Insane corporate efficiency – part 5

Recipe for disaster

Insanity in a corporation does not happen spontaneously. It may be caused by well-meaning people with a limited understanding of life. On the other hand, it may come about because of a criminal mentality (wanting something for nothing) in top management. Either way, a situation arises where dedicated and hard-working employees do not get recognized for delivering what customers need and want.

In other words, an insane corporation punishes employees who understand the importance of providing good service to customers. The future of any company depends on maintaining fair exchange with customers. The insane company puts its priorities on making sure that arbitrary targets are met.

There are many companies which fit this pattern, but it takes a few more factors before the last shreds of corporate culture wither and die. Corporate culture, you will remember from the earlier parts of this series, is the spirit which keeps a company growing and enables it to overcome obstacles.

A company which institutes a top down command and control system which substitutes rules for decision making ability at all levels is doing a good job of suppressing corporate culture, but it takes micromanagement by beancounters to drive the productive employees completely around the bend.

"Gaming" the system

A company seeking salvation through numbers rather than excellent products in the hands of customers is wide open to those who play the numbers game without doing anything effective. When numbers become more important than quality, someone is always ready to take advantage of the situation and will move rapidly upward in the organization by producing statistics that win the heart of management.

Statistics are only valuable if they measure something that can be exchanged for money or support. "Number of systems shipped" is a meaningless number if the systems are shipped untested. "Potential orders" tells us nothing if the probabilities are fudged to make them look encouraging. When management puts the pressure on for higher numbers, employees respond in some cases by falsifying the numbers and hoping that things will work out somehow.

The other effect of this fixation on numbers is the demand for higher numbers at all levels of the organization. This causes something called a "stat push" which is a meaningless action designed to increase a reported number. When you get repeated sales calls from the same salesperson and you have no requirements she can fill, she is probably keeping her "sales calls" numbers in a safe range. Some companies have a quota on letters out, so employees being measured on quantity of letters send out anything that will fit in an envelope and count it as a letter. When the number of anything becomes more important than the result, it will lead to a manipulation of the number.

It is a worthwhile effort to track sub-products in any complex product offering because one can get a sense of how the project or shipment is going. If you ship only one product a quarter, you had better keep track of the bits and pieces that go into making the product or you may miss the quarterly shipment, but the sub-products must be real and be valuable. If they are not, you get statistics like "lines of code" and "issues resolved" or even "hours worked".

It all comes down to employee responsibility. When the employee is punished for taking responsibility, they can fight, leave, or shrug and stop worrying about customer needs. When they produce what management wants and ignore the harm that results, this is irresponsibility. This irresponsibility may take the company down the tubes, but it will damage employee self-esteem first.

People generally produce what management wants. Management that consults employees (and customers) will generally get enough feedback to avoid creating a recipe for disaster.

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0 Responses to Insane corporate efficiency – part 5

  1. Jane Chin says:

    Yes. People know how to work the numbers. In fact, doing too well too soon is not a good thing – it leads to raising the expectation of those numbers. Thus the prudent corporate employee learns to meter her productivity, so that she is able to consistently demonstrate an increment of “improvement” and “initiative” over time. This also works in the healthcare system. Let’s take mental health as an example. A depressed patient and his psychologist has to know how to work the numbers. If you score too low over time, you’re denied continual treatment because you’re a lost case. If you score too high over time, you’re denied continual treatment because you’re already “well”. So psychologists have to play the numbers, to make sure the patient looks as if he is continually improving and not looking too much like a lost case, in case a bean counter decides to stop paying for therapy.

  2. Jane Chin says:

    I forgot to qualify my earlier statement – it leads to raising expectations of performance numbers without correlating raise in pay, praise, or career advancement. Hence there’s nothing behind those numbers worthwhile of pursuit by brilliant workers.

  3. This reminds me of Hawthorne Effect (which came out of an organizational behavioral research study conducted between 1927 and 1932 by researchers at Harvard). From Wikipedia:

    [The researchers] found, that the small group had informally established an acceptable level of output for its members. Employees who overproduced were branded rate busters, and under-producers were labeled chislers. To be accepted by the group workers would have to produce an acceptable level. They also found, as workers approached their acceptable level of output, they began to slack off to avoid over producing.

  4. Regards from The Small Office and congratulations on your Corporate Insanity series.

    Series (ripples?) is the operative word, for the insanity you describe insinuates itself in step-wise fashion, wending its way slowly and imperceptibly throughout an organization. It manifests itself in a variety of ways, none attracting attention but all combining to wear away the fabric of corporate culture. It also erodes the energy, rigor and resolve individual employees bring to their work.

    The focus on numbers both propagates and controls the insanity.

    Numbers stultify creativity, limit initiative and eliminate risk. Numbers are destinations not routes. They define the end point rather than give direction.

    Numbers ensure people produce what management wants rather than what they, as individuals and as an organization, are capable of producing.

    To have any meaning, numbers must be specific and are thus unable to reward progress or recognize secondary benefits.

    Numbers are not big picture. Meeting numbers focuses people on the tactical rather than the strategic. Adding a time element to the numbers ensures that little weight will be given to the long term-impact of decisions. That said, numbers almost always come with a time element.

    Numbers de-personalize objectives. You cannot measure the quality of relationships, nor the return over time of the investment in relationships. Numbers can be fudged; relationships cannot.

    Numbers foster competitiveness rather than teamwork.

    Numbers are easy to understand, results easy to measure. But what is measured is a quantity at a moment in time. It is the intangibles, the qualitative side of an organization, that will ultimately ensure it will not only survive but, in fact, thrive in a changing, hyper-competitive market.

    As you know, the drive to numbers is rearing its ugly head at The Small Office. It is becoming increasingly evident that the more we focus on numbers, the less we meet our targets and the more we become one.

    Absolutely insane.

  5. dearieme says:

    In Britain, employees rejecting a reasonable request from customers tend to use the expression “It’s policy.”

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