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KVD Service-Management Prize 1992
Vision of the Service Exchange
Market economy within the company
By Dr.-Ing. Walter Tritt · From the doctoral thesis · Foundation of GoodPoints
This article is the origin of GoodPoints. Written in the 1990s for the steering of service organizations, awarded the KVD Service-Management Prize 1992. The principle is as relevant today as it was then: market economy works, planned economy does not.
Market economy works, planned economy does not! This means that more market economy should be dared within a company as well. In order to achieve the economic and performance-oriented corporate goals, competitive components must be incorporated.
The Three Market Forces
Which essential components of a market economy do we need within an organization? Three elements are necessary:
Required market forces in an organization
Personal profit maximization
the reward
Control parameters
the framework
- Competition serves as the incentive.
- Personal profit maximization serves as the reward.
- Control parameters keep the market within the framework.
In service organizations for complex technologies, 60-80% of costs are personnel costs. Increased effectiveness of staff leads to substantial cost savings. Maximum effectiveness is achieved when the interests of staff, the company itself, and the customers largely coincide.
The Service Exchange
In order to achieve the greatest possible alignment of interests, the employee must have the ability to choose their work with maximum degrees of freedom. The company itself must offer them an optimal selection opportunity. This is achieved by presenting the assignments to the employee in a transparent and comparable manner.
Through the medium of a "service exchange," the individual tasks to be assigned can be offered in the desired form.
The Process
From fault report to completed assignment
Customer reports fault
→
Control center logs it
Assignment gets a value
→
Exchange shows assignment
Specialist selects
→
Processing & points
A customer reports a fault. The control center logs it, and the assignment receives its typical data along with an assignment value. This value is based on various elements: profitability, technical requirements, and marketing aspects. The assignment value represents the quality requirement of the work.
A specialist selects from the offered assignments the one that suits them. Upon successful completion, the assignment value is credited to their account.
Strategic Steering in 3 Stages
Management has an excellent influence on what happens. The final determination of the evaluation criteria takes place in three stages:
3-stage model of strategic steering
Stage 1: Entrepreneur
market strategies, revenue targets, profit margins
Stage 2: Management
regional specifics, adjustments
Stage 3: Staff structure
skills, capacities, balance
From these three stages, an assignment matrix is formed. This enables the control center to very easily assign a base value to a reported fault. In the exchange, the current assignment value is then dynamically adjusted based on this base value according to supply and demand.
Supply and Demand as Regulator
The regulating mechanism is the relationship between supply and demand. With the help of this mechanism, even unpleasant assignments attract the interest of employees - they can be correspondingly well compensated.
When the technology changes, for example through innovations, there is not yet a large supply of specialists. Corresponding assignments are valued higher. This causes more specialists to train, until a balance is reached. The value then drops to a customary level.
The Advantages
- Flexibility with innovations toward new technologies
- Continuous self-optimization of employees
- Speed in responding to fault reports
- Effective staff deployment with high willingness to perform
- Maximum customer satisfaction (the customer is king)
- Significantly reduced control center effort
- Drastically reduced management costs (over 70% savings)
- Simple controlling via performance points
- Leaner organization made possible
The Crux
The crux of this model is that an unusual step must be dared within the company. It is the transition from a strongly dirigiste, supposedly plannable task assignment to a more market- and competition-oriented, supposedly chaotic system.
Exactly this step - from the dirigiste to the market-oriented system - is what GoodPoints does. Points instead of commands. Transparency instead of hierarchy. Self-regulation instead of external control.
Quality Control Through Colleagues
Who controls the quality when every specialist assigns their own work? The solution is elegant: colleagues control each other - and earn points for it.
- An authorized specialist who was not involved in the execution selects any completed assignments for quality review.
- The review itself is an assignment and is compensated with points.
- If the assessment between customer, executor, and reviewer diverges, the majority of the three parties decides.
This creates quality assurance without a control authority, without quality managers, without bureaucracy. The system regulates itself.
Proven in Practice: The 2006 Pilot
In 2006, the model was qualified and tested in a German corporation. The results were clear:
Productivity increase in the pilot team
+20% productivity
from the first month
The project costs were - despite a manageable pilot team - more than recovered through the resulting efficiency gains.
The Behavioral Shift
Before the project: When assignments were pending, the saying was: "Why me?"
People more or less worked along at their own pace. Permanent overload. Assignments were given to external vendors.
During the project: Employees asked: "Why don't I get the work?"
Specialists proactively contributed improvement suggestions and pushed for their implementation. Active pressure on superiors for better workflows. Searching for additional work of their own.
The sponsor - a regional manager of the corporation - moved to a board position at another corporation. His successor set different priorities. That ended the project.
Other companies tested the model over the years, but without expert guidance and without suitable software. They failed for various reasons.
Why did earlier attempts fail? The main cause was not the concept, but the implementation: superiors wanted to see and control their employees' points. This misused the system - from a self-regulation instrument to a surveillance instrument. Motivation collapsed, trust evaporated.
GoodPoints solves exactly this problem. The software structurally prevents what self-built systems could not uphold:
- Points stay private - only the employee themselves sees their own points account
- Comparison is anonymized - you see where you stand, but not who has which score
- Superiors see only group overviews - not individuals
- No misuse possible - the system cannot be abused as a control instrument
What expert guidance by specialists used to have to achieve - maintaining the discipline of the system - GoodPoints achieves as software. The corset is cast in code.
Side Benefits
Beyond the direct productivity increase, further effects arise from self-regulation:
- Reduction of processes - the unnecessary disappears on its own
- Shortening of throughput times - faster from assignment to completion
- Improvement of interface quality - handovers between employees become cleaner
- Perception of new business - employees recognize customer needs earlier
Risk Assessment
If the pilot succeeds: A new era has dawned, securing the survival of your organization over a longer period of time.
If the pilot fails: It was one of the attempts and approaches that are constantly necessary in living organizations to secure future viability.
Cost reductions of up to 40% are possible - depending on the starting position of the organization. For organizations with a lot of room for improvement, it can be significantly more; for already lean structures, hardly any.
Original title: "Vision of a Model for Steering Repair Operations for Service Specialists" by Dr.-Ing. Walter Tritt. Awarded the KVD Service-Management Prize 1992. Further publications at www.scwt.de.