One of the most frequent and frustrating occurrences I see among corporate managers is the failure to understand the cost-benefit ratio of information.  This is the idea that it costs a certain amount to obtain each bit of information, and that cost rises as you approach 100% of the information you might need (or think you need) while the value of each bit of information falls.  To relate it to the Pareto principle, in almost any situation you can get 80% of the information for 20% of the cost, but the other 20% of the information will cost you four times as much.  This is perhaps a bit of an overstatement, but illustrates the concept. 

In the end, you may only need 80% of the information to know whether you have a problem or not.  In some high-risk circumstances, like deciding whether to shut down a plant at a cost of $5 million per day, the critical point may approach 97% of the information, for example, justified by the high cost and risk involved.  It is also possible in such cases that the first 10% of the information may reveal a problem that is a “show-stopper”, in which case the critical decision can be made without going farther, and it may be wiser to re-plan the appropriate schedules, inform the stakeholders of the changes, and restart the information gathering effort (if it is not going on continuously) at an appropriate time.

I can’t tell you how many times I and many other workers have been sent scurrying madly by a nervous project manager to call and email suppliers, ambush people outside meetings, and chase people down halls or across the world in an effort to get “100%” of the information about something.  In no case, even when the information was finite and tightly-defined, such as the status on a list of parts, have we EVER gotten 100% of the information.  In all cases there was still risk, as unforeseen things could still go wrong.  In most cases it caused a lot of frustration and wheel-spinning waste, and, in the worst cases, made some of us unwelcome with people from whom we frequently needed key pieces of information.  In most cases, chasing information beyond the point of diminishing returns also caused us to neglect other work which had a much greater potential to affect the success of the organization.  This is my effort to help you understand this issue, and hopefully will help you better explain the concept to those who need to understand it.

As always, I welcome your comments.

In every supplier relationship there are key pieces of information, besides the actual product or service provided, that have to be exchanged for business to be carried out successfully. All too often, requirements or deliverables are not clarified sufficiently, leaving one (usually both) parties short on something – information, money, or end products and services. So what considerations are involved, and how can a manager make sure both organizations get what they need, when they need it, in a way that provides maximum benefit to both?

Over the years I have often observed the waste and inefficiencies that result from poor communications between customer and supplier, and the less-than-optimal results for both. The most frequent observed result is that the product or service failed to meet the customer’s requirements when delivered, or is delivered late, but there is usually a pretty involved story behind this.

Most often incorrect, late, or faulty product or service was a result of unclear communications as to what was needed, and sometimes what was possible, from both sides. Many customer organizations have established guidelines, specifications, and standards for their requests for quotes and proposals, and the statements of requirements they convey to their suppliers. Formal standards for these communications are very good, and establish baselines for the agreements that will govern the mutually profitable relationship going forward, but they can easily be overdone, resulting in needless inefficiency and decreased quality in the communications, relationship, and end results.

For example, a major corporation I know has so many documents and standards used in contracting with suppliers that no single person seems to know of them all, let alone understands them or how they are intended to work as a system. Just in the area of getting plans from suppliers, they specify more than fifty key events that they want the supplier to include in their plans, many of which would normally be invisible to the customer company, and on which the customer can have no direct control in any case. The burden imposed by requiring the supplier to report all this detail is considerable, and the net result is that both supplier and customer companies dedicate needless time and effort to specifying, demanding, obtaining, analyzing, and reporting the information. Both organizations fail to report or analyse the huge volume of information involved, and the information is usually incomplete if it is reported at all. Even if it is reported, there is too much information to be worth analyzing, and, most importantly, the critical pieces of information are buried in the morass of partially-reported data, probably never to be seen. The net result is, neither supplier nor customer get the critical information they need, and they are lucky if the product or service is delivered on-time or meets the customer’s requirements.

What both sides are missing is that there are always a handful of key points, some would call integration points, where information or materials needs to be passed from one side to the other. Requiring or reporting on any more than the key items is wasteful and can prevent either or both sides from understanding what really needs to be done, with predictable results.

There is another risk, too. When the customer gets too deep into the supplier’s business, and begins to try to influence or otherwise manage supplier operations, the situation gets worse yet. When the customer is taking any control, however slight, of the supplier’s processes, the supplier no longer has complete ownership of them. This means the supplier has an “out” if things go wrong, as they can point to the customer as the source of the problems. It also means the supplier no longer necessarily has full control of their own processes, which can inhibit their ability to do the best possible work. At this point, the customer has not only impeded the abilities of the supplier, but made themselves partially responsible for things that might go wrong. Now the customer has less standing from which to hold the supplier responsible for what they provided, and both sides have wasted effort on an overly-involved relationship involving a lot of needless work that added no value to the process for either side.

As a third point, both customer and supplier have to have extra people, time, and other resources to handle the paperwork involved, increasing cost for both, and reducing the profitability of the relationship. Is it any wonder that a supplier, sometimes with a long term relationship with the customer, sometimes refused the business, seeing that the requirements of the customer based solely in bureaucratic standards and paperwork make the deal unprofitable? I have seen this happen more than once.

A fourth pitfall is that the supplier changes their requirements after the agreement is in place and work has been done. This is infamously known in project management circles as “scope creep”. Up to a point, a change of requirements may have only small impact on cost, timing, or product function, but, after that, changes in the scope of the deal create a need to rework the agreement on the fly, frequently a messy process requiring even more paperwork, time, and cost, and saddling both organizations with increased risk. A lack of organizational or managerial discipline on the customer side can quickly make the deal unprofitable and problematic for the supplier, and much more risky for the customer.

To manage a supplier-customer relationship successfully requires seeing the relationship as a system in which a focus on a few critical pieces of information, and the avoidance of bureaucratic overhead and too much influence by either party on the other, will provide the best result. Trust between organizations must be strong for best results. The identification of the most critical elements of time, cost, function, and quality-related information, and the efficient exchange of that information, should be the focus of both organizations, along with a resistance to going overboard and asking more than is truly required to get the job done.

What is “command and control” management? Many good articles have been written on this by smart folks like Joel Spolsky and Bruce Nussbaum. A good description is included in the Traditional Management Model page of www.1000ventures.com in the section (near the bottom of the page) labeled “25 Lessons from Jack Welch“. Much has been written decrying “command and control” management, but what makes it a bad thing?

A manager-employee relationship is always a two way street. I believe when a manager takes an unnecessarily-authoritative or commanding position with a subordinate, the employee feels less respected, and will have a decreased desire to contribute. As a result, information flow up to the manager will be diminished. This will only reduce the manager’s ability to make good decisions, even to the appoint of reducing their apparent competence.

People work harder when they feel they are making a positive difference, an intrinsic motivation. The command and control management style works through extrinsic motivators such as threats, authority, and even monetary incentives, all of which prevent or even replace employees’ natural intrinsic motivation. A management style that gives people ownership of their methods, tools, and results, and in which people can feel good about collaborating with and helping those around them (coworkers, customers, and suppliers) provides intrinsic motivation, and people work hard because they like the way it makes them feel, and feel important and appreciated — the “psychological pay” principle. Everyone wants to feel good about themselves, but command and control takes that feeling away from them.

People work harder for someone they respect, and preferably like. A manager who understands that the workers in the trenches usually see the organization’s challenges and problems better than he or she can, can gain their input and support their efforts more effectively than a “commander” who assumes he or she knows, or is expected to know, more than their subordinates. This attitude only alienates subordinates and loses their loyalty, respect, and input. It may even move them to undermine the organization’s performance in subtle ways in an effort, possibly never acknowledged, and probably in a form that can’t be identified, that is based in nothing so much as a desire for revenge.

People work harder when they’re not doing it under threat. Some command and control-styled managers use subtle threats to do their job, and may unwittingly put employees in a situation where they can’t see a way to succeed. The results can be disastrous as far as morale and work performance, not only for the employee placed in that position, but for their coworkers who will see what is going on and fear being put in such a position themselves.

An example of that is a supervisor I once had. I had only been at the company for a few months, working as a lowly engineer, and one day my supervisor came in and asked me to fill out a performance review. He was having the other employees write theirs, and it was easier for him to just do everyone’s at once. I was instructed to write my own performance review and provided a standard form. Then, as he was about to leave, he turned back at the door and revealed that he had had nothing to do the previous weekend, and had written a performance review for me. I (brightly) asked if that meant that I didn’t have to write my own after all, and he said that, no, the company policy was that I would write my own. Perplexed, I asked him what it would mean if his evaluation and mine didn’t agree, and he said “Well, then … WE … have a problem.” and walked out. I’m sure he felt very powerful, secure, and in control. I, however, instantly saw I was in a no-win situation in which he was “power-tripping” me with his clear threat, and was taken aback. Not only did I lose respect for him as a boss, I also lost respect for him as a person. After that I was never again comfortable working for him, or even the company to some extent, and I was actually relieved when I was caught in the next down-sizing less than a year later.

People will passively or actively undermine a manager they think doesn’t respect them or is abusing them. Although it was said in jest, there were times in my past assignments when a particularly repressive manager would be discussed in his absence, and people would joke about having someone with a cold or flu be sure to sneeze on the next report they were to put on the manager’s desk. That is an extreme, but, once employees’ feel they are disrespected or abused, their productivity will decrease. Worse yet, the best and most marketable employees will find better employment, further damaging the organization.

Inevitably, once a manager has achieved a negative image it can take much longer to reverse that impression, even with superlative performance and efforts. In general, a manager must remember that it is possible to do damage to oneself in a minute that could take years to repair, and disrespect expressed towards an employee, even in confidence, is a huge risk.

This matter goes back to something my relatives taught me when I was a child: never say anything about someone who is absent that you wouldn’t be comfortable saying to their face. This is a hard thing for most of us, as we are all emotional and opinionated beings, each with our own flaws and preferences, but we must strive to remember this and be careful of what thoughts we express to others. I can’t claim perfection in this area either, but awareness is the first step to real personal integrity, which is essential to a good manager.

The risk of acquiring a negative image is higher for those of us with management responsibilities because our subordinates depend on us, and they need to be able to trust us to do a good job. We, similarly, are dependent on them to do a good job, and must therefore be careful to make the relationship as mutually positive and beneficial as possible. As I said at the beginning, the manage-subordinate relationship is a two-way street, and the manager who operates in a “command-and-control” mode will only diminish the performance of subordinates and the organization as a whole.

Interestingly, one of the sources linked in the first paragraph pointed out that there IS a place for command and control, but it’s when one must make 18-year-old soldiers charge, firing their weapons, across a mine field. I know of no business that operates in circumstances even remotely analogous to this.

I look forward to any comments or experiences you’d like to share. Thanks in advance – Tim

This morning NPR did a story on a woman writing a novel about a female horse trainer of the late 19th century, who used the “horse whispering” or “gentling” technique and was superior to the others in her profession.  The traditional method of breaking horses at the time (and still prevalent) was to have some big brute of a guy get on the horse and ride it, bucking and kicking, until it tired out and was “broken”.  Needless to say, horses trained in this way often developed personality disorders or other peculiarities that were occasional problems for the owner or rider.  I quickly began to see implications for the management of human organizations.

I thought about the Dog Whisperer TV show (on cable), which my wife and I like, and realized that, if there can be horse whisperers and dog whisperers who get superior results in dealing with those animals, why shouldn’t we recognize people whisperers.  These would be people who are skilled at reading, understanding, and working with other people.  It occurred to me that the people whisperer, like the dog or horse whisperer, succeeds by building a deep understanding of the species’ instincts, the society’s mores, customs, and conventions, and eventually the group or individual’s psychological makeup. 

It may be observed that managers of human organizations have too many people to deal with, and do not have the time to understand every individual, and thus need to use the more forceful (and inconsiderate) methods, but I disagree.  Just as the dog whisperer is more successful because part of his knowledge involves understanding the psychology of the pack, a good manager understands basic principles of organizational behavior and group dynamics, along with the culture and environment of the organization he or she is dealing with, and is thus much more effective than a manager who uses command-and-control techniques.

I won’t go into the destructive side effects of command-and-control management techniques.  The results are clear in the histories of the companies in which this sort of thinking (culture) predominates.  I suggest (and there is room for a study here to confirm or refute) that organizations with a command-oriented culture tend to succeed in boom times, but crash in hard times, in a scenario I have often described as muddling.  When things go well whoever is in control takes the credit, and when things go badly they blame first factors outside the company and then people or factors inside the company.  There is more volatility in their long term performance, higher turnover among the staff, poorer overall quality in their products, and inconsistent returns to their investors.  I can add that I have secured jobs with a number of these companies, often when their fortunes were in decline or bottoming out, due to my ability to synthesize my past careers and take on multiple responsibilities.  They were not generally comfortable places to work, and sometimes I have been released when they were caught in their next decline.

I believe that companies with a more positive and collaborative culture will keep their “people whisperer” managers longer, experience less volatility in the face of market and other changes, and generate a lot less misery and stress among their employees.  I also believe their culture can extend to their suppliers and customers, who will also be more willing to do business with them and, essentially, participate in their success.

Organizational culture is a huge topic all by itself, but I believe that the critical factor is, as W. Edwards Deming said, “the intent at the top”.  Every manager has a strong influence on the culture of the organization under his control, and it follows that the head of the company has more ability to affect the organizational culture than anyone else in it.  A mid-level manager has the same influence on the part of the organization beneath him, but will be exposed to the opinions and possibly interventions of his peers and superiors, making the maintenance of a subculture different from that of the total organization potentially difficult.

I once worked for a mid-level manager who joined in on some lunch hour sessions I organized to watch a series of training videos by W. Edwards Deming, Joseph Juran, and others that I found in the company’s library.  The teachings of W. Edwards Deming, in particular, though they started with the use of statistics to improve product and process quality, revealed the fundamental influence of culture in the workplace with specific demonstrations of how business results came from the systems and the expectations placed on employees, not on employees being specifically good or bad.  My boss found the material interesting enough to attend these viewings with us on many occasions, and I noticed that during this period his management style went through a transformation. 

When I first worked for this man, he was very controlling, to the point of being vindictive.  Once, in a hallway discussion with another person, I made a point that contradicted something he had said, and not in any “in your face” kind of way.  I believe I was objective and professional about it.  I later realized he must have felt embarrassed by that, however, and a couple of weeks later in a large staff meeting he put me on the spot and joined the others in questioning my judgement on a particular matter in an aggressive and embarrassing way.  I felt a lot of pain from being “hung out to dry”, but I figured out later that that was his revenge for my contradicting him in front of a peer previously.  We had a few other unpleasant confrontations over the following months, and I saw him behave similarly with others.

After he started viewing the Deming videos with the small group who had joined me, his manner significantly changed over a period of months.  He began to defend his people in meetings rather than “throwing us under the bus”.  He became increasingly collaborative, and the performance of his organization improved significantly.  If nothing else, it actually became fairly pleasurable to work for him, in spite of the fact that the company was going through very hard times, with layoffs occurring twice each year.  Somehow, and I believe it was due to his new leadership style, the group continued to be highly productive even as our numbers were cut in half over just a few years.

Unfortunately, I noticed that his relations with his mid-level peers in the management became harder for him.  A couple of them who worked most closely with him did not understand his changed approach to management, nor perceive the benefits of the more collaborative culture he maintained among his people.  I saw evidence they were accusing him of being “soft on his employees”, for example, and realized he was having to fight off criticism, however unjustified, to keep our work environment the way it was.

Sadly, after several years he eventually gave up the fight and voluntarily took a non-managerial position, which may have been part of the downsizing the corporation was experiencing as a whole, but was also, I believe, a matter of fatigue on his part gained from bucking the corporate culture.  I have since understood that it is a tough proposition for a mid-level manager, however enlightened and effective, to go against the culture of the larger organization.  It may cost him or her promotional opportunities, for instance, as well as the day-to-day stress of being noticeably different and misunderstood among peers. 

More unfortunate is my observation that companies and organizations with positive cultural values imposed from the top are rare, at least where my experience is in the rust belt of middle America.  There are certainly enlightened managers, and “people whisperers” around, but their work lives are not as good or productive as they might be, since they must buck their organization’s culture to reach their maximum effectiveness in their jobs.  Still, I can’t deny the observations I’ve made, and see only the need for studies to confirm or refute those observations.  Working for an enlightened manager can certainly be a great experience, while working for a poor one can be a living hell.  I can testify to having experienced both, and even under the same manager.

I look forward to reading any comments you have, as we can all learn about what makes for good or bad management from the experiences of others.