Hiring should be the last thing to do when overwhelmed with work

October 1, 2014

Read time 3 min

“We need more people” said Justin, the Chief Operating Officer (COO). Their IT support company had been struggling to meet customer demand for quite a while. They simply couldn’t keep up. Mary, the Chief Executive Officer (CEO), reminded Justin that this is a positive problem and agreed that they need to start hiring.

Some months later new employees had been hired, trained and finally they were productive. Justin had expected to feel relieved, but he wasn’t. Despite the new hires, customer demand was still overwhelming. In fact, the pressure was even bigger than before. Justin was confused, but remembered how the CEO had said it’s a positive problem. They would simply need to hire more soon.

A few more months go by. Mary, Justin and the rest of the leadership team meet to go through key business figures. They’re expecting a rise in revenue, but unfortunately that’s not the case. Revenue has remained roughly the same. Even more alarming, profits have gone down. “We hired more people, but our numbers look worse. What happened?” asks Mary, dumbfounded. The meeting ends on a low note.

Justin decides to figure out what’s going on. He calls Arto, a management consultant from Reaktor, and they meet. Arto explains how demand can roughly be divided into two categories: value demand and failure demand. Value demand is fairly straightforward. The customer gets value when the demand is satisfied. When a customer asks for a cappuccino and gets one, that’s value demand. Failure demand is generated by forgetting to do something or failing to do something right. It’s when the customer asks for a cappuccino, but gets a latte and then demands to have the cappuccino he or she ordered.

Justin studies the company’s incoming demand and categorizes it. He’s shocked when he learns that most of it is actually failure demand. Justin realizes they hired people to work on stuff they shouldn’t even be doing in the first place.

Justin and Arto discuss how to fix the situation. Failure demand is generated by the organization itself by failing to respond to value demand properly. To get rid of failure demand, the company must focus on satisfying value demand properly the first time.

With the help of Arto, Justin realizes how setting targets for closed tickets per day per employee has actually been counterproductive. It has resulted in quick fixes that hide the actual problem for at least a day or two. When the client calls back after two days, it’s a new ticket. The targets have simply encouraged employees to bounce issues around instead of actually solving them.

Justin notices how they’ve pretty much built their company around the huge amounts of failure demand. They have a customized ticket system and very specific instructions and policies on how to use it. They’ve spent hours and hours figuring out how to deal with failure demand when they should’ve been thinking about how to remove it altogether. They’ve institutionalized dysfunction.

Together with the people doing the actual work Mary, Justin and Arto redesign the work to focus more on the customer. They get rid of targets focused on closing tickets quickly and instead start emphasizing customer satisfaction. They create an environment in which people doing the actual work are given the power and authority to do their work properly. Mary and Justin start viewing themselves more as enablers than managers.

Later on Justin explains to Arto how hiring people to deal with failure demand doesn’t make any sense. A company should first do their best to get rid of failure demand. “You shouldn’t hire people to do work that shouldn’t be done in the first place” says Justin. Arto nods.

Value and failure demand are terms coined by Prof. John Seddon. You can read more from his book Freedom From Command and Control.

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