How feedback loops inform the reality of your situation to optimise processes
Ever heard someone walk into your office exasperated and playing the victim card? It usually sounds like: “The business process is broken. I need the CEO to fix this. Managers just need to do their job.“
Of course you are sick of the complaints. You just want the process fixed and for this issue to go away. The question I ask is: fix what?
The real world is made up of complex interactions. We overlay perceptions, beliefs, business rules, information and our own views of how the real world works, versus how we think it works.
Here’s a method I use to make sense of complexity and get to the heart of the issues.
To understand how well things like business processes work, I use feedback loops. Positive feedback is self-reinforcing. We all love praise and if we get it we keep doing more of the same. Negative feedback is opposed to change, it’s resistant and works darn hard to preserve the status quo.
Below is a simple example of the outcome of a one hour coaching session with a corporate services team discussing a broken process that appears (prima facie) to be caused by managers outside of Finance.
FYI: My 1 hour of coaching saved this business around 65 person-days of ineffectual activity per year. What is the daily rate of a payroll officer? Assuming $300 per day = $19,500 saved in 1 hour.
Situation. The Corporate Services team own the Payroll process. The Company had recently outsourced payroll to save money. Over time, the Finance Manager found the number of payment errors to employees was increasing and his team was receiving significant complaints. They were running off-cycle pay-runs every second day.
Intervention. To fix the problem, the Finance Manager hired an internal payroll specialist to check each and every payroll transaction prior to payment and liaise with the business to reduce the payment error rate (the end goal).
Positive Feedback Loop (R). By increasing payroll checking, the Payroll Officer successfully increased the proportion of correct payments. This was partially achieved by approving missed time-sheets on behalf of managers and undertaking other basic checks. The result: less complaints to Finance.
Job done? Not quite.
Negative Feedback Loop (N). Installing a studious Payroll Officer influenced management behaviour. Managers progressively reduced their scrutiny of time records - they started rubber-stamping time-sheets. The result was an increase in incorrect time-sheets.
How a processing system self regulates. The Payroll Officer intervention initially resulted in decreasing incorrect pays but over time management carelessness counter-acted those benefits. The intervention was self-limiting with the status quo ultimately prevailing. The ‘processing system’ sought to find its own equilibrium.
When both feedback loops are combined you can see they are working against each other:
As a result, the Payroll Officer will have a job for life because the ‘self-regulating system’ wants them there.
How the process can be improved. Once a time-sheet is approved - there is no need to intervene - it can be directly processed by the payroll company. For incorrect pays, the employee will exercise a negative feedback loop on the approving manager.
The process will encourage the manager to be responsible and take more care. Finance needn’t be involved at all other than monitor that the feedback process is working.
The Payroll Officer can be redeployed into other value-adding tasks. If properly designed, the ‘system‘ sorts itself out. Job done.
Holistic thinking. By looking at the whole system and not just one part of it, you can see how things interact. Feedback moments that either reinforce or negate the behaviour you are looking for, are everywhere. I see them in Finance, Collections, Accounts Payable, Procurement, Human Resources and IT.
The trouble is that the people doing the work may not see the loops. Often entrenched in the detail of their mental model of reality, they are not thinking holistically about the 'system' they are part of.
Try this method for yourself. Take some time to look at some of your processes. Where can you see feedback loops that work against each other?
In this article, the Payroll Officer was acting as the bicycle training wheels for a manager thus inhibiting a helpful feedback loop. Feedback is a great way to learn how to ride a bicycle. Once learnt, it's hard to forget, especially when staff pay is involved.
About Revera Business Optimisation
Revera optimises businesses in the commercial, public, health and human services sectors. By collectively maximising the potential of key functions: Finance, Human Resources, Procurement and Technology, we lift organisational performance, improve engagement and increase the effectiveness of the entire organisation. Contact us today for more information about our services on 1300 69 70 40.