The pressure is on
Your cost base is spiralling upwards, your boss is squealing, and his boss is squealing louder. Unless you get a firm grip of the situation you are going to get lots of “executive help”. You need to do something and do it now.
When caught like this it is easy — perhaps even mandatory — to jump to solutions:
- Reduce the training budget
- Buy cheaper raw materials
Actions like that are bound to cut costs, you may even get back on track and hit your budget, (and get your boss off your back, and better still get paid your bonus). Act now and act quick.
Life is never that simple
How many of our initiatives really save money?
- Perhaps the training programme was designed to up-skill your staff. Stopping it will simply lead to more expensive mistakes.
- Perhaps your raw materials are substandard and causing lots of defects. Cheaper raw materials are unlikely to resolve that problem.
It happens in the real world
A large bank was faced with ever-increasing investment costs, the IT budget kept growing and growing and delivery kept shrinking and shrinking.
In an effort to contain the situation the scope of a major project was curtailed. The last discretional part of a core system replacement was cancelled and the project came in — just — below budget.
Backs were slapped and parties held. Finally a successful implementation.
Skip forward 5 years
The bank was still losing money.
A team of data analysts were given the task of investigating why and coming up with the root causes and possible solutions.
They failed miserably.
The part of the IT implementation that they canned was installing a management information database. In its efforts to save money the organisation had stopped the investment in the very tools it needed to be more efficient.
Organisations are complicated
There are a whole host of interconnections, linkages and interdependencies. They have hard tangible parts (IT, processes, policies and procedures) and soft emotional parts (customers, suppliers, employees) that link together in a whole host of interrelated ways.
The obvious solution rarely leads to the outcome you expect.
Action is good, but unless you really understand the cause of your problem you are doomed to make change after change that never lead to any improvement.
Enlightenment is easy. It involves visiting the shop floor and then running a test. I guarantee it will amaze you.
The hardest bit is admitting you need to look.
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Image by darkwood67
James,
How does the saying go? Don’t cut off your nose to spite your face?
Unfortunately, companies do that in many different ways – you gave some good examples. They do it to/with employees, too: specifically when it comes to salaries, raises, and training. They don’t pay employees a competitive wage or what they should be paid – or they choose not to invest in training… because they want to save money or invest as little as possible.
Annette :-)
Interesting thought Annette, how many times have you seen an organisation scrabble about to give somebody a pay rise when they announce they are about to leave?
All the time. Sad, isn’t it.
James,
In your experience, do companies routinely conduct pilots or tests to better understand the linkages and dependencies that are required to implement news systems/technology before making big investments, particularly in new IT systems?
Adrian
Not in mine Adrian, which is funny when you think about agile software development, which is fundamentally about implementing things quickly and learning from them.
Hello James,
I was once brought into an organisation to ‘fix” a failed Management Information System – one that the Tops had spent lots of money on implementing as they saw it as key to make sound decisions. What I found was that when it was being scoped out, the ‘analysts’ had figured out it would take 18 months to implement. The Tops didn’t like this answer and mandated 9 months or else. So it was implemented in 9 months. And it never worked. Why? Because all the systems related dependencies had to be ignored to meet the 9 month deadline: cleaning the data, changing processes, redesigning roles, educating folks, training folks, hiring new folks, doing enough testing….
The mandate for speed to market and efficiency (minimisation of costs) leads to solutions and approaches that have to ignore the systems nature of living (and all life). And this ‘evil’ is ubiquitous in large organisation. Finally, and most importantly, most folks have been educated/trained out of systems thinking such that most are not able to take a systems view of the situation.
All the best
maz
Maz, I think that is known as the planning fallacy
Alive and working in an organisation near you
https://www.squawkpoint.com/2012/12/planning-fallacy/