Why does our service economy offer such bad service?

How do you get a call centre to do anything for you that involves change, or taking responsibility? Robert Skidelsky and Nan Craig on the downsides of our overdependence on a service economy.

Britain is a service economy with a lot of lousy services. The paradox is easily explainable. Service and cost-cutting are contradictions in terms. Good services are intrinsically expensive because they require a high ratio of labour to product; hence the old view that services could not be automated. Yet the main aim of those who run our service economy is to cut the costs represented by human labour as much and as fast as they can.
The view that services are automationproof has been disproved. Think of the labour-saving devices in the home – vacuum cleaners, washing machines, dishwashers – that have reduced the burden of domestic drudgery and created leisure time that in the past only the rich enjoyed. Think of cash dispensers, of online shopping. In all these cases, machines provide the services that people once did – and usually more conveniently.
On the other hand, think of call centres, which offer services according to automated formulae. In this case, it is not that people are being replaced by machines but that they are being programmed to act like machines. This enables them to process a greater number of calls per unit of time.
Recently, NHS Direct announced that it will pull out of contracts to deliver the new NHS 111 helpline. The details are complicated but the gist is that contracts to run the helpline have been awarded by competitive tender, with bidders offering the service at the lowest cost. Cost reduction is secured by reducing the number of doctors and nurses per operator, with operators relying on callcentre scripts and algorithms to process calls: exactly the opposite of what most people think of as a good service. Andy Burnham, the shadow health secretary, has spoken of nurses being replaced by computers and of an urgent need “to get more clinicians back in the front line handling calls”. He is right.
Try changing your mobile telephone provider, reporting a lost credit card or making almost any attempt to contact your bank, and you are likely to enter a Kafkaesque world of customer frustration. The recent attempt by our office to upgrade a phone package is a case in point. We were moved back and forth between the old supplier, the new supplier and the delivery service, none of which seemed to have the faintest idea what the others were doing.
What distinguishes services that can be automated successfully from those that can’t? The answer is the nature of the need: the less complicated the need, the more efficiently it can be satisfied without human intervention. The economist William Baumol identified services that resisted commodification, for whichthe human touch was essential and quality was correlated with the amount of human labour dedicated to their production. He gave the performing arts as an example, but the analysis can be extended to such services as teaching and medical care.
Amazon, for instance, works well when it allows people to order, quickly and conveniently, an item that they already want. Its recommendation system, however, is based on algorithms rather than the knowledge and intuition of a good bookseller. That is why bestsellers sell more and everything else sells less. Automated services fit and thereby create products that can be standardised, because an automated system can’t cope with anything else.
In the rich countries of the west – in some more than others – personal service has fallen victim to a kind of Fordism or its successor, scientific management, which dissects tasks into tiny individual units. Scientific management, developed by the American mechanical engineer Frederick Winslow Taylor in the late 19th century, is the foundation of modern techniques such as the use of strict call-centre scripts, which aim to create algorithms that automate the human element of work as much as possible.
Adam Smith foresaw this development in manufacturing 250 years ago.He gave the example of the pin factory, in which “the important business of making a pin is . . . divided into about 18 distinct operations, which, in some manufactories, are all performed by distinct hands”. The result of this “division of labour” was a tremendous increase in the productivity of the factory.
Cost-cutting in services proceeds by a false analogy with the pin factory. In all services that can be automated, part of every process is delegated to a team that inhabits a separate silo. No team is able to carry out more than its tiny element of the process; as a result, from the first moment you contact a company, you have to choose which team to talk to (“Press one if you are a business customer; press two if you are a personal customer; press three if you wish you were dead”).
Then, if you have a query that is even slightly complicated, at least the first three people you speak to will probably not be able to help. No one has an overview of how the whole thing works and no one has any power to cut through the undergrowth, because each person is in control of only a tiny patch of the service. As no one person or team knows what anyone else does or who any of the customers is, all information has to be stored centrally; if something is “not in the system” or if the system has broken down, it’s a dead end.
As the call-centre worker has never met you before, he or she will have little sympathy and no relationship to draw on; because they will almost certainly never speak to you again, there is no incentive for them to be helpful if your problem can’t be fixed within the formula. From their perspective, they are having to deal with customers who are irate because of events that the service provider has no control over and no responsibility for.
As ever, there are people with a sense of service, but whose hands are tied by the architecture of the system that they inhabit. There are also, inevitably, a few people who hate customers and are terrible at their job. They suit the system well because they are never required to be innovatively helpful and, if something goes beyond their remit, they can happily transfer you to someone else or simply tell you that what you want is impossible and ring off.
Eventually, someone at one of the call centres we contacted in our efforts to upgrade our telephone agreed that the system does not work very well. He sounded unhappy about it but said, “That’s the way the world works.” He is almost right. That is now how much of the world works. It hasn’t worked this way for long but it is no longer possible to imagine a world in which contacting any large company by telephone would not involve speaking to a different person every time you called.
No one is made happier by the system except, perhaps, the owners of the cost-cutting companies, who can pay for properly personal services for themselves out of hugely enhanced profits. As the cost of idiosyncracy rises, what used to be thought of as personal services can be afforded only by the rich. The so-called concierge services make a great play of being adapted to individual requirements. Yet, like the “bespoke” tailors of old, they mainly serve the rich. If you have £100,000 on deposit, your bank gives you a “premium account manager”; if you don’t, you go through the call-centre system.
Beyond the nightmare for the consumer is the nightmare for the producer. Smith rightly understood that the division of labour, though good for productivity, was degrading for the worker. The effect on the “hands” of knowing nothing about the manufacture of pins except what was required for their specific tasks was, he said, to make them “as stupid and ignorant as it is possible for a human creature to become”.
The same deskilling effect operates in the service economy. It has been suggested that part of the problem with call centres is that the people who staff them are uneducated and badly trained. However, the problem is that the system in which they work prevents them from taking responsibility for their products. Taking away the ability of a callcentre worker to help people doesn’t just frustrate the caller but destroys the satisfaction that comes from solving someone’s problem. It’s the deprivation of this satisfaction that makes the work of the operator both boring and emotionally stressful, rather than something that has an intrinsic motivation. The call-centre operator is a contemporary example of the artisan deprived of the pleasure of workmanship.
There is an even more dire implication. If profit maximisation requires human beings with machine-like qualities, why not get rid of the people altogether? Machines don’t need wages. Call centres, like factories, will soon be staffed entirely by machines; all checkout services at supermarkets will also be done by machines; the specialist knowledge of taxi drivers will be replaced by satnav; there will eventually be driverless cars. Machines will “talk” to each other. Except for a few specialists to make and fine-tune the machines and others to meet the continued demand of the wealthy for personal services, the human race will no longer be required for work. It will have to find something else to do.
Robert Skidelsky is a cross-bench peer and emeritus professor of political economy at the University of Warwick Nan Craig is the publications director of the Centre for Global Studies.
Artwork by Nick Hayes.

This article first appeared in the 26 August 2013 issue of the New Statesman, How the dream died

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The 7 brilliant arguments Theresa May once made against Brexit

Just in case you missed them. 

“Just listen to the way a lot of politicians and commentators talk about the public,” the Prime Minister Theresa May told the Conservative party conference in October. “They find your patriotism distasteful, your concerns about immigration parochial, your views about crime illiberal, your attachment to your job security inconvenient.

“They find the fact that more than seventeen million votes decided to leave the European Union simply bewildering.”

Of course, there was a time not that long ago, when May too found the idea of Brexit pretty bewildering herself. Nicknamed “submarine” during the EU referendum campaign for her low-key support for Remain, she nonetheless had made up her mind it was the right thing to do. 

In a recording obtained by The Guardian, she told an audience at Goldman Sachs that “the economic arguments are clear”. She continued: 

“I think being part of a 500m trading bloc is significant for us. I think one of the issues is a lot of people invest here in the UK because it’s the UK in Europe. 

“I think if we were not in Europe, there would be firms and companies who would be looking to say do they need actually to develop a mainland European presence rather than a UK presence.

But if that hasn’t convinced you, luckily May also made a public case for Remain on 25 April 2016. Here are some of her best points:

1. There’s no such thing as total sovereignty

At conference in October, May said Britain was leaving “to become, once more, a fully sovereign and independent country”. 

But in April, she said that “no country or empire in world history has ever been totally sovereign”. Nation states, she said, have to make a trade off between agreeing to cede some sovereignty “in a controlled way” to prevent a greater loss of sovereignty in an uncontrolled way, such as “military conflict or economic decline”. 

2. It's safer to Remain

In her conference speech, May said she wanted a Brexit deal to include “co-operation on law enforcement and counter-terrorism”. 

In April, though, the then-Home secretary thought it would be a lot simpler just to stay in the EU. She predicted that while a Brexit Britain would still share intelligence, “that does not mean we would be as safe as if we remain”.

For example, May helpfully pointed out, a Britain outside the EU would have no access to the European Arrest Warrant, which allowed her department to extradite more than 5,000 people from Britain to Europe in the last five years. 

She also distinguished between the EU’s freedom of movement rules, and border checks, declaring: “Some people say the EU does not make us more secure because it does not allow us to control our border. But that is not true.”

3. Rules are better than no rules

At conference, May said Brexit would mean “our laws made not in Brussels but in Westminster”. Anyone who believed they were a “citizen of the world” was in fact “a citizen of nowhere”. 

Back in April, she had a more nuanced view. She said Europe had “stumbled its way to war in 1914” because of the “ambiguity of nations’ commitments to one another”. 

She declared: “Nobody should want an end to a rules-based international system.” Although, she did add that reconciling these international systems with democratic government was “one of the great challenges of this century”. 

4. It could break up the UK

In her speech at conference, May took aim at the Scottish Nationalist Party when she blamed “divisive nationalists” for threatening to drive the UK apart. 

When she spoke in April, though, it seemed she might be talking about a different set of nationalists. “If Brexit isn’t fatal to the European Union, we might find that it is fatal to the Union with Scotland,” she warned. 

Scots are more likely to be in favour of the EU than voters in England and Wales, she noted: 

“I do not want the people of Scotland to think that English Eurosceptics put their dislike of Brussels ahead of our bond with Edinburgh and Glasgow. I do not want the European Union to cause the destruction of an older and much more precious Union, the Union between England and Scotland.”

5. Brexit endangers Britain’s financial services industry

In her conference speech, May described London as “the world’s leading financial capital”. 

But according to May circa April 2016, it might not be for much longer. She warned that outside the EU: “There would be little we could do to stop discriminatory policies being introduced, and London’s position as the world’s leading financial centre would be in danger.”

6. Negotiating trade deals won’t be easy

May is a believer in free trade – her conference speech was peppered with references to it – and she has appointed Liam Fox as International Trade secretary to broker new deals.

And she knows how hard that will be. In her April speech, she noted Britain would have to replace 36 existing trade agreements with non-EU countries: “While we could certainly negotiate our own trade agreements, there would be no guarantee that they would be on terms as good as we enjoy now.”

7. Nor is staying in the single market

Even in April, May was clear she thought Britain could survive Brexit, but she was not sure whether it would do so better off.

As she put it: 

"The reality is that we do not know on what terms we would win access to the single market.  We do know that in a negotiation we would need to make concessions in order to access it, and those concessions could well be about accepting EU regulations, over which we would have no say, making financial contributions, just as we do now, accepting free movement rules, just as we do now, or quite possibly all three combined.  

"It is not clear why other EU member states would give Britain a better deal than they themselves enjoy."

Couldn't agree more, Prime Minister. 

Julia Rampen is the editor of The Staggers, The New Statesman's online rolling politics blog. She was previously deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines.