Friday, August 31, 2012

Deming Revisited

In 1999, the Los Angeles Times business staff compiled a list of the 50 people or groups who most influenced business in the 20th century. Douglas MacArthur and W. Edwards Deming were featured for their role in helping Japan recover from its post-war devastation: “the world's greatest economic recovery story.”

Deming lamented American management's failure to understand the transformation that made their Japanese counterparts successful. American leaders are quick to adopt the tools and solutions - the technology and methodologies - but they missed the point that the change starts with them; the transformation is up and down the management hierarchy.
"A transformation must take place in American industry or it will continue on the decline until the style of American management changes...and they don't know what to do. 98% don't know there is a problem or there is anything they can do."
Deming was right.

Managers must first understand the problem, which Deming described as the Five Deadly Diseases of American management:
  1. Lack of constancy of purpose – "People haven’t decided what they’re in business for." It leads to short-term thinking; a lack of long-term definition and goals.
  2. Emphasis on short-term profits – a focus on the quarterly dividend and the price of the company stock over plans to stay in or grow the business through improvement in quality of product or service.
  3. System of annual rating of performance - Performance appraisals, management by objectives, etc, a focus on short-term performance demoralizes employees, undermines team-work, and "annihilates long-term plans."
  4. Mobility of management – People need roots in the company to have knowledge of its problems, of production, of sales, of service. “People in management today know nothing about the problems of anybody else; and don’t even know their own.”
  5. Use of visible figures only for management – Little consideration is given to measures that are unknown and unknowable, e.g. the multiplying effect of unhappy customers.
“People are misused, abused and underused by management that worships a sacred cow style of management that was never right.” - W. Edwards Deming

Tuesday, July 31, 2012

What Every CEO Should Know and Do about IT

A leading researcher, Prof. Joe Peppard, has collaborated with the internationally renowned consultant and author John Thorp to publish a very good article, What Every CEO Should Know and Do about IT.
Their research reveals that, while most investment in IT failed to deliver expected value, CEOs still haven't properly understood their own role in effecting the realization of benefits even when they see IT as core to their 'real' business. Organisations with CEOs who do 'get it' generate superior returns from their IT investments. Those that don't, after rounding up the usual suspects, go on to keep repeating the same mistakes.

Indeed most CEOs have no idea about what is going on and what to do about it; they just want someone to sort out their IT. The Chief Information Officer (CIO) is sometimes empowered - whatever that means - to get on with it, but they can only change what they can control; and that is the delivery of IT not how IT will be used - that is properly the responsibility of business managers.

One unsurprising finding is that executives at all levels are unsure what a CIO is and what to expect of them. What is astounding is that 64% of CIO's have a significantly different perception than the CEO and their CxO colleagues of the CIO role.

The article lists a number of principles of value creation (Box 1), that are all important, but I would add one more, that I believe to be the most critical:
Until CEOs understand the need and accept accountability for clearly articulating the roles, authorities and accountabilities of their managers for business appropriate supply and use of IT and the realization of benefits, it ain't gonna happen.
The article usefully restates how to go about applying these principles. It is not as intimidating as it seems: the CIO can be accountable for facilitating the process so long as it is recognized they do not have the authority nor accountability to lock in the changes needed in the system of business to bring about the expected outcomes. Only a role with overall authority and accountability across the business - the CEO or maybe the COO - can do this and hold managers accountable.

Update 2/8/12:
Broken link changed to now refer to an original blog post by Prof. Peppard; this contains instructions for accessing the article.