Optimization in Services Management

I ran across an interesting paper - Multidisciplinary Optimization in Services Management by George Moldaveanu and Octavia Thor Pleter of The University Polytechnica of Bucharest. This paper gets into the use of Genetic Algorithms to manage the Costs, Quality and Speed of Services Management.

However, companies are dealing with problems that may demand simpler solutions than deep economic modeling. They may not even be measuring many of the Business Process metrics, much less trying to optimize them!

If they are at the stage where they do, however, they may be somewhat confused at how to balance the different metrics that represent Speed, Quality and Cost. It may be better to think of them as Performance Constraints. Whether the business processes are rendered as a service for payment (Outsourcing Vendors) or in-house, my guess is that there is always some confusion about what to do with the measurements once they are done.

Once you have Average Handle Time (AHT), Customer Satisfaction Index (CSAT) and Cost Metrics, where do you go from there? Do you continue trying to reduce the AHT metric when you know that at some point your CSAT index is going to suffer? If you try and reduce your Cost metric, the other two may suffer!

The answer may be in the definition of Optmization - The procedure or procedures used to make a system or design as effective or functional as possible, especially the mathematical techniques involved.

I would contend that in Optimization there is no right or wrong set of Performance Constraints you need to shoot for but that it depends totally on what your Strategy and Tactics are in business!

If you are selling mortgages in the housing market of November 2007 in the U.S, you better maximize your CSAT index, no matter what your AHT is. If you are one of the thousand online electronics stores competing for the 2007 Christmas dollars, your customer support over the phone better be as good as possible, notwithstanding AHT or the Cost.

On the other hand, if you are an established company with a large market share and customer base, you may not worry so much about CSAT index and minimize your AHT on the phone. Not all the time in the long run or you may not have the large market share for too long but they don’t need to worry about it as much as a smaller competitor trying to build up market share.

Instead of worrying about what should be the right level of Performance Constraints, you may want to keep it flexible and vary it in response to your strategy and tactics at any time.

Given my current state, strategy and tactics, what should be the optimal values of my performance constraints? That may be a better question.