We regularly see news items and posts on big government projects which have failed and Public Accounts Committee declarations which castigate Ministry of Defence for project cost overruns and late deliveries. We also have seen too many instances of banking system meltdowns in recent years, coupled with major failings in BA (British Airways) systems.
What do all these things have in common?
Broadly speeking it could be said that they all occur in environments where "Efficiency" or "Value for Money" is held at a premium over everything else. In these circumstances, Efficiency is actually another way of saying Cost Cutting and Investment Containment. In such environments, Quality, Value and Customer or User Experience are traded for keeping to budget. Timeframes get squeezed to meet the allowed spend profile and risk management is subordinated to keeping spend in check.
Over time, this results in a house of cards syndrome where multiple sub optimal solutions get patched together in ever more fragile comninations and governance is subordinated to budget conformance. The room for experimentation and evolution of the right solution is lost and cautious groupthink starts to destroy innovation and build catastrophy into strategy, planning and control of the business. Innevitably this leads to failure, finger pointing and further failure to rectify problems. So repeat failures start to happen.
What is the remedy?
Sack the CEO and The Finance Director! Appoint an empowered CIO. Pursue a culture change programme. Start Focussing on quality and value, which means reconnecting with both customers and the people who deliver the business. Adopt a philosophy where it is better to deliver a small amount of value incrementally and on time than to pursue an everything at once approach. Use design thinking. Understand your business architecture. Align your risk appetite to value (not budget). Experiment with Lean Delivery. But most of all remember that efficiency is not calculated as:
Efficiency = Q/t
(where Q = quantity produced, t = time period of production)
Instead, use the equation:
Efficiency = (Q-D(1+n))/t
(where D = the number of defects and n = the number of things produced needed to pay for the defects)
So for example if profit margins are 10%, then 10 satisfactory units are needed to pay for the cost of the defective one and n = 10. If 100 units are produced per day, 1 unit is defective and n = 10, then Efficiency is (100 - (1 + 1 x 10))/1 = 89. If 99 units had been produced with no defects, then efficiency would have been 99. It is better to focus on quality and value, than time or cost. Time and cost have their place, but should be subordinated to outcomes.
No comments:
Post a Comment