real Life Example
We had been working with this customer for over three years and together we had produced some amazing cost savings and productivity outcomes. We had driven utilization from low teens in their labs to almost 30%. During one of our governance meetings, executives asked me what I thought the utilization limit was and I told them I wasn’t sure, but with some additional practices, I could see producing over 50% utilization. Given what I was observing in our operations I thought we were at about the process limit at 30% utilization with our current set of capabilities.
My concern was that at the speed of new demand for equipment coming into our operation we’d miss something either because we weren’t told about it, we — our customers and us — were making assumptions about our capacity that wouldn’t be true, or some other reason. Everyone was too used to Sente always delivering. I felt our planning capacity needed to become more capable of anticipating constraints that were related in complex ways and constantly changing as schedules changed. With more programs coming faster, and schedules changing, I didn’t think it was possible for us to keep up with that and be trustworthy.
We made the decision to drive for 60% and we’d do it with the team and capabilities we had. The customer didn’t want to take on additional costs. If there were any issues we’d fix them along the way. I felt uneasy but couldn’t ground my concern for sure and thought their suggestion that we’d “fix issues along the way” seemed reasonable.
The Distrust Contagion
You probably guessed it. With business ramping up we missed a commitment. We were supposed to have 20 pieces of equipment to start a test program by a certain date and we only had 19 of them. Unfortunately, the one that was missing would delay the start of the test. There had not been a delay since Sente had come on board, in fact, Sente had solved all of the problems they had before and there had been no delays. It didn’t matter. Rumor had it, “Sente had lost the secret recipe.” The rumor spread like wildfire. If Sente was no longer trustworthy people began locking down their equipment and refused to share it because now they had to “take care of themselves”. The more they hoarded, the more other commitments were broken causing more and other people to hoard. They were reverting to old behaviors. It was a vicious cycle producing distrust. We didn’t find out about the issue for some time.
The Recognization and Intervention
No one told us they were going to start hoarding, they just did. They gave us excuses that we believed because up to that point we were trusted so they always told us the truth. Now they told us what we needed to hear so they could keep their equipment. After a few months, it was clear something had happened. We could see it in the metrics and now had a better understanding of what distrust meant, where it showed up first, what was required to fix it and how long it took to recover. Below is data extracted from a very old report using some of the important metrics we write about in, “Are Your Metrics Complete? Do They Trigger Effective Behaviors and Results?”
Both Sente and our customer took ownership of the situation, installed our new planning capabilities and eventually hit utilization levels above 65%. It took a good year to completely recover trust even after the three years of near-perfect performance that preceded the big miss.
The Cost of Distrust: Over $1 million
Fortunately, we had our processes well-instrumented so once we realized what was going on we could see it’s effects on multiple metrics and determine costs.
- Assets shared decreased from a peak of close to 400 per month to just above 100
- Requests kept, which had been running 98% plus, plummeted to 49%
- Utilization had peaked at around 40% and would eventually drop to 20%
- A conservative estimate of the financial cost of this mistake was $1 million. Fortunately, because of our performance earlier in the year we were still on track to meet our annual commitments, but the customer wasn’t happy. They could have saved and reinvested more money without the breakdown.
Lessons Learned About Building Trust
Lesson number one is to catch the breach in trust early, anticipate the consequences and quickly intervene with apologies, explanations, and plans that can be trusted so hoarding can be halted. We didn’t make any real intervention for a couple of months because we didn’t know there was a major issue. The delay in seeing the breakdown was costly. We now know what to look for.
I’ve also learned to trust my knowledge where I have it and know where I don’t have it. Unlike many asset management solutions, we’ve always understood that there were consequences to asset costs resulting from human behavior and that trust was critical to keeping costs low. We learned quite a bit from this experience. We learned that trust wasn’t a “1” or “0”, “on” or “off”, “had it” or “didn’t have it”. There were standards. Production of trust was situational. Without the new capabilities, we weren’t trustworthy to drive utilization above 30% no matter how good our intentions.
Finally, the truth always shows up in actions and not always in words. While no one was telling us they were going to hoard, after the fact we could see their behaviors in measurable ways through our metrics. To build trust make judgments based on facts, which means you must accumulation the right data and facts to make those judgments.
If Your Support Groups Run Like the DMV, You Are Paying a Big Hidden Cost
I wrote about this in our blog post, “Are Your Support Organizations Operating With a DMV Mindset”.
This mindset comes from management methods and habits developed in the last industrial revolution which were internally focused, driven by people in silos getting their tasks done with standard operating procedures designed by someone else. In a world that changed much more slowly than today’s world this worked. It produced efficiency at scale. Today it is a competitive disadvantage. It is too slow in a world that needs speed.
Customers of these organizations probably know they aren’t producing at a high enough level but don’t know what is possible and it’s not their job to figure it out. You can be sure the distrust in the system is driving costs that are hidden but that show up on the bottom line. They are part of the cost of running a business. They don’t have to be.
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