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

Show Hide image

Will Euroscepticism prove an unbeatable advantage in the Conservative leadership race?

Conservative members who are eager for Brexit are still searching for a heavyweight champion - and they could yet inherit the earth.

Put your money on Liam Fox? The former Defence Secretary has been given a boost by the news that ConservativeHome’s rolling survey of party members preferences for the next Conservative leader. Jeremy Wilson at BusinessInsider and James Millar at the Sunday Post have both tipped Fox for the top job.

Are they right? The expectation among Conservative MPs is that there will be several candidates from the Tory right: Dominic Raab, Priti Patel and potentially Owen Paterson could all be candidates, while Boris Johnson, in the words of one: “rides both horses – is he the candidate of the left, of the right, or both?”

MPs will whittle down the field of candidates to a top two, who will then be voted on by the membership.  (As Graham Brady, chair of the 1922 Committee, notes in his interview with my colleague George Eaton, Conservative MPs could choose to offer a wider field if they so desired, but would be unlikely to surrender more power to party activists.)

The extreme likelihood is that that contest will be between two candidates: George Osborne and not-George Osborne.  “We know that the Chancellor has a bye to the final,” one minister observes, “But once you’re in the final – well, then it’s anyone’s game.”

Could “not-George Osborne” be Liam Fox? Well, the difficulty, as one MP observes, is we don’t really know what the Conservative leadership election is about:

“We don’t even know what the questions are to which the candidates will attempt to present themselves as the answer. Usually, that question would be: who can win us the election? But now that Labour have Corbyn, that question is taken care of.”

So what’s the question that MPs will be asking? We simply don’t know – and it may be that they come to a very different conclusion to their members, just as in 2001, when Ken Clarke won among MPs – before being defeated in a landslide by Conservative activists.

Much depends not only on the outcome of the European referendum, but also on its conduct. If the contest is particularly bruising, it may be that MPs are looking for a candidate who will “heal and settle”, in the words of one. That would disadvantage Fox, who will likely be a combative presence in the European referendum, and could benefit Boris Johnson, who, as one MP put it, “rides both horses” and will be less intimately linked with the referendum and its outcome than Osborne.

But equally, it could be that Euroscepticism proves to be a less powerful card than we currently expect. Ignoring the not inconsiderable organisational hurdles that have to be cleared to beat Theresa May, Boris Johnson, and potentially any or all of the “next generation” of Sajid Javid, Nicky Morgan or Stephen Crabb, we simply don’t know what the reaction of Conservative members to the In-Out referendum will be.

Firstly, there’s a non-trivial possibility that Leave could still win, despite its difficulties at centre-forward. The incentive to “reward” an Outer will be smaller. But if Britain votes to Remain – and if that vote is seen by Conservative members as the result of “dirty tricks” by the Conservative leadership – it could be that many members, far from sticking around for another three to four years to vote in the election, simply decide to leave. The last time that Cameron went against the dearest instincts of many of his party grassroots, the result was victory for the Prime Minister – and an activist base that, as the result of defections to Ukip and cancelled membership fees, is more socially liberal and more sympathetic to Cameron than it was before. Don’t forget that, for all the worry about “entryism” in the Labour leadership, it was “exitism” – of Labour members who supported David Miliband and liked the New Labour years  - that shifted that party towards Jeremy Corbyn.

It could be that if – as Brady predicts in this week’s New Statesman – the final two is an Inner and an Outer, the Eurosceptic candidate finds that the members who might have backed them are simply no longer around.

It comes back to the biggest known unknown in the race to succeed Cameron: Conservative members. For the first time in British political history, a Prime Minister will be chosen, not by MPs with an electoral mandate of their own or by voters at a general election but by an entirelyself-selecting group: party members. And we simply don't know enough about what they feel - yet. 

Stephen Bush is editor of the Staggers, the New Statesman’s political blog. He usually writes about politics.