My first line job was as supervisor for the "back-end process" in a Chargeback unit of the nation's largest merchant processing bank. Chargebacks are disputes in the credit card business. They are initiated by the bank, which issues cards to card members. The dispute can be a customer complaint, a fraud case, or a processing error such as a duplicate charge,. The issuing bank sends the dispute to the merchant bank using a Chargeback transaction. The merchant bank has a fixed period of time, depending on the nature of the charge back, to either remedy the dispute or charge it back to the merchant.
In the Chargeback unit where I worked incoming Chargebacks were distributed into two work teams depending on type of Chargeback. Typically, a ‘documentation’ Chargeback was more complicated to work than a ‘non-doc’ Chargeback. Every day the supervisors in each of these two departments would distribute piles of charge backs files to each of the Chargeback clerks. Chargeback clerks but were measured on the number of Chargebacks they processed each day. At the end of the day, any unworked files were returned to the supervisor. Once a Chargeback was processed it was sent to the quality unit, which checked the correctness of the processing before sending it either back to the issuer or onto the merchant.
In addition, all of the accounting control was handled in the back end where I was the supervisor. And the Arbitration unit handled all of the disputes that went to the card associations for arbitration. Altogether the Chargeback department consisted of 120 people. The unit worked a normal 40-hour week, and every Saturday about 25% of the people were required to come in to do overtime work. Morale was low. The unit was in a constant state of backlog, and because of the backlog timeframes were expiring resulting in losses for the unit. When I arrived losses were running at eight million dollars per year. Three people in the unit produced volumes of MIS around these losses.
During the first three months I was there I made some changes to the way the back-end operated to give us more control, and to automate the tracking of files by affixing a bar code to each. We installed three PC workstations with bar code readers so we could track the accounting slips associated with the files. I also spent time trying to understand the Card Associations’ rules around Chargebacks and the processes we used to work them in the rest of the department.
It seemed to me that the loss in the Chargeback department was due to four things. First, training across the board was inadequate. Second the organization of the work promoted inefficiency. Third, the way the performance was measured contributed significantly to the backlog. And lastly, the Quality Unit created it’s own backlog which allowed Chargeback timeframes to expire.
The supervisory team, met daily with the manager of the department. Most of the focus was on the MIS around losses. Losses were “the BIG problem for everyone on the team”. This MIS cut losses into every imaginable category, from issuing bank, to merchant type, to Chargeback type, to amount buckets, to aging buckets. None of the MIS helped identify the causes of the loss. On several occasions I attempted to make suggestions on how we could correct the four areas, which I felt we needed to fix. The manager responded on each occasion that I was new to the group, and that I should focus on my own area and give myself some time to understand the workings of the department before I made such suggestions. At some point, one of my fellow supervisors mentioned to one of his friends in another unit that I had ideas that would fix the problems, the friend mentioned it to his boss who mentioned it to his boss until the manager of the Operations Center got wind of it.
The center manager called me and we had a chat and he asked me to put together a presentation on what I would do to fix the unit. Ultimately, I made the presentation to the SVP responsible for the credit card business in the bank. The SVP gave me the go ahead. He decided to reassign the current manager of the department, putting me temporarily in charge.
I also exacted from him, a promise that we would not lay-off anyone in the department who was performing at a ‘level one’ or ‘level two’ performance grade, and that for six months no auditors would show up to distract us. Anyone from management was welcome to come and observe or participate unannounced.
It was mid-May, just when universities were concluding their spring semester, so I went to the nearby university and a hired six science students as summer interns to help with the department's organizational needs.
I called a general meeting of everyone in the department, and announced the reorganization. I told them that at the end of the year we would have 60 people working in the Chargeback department rather than 120, but that no one who is performing at a level one or level two would be laid-off, and that I would do everything I could to ensure that each person could demonstrate a level one or level two performance. Furthermore I said, if I have to lay anyone off, I will lay myself off first. The first requirement was that everyone on the staff get trained in the credit card rules, particularly around Chargebacks. We put together a simple, but effective, self-paced training program, which required passing a 25 question, multiple choice open-book test with a score of 100%. The test could be taken as many times as needed to get a 100% score. Each time the test was taken it was different. At first, the staff argued that the requirement was unrealistic, and perhaps a passing score of 70% was more reasonable. But, as people began passing the test, the objection disappeared. Several people adopted a learning strategy of just taking the test. We did not track how often anyone took the test, since in our view, the more often someone took the test, the better trained they would be. Within three weeks the entire staff had passed the test.
At the time, there were about 75 different Chargeback reasons. We assigned individuals to specific Chargeback reasons. These Chargeback experts were held accountable for ensuring that all the Chargebacks that flowed through their inventories were properly processed. We eliminated the quality unit entirely.
Since the volume of incoming work was completely out of our control, and it would be possible for some Chargeback experts to get ahead of their work and others fall behind, we established a performance measure, which encouraged teamwork. It was a simple structure which said you got credit for all the work done on the Chargeback reasons for which you were responsible (irrespective of who actually did the work), plus you got credit if you helped someone else to manage their inventory.
Human resources initially objected to the structure because it allowed us to give credit to two people for one person's work. We managed to convince HR that while this was true, the behavior would benefit us in the long run because, not only would we have a sense of team, but we would have overlapped in expertise which would cover us when someone was sick or on vacation. People are intelligent and clever, and before long we had people switching desks to get double credit. It cost us nothing, the quality of work was very high, and morale rose dramatically. HR further objected however, that too many people might achieve an outstanding performance rating. We asked them "what would represent a outstanding performance for the department as a whole?", and suggested that eliminating the losses, eliminating the overtime, cutting most of the fees we were paying for arbitration, and doing so with half the people surely would represent an outstanding performance. And if the whole group were needed to achieve this, surely there would be many outstanding performers. To which the head of HR laughed with obvious skepticism "if you could achieve that, then it would be 'outstanding'!"
Over a weekend, the management team along with the Science students reorganized the physical workspace and colorfully decorated the area. I turned the manager's office into a lunchroom, and moved myself out to a desk on a side of the floor where I would be accessible and everyone could see me. On Monday morning the trained workforce showed up to their new responsibilities. Overtime was immediately stopped. Within three weeks the backlog was eliminated. After six weeks all losses in the pipeline were flushed through, and further losses disappeared completely. So did the volumes of MIS around losses. Over the next three months, two people retired, one was fired because he refused help for an ongoing drug addiction, and 58 people landed other jobs within the bank mostly because the training we gave them made them the most knowledgeable people in the center. Among the 58 who left, were our 5 "best" people, all of whom received promotions in their move. We could afford to let them go because other members of the team were able to step in and be effective in those jobs.
Several months later we had a discussion about what made the reorganization so successful. I thought about that and said, "We took angry, demoralized people who were being treated as children and let them behave as adults." Their environment changed from having someone hand them their work, and having someone check everything they did, to an environment where they, themselves, managed the inventory, and no one checked their work. I was asked "If you don't check their work, then how to you manage them?" I responded, "I don't think you can manage adults. You can coach, help, and support them, but the whole notion that you need to manage adults is wrong. Adults manage themselves." We put together a structure in which people could understand how what was valuable and important to the business, was in sync with their personal and social values. Our success was based on candor, credibility, and the notion that everyone is unique, but, in our ‘adultness’ we are equal. Management's one responsibility is to manage the environment, the maturity level in the workplace.