Fallen Arches: Fixing service at McDonald’s

What counts as good service at a fast food restaurant? Speed obviously matters but what about staff interactions? No expects a quick service restaurant to have a Zagat’s rating (although some Chicago hot dog stands are graded) but can fast food service slip so much that customers notice?

Apparently the answer is yes, and furthermore McDonald’s hasn’t been doing so well in delivering service (McDonald’s Tackles Repair of ‘Broken’ Service, Apr 10).

But achieving speed and friendliness of service across the chain has been a particularly elusive goal, at least in part because about 90% of McDonald’s restaurants in the U.S. are owned by independent operators.

In QSR Magazine’s annual Drive-Thru Study, the only comprehensive industry comparison of customer service at fast-food chains, other restaurants have consistently outperformed McDonald’s in those areas. In last year’s study, the average service time at the McDonald’s drive-through studied was 188.83 seconds, compared with 129.75 for industry leader Wendy’s Co.  Chick-fil-A had the top friendliness ratings. Out of the seven major chains in the study, McDonald’s was second to last in the “very friendly” ranking, just above Burger King.

So what are the root causes of the problem and what can they do about it?

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Making fast food faster

How does a quick service chain increase sales when it’s tough to raise price or open new outlets? Process improvements! Or at least that is what the Wall Street Journal says (Restaurant Chains Feel the Need for Speed, Aug 29). The argument is that long lines scare off customers — especially at peak times — so faster  fast food means more sales.

Here’s what they say about Chipotle:

For Chipotle, it’s a top priority. “We’ve come a long way, but there’s still a long line, and there’s people turning away at the end,” said Co-Chief Executive Monty Moran.

Chipotle processed an average of six more transactions during the lunch hour last quarter, beating its 2007 record. The Colorado-based burrito chain is training its staff to be more prepared for the lunch rush, with extra trays of ingredients ready on the sideline, and to be attentive to customers so they don’t have to repeat themselves.

At each of its most efficient restaurants, Chipotle averages more than 350 transactions during the lunch hour—about one every 11 seconds.

A customer every 11 seconds is pretty impressive and certainly faster than I would have expected. Note that Chipotle’s approach makes sense since their service is very much human paced as orders are filled by scooping fillings and rolling burritos. The article reports that they have tried having a second register but found it generally made no difference. That they even tried that makes me wonder if whoever proposed that has ever eaten at a Chipotle since payment is clearly not the bottleneck.

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The medical implications of the Cheesecake Factory

A recent New Yorker article by Atul Gawande has gotten a lot of attention (Big Med, Aug 13). The article is built around an intriguing observation: The Cheesecake Factory can churn out a high variety of dishes at consistently decent quality at reasonable prices across more than a hundred locations. The question then is whether healthcare providers can learn anything from the Cheesecake Factory?

It is an thought-provoking question. The Cheesecake Factory is one of many “service factories” in a variety of industries that provide decent service at very reasonable prices. Many (e.g., Jiffy Lube) do this by winnowing down the range of services they offer but the Cheesecake Factory has a huge menu and can handle some special requests. So Gawande takes a hard look at the Cheesecake Factory to see just how they do it and finds that the kitchen manager plays a special role:

I watched the kitchen manager for a while. At every Cheesecake Factory restaurant, a kitchen manager is stationed at the counter where the food comes off the line, and he rates the food on a scale of one to ten. A nine is near-perfect. An eight requires one or two corrections before going out to a guest. A seven needs three. A six is unacceptable and has to be redone. This inspection process seemed a tricky task. No one likes to be second-guessed. The kitchen manager prodded gently, being careful to praise as often as he corrected. (“Beautiful. Beautiful!” “The pattern of this pesto glaze is just right.”) But he didn’t hesitate to correct. …

The managers had all risen through the ranks. This earned them a certain amount of respect. They in turn seemed respectful of the cooks’ skills and experience. Still, the oversight is tight, and this seemed crucial to the success of the enterprise.

The managers monitored the pace, too—scanning the screens for a station stacking up red flags, indicating orders past the target time, and deciding whether to give the cooks at the station a nudge or an extra pair of hands. They watched for waste—wasted food, wasted time, wasted effort. The formula was Business 101: Use the right amount of goods and labor to deliver what customers want and no more. Anything more is waste, and waste is lost profit.

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Kaizen and private equity

The current issue of Businessweek has an interesting profile of a Monomoy Capital Partners, a private equity firm with about $700 million in investments (My Week at Private Equity Boot Camp, Apr 26). Private equity deals are not the normal focus of this blog, but the article highlights an intriguing aspect of how Monomoy goes about deals. To take over a company and then be able to spin it off for a profit requires some combination of cleaning up balance sheets, rethinking the acquisition’s strategy, or straightening out the firm’s operations. As  the article tells it, Monomoy’s approach to the latter is (from an operational perspective) is encouraging.

To buy a company and sell it at a profit requires a complex skill set: financing, restructuring, negotiating new leases and labor contracts, and, of course, “operations,” the term private equity uses for “making things.” Improving operations can mean parachuting in a consultant or a former chief executive officer as an adviser. Monomoy goes further. It occupies a plant floor like heavy infantry, with yellow tape, label makers, and overwhelming force.

In part, Monomoy does this through a series of two-week “boot camps.” Four times a year, the firm pulls about 20 managers from the manufacturers in its portfolio and sends them to one of its plants to suggest—and carry out—efficiencies.  …

Monomoy has adopted Toyota’s system. Five of the seven people in Stewart’s operations group spent time on the line at the Toyota plant in Georgetown, among them Mike Bray, also in the training room. Bray, tall and goateed, runs the boot camps for Monomoy. He uses the word “kaizen” as a transitive verb and as a noun with an indefinite article, as in “We’re going to kaizen this” and “We ran a kaizen on it.”

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Should health care practices be standardized?

One of the things I like about my undergrad alumni magazine is the classified ads. There is always something eye-catching. Like this one that was listed under “Employment Opportunities.”

Family Medical Coordinator: Highly intelligent, unusually competent individual with a background in science and exceptional communication skills sought by Manhattan family to research and coordinate family medical and healthcare issues. This person will manage a small team of professionals and interface with physicians, medical researchers, and consultants (in academia and otherwise) to ensure delivery of highest-quality medical care to family members. Considerable weight will be given to unusual academic distinction and other intellectual achievements. Clinical experience is a plus. This is a full-time position with a highly attractive compensation package and significant upside potential.

It got me wondering about what is the combination of family crisis and disposable income that makes trolling an Ivy League alumni magazine for someone to actively manage family medical issues is a reasonable plan of action. What it makes clear is that at least some consumers will insist on being co-producers in health care. Co-production here goes beyond taking ones medication as prescribed or showing up for physical therapy. Rather this suggest that the patient wants an active role in determining the appropriate course of treatment.

Part of what intrigued me about this ad is that they day I saw it, the Wall Street Journal had a piece arguing against process standardization in health care (Rise of the Medical Expertocracy, Mar 31).

As the health-care debate heats up again in Washington, both Democrats and Republicans will try to convince us that they have the experts to answer all our health questions. President Barack Obama and the Democrats propose panels of government experts to evaluate treatments and, in the president’s words, “Figure out what works and what doesn’t.” Republicans claim that the free market (that is, insurance companies with their own experts) will pay for value and empower consumers. Both sides insist that no one will come between us and our doctors.

Democrats and Republicans share a fundamental misconception about medical care. Both assume that, as in mathematics, there is a single right answer for every health problem. These “best practices,” they believe, can be found by gathering large amounts of data for experts to analyze. The experts will then identify remedies based strictly on science—impartial and objective.

I find this an interesting proposition. On the one hand, if patients were willing to accept what was being suggested as an immutable best practice, there would be little need for a family medical coordinator. Given the diagnosis, the course to follow would be straightforward and clear. If patients — or at least those that can afford to — feel the need to take a more active part in determining care, then it suggests that at a minimum they question whether “best” practice is indeed best.

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Improving airline performance

So the Wall Street Journal’s travel column this week ranks US airline performance (The Airline That Loses Bags, Cancels Flights, Jan 5). The idea here is to build an index that weighs things like on-time performance, complaints filed with the feds, etc. For those of us in Chicago, the bad news is that American is the worst and United-Continental is barely better.

The more interesting points in the article, however, are what Alaska and Delta — two of the worst performers in past surveys — have done to improve performance.

Alaska, which launched an operational overhaul in 2007 after several years of dismal reliability, was first among major airlines in on-time arrivals. The carrier has set internal standards: There are 50 different check points on a timeline for each departure, with data collected on each one. Flight attendants have to be on board 45 minutes before scheduled departure; customer-service agents board the first passenger 40 minutes before departure, and 90% of passengers need to be boarded 10 minutes before departure. What time the fuel truck hooks up and what time it disconnects its hose are measured. When flights arrive, the time the belt-loader pulls up to the plane is tracked. The cargo door is supposed to be opened three minutes after arrival; the first bag needs to be dropped on the carousel before 15 minutes after arrival.

“There are so many moving parts. You just can’t tell people to get the airplane out on time,” said Ben Minicucci, Alaska’s chief operating officer.

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Better emergency rooms

Hospitals present a host of operational challenges. Patients arrive with a variety of ailments and the mix of work changes by the day or even by the hour. Resources are always limited and time can be of the essence. This is especially true in the emergency room. Sure there are challenges up in, say, the obstetrics ward, but they can at least keep non-obstetric cases out of the ward. The ER, however, has to take all comers and decisions have to be made quickly. Perhaps, then it is not surprising that ERs are a major source of malpractice suits (Hospitals Overhaul ERs to Reduce Mistakes, May 10, Wall Street Journal).

Often chaotic and overcrowded, with scant data available about new patients, the emergency room is among the top hospital departments responsible for malpractice suits—and diagnostic errors account for 37% to 55% of cases in studies of closed claims. The average payments and legal expenses for ER cases have more than doubled over the past two decades, according to the Physician Insurers Association of America, a nonprofit trade association whose members cover about 60% of emergency physicians.

Insurance broker Aon Corp. estimates malpractice suits arising from emergency-room incidents in 2009 alone will cost hospitals $1 billion.

Here’s a the article’s author discusses some of her finding and how hospitals are trying to reduce the number of errors.

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Managing capacity of itensive care units

Managing “patient flow” is one of the most challenging aspects of running any health care facility. Whether in a hospital or a clinic, there is a limited supply of resources but a seemingly unlimited supply of patients at least some of whom need care desperately. Managing capacity is then a critical issue. No where is the need for the careful management of resource more important than the intensive care unit. ICUs are set up to treat the most critically ill patients and it is here where the US health system can spend big bucks real fast.

One hospital that does very well managing its ICU is Montefiore Medical Center in the Bronx. The Wall Street Journal had an intriguing profile of just what they do (Critical (Re)thinking, Mar 26).

[H]andling the flow of patients in and out of the hospital’s 78 adult medical and surgical ICU beds, and anticipating who else might need such high-level care on any given day, requires precision management. Many hospitals struggle to do it effectively, but Montefiore doesn’t—thanks to several innovations spearheaded by Vladimir Kvetan, director of critical-care medicine, over the past decade.

Among them: Teams of critical-care specialists are dispatched to the bedsides of potentially critical patients before they are brought to the ICU to determine what kind of care they really need and where in the hospital that can best be provided. An “ICU Without Walls” system can provide ICU-level care anywhere if a bed isn’t immediately available. Terminally ill patients are offered palliative care instead of high-cost, high-tech interventions. And all of Montefiore’s ICUs—for medical, surgical, neurosurgical and cardiothoracic patients—report to the critical-care department, not individual medical services, facilitating patient flow and minimizing turf wars.

Such changes in critical care have helped Montefiore reduce its overall mortality rate from 3.5% in 1997 to 1.8% in 2009. In its medical and surgical ICUs, the mortality rate fell from 36% in the 1980s to less than 8% in 2004—in part because many terminally ill patients are now offered palliative care elsewhere.

Such aggressive management of the ICU has payoffs that reach beyond the units wards. Because beds are available in the ICU, for example, surgeries can happen on schedule and OR are not left idle. Similarly, the ER does not back up with people unable to move into hospital beds. At Montefiore, the emergency department has seen demand go up by 45% (according to the article) without overwhelming the ICU.

So what’s the secret sauce? It seems largely to be what my queuing theory friends call admission control. In plain English, that means not letting people in.

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Southwest Airlines: Do free bags create problems?

Southwest along with Walmart and Toyota have long been stock examples in Operations Management classes. They have always been reliable go to examples of firms whose success has depended in non-trivial ways on how they manage their operations. Of course, the problem with relying on a stock example is that little things like, I dunno, recalling millions of cars can dampen the persuasiveness of the example. It’s not just Toyota. Walmart too has add some issues and missteps. Now comes word that Southwest is having operational difficulties (As Southwest Airlines tries to cope with its success, problems at Midway will get team’s attention, Mar 3, Chicago Tribune).

Bags still fly for free on Southwest Airlines, but travelers are paying a price in other ways. They’re encountering more lapses in Southwest’s hallmark on-time performance as the carrier departs from what once was its core principles of avoiding congested airports and shunning hub-and-spoke complexity in favor of getting passengers to their destinations on a single aircraft.

Revenue soared as Southwest added business destinations such as New York’s LaGuardia Airport and connecting flights at Chicago’s Midway Airport. But as it struggles to cope with increasing numbers of passengers and bags, Southwest risks tarnishing the reliability it has touted since the 1970s. …

While its rivals shrank their U.S. operations following 2008′s Great Recession, Southwest added 13 million more passengers per year. The carrier also took a scalpel to its schedule, canceling flights that didn’t attract great numbers of passengers and adding more flights to peak periods.

With little room to make up for delays, Southwest’s on-time arrivals in 2010 dipped below the carrier’s historic 80 percent rate. The lapse was magnified as rivals like United Airlines posted the best on-time numbers in their history.

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Economists prove that operations management matters!

I have to admit that I don’t usually pay that much attention to Stanford Business, the Cardinal’s alumni magazine. Be true to your school and all that, but it rarely has anything that I find all that interesting. The current issue, however, has an intriguing cover story asserting that management matters (Good Management Weaves Gold into the Bottom Line, Winter 2010-2011). The article reports on a very ambitious research project carried out by a number of Stanford faculty together with academic co-authors, the World Bank, and Accenture. The basic question is “Does management matter?” That is, do standard management techniques make a difference in performance? That is a broad question and could incorporate any number of nebulous, potentially ill-conceived management fads. What they end up focusing on though is largely basic operations management blocking and tackling. And, yes, it does matter.

Here is the set up.

The researchers worked with Accenture consultants to expose 20 mid-size Indian textile plants owned by 17 firms to management practices commonly employed in U.S., European, and Japanese manufacturing plants. The factories, a small fraction of those in the towns of Tarapur and Umbergaon, India, were assigned randomly to a control group of 6 plants or to a “treatment” group of 14 plants. Based on their prior textile experience, the consultants chose to promote 38 practices such as routines for recording and analyzing quality defects, production, inventories, and order fulfillment. They encouraged preventive maintenance, clear job assignments, and incentive pay based on performance.

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