January 27, 2015

Management Paradoxes

Written by Dragos Dumitriu

Being always busy does not always mean being productive

As often happens at the end of a calendar year, many people reflect on the past and start thinking about what would make sense to do different in the future.

Recently, I was having such a contemplative conversation with a client. He asked me if I am seeing any trends with management practices that, while put in place with good intentions, have unexpected consequences or side effects. He wanted to understand if his organization’s challenges in meeting delivery date commitments and accelerating time to market are rooted more in something they do versus something they don’t do.

Utilization Vs Throughput
While there are many trends I could talk about, there is a common pattern I have seen not only in the past year, but for the past twenty years. This pattern is prevalent in silo organizations and is usually a result of good managers doing what they are expected to do: keep systems running and control or minimize costs, while maintaining organizational commitments.   If managers do these things, they are “managing well”.

One way to minimize cost is to minimize waste. What do we consider one of the biggest wastes in our environments? Idle resources.  We don’t want idle resources because it feels like we’re wasting money, like we’re paying them “for doing nothing”. So, managers often aim for departmental efficiencies by focusing on maximizing utilization of people in their department. In knowledge work fields like software engineering and information technology, this practice is frequently used to minimize costs within a department.

While controlling personnel costs is managed at the department level (e.g. Product Management, Project Management Office, Development, Test, Operations, Support, etc), maintaining organizational commitments can be achieved only through synchronized efforts across departments.

Although not readily apparent, this creates a conflict because the organization’s throughput is deeply affected by the flow of work through the whole system and has nothing to do with local, departmental efficiencies.

Stop Managing Locally, Start Managing Globally
Maximizing resource utilization at the local level does not necessarily support an enterprise or systemic (i.e., global) optimization of getting products or services to market as quickly as possible. Quite often there will be departments with minimal slack time because the people are fully utilized, yet they are creating long delays for other departments. While everyone is very busy (and that makes us feel good), projects seem to take forever to be completed, or are completed so late that market opportunities are missed.

As long as we manage a complex production system such as an IT organization by breaking it down into department subsystems, and we manage these subsystems individually, we’ll continue to find it difficult to achieve significant jumps in throughput or profit within a relatively short time (months). The fact that each subsystem is optimized does not mean that the flow through the system is optimum.

Managing departmental costs means making management decisions according to local efficiencies, whereas managing commitments and reducing time to market requires management decisions according to global efficiencies. In other words, to manage, improve, and predict the output of an organization, we must be able to understand and optimize the flow of work through the whole organization and NOT the local efficiency within each department.

A Fundamental Shift
The shift in thinking required to manage globally vs locally is significant for many organizations, and starts with the leadership team.

However, the inability to make this change throughout an organization is a common cause of failure when trying to increase throughput, improve adaptability, and achieve enterprise agility.

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