Measure – Matter – Measure

By Guy Higgins

Last week, I came across an aviation article that urged airlines to adopt AoA (Angle of Attack)* as one of the “metrics” monitored by pilots to ensure proper airplane performance. AoA is very useful because it is self-compensating for airplane weight and remains an accurate indicator of wing stall. In fact, for practical purposes, the AoA for maximum range airspeed is always the same even though the actual airspeed varies with airplane weight. The same is true for maximum endurance airspeed and stall airspeed. AoA is a seriously cool, real-time, self-compensating metric for pilots.

Okay, fine – what has that got to do with non-aviation (which is a very large domain – sort of like non-dandelions)? To answer that, let’s look at the title of this post – Measure – Matter – Measure. We’ve all heard that what gets measured gets managed, and I think that is certainly true. The question I want to explore is whether or not what gets measured actually matters. Continue reading

Workplace Automation

By Guy Higgins

I recently read an analysis report by the McKinsey Global Institute, Where Machines Could Replace Humans – and Where They Can’t (Yet). I found the analysis very interesting, and I think that workplace automation is something that organizational leaders should understand and think about – very hard.

I found several take-aways that I think are worth considering: Continue reading

Time to Think

By Guy Higgins

I recently read an article, Procrastination makes you more creative, research says. I actually got a different message from the article. What I read was, “It pays dividends to spend time actually thinking about stuff.”

The author of the article highlighted a couple of cases that she claimed validated her title:

  • Lincoln continued to work on his Gettysburg Address almost until the moment he gave it
  • M.L. King actually changed his “I have a dream” speech in real time (in fact, he ad-lib’ed the “I have a dream” phrase).

I don’t think that either of those cases represents procrastination. President Lincoln and Dr. King both worked on their speeches diligently. They didn’t goof off and then “wing it.” They invested significant time and effort – but in bits and pieces over a prolonged period. They gave themselves time to think. Continue reading

The Winter Solstice

By Guy Higgins

Today is the winter solstice – the “shortest day of the year.” That got me to thinking. We (that would be human beings) seem to feel compelled to get things finished by the end of the day, the week, the month, the quarter, the year – whatever time period we’re approaching. So, here we are coming to the end of all of those, and it’s the shortest day of the year (okay, so it’s only the shortest period of daylight – and only for the northern hemisphere, but I want to make a point). Continue reading

Metrics – Signal or Noise?

By Guy Higgins

Everyone has heard the adage, “What gets measured, gets managed.” Certainly “stuff” that has the attention of senior leadership gets a lot of attention from lower level managers. The important question for leaders is, “Do the metrics of the ‘stuff’ being measured actually provide useful information?”

There are a number of factors to consider when identifying metrics – factors beside the obvious, “Am I interested in that parameter? Does it tell me anything about how well I’m performing?” I think that those additional factors include:

  • Sampling frequency – how often am I going to measure the parameter? Is that often enough to give me actionable information? Is it too frequently to give me actionable information?
  • Stability – how stable is the parameter? Is it well behaved or does it vary wildly? Does either of those conditions mean anything important?
  • Signal to noise ratio – is the parameter you are measuring (the “signal”) buried by unrelated noise?

Continue reading

Problems or Symptoms?

By Guy Higgins

I recently came across a blog post on the risks of treating issues as the problem when they might only be the symptom. That reminded me of a story that Michael Roberto relates in his book, Know What You Don’t Know: How Great Leaders Prevent Problems Before They Happen.

Professor Roberto tells of a time when he was teaching at Harvard Business School and his class was visited by Robert McNamara (who attended HBS just shortly after he got off the ark with Noah). Mr. McNamara asked if they still used case studies at HBS because he was impressed with the value of considering actual business situations as a learning tool. He was told, “Of course. Case studies are the foundation for HBS courses.” Mr. McNamara then observed that such a focus, unfortunately, also created a problem – in case studies, the actual problem is presented to the students while in the real world, problems have to be uncovered.

That takes us right back to the title of this post – is an observed issue a problem in itself or is it a symptom of a deeper problem? Continue reading

Metrics – Meaningful or Merely Measurable?

By Guy Higgins

The age of scientific management – the idea that managers can measure “stuff,” understand what the measurements mean and then act to control or improve the performance that is characterized by the “stuff that has been measured” – is well over a hundred years old. We see references to it all the time:

  • You manage what you measure
  • Crunch the numbers
  • Metrics reviews
  • Professional athletes’ performance statistics
  • Performance-based management

I just finished reading an article in the Harvard Business Review, The Capitalist’s Dilemma, in which Clayton Christensen (author of The Innovator’s Dilemma) bemoans the absence of market-creating investment and innovation. He attributes this absence to the use of metrics. Christensen highlights some of the standard metrics: Return on Net Assets (RONA), Internal Rate of Return (IRR), and Return on Invested Capital (ROIC). He observes, correctly I think, that these metric are biased against long-term investment because they create a focus on conserving capital. Christensen claims that capital, today, is not a scarce resource, and therefore the traditional metrics are the wrong ones for businesses and industries that want to or need to emphasize market-creating innovations (a market-creating innovation is one that provides a radically new solution to an existing problem or a solution to a previously unrecognized need – think Palm Pilot). If the metrics being used today are the wrong ones, why are companies using them? Continue reading

Centralized or De-centralized?

By Guy Higgins

Organizations seem to continuously grapple with a single important issue – how to create a structure that has the consistent performance of a highly centralized structure while retaining the agility and responsiveness of a highly de-centralized structure. Based on my experience, actual organizational structure is a function of organizational size.

Very small organizations tend to be inherently responsive – there simply is almost zero impedance to either communication or decision/direction. One apparent price for this speed/agility is a frequent lack of consistency in the quality and strategic alignment of the decisions/directions. This lack of consistency is a result of the absence of stringently implemented and enforced processes. Action is taken by the “right person,” but said action is aligned with that person’s perspective of “the right thing to do” and his understanding of the organizational strategy. So, very small organizations react very quickly – sometimes well, sometimes not so much.

Very large organizations tend to achieve very consistent performance (although that performance may be significantly poorer than possible). One apparent price for that consistency is the loss of speed/agility. Both the consistent performance and the loss of speed/agility are the result of the creation, implementation and enforcement of processes (processes are good things, but they do take time). These processes seem to require (or are required by) layers of management – parts of the organization to execute the processes. Each of these parts of the organization uses time to complete “its” steps in the process. When the output of the process reaches the decision maker, it is in a consistent format with all the expected information (all the blocks are checked). The decision maker can then quickly absorb the information and then either make the decision or convene a meeting to discuss and debate the situation/information and then reach a decision. None of this is bad, but it does have unwanted characteristics.

Am I implying that very small organizations cannot be consistent or that very large organizations cannot be agile and responsive? I don’t think so. Before I get further into that, I want to take a short trip down history lane.

The very first known organization chart, and therefore the first purposefully designed organization (as opposed to an ad hoc organization), was developed by Daniel McCallum for the New York and Erie Railroad in 1854. The organization (and its chart) was highly de-centralized (each railroad line was physically independent and run independently). Decisions were made by the men at the stations and on the trains – the men actually running the railroad. In that age of telegraphic information, they were also the men with the best, most current information. The railroad had a common set of processes that were enforced – but enforced at the “local” level, the level at which time-sensitive decisions were made. In this instance, “time sensitivity” means that the time available in which to make and execute a decision, the time required to obtain the information needed to make the decision, and the time available for the action to be completed all align.

Seventy-five years later (say about 1930), organization charts were commonplace, but little thought had been devoted to the question of centralization vs. de-centralization. Most companies were organized with central control. I suspect that this was largely the result of the Status Quo Bias (humans are reluctant to change the existing situation) not some considered decision. The greatest discussions about organizational structure addressed the question of whether they should centrally organize around focused efforts (products, programs, projects) or technical skills (engineering, finance, manufacturing). In fact, these discussions are continuing today as companies swing, pendulum-like, between strong program structures and strong matrix structures.

I’ll assert that large companies suffer from this oscillation between strong matrix structures and strong program structures, and that has resulted in the centralization that is common among these large companies. Similarly, it is the absence of any matrix-like influence in very small companies that results in the decentralization and lack of consistency.

I think that the information technology available today can enable both very small and very large companies to operate with both consistency and agility.

For small companies, the key to consistency is process. These companies can, with much less effort than feared, expected or projected, document the ways that they will do business – that documentation is their processes. The documentation need only be as detailed as necessary to achieve acceptable consistency of performance. It’s always important to remember, when documenting/creating processes, that the goal is to get the job done, not to create the process. The process is a tool, not an end objective. Very small companies are, commonly, project-oriented by nature – this puts the decision making in the hands of the people doing the work, which in turn creates responsiveness/agility. Information technology makes it simple to create the processes and make them available to everyone in the company.

Very large companies, however, have the opposite problem; they have lots of processes, but they also centralize the decision making at very high levels (to ensure that consistency across the entire organization). These companies need to invest much more effort in achieving agility than does the very small company in achieving consistency. To achieve agility in a process-dense environment, very large companies need to:

  • Establish a common vocabulary to facilitate effective communication across the company
  • Commit to the creation of a culture that puts the decision making at the “pointy end of the sword” so that the people who most need quick decisions and are most able to make those decisions are invested with that authority.
  • Invest in the development of leaders at all levels of the company – people who speak the common vocabulary, understand the business, understand the “non-user-friendliness” of the real world, and are practiced in leading and making decisions.
  • Trust leaders throughout the organization and accept the inevitability of mistakes and failures. Mistakes and failures should never mean the end of a career.

These activities will move a company from being highly centralized to being more de-centralized. That leaves very large companies with the problem of ensuring consistency in a more de-centralized organization – similar to a small, de-centralized company. This is where modern information technology again comes riding to the rescue. Networks allow the nearly instantaneous publication and updating of processes throughout the organization – and it also facilitates continuous improvement of those processes – two-way (up and down the hierarchy) process management.

It takes much more work to change the direction of a very large company than it does a very small one just like it takes much more effort to turn a glacier than it does an ice cube. That doesn’t mean that all companies should not be investing effort in being both consistent and agile.

Thoughts?