tl;dr: The blog post criticizes the focus on 100% utilization of resources in businesses like American Airlines and Verizon FIOS, arguing that it leads to poor customer service and long wait times. It highlights the author's personal experiences with these companies, emphasizing the negative impact of such an approach on customer satisfaction. The post references the principles of Factory Physics and Lean, advocating for a balance that prioritizes customer experience and efficient flow over mere cost reduction.
I have as many bad customer service experiences as the next guy in healthcare and other businesses. As I've said before, I try not to be a “hack” blogger who just uses their platform to complain about the last bad thing to happen, unless there's a broader lesson involved.
Let's say you HATE your customers. It sounds unimaginable, but I've long suspected this is the case with American Airlines, having flown almost a million miles with them. OK, so that's a bit harsh, but it does seem true that American falls into the trap that many other companies do – expecting 100% utilization (of equipment or people) in the name of efficiency while ignoring the laws of nature that say 100% utilization leads to LONG customer waiting times – in person, or on the phone. I've also had similar experiences with Verizon FIOS… bear with me; I'm not just griping and moaning in this post.
If you've studied queuing theory, Industrial Engineering, or the famous textbook Factory Physics, you know that 100% utilization of a resource is a recipe for long waiting times and poor customer service. It's a mathematically provable law of nature. Expecting to have 100% utilization of a machine in a factory, means you'll have lots of waiting time and lots of inventory (and/or poor customer response). Expecting 100% utilization in a call center means lots of busy signals or customer hold time.
Check out my podcast interview with Mark Spearman, one of the two co-authors of Factory Physics. Spearman also later co-authored Factory Physics for Managers with Ed Pound.
2023 update: Spearman and Pound are now involved with a new company called the Operations Science Institute, and I'm happy to be on their advisory board.
Long story short, American Airlines misplaced our suitcases for the first four days of our vacation back in June. That's hardly breaking news that airlines lose bags. My wife and I were more upset about:
- The finger-pointing that took place between American and Iberia (our transfer was in Madrid)
- Failure to deliver on the promised response (they didn't bring our bags to our hotel, as they had promised)
- The insincere “we care about you” mass emails that American calls a “personal communication”
So when we got back from vacation, we wrote a letter to American, complaining about the generally indifferent and surly service that we encountered at every step of the journey (again, this isn't a news flash, this is like a hack comedian complaining about bad airline food).
The First Instance of 100% Utilization — American Airlines
Within about a week, I received a phone call from someone in the Executive Office of American Airlines. OK, that's not bad. But I was on the phone, so she left a voicemail with her name and number.
I called back later that day… no response.
I've called back four or five times over the last two weeks, and I have always gotten her voicemail with the message, “I am already on the phone with another caller, please leave a message.”
Granted, it's a limited sample, but is she busy making outbound apology calls all day long? Without being too obsessive and dialing non-stop or something, I find it hard to believe that somebody is so busy that they can't return a call — they only have time for one attempt?
No amount of “we care” emails or a “we received your letter and we care” postcard can gloss over the fact that American apparently doesn't have enough capacity to deal with the number of complaints they receive. Instead of just adding more reps, ultimately, their goal should be to reduce customer complaints, so fewer reps are needed. But that's really pie-in-the-sky thinking for American and the other old legacy carriers.
I don't know if I'll ever get through to that Executive Office person. I'll let you know if I do. I'll try again Monday morning.
The Siren Song of 100% Utilization
Industrial Engineers learn that 100% utilization is bad. According to the lessons of Factory Physics, depending on the system – how much variation you have – waiting times start to skyrocket after 80% utilization or so. If your primary objective is low cost, you'll drive 100% utilization, and customers will suffer. If you really want to be responsive, you can't plan for 100% utilization. Looking at somebody being “not busy” is a very obvious cost – and hating to see people idle is old Frederick Taylor thinking.
Lean practitioners, going back to Taiichi Ohno, would hate to see the part in the factory not moving. That's a different type of waste and a different focus. In a service setting, seeing the customer wait would be worse than seeing an agent idle, if you're really trying to be Lean. It's easy to calculate the cost of an idle call center agent. It's much more difficult to determine the cost of an angry customer caused by poor customer service.
It seems that typical MBA education teaches managers to focus solely on cost when the real problem (not just in my selfish case) is poor flow and bad customer service that might drive customers away. American Airlines, like other airlines, is obsessed with 100% utilization of the planes, which works fine unless a flight gets canceled… you need slack capacity in any system if you're going to have flow.
Another Case of 100% Utilization — Verizon FIOS
A few weeks back, I switched from my local cable company to Verizon FIOS for phone and internet. I could get a faster connection for a lower price, which seemed like a great value.
The wireless router included in the hardware was constantly fritzing out, requiring reboots. After several customer service calls over two weeks, I finally convinced a phone agent to send me a replacement box.
The decision to actually send the box required a 2nd-level tech support approval. The 1st-level agent I was on the phone with apologized for the delay in waiting for the 2nd-level tech to be ready to talk with her via Instant Messenger.
After waiting (I'm sure the 2nd-level tech was being kept 100% busy, being a more expensive resource and all, typical MBA thinking would say), the 1st-level tech (1LT) and I and the 2nd-level tech (2LT) had a discussion like this:
- 1LT: What operating system are you using?
- Me: Well, one machine is Windows 7 Professional, the other is Mac OSX Snow Leopard, why does that matter?
- 1LT: (typing furiously)
- Dead air — waiting
- 1LT: Have you tried changing the wireless channel?
- Me: Yes, many times, that's well documented from the previous calls
- 1LT: (typing furiously)
- Dead air — waiting
This continued for a few more questions, with very long waits before the next question. I asked the 1LT what was going on.
She said the 2LT was always on IM with four different 1LTs and four customer issues at the same time, so due to the multitasking we had to wait.
It seems the ONLY reason you'd design a system like that is if your only concern is 100% utilization. That's cost focus (it makes me want to pull my MBA diploma off the wall). My call took at least four times as long as it should have, and it was ten times as frustrating. Keeping the 2LT busy wasted my time and the time of the 1LT.
Can you imagine a system design like this in a physical setting? Does a grocery store drive efficiency by having one cashier run back and forth across four registers? Does a hospital try to have one rep register four patients simultaneously, running back and forth across different desks?
Why does this job and system design seem to make sense in a virtual setting? Are people truly allowed to have joy and pride in their work, as Dr. Deming would say when they're kept 100% busy like this?
Conclusions
The only conclusion you can draw is that these companies are more concerned about siloed cost than they are about keeping customers happy and having good flow. Thank goodness NOBODY is holding up either American Airlines or Verizon as a company that's supposedly using Lean principles. There's nothing Lean about a system that mandates 100% utilization rates.
Again, it's far more concrete to measure the cost of an idle person than it is to measure the cost of poor flow, unfortunately. That drives a lot of bad short-term decisions, apparently.
A really good read on the topic of slack, utilization, and flow is Slack: Getting Past Burnout, Busywork, and the Myth of Total Efficiency.
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I think there are many companies that obviously do not attempt to provide good customer service: airlines, large banks and Verizon are examples that have huge numbers of customers being treated very poorly. If there are options to choose decent service it doesn’t bother me so much (credit unions provide a very good alternative to large banks most often). Thankfully you can often avoid United, American… by choosing Jet Blue or Southwest but obviously that is not always possible. Verizon is even more annoying because they have bought their way into very anti-competitive positions (banks and airlines also obviously have done so alos).
Near monopolies have the freedom to provide lousy service. Companies like Verizon, American, Chase, Wells Fargo… attempt to make their customer hostility sustainable by securing monopolistic positions. It has worked pretty well for them. I think we are much more likely to get customer friendly policies by new companies coming along that don’t sell out the oligopolists. Unfortunately the anti competitive behavior these companies favor it just to buy out customer focused alternatives instead of providing service themselves.
Regulators allow such anti-competitive behavior is another thing we could hope to see change. But the chance of proper regulation of anti-competitive behavior is not good. And hoping those companies stop being so customer hostile is not something that will likely work. I don’t see good odds that the monopolistic customer hostile companies will change. Those companies that don’t have monopolistic positions are not such a big issue because after providing universally bad service they go out of business. It would be nice if our regulators didn’t allow the monopolistic behavior but they obviously are going to do their part to allow capitalism to function, bad service and high prices is what we can expect from the monopolistic companies.
Thanks, John. Living in the DFW area, I don’t have many practical options, I’m pretty much stuck flying American and they know that.
An MBA classmate of mine worked (or still does work) for American. I complained to her once about a policy and she said, literally, “well, what are you going to do?” since I live in the DFW area. And she works in marketing. I wish we could revoke her MBA, as American poisoned her mind apparently.
I forgot to add the detail from the American Airline postcard, it said “We are currently experiencing a higher than normal volume of correspondence and consequently our response to your letter may take a little longer than usual.”
The fact that they have postcards printed up to this effect tells me it’s hardly unusual, this volume of complaints.
I’m glad to see that more professional people (including you!) have noticed what I have. Sometimes, I think it is just me who gets the “bad apple” in customer service. I could type to you all day about bad phone and chat customer service I have encountered. However, I am multi-tasking right now and I simply don’t have the time to give to you that you deserve.
I’ll leave you to wonder what Comcast, Sprint, Terminix, Apple (I know…unusual) and a handful of smaller companies have done or not done that was poor in my book of customer service.
Well, I tried calling again… no answer. No surprise.
The thing that drives me crazy about 100% utilization (besides that it creates problems) is that it leaves no time for improvement. How can leaders expect every person to be solving problems every day if they are 100% utilized with patients/customers? They can’t!
Great post!
From the Gospel of Mark (Graban, Lean Hospitals, Productivity Press, 2007), Ch. 10, p. 191: “One pitfall to avoid was highlighted by a manager who said his hospital had gotten away from having regular team meetings. The corporate staff was punishing managers, via productivity standards for team meetings, and managers became reluctant to pull front-line staff for this reason. This highlights another example of how, unfortunately, the best local Lean efforts can be undermined by a lack of alignment with corporate or senior leadership attitude, policies, or metrics.”
Well, Verizon let me down. They claimed they were overnighting me a new router box to arrive today. I was VERY skeptical on Saturday when they said I’d get it by Monday.
Way to overpromise and underdeliver.
Had a similar experience with American Airlines in early April. A colleague and I were traveling from remote Northern Upper Peninsula of Michigan to a National Conference at the beautiful Doral Golf Resort 9 miles outside of Miami. Have to fly American and through O’Hare to get there from here. Everyone one of our planes and connecting flights (2) was delayed due to mechanical problems with the aircraft. We arrived 9 hours late in Miami after traveling for 16 hours in one day. They had lost our luggage due to the delays, transfers to other aircraft (which also had mechanical problems) and missed flights. We were told by their personnel that our luggage would be delivered the next day. It was a 3 day conference and every day we would call when the luggage didn’t arrive. Every day we were told it was on it’s way from the airport to the resort. We had to wear our traveling clothes, wash the unmentionables in the bathroom sink and finally purchased some expensive golf attire to attend our conference. The luggage finally arrived AFTER the formal dress banquet the last night of the conference. We attended the banquet in our “golf” clothes. By then I had purchased a carry on bag for $100 and toiletries for another $50. The boutiques at the resort weren’t cheap. We were due to fly out the next a.m. We arrived at the airport in plenty of time, this time hanging on to our carry ons, just in case. Yup, that flight was delayed to mechanical problems as well! We ended up sitting on the runway for an hour, being taken off the plane and waiting another hour for a flight out. Could have spent that time enjoying the day in Miami since we finally had our resort clothes! When we finally reached our connection in Newark New Jersey due to yet another mechanical problem at O’Hare, we had of course missed our flight home to the U.P. of Northern Michigan by hours! We finally reached a hotel in Newark by 8 p.m. Arrived home midday a day after we were originally due.
We wrote letters documenting all of our flight numbers etc. We sited the facts of the very rude customer service reps at the United and American counters on both ends of our trip. Also included our embarrassment at the swanky resort and conference at only having our clothes on our backs because each day were assured our luggage was on it’s way! We included receipts for all of our necessary purchases. Their response was an apology and an offer of a $50 voucher each on our next American Flight within the year. Ha Ha! No reimbursement for our expenses or anything reasonable for our troubles. We’ll never fly American again! In the future we’ll drive several hours to avoid them!
I finally got the box from Verizon yesterday. Then, AFTER, it arrived, I got an automated phone call from Verizon giving me the UPS tracking number so I would know when it would arrive.
Still no call back from American.
The Keystone Cops would be proud that their methods and performance are being emulated in the 21st century ;-)
I completely agree and am battling similar issues with my senior management who perform simple math to allocate development resource to a development project. The math usually involves the number of days estimated / the number of days before deadline = the number of developers required = 100 utilization. I take issue with this logic for all of the reasons you have stated but add that complex task dependencies also exist in these scenarios and are rarely accounted for or understood.
On a similar note, I love the quote from Terry Pratchett’s Going Postal from the Discworld series of books: “The aim of Business is not to provide good service, but provide the only service.”
When this is true, all hope of providing a good service give way to greed.
Ok, final update for anyone who cares.
After my 6th attempt at calling back to the name/number left in my voicemail more than two weeks ago, I re-sent my original email, this time cc-ing the CEO of American, as found on this web page:
http://onyoursi.de/wiki/airline/american-airlines/
Funny that you have to go to some random German website to find his email, as it’s not posted on aa.com.
From my experience working at Dell, this email for American CEO Gerard Arpey is likely not his “real” email address, but one that’s read and answered by staff. Back in the day, when you emailed the widely circulated “Michael Dell email address” that wasn’t the one that he personally read. It makes you wonder how much the CEO is shielded from raw customer feedback like that. The curse of big companies, eh?
So anyway, within about two hours I got a call from somebody in the CEOs office… at least they listened to the concerns and the woman who called was more than decent about everything. I wonder how many people they have employed to just call and try to sooth frustrated customers?
None of the response makes me want to go out of my way to fly American Airlines internationally again, though.
The problem is that aviation has become a giant system, yet lacks systems thinkers. Each manager, MBA style, concentrating on optimising their own little patch of the industry, and to hell with the others.
The redundancy should be looked at in ‘flows’ for example, if we took a Chicago area airport out of circulation for a day, we will put pressure on the others. That’s OK, because they’ve got some spare capacity, and because we are treating the passengers in single piece flow FIFO, everyone gets a little piece of the ‘delay’ caused by this.
Instead you get people saying “screw you” I’m not varying my schedule or my labour hours or my aircraft utilisation or my supply contracts…the fact that you and your customers are worse off is not my concern.
Losing a plane or a crew or an airport here and there shouldn’t bring catastrophically poor outcomes for a small group of customers, rather the system should be designed so that the entire system adjusts on the margin, for example, the missed connection in Madrid means that the airline is able to place all the passengers affected, say on several different flights that all have a little spare capacity, and you are not ridiculously late at the end.
With so many US East Coast airports, and so many transatlantic flights, I can’t believe the whole thing can’t work seamlessly, and why say a Miami bound passenger couldn’t be offered the next flight to an airport in the area, and a rental car voucher, if that will get them there quicker than waiting for the next flight.
As for the clothing issue, I would go the other way and say that the airline should not be responsible; you should make it clear the passenger has insurance. However as soon as it is clear the luggage didn’t arrive with the passenger, force the airline to sign a form that allows immediate claiming on that insurance. Then the passenger knows they need to immediately go and buy some clothes.
That said, finding and fixing the root causes of luggage going astray would be the best option.
The last bit of absurdity I will share from American… from a different flight that was delayed 3.5 hours last week.
The subject line is:
About your Recent Flight: A Personal Message from American Airlines
OK, there’s NOTHING the least bit personalized about this message, other than putting my name in it and the date. Why bother calling it a “personal message”? Oh, and to boot, the emails are ALWAYS signed by a supposed “B.J. Russell” – the email my wife got a few weeks ago came from the same supposed name. American Airlines is not fooling anyone…
August 4, 2010
Dear Mr. Graban:
We know how important it is for our customers to rely on the on-time departures and arrivals of our flights. However, there is nothing more frustrating than learning your flight has been delayed – or even canceled – while attempting to get to your destination as planned. Therefore, we hope you will accept our apology for the disruption of your travel plans on July 29.
Although our schedules cannot be guaranteed due to the many variables associated with the operation of an airline, we want to show our concern for your disappointment. Because you are one of our most loyal travelers, I have added 5,000 Customer Service Bonus miles to your AAdvantage ® account. You can view this activity soon via our web site at http://www.aa.com/AAdvantage.
While the safety of our passengers and crew members will always take priority over on-time departures and arrivals, we hope that you will give us another opportunity to serve you when your plans call for travel by air. It would be a pleasure to welcome you aboard American Airlines.
Sincerely,
B. J. Russell
Customer Relations
American Airlines
Have you guys heard about this novel “Dear American Airlines” in which an AA customer (let down by them of course) writes a letter to them, summing up his experience? I haven’t read it, but it sounds promising, doesn’t it?
I wish they wouldn’t use this word “disappointment” at the flight running late. It is not understanding the customer’s value proposition.
If you have built the flight into your schedule for your business, your conference, you day of vacation or attending someone’s funeral or whatever, it isn’t disappointment. It is usually ‘disruption’ or much worse like ‘lost business’ or ‘lost conference learning time’ or whatever. It can also usually have an economic impact which AA are not acknowledging, merely the ‘feeling’ you have as if what time you fly is only a casual interest of yours. Of course they don’t want to acknowledge the real eg economic impact because it smells of liability for it.
Mark
I have been there an experience the pain, but they are by far not alone. A large number of software companies are evry bit as bad or worse, as are some of the larger computer makers, Toyota may screwup on design, but dealing with most of the auto industry is constant poor overpriced service. The problem is like blind sheep we keep going back for more.
Until customers leave and stop coming back nothing changes. Surprisingly I know one business that plays the game differently, a very successful steak house deals with one supplier until that supplier drops the ball. In the time I have known of them (45 years), they have had only 3 companies supply them their beef. Since there are several dozen possible suppliers one failure means you gone for life. But this company willingly pays for great service, most of us choose lowest price.
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Quality Digest has re-printed this piece, if you want to see if there are comments there. Unfortunately, you have to register to comment there (sorry, I wish they didn’t do that).
Mark:
I have a question, once a set the stage.
In India, over 20 years ago, the word service was almost nonexistent in most of the “organized” service businesses, since most of them (banks, postal, telephone, railway, of course airlines, etc.) were run by government. Things have improved a lot, since then, although, a lot more improvements remain.
When I came to US over 20 years ago, I could notice the difference in service very clearly. In these 20+ years, I have seen services deteriorating in US and improving in India.
We can all agree that the improvement in India is because of privatization and competition (about 6-7 years ago, I had an employee of the government run Indian Airline catch me as I was entering the terminal, and when I said I am not flying with them, he said, “sir please try us now”) is responsible for the improvements in India.
The question is: What can we attribute the deterioration of services in US to?
Dipak
Great question, Dipak. I think the main factors are some of the same problems Dr. Deming identified decades ago:
– Responsibility for quality is not at the top of the org. (it is delegated)
– Short term management decisions
– Focus on cost above all us
– Not understanding how systems work
I’m paraphrasing and a bit incomplete. Do a search for Dr. Deming and the “Deadly Diseases” of management – the 5 or 7 of them:
http://www.google.com/search?client=safari&rls=en&q=dr.+deming+deadly+diseases&ie=UTF-8&oe=UTF-8
Received a good comment via email:
“I read your article “How to Design Poor Service” and it was a great article.
Always a BUT though. You might want to go read Fredrick Taylor’s books (in particular “THe Principles of Scientific Management”), because he was NOT a proponent of 100% efficiency.
He talks at length about machining and the 17 ket sceientific areas and just keepin the machine busy and fastest run time is a mistake.
Good article otherwise.
James Abbott
http://www.EffectiveCallCenters.com”
I guess I stand corrected. I still would argue that modern “Taylorist” or “Taylor-ish” thinking focuses on keeping everyone and everything 100% busy and that’s a problem.
Great article. While we expect bad service from Airlines, American is just over the top rude. Some of their employees seem to go out of their way just to insult you. The other day, I went to Logan airport. My wife and I were trying to use the self-serve kiosk but there was some issue with the machine or tickets, so only mine would print out. We went to the counter to get help. The very first words from the lady at the counter (don’t remember her name) were “You need to calm down” in a very condescending voice. I said “what are you talking about?” Then she said “You look like you are about ready to snap.” I just left, there’s not much you can say or do with such low class people, just try to avoid whenever possible.
On the Taylorism thing, I think he might get a bad rep, thanks to the zealots that followed him with stopwatches (much like the 5s zealots I struggle with now.)
The example that I seem to recall from him was that of actually forcing the pig iron shoveller to rest so that he could effectively shovel more pig iron. That would indicate to me that he wasn’t a proponent of 100% utilisation?
The UK Government has a set of metrics for it’s call/contact centre’s. Among them are Availability and Utilisation.
Availabilty = Time spent logged and in taking calls + time spent on wrap up + time spent logged in waiting for calls, divided by total number of working hours employees are paid for (including vacation, sick leave etc.)
Utilisation = Is the same but without time spent logged in waiting for calls.
When you talk about Utilization do you mean the same measure? It seems to me that Utilization should be measured as a percentage of Availability rather than a percentage of total time, because the highest possible score for Utilization is acheived if time waiting for the phone to ring is reduced to zero. The problem with achieving such high levels of utilization is that, as you point out, if there is an unexpected spike in demand, or drop in capacity the call centre can’t respond and the queue builds up – resulting in poor customer service. The problem is that management thinking is often along the lines of: “greater efficiency must mean a better service. If we have problems with the queue we can solve them by increasing Availibility/Utilization.
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