Category Archives: Process Management

Time Cards

Time cards have been a symbol of manufacturing productive efficiency for years. I think we have all seen images of production and manufacturing associates dutifully standing in line to “punch in” at their appointed shift on the time clock. It seemed to be a marvelous mechanism to maintain, measure and direct those resources associated with production, in the most efficient manner. It is where the phrase “on the clock” originated. You came in and they started paying you when you “clocked in” and they stopped paying you when you “clocked out”. It was efficient.

By the way, the “Time Clock” that has become so universal when talking about clocking in and clocking out, first made its appearance on the business scene in the late nineteenth century.

” An early and influential time clock, sometimes described as the first, was invented on November 20, 1888, by Willard Le Grand Bundy, a jeweler in Auburn, New York. His patent of 1890 speaks of mechanical time recorders for workers in terms that suggest that earlier recorders already existed, but Bundy’s had various improvements; for example, each worker had his own key. A year later his brother, Harlow Bundy, organized the Bundy Manufacturing Company, and began mass-producing time clocks.” https://en.wikipedia.org/wiki/Time_clock

There then arose the dichotomy in business where there were those that were “paid by the hour” (those on the clock), or waged employees, and those that were paid a set amount per period of time, or salaried employees. Waged employees were referred to as Non-Exempt and Salaried employees were referred to as Exempt. These definitions were laid down in 1938 by the Fair Labor Standards Act.  https://www.investopedia.com/terms/e/exempt-employee.asp

Below is a brief comparison of the differences between the two:

So, why am I talking about one hundred and thirty year old inventions (Time Clocks) and eighty year old employee definitions (Fair Labor Standards Act)?

The reason is pretty simple. As the production and standardization processes that have been used in manufacturing have found their ways into the other disciplines and aspects of business, so has the cost tracking and charging of those resources responsible for doing the manufacturing.

We are now asking our exempt employees to fill out time cards associated with the work they are doing. This in and of itself is probably not a bad thing, however it engenders a new and different behavior in the exempt employee. It is this new “Time Card” behavior in exempt employees that can a detrimental effect on the business.

For lack of a better definition, exempt employees are paid by the “job” as opposed to by the “hour”. If an exempt employee must work late hours and weekends to complete their assignment, they do not get paid any more. They do however get the satisfaction of knowing the completed their task, regardless of how long it took them.

The idea of having exempt / salaried employees track their time, was to better associate costs directly with specific projects or activities. This association gave rise to the exempt employees who could directly associate their activities with specific items or revenue producing functions, and those that could not associate their work with specific items. Those that could be directly associated with specific products, projects and functions were called “Direct” labor, and those that could not be directly associated were called “Indirect” labor.

“The essential difference between direct costs and indirect costs is that only direct costs can be traced to specific cost objects. A cost object is something for which a cost is compiled, such as a product, service, customer, project, or activity. These costs are usually only classified as direct or indirect costs if they are for production activities, not for administrative activities (which are considered period costs).

The concept is critical when determining the cost of a specific product or activity, since direct costs are always used to compile the cost of something, while indirect costs may not be assigned to such a cost analysis. It can be too difficult to derive a cost-effective methodology for the assignment of indirect costs; the result is that many of these costs are considered part of corporate overhead or production overhead, which will exist even if a specific product is not created or an activity does not occur.” https://www.accountingtools.com/articles/the-difference-between-direct-costs-and-indirect-costs.html

The following as a good way to think about this. I promise I will get to my point about Time Cards and why this is important soon.

So, all of this work associated with slicing and dicing the time that salaried employees spend on their various activities is being done to understand what portion of their work can be directly associated with a cost object (Direct) and what portion cannot (Indirect). Why is this important anyway? It’s pretty simple.

All businesses want to reduce, minimize and otherwise exit overhead or indirect costs from the business equation.

Every business has the objective of reducing indirect costs, otherwise known as “Overhead”. As noted, these are the costs that cannot be directly associated with revenue production.

So, when Exempt, salaried employees are asked to fill out time cards, and they have multiple options, both “Direct” and “Indirect” to associate their time with, which are they going to choose? Knowing the corporate desire to minimize, reduce and exit Indirect and overhead costs from the business, they will naturally migrate their time charging to “Direct” functions and charges.

On the surface this might seem like a wonderful way for companies to reduce overhead, and in some instances, it will work. However, if you have the financial responsibility for one of these cost objects, you will want to be able to closely monitor the number of people and the amount they can charge to your cost object. This monitoring, or policing activity and capability again creates an incremental overhead.

It is essentially a transference of the overhead responsibility from the labor pool owner (of salaried, exempt employees), to the Cost Object owner.

Labor pool owners are always going to try and minimize the amount of their labor that is not directly associated with a revenue producing cost object. They will want to show the preponderance of their time, as reported by time cards, as being directly associated with a revenue producing function. Engineering groups, development groups, support groups and just about every other group will begin to display this behavior once time cards are utilized in this fashion.

The fear for them is that if they show too much time spent on overhead functions, they will be subject to a cost reduction activity in an effort to reduce overhead.

The results of this “Time Card” behavior are manifold:

  • With the pressure to be associated with, and charge to only Direct costs, the direct costs associated with specific cost objects can become inflated by excessive charging. Since direct costs are “above the line” in accounting and margin terms, this could result in inflated and non-competitive prices.
  • There will now be a somewhat adversarial relationship in place between those groups wanting to charge directly to cost objects, and those groups that are responsible for maintaining those cost object budgets, and the corporate inefficiencies and friction that this creates. There is also the non-productive time that will be spent challenging, changing and rectifying those charges as they come in.
  • There is non-productive time, effort and cost for increasingly capable corporate tools to maintain, monitor and control this type of charging effort. How do you control who should and should not charge to a cost object?

Time cards, like process can be a good thing. But like process, they should not be viewed as a replacement for judgement. When you move costs associated with time cards from indirect labor to direct labor, it may solve a corporate desire to reduce perceived overhead and indirect labor expenses, but it also creates several new issues and expenses associated with monitoring and controlling those charges. Due to how costs are accounted for in direct versus overhead items, it can also change both the cost profiles, margins and ultimately pricing profiles in the market.

Time cards in the salaried or exempt employee environment can and will change behaviors. Labor resource groups will increase their focus on having cost objects to charge to as opposed to understanding that there is to be expected a certain amount of slack time that they will have. Instead of the labor resource pool manager managing this slack level, time cards in essence transfer this issue to the cost object owners to try and control and manage.

Time cards for salaried and exempt employees can provide a better level of visibility into how time is spent and what employees are working on. It does however carry with it what is known as “The Observer Effect”.

I always try to sneak a little physics into any discussion.

“Observer effect (physics) In physics, the observer effect is the theory that simply observing a situation or phenomenon necessarily changes that phenomenon. This is often the result of instruments that, by necessity, alter the state of what they measure in some manner.”    https://en.wikipedia.org/wiki/Observer_effect_(physics)

As long as business is aware of how behaviors are changed, and what may need to be done to compensate for these changes, there can be value in them. However, without those considerations they can create an entire new set of issues for a business to deal with, and may result in little to no efficiency gains.

Process Purpose

With the continued increase of the process-oriented approach to all facets of business, a new phrase has found its way into almost every business conversation and lexicon: “How do we fix the process?”. Immediately upon hearing this, it is not uncommon for multiple teams to set up multiple cross functional calls, across multiple geographies and time zones to discuss the problems. Multiple issues will be defined with the process, and multiple action items will be assigned.

We are no longer fixing business problems or issues. We are fixing processes. Much of the generated activity and churn associated with fixing the process might be avoided with the simple act of stepping back and first correctly understanding what the purpose of the process is.

Many times, we all take it for granted that the process is there to help employees perform their required tasks. We associate processes with making things go faster. Making tasks easier to complete. Sometimes this is the case. Many times, however, maybe not. I’ll provide a few generic examples.

Long ago, in a galaxy far, far away, back when I was relatively new to business, I remember there used to be a very special place where companies, business units, groups, teams, etc., kept a very special resource known as supplies. Supplies usually consisted of the little things that made it easier for employees to do their jobs, such as pens, pencils, paper, notebooks, staplers, tape and tape dispensers, highlighters and the like. When people needed these supplies, they would go find the person that had the key to the supply location, get access to it and select the supplies that they needed to continue efficiently performing their job.

As time passed and costs and cash flows continued to draw greater and greater attention from the company’s financial community, it was decided that this anachronistic way of providing employees supplies was not in the company’s best interest. It may have been efficient for the employee, but not for the company. Seemingly random and untracked amounts of money were being spent on supplies, and then these supplies would just sit idle (reference to the utility of money and cash flow) somewhere, waiting for someone to come by and use them. And then there was no specific process or methodology to be able to track who was actually using these supplies.

Unaccounted for money and expense was sitting in supply cabinets everywhere.

The result was that associated support teams and their supply budgets were reduced. And usually in their place a new process was created where individual employees would then have to access the on-line purchasing systems themselves where they could then order their required supplies.

Now admittedly the preceding topic has created an exacerbated issue in that it does require a change in employee behaviors. In the past, an employee would wait until their pen ran out of ink, or they used their last piece of paper before going to the supply location and getting more. Now they had to take into account the added time and complication of gaining access to the supply ordering system, and the delay associated with the supply provider delivering the desired supplies, and the internal delivery system to get desired supplies from the loading dock to their office.

What used to be a simple walk to the supply location to get any required supplies, had now become a multi-day, multi-system, multi-approval ordering process.

Now a days, if you need supplies, you had better plan ahead. Or you can just run by the office supply store yourself, and buy your own supplies. Either way, the corporate goal of the new office supplies process has been achieved: the amount of money the company spends on supplies has been reduced.

The point I am making here is that the supply ordering process was not implemented to make it easier to order supplies. It was put in place to reduce the amount spent on supplies. It was put in place to reduce the amount of money the company has tied up in supplies, sitting in some supply cabinet, waiting for someone to come by and get them.

The same can now be said just about any process that involves the expenditure of company funds. Travel approval policies are not there to make it easier for people to travel. Hiring processes are not there to make it easier to hire people. These processes are not put in place not to make it easier, or faster to perform these functions. They are in place for corporate tracking and control.

Just because they take extra time and require multiple approvals does not mean they are broken processes. In many instances it means that they are working as planned.

On the other side of the coin, we can look at those processes that are associated with the provision of the product or service that the company sells in its selected markets.

Sales people inherently understand that the relatively cheaper a product is versus its competition, the easier it is to sell and the greater the probability for a successful sale. Companies that vest too much uncontrolled authority in the sales arm have a tendency to experience lower margins and profitability, as sales tries to press for lower prices.

As proof of this point, would you be willing to go to the gas station across the street to buy their gasoline if it was five cents a gallon cheaper? How about two cents a gallon? There is always a point where convenience and timing can outweigh price differential, but in today’s cost intensive world price always plays a key role in everyone’s purchase decisions.

Sales and pricing processes are then normally put in place to enable business management to have greater influence on pricing in an effort to achieve desired profit levels. These are not processes designed to make it easier to create quotes and provide lower prices. These are processes designed to put checks and balances in place that protect the company’s profitability.

If you are a sales person attempting to compete for a customer’s order, they are an impediment and hindrance to your potential success. They are a broken process that is making it more difficult for you to obtain the order.

They are also probably the result of someone (or multiple someone’s) demonstrating bad judgement. Somewhere, sometime, someone probably knew that a price that was supplied to a customer was probably not in the best interest of the company as a whole, but did it anyway in order to get an order. The individual goal was achieved, but the corporate profitability suffered.

I have said many times that process is implemented as a substitute for judgement. In this case, bad judgement.

Sales people inherently know that the company must be profitable, if it is to continue in business. Margins must be at sufficient levels to meet the numerous business objectives such as paying for expenses, investing in new product development, paying sales commissions and providing a reasonable return to its investors.

Unfortunately, most sales incentive plans are focused solely on obtaining a top line order level. This is the objective that drives sales people to try and drive prices down, thereby making it easier for them to sell. It is also contrary to business objectives listed above.

In this situation there would be two key aspects of the business structure creating friction. The physics definition of friction is:

“… the resistance to motion of one object moving relative to another.” https://www.livescience.com/37161-what-is-friction.html

One trying to move price down, and one trying to increase prices. Process or not, this is inefficient for the company and creates waste.

Instead of creating a process to govern a function that generates corporate friction, which I would liken to the “stick” approach to problem resolution, (removing independent thought and decision making capability from those closest to the customer) I would suggest that It might be better to implement incentives that encourage the desired behaviors, or the “carrot” approach.

What might happen if the company offered the incentive of increased commissions to sales with higher margins, and at the same time offered the deterrent of significantly reduced commissions on sales with lower margins?

Instead of creating a process that can become an obstacle to the desired event (getting office supplies, or generating competitive customer offers and proposals…) which must be dealt with, or in some instances overcome, why not reexamine the event (and judgement point) that is driving the creation of the proposed process? Aligning individual, business unit and corporate goals, with appropriate incentives and deterrents for specific behaviors could be a much more efficient way of dealing with the issue.

With this approach in mind, it might be found that much of the effort that may be currently spent on “fixing the process” can be refocused on solving the underlying business issue and need. This is because, as has just been demonstrated, just because a process is not helping the individual be more effective and efficient at doing their job, does not mean that it is a broken process.

Détente in the Organization

As the matrix organizational structure continues to flourish, where organizations are structured according to business disciplines and processes rule on how these organizations interact, tension is bound to build between these organizational states. Product groups will always believe that they know how best a product should be sold. Finance teams will always think that they are the only ones who will care about the profitability of a deal. Sales will always have to deal with ever more aggressive competitors, and ever more demanding customers, as they try to translate these requirements into something the product and finance groups (and others) can act on and agree with. Trust between these groups when associated with the new business process will be key to the success of the organization going forward.

So, how do you deal with the tension between these organizational groups? History has shown that détente, as practiced between the United States and the USSR during the cold war has probably found its way into the organizational environment.

Détente (a French word meaning release from tension) is the name given to a period of improved relations between the United States and the Soviet Union that began tentatively in 1971 …https://www.history.com/topics/cold-war/detente

The relaxation of strained relations or tensions https://www.merriam-webster.com/dictionary/d%C3%A9tente

While the Soviet Union (in that manifestation) no longer exists, it would appear that Détente still has a place in the current organizational discussions, at least when it comes to discussions associated with matrix organizations and how they interact. That being in how these organizations can decrease the tensions that invariably arise when they are working with each other, sometimes at cross purposes, in the pursuit of their business objectives.

This is just a nice way of introducing the idea of how do you get disparate organizations to work together towards the overall business goals. In the perfect world these organizations would all be altruistic, focus on the business’ greater good and trust each other as they worked together according the latest management process. Unfortunately, none of us resides in a perfect world.

To continue the political allegory a little farther (to possibly foolish extremes, but since I am already in this deep…) this can result in inter-organizational relationships (as noted above) that can be best described as resembling those of the participants of the “cold war”. That being somewhat distrusting and antagonistic, but not so openly as to flare into open warfare.

Although the start of détente has been attributed to President Nixon in the 1970’s, it arguably hit its peak in the 1980’s with president Reagan. As the two world powers searched for a way to work together toward nuclear arms reductions, Reagan is credited with the immortal phrase:

“Trust, but verify”

Suzanne Massie, a writer in Russia, met with President Ronald Reagan many times between 1984 and 1987. She taught him the Russian proverb, “Доверяй, но проверяй” {Doveryai, no proveryai} (trust, but verify) advising him that “The Russians like to talk in proverbs. It would be nice of you to know a few.” The proverb was adopted as a signature phrase by Reagan, who subsequently used it frequently when discussing U.S. relations with the Soviet Union. Using proverbs that the Russians could relate to may have helped relations between the two leaders.

Reagan used the phrase to emphasize “the extensive verification procedures that would enable both sides to monitor compliance with the treaty”, at the signing of the INF Treaty, on 8 December 1987.  https://en.wikipedia.org/wiki/Trust,_but_verify

The Intermediate-Range Nuclear Forces Treaty (INF Treaty) is the abbreviated name of the Treaty Between the United States of America and the Union of Soviet Socialist Republics on the Elimination of Their Intermediate-Range and Shorter-Range Missiles. https://en.wikipedia.org/wiki/Intermediate-Range_Nuclear_Forces_Treaty

Now, “extensive verification procedures…” are very good if you are talking about global nuclear weapons reductions. I for one, am all in favor of it in this instance. The easing of tensions and the reduction in nuclear arms are “good things” as Martha Stewart is apt to say. The significant cost of these verifications when measured against the global good generated by the agreements and conduct of the participants would seem to be a significant value.

However, when we are talking about inter-organizational tensions in business, how do you trust but verify?

Matrix organizational structures, and their accompanying processes were put in place to reduce costs and increase efficiencies. Each group was to be responsible for the application of their discipline specific expertise, and then hand off the process to the next organization. An almost production line capability was envisioned where efficiency would rule. These inter-organizational tensions were never taken into account. So, what has occurred?

As I noted earlier, each business organization associated with a process has relinquished ownership and control for all associated activities outside of their specific disciplines. This means that the product group that feels that it knows best how to make sure the product is properly sold, has no real direct responsibility or authority for the sale of its product. This obviously creates tension between the sales group and the product group.

How do they create detente out of this situation?

The answer that seems to have evolved with the “trust, but verify” aspect of the relationship. Most product group organizations have responded to the trust issue by creating a product group owned organization that is responsible for “helping” or supporting the sales group in the proper sale of the product. They bring aspects of the product group to the sales team, and provide communication from the sales team to the product group. They in essence handle the process hand-off from the product team to the sales team.

The other actual function of these sub-group organizations is to trust the sales group in the sale of the product, but also to verify that they are in fact selling the product, and selling the product properly (at appropriate margins, with accurate and deliverable functionality, etc.), in the manner the product group might prefer.

The product group (in this example) is not the only discipline to have created an inter-discipline “support” team. These inter-organization hand-off groups have a tendency to spring up at almost every inter-organization interface in the matrix business process. A structure and process that was thought of and designed to increase efficiency and reduce costs has now given way to a whole new set of incremental organizational structures designed to make sure that those “other” groups are in fact doing the job that they were envisioned and supposed to do when the matrix structure was adopted.

Inter-organizational détente has been achieved, but at what cost?

Have the efficiencies that were to be gained by going to a discipline structured matrix organization with defined processes and hand-offs been lost due to the proliferation of these inter-organizational “support” groups? Has the “Trust, but Verify” doctrine created the need for every business organization to create groups that are designed to understand and interface into every other business organization, for the purpose of verifying that the other groups are in fact doing what they are responsible for doing? Doesn’t all this seem to violate the idea of efficiency and cost reduction that drove the matrix structure in the first place.

The cold war, and détente ended when one of the powers involved started to crumble under the weight of the structure that they had imposed. In the 1980’s the Soviet leadership tried to introduce reforms that would allow their system and structure to adapt to the new realities of the fast-changing world. These new structures and adaptations did not enable the soviet system to adapt, but instead ended up further precipitating its downfall.

… In November of that year (1989), the Berlin Wall–the most visible symbol of the decades-long Cold War–was finally destroyed, just over two years after Reagan had challenged the Soviet premier in a speech at Brandenburg Gate in Berlin: “Mr. Gorbachev, tear down this wall.” By 1991, the Soviet Union itself had fallen apart. The Cold War was over.  https://www.history.com/topics/cold-war/cold-war-history

It appears that sometimes the idea of an organizational structure can be much better than the reality of it application. When the concept and reality don’t quite mesh, the first impulse seems to be to try to increment and adapt the structure to get closer to what is called for. This seems to be something of a delaying tactic for what is usually the inevitable outcome.

A structure can be imposed by management with the idea of better progress and efficiency for all. As incremental structures are added to deal with the true business environment, the entire “weight” of the organizational structure begins to be strained. Many of the expected efficiencies associated with the matrix structure organization would appear to have been lost due to the growth of the many hand-off and verification groups that have sprung up to deal with both the process, and human nature.

Détente, and trust, but verify, are excellent historical applications associated with the difficult relationship between global nuclear powers. I think when you can start seeing the parallels associated with these concepts within the difficult relationships between business organizations, that there may be some inherent challenges associated with the organizational structure. After all, the result of the application of these ideas was the verifiable dissolution of one of the global participants and the changing of their organizational model completely.

The Nimble Process

I have read that there have been many claimed sightings of the nimble process in business these days. they usually occur in small out of the way places, and by possibly dubious sources. When the reports of these sightings first come in they are usually confused and somewhat contradictory. Sometimes the questionable sighting is just attributed to the reliability of the witness claiming to have seen it. Whenever there is an examination of the data associated with the sighting, the results are invariable inconclusive. The hunt for conclusive evidence goes on.

In short, confirming the existence of the nimble process may have become the business equivalent of trying to confirm the existence of Big Foot, the Yeti, or the Loch Ness Monster. There are plenty of people who have claimed to have seen them, but there just isn’t that much reliable evidence around to actually confirm their existence.

If we are going to look for, and discuss the nimble process, we need to start with some simple definitions. Where else but the dictionary can you go to get really good definitions:

Nimble [nim-buhl] Adjective: quick and light in movement; moving with ease; agile; active; rapid http://www.dictionary.com/browse/nimble

Process [pros-es; especially British proh-ses] Noun: a systematic series of actions directed to some end: a continuous action, operation, or series of changes taking place in a definite manner: http://www.dictionary.com/browse/process?s=t

As can quickly surmise, a nimble process is what is known in many circles as an oxymoron.

Oxymoron [ok-si-mawr-on, -mohr-] Noun: a figure of speech by which a locution produces an incongruous, seemingly self-contradictory effect, as in “cruel kindness”, “jumbo shrimp” or “to make haste slowly.”. http://www.dictionary.com/browse/oxymoron?s=ts
(I threw in the jumbo shrimp one myself, mainly because a really like it for illustrative purposes. The other two were actually in the definition.)

The primary difference between a nimble process and other oxymorons is that there are verifiable instances of the other oxymorons existing in the real world. You can in fact go to the local grocery store or food market and purchase jumbo shrimp. They are in the bin next to the merely “large shrimp”. The search for the nimble process however, continues to go on.

As noted in their definitions, nimbleness is defined as quick and light in movement, and process is defined as a systematic series of actions, and operation…in a definite manner. Businesses yearn to be able to operate with quick and light movements in a definite manner. This is the big foot / yeti / Loch Ness monster that almost every organization is searching for. The ability to define almost every conceivable option in a process, and the ability to execute on any one of them almost immediately.

Personally, I think there is a greater probability of big foot calling and holding a news conference for the purpose of confirming its own existence.

Process is the defining of specific steps and alternatives. I have written in the past about the fact that process is designed to help generate repeatable results by removing judgement as a variable in the business process. Since almost everyone in business has different types and levels of judgement, it has been identified as a variable that can somewhat be controlled by process. If you define the process steps, you inherently reduce the need for judgement. If all your steps and alternatives are thus defined, what is the use in being nimble in the execution of them?

As more and more process is implemented into the business environment the supposed need for the ability to adapt to new opportunities, or issues, should also be reduced. If this was indeed the case there would be no need for being nimble at all. You would merely continue to increment in new steps to the process until every alternative would be covered.

This is what appears to be the business goal of what happening today.

Processes grow ever bigger and more complex as people strive for that process that can be applied to every situation. Instead of focusing on solutions, focus has shifted to how the process will need to be incremented or modified so that it will generate an acceptable solution.

Nimble is normally associated with the ability to perform the most of complex movements with speed and grace. It is the ability to change and adjust spontaneously to changing issues and inputs. It is moving lightly and actively as opposed to moving passively in a prescribed manner. It is in effect the basic opposite of process.

The only way to make a process more nimble and agile, especially when it comes to issues and events that have no current response defined within the process, is to reduce the intensity of the process.

As processes become more detailed and refined they become more rigid. The more prescribed actions and directions that are contained in a process, the less agile and nimble it becomes. The more judgement that is taken out of the hands of those implementing the process the more fixed and ingrained it becomes.

Judgement, or the lack of it, is an excellent indicator of both an individual’s and organizations ability to adapt and adjust to changes in its environment. It is indicative of the search for the nimble process in that as organizations implement more processes in an effort to remove performance variations, the environment that they must operate in continues to become more variable and to change at a faster rate.

Process, via its fixed step connotation as it is implemented, reduces an organizations ability to adapt to its variable and changing environment.

Still, the search goes on.

There are an ever-growing number of television shows dedicated to the search for finding proof positive regarding bigfoot. There is the show “Finding Bigfoot”. There is “Mountain Monsters”. Heck, even the guy who used to show us how to survive in the wilderness for a week or two with nothing but a multi-tool and some dental floss has given up his show “Survivor” and is now out there looking for bigfoot.

It appears that shows about finding what has to this point proven to be unfindable are entertaining and are generating an ever-increasing following.

Like-wise it appears that there continues to be an ever-increasing drive to create the ever more nimble process by draining the requirements for judgement and flexibility from those who most need, and must utilize those attributes. What really worries me is that there are so many who are comfortable with this ceding of their judgement to the process.

As long as it is easier, and now safer, to follow the steps in a process instead of thinking, using judgement, and possibly being wrong, business risks the continued petrification (a long-term process) of their processes. If business continues to drive judgement out of its staff’s lexicon in favor of process and predictability, then business will continue to become very predictable in its inability to demonstrate any nimbleness or agility.

It’s time to change the meaning of the word “process”. Process, as it is used in business today, is used as a noun describing a fixed methodology for performing actions. It appears that if true nimbleness is desired, many of the prescribed actions need to be removed from the current “by rote” methodology, and process will need to adopt one of its other dictionary definitions:

Process verb: to integrate sensory information received so that an action or response is generated: the brain processes visual images relayed from the retina.
to subject to examination or analysis: computers process data https://www.merriam-webster.com/dictionary/process

The idea here is to take the input associated with the situation and generate a proper response, not follow a preconceived fixed in place response associated with a “process”. Instead of having people merely follow a prescribed set of responses in a process, businesses need to require their people to be smart, examine and analyze the information and input available, process it, and then act in accordance with their resulting judgements and less rigid business guidelines, not prescriptions.

I think therein lies the direction to the nimble process.

Instead of trying to create a process that takes every possible business and market permutation into account, businesses need to scale back the rigor associated with their processes, and require more of their team members. I don’t think that thinking is a lost art in business, yet. The more people that think and exercise judgement the faster a business can respond to new threats and opportunities.

Processes need to become a little more general, and a little less specific for nimbleness to take hold. The more complex the process is, invariably the slower it is to change, be changed and react to new and different circumstances.

There may in fact be a variation in performance as a result of the reduction in the prescribed steps in a process. As I said, not everybody’s judgement is the same. However, if there is as much variation and change in the market (see just about every article ever written about the status and stability of every market, for confirmation of this idea) as noted, then the increased ability to adapt to and deal with this change should in general generate more positive variations than negative ones.

And after all, isn’t positive performance the objective of any process?

Judgement

I read an article the other day by Stephanie Vozza in “Fast Times”. (https://www.fastcompany.com/3068771/how-employees-at-apple-and-google-are-more-productive ) It was one of their “4 Minute / Work Smart” articles. I normally am not too inclined to read these types of articles, but for some reason I did read this one. While it was ostensibly about why employees at Apple and Google are more productive, there was a passage in it that both resonated with me, as well as rang significant alarms. It captured what I have been feeling, and writing about regarding business and leadership in such a succinct way that I felt I had to address it. In her discussion regarding Organizational Drag, and the associated costs and losses to business due to processes, Vozza said:

“This often happens as a company grows, as the tendency is to put processes in place to replace judgment.”

Wow. I think she hit the nail on the head. Process is implemented to replace judgement. I do think there ought to be a qualifier in ahead of that last statement such as “Most processes, when over implemented…”. Many processes when implemented as guidelines do provide a needed and efficient methodology for accomplishing repetitive tasks. It is when they are over-expanded, applied and relied on for all facets of an organization that they cause drag and sap judgement.

A quick Googling of the word “judgement” provides the following definition:

“the ability to make considered decisions or come to sensible conclusions.”

Let’s tap the brakes here for a minute. Are we really saying that we want to replace people’s ability to make considered decisions, or to come to sensible conclusions with some sort of follow by rote process? Isn’t judgement one of the key attributes of business leadership and business stewardship? And not just judgement, but good judgement.

There are a lot of people who have said something along the lines of:

“Good judgment comes from experience, and a lot of that comes from bad judgment.”

Will Rogers, the American humorist said it in the 1930s. Simon Bolivar, one of the great heroes of the South American Hispanic independence movements of the early 19th century, said it in the early 1800s. I think you get my point. A lot of people have talked about the need for, and how you get good judgement. We would all like to think we were just born with it, but that is usually not the case.

The primary method of gaining good judgement is to learn it through experience.

So, again let me get this straight. It seems that by implementing so many processes to avoid the potential costs associated with errors and bad judgement, businesses are both creating the incremental expense of organizational drag that Vozzie noted, as well as removing the opportunity for team members to practice and gain good judgement through the experience of learning.

I don’t know about you, but I came up through business hearing the mantra surrounding management’s desire that we take (reasonable) risks in our efforts to improve the business. This is in line with the risk and return economic model. This model would require the use of judgement to ascertain what the contributing factors to the risk were, and did the expected return justify the business decision in question. The process oriented model would remove these opportunities.

Process, when used as a guideline and milestone marker can be a powerful tool. It seems that whenever it goes beyond this and starts generating ever finer detailed steps, is when it starts to generate issues both in terms of organizational drag, and what I think is potentially the greater long term risk, the stunting of leadership growth.

The Fast Times article mentions the total cost lost to organizational drag associated with process at approximately three trillion dollars. That’s a three with twelve (count ‘em, twelve) zeroes behind it. This seems like a relatively expensive price to pay to avoid whatever the number of errors associated with bad judgement (the learning process) and the costs that they would generate. One would suspect that by just flipping a coin one would hope to be correct on average at least half the time.

By removing judgement in favor of process future leaders are no longer able to get the experience (and judgement) that they will need as they move into leadership positions. The process experience that individuals gain in its place may be useful in a more predictable or production line type organization (secondary type economy sector – producing finished goods, e.g. factories making toys, cars, food, and clothes), but as the economy continues its evolution further into a tertiary sector (offering intangible goods and services to customers) I would think that judgement, and in particular good judgement would not only be preferred, but a necessity.

I think one of the ways to deal with the “Process versus Leadership” issue may be to dial back the drive for process just a little bit. I think we have all heard the adage that if a little bit of something is good then a whole lot more of it should be better. I think we are all aware of the fallacy behind that type of thinking as well. But, it appears to be the creeping mind set of many companies as they grow in size and expand across different geographical and technological markets.

It is all too seductive to aspire to manage all sorts of diverse markets and technologies via standardized processes. If it worked once in one place it becomes a goal to make it work every time in every place. Once that process starts it appears to be a slippery slope of incrementing just one more step in each process to take into account each new business or market variation that must be dealt with. The desire for repetitive and interchangeable processes leads to both product and market biases that can result in multiple missed opportunities as well as the organizational drag that has already been noted.

I think leaders may need to start thinking of the drive for processes as points on a scale. On one end of the spectrum there is a fully structured, process oriented organization. This would be an organization where very little judgement is required, the function or market are stable and little variation is required.

Accounting comes to mind, but that might just be me.

On the other end of the spectrum would be a completely judgement based organization where each new opportunity is unique and would require its own new set of potential processes for implementation. I am sure there are other examples, but organizations that conduct search and rescue operations along the lines of the freeing of the trapped Chilean miners in 2010 might be a good example of such a unique organization.

Obviously, in reality most businesses lie somewhere between these endpoints. There will most likely be multiple organizations within the business that are distributed along the process – judgement scale. What concerns me is that as process continues to be implemented in greater detail and into new areas, business run the risk of both alienating their current leaders in that their judgement will no longer be desired, and hampering the development of their future leaders as the opportunities to gain judgment are replaced with the continually more complex process.

Businesses need to begin learning to resist the desire to replace judgement with process, and understand that there needs to be a balance between the two. Just as many organizations seem to have a built-in resistance to change, they also seem to have a built-in desire for predictability which process seems to satisfy.

However, nothing comes without a cost. The implementation of process can create a stable, repeatable, predictable organization, but its costs can be seen in the organization’s inability to quickly respond to changing conditions, the resulting costs associated with organizational drag, and reduction in the use and availability of good judgement.

The Process – Simplicity Paradox

The known world is full of paradoxes. Paradoxi? Whatever. Having studied Physics in school I am somewhat familiar with a couple of scientific paradoxes that changed the way we look at everything. Prior to these changes the world was viewed through the lens of what was called Newtonian Physics. That is the mechanics of the motion of objects of non-zero size. Beach balls bouncing, planets orbiting, that sort of thing. It worked well until technology progressed to the point where people could examine smaller and smaller objects, like “particles”, electrons, and protons and such. Then it didn’t work anymore.

It was at this point in time that a new branch of Physics had to be created. It had to work for the macro-world of bouncing balls and the micro-world of sub-atomic nuclear particles. It was called “Quantum Mechanics”. It had to address the paradoxes that were now visible.

It had to address the paradox that sometimes light behaved as a wave and sometimes it behaved as a particle, when in reality it had to be both a particle and a wave all the time. If that was truly the case then everything had to exhibit the same characteristics of waves and particles. This is called the wave-particle duality.

There were other paradoxes that Quantum Mechanics had to address. The idea that physical quantities such as speed and energy (and others) changed in only discreet amounts, sort of like going up and down steps as opposed to the idea of smooth slopes like slides. It also had to explain why the very act of observing these things changed their behavior and made observing other aspects of the same objects that much more difficult.

So, as usually the question now is: What does this introduction have to do with anything associated with business. I think it is pretty simple. I think we have been working in a business management model that for analogy’s sake is the seventeenth century equivalent of Newtonian Physics. It has worked, or not worked as the case may be, on a somewhat macro-scale, but as we have tried to drive it further down on a micro-scale into the organization, it seems to no longer provide the solutions and value businesses need.

As we have introduced more process into the business system in order to try and drive more and more order into the system, I think we are starting to see a breakdown in the results we are expecting to see. Instead of getting better we have gotten slower. We don’t get the results that we expect. So what have we done? We have attempted to introduce still more and more process on a smaller and smaller level in order to achieve the predictability and order that we desire in our business universe.

I think we may have reached the same metaphorical boundary in business that Newtonian Mechanics Physicists had to cross in order to get to the new Quantum Mechanics model of the world.

As we layer in more and more process in order to try and simplify, streamline and make our business universe more predictable, we are also adding in more complexity to the business system through the application of the process itself. Herein lies the paradox: The very act of adding incremental process in order to simplify the business adds complexity to the business. We may actually end up simplifying the business a little, but it takes more effort in the process than we save in the business.

This incremental process complexity manifests itself in the time it takes to accomplish simple tasks. It can be seen in the number of conference calls that are now required before any actions can be taken. It can be seen in the increased desire for consensus instead of action. All of these complexity symptoms can be seen as the result of trying to drive the increased application of complex process into the business structures.

Extending the Quantum, Mechanical and Measurement metaphors a little farther into business could also give us some of the solutions to the paradoxes that business is now facing. If the very act of trying to simplify adds complexity, and if the very act of measuring modifies the behavior of how the business behaves, what do we need to change?

I think one of the first things we need to do is change what we measure. As we have seen in the quantum mechanical world, the more specifically we try to measure something the more we modify some of the targets other characteristics or attributes. This is actually called the “Uncertainty Principle” (It was actually introduced in the early part of the last century by the German Physicist Werner Heisenberg, and is also known as the Heisenberg Uncertainty Principle).

The same behavior is noted in organizations and is defined by the phrase “Expect what you inspect”. This generally means that by merely measuring something in an organization, whether it has value to the organization or not, you can change the behavior of the organization with respect to what you are measuring. If you measure the wrong things you should expect the wrong behaviors.

So perhaps we should reassess the value of ever more specific metrics and measurements. This thought seems to run almost entirely counter-intuitive to the directions that many organizations are going today. Instead of looking for ever finer and more specific things to measure we may want to take a step back and focus on the organization as a whole.

There are many metrics that the market looks at when it puts a value on the whole of a company, but the primary ones are financial: Orders, Sales, Profit, Earnings and Cash Flow. There may be others, but these should work for this argument’s sake. It is through the application of these metrics that the market usually establishes a value for the business. We might want to add Customer Satisfaction into the business metric mix, but I actually think that metric will sort itself out through the other financial metrics. If you don’t have Customer Satisfaction, or Quality or any of those derivative topics, you eventually won’t have the financials either as your customers will leave and take their business elsewhere.

So the simple baseline metric for every process, project, strategy, product or program should be: Is there a Financial Business Case that improves one of the five financial metrics that justifies the activity? By forcing the creation of that business case you have created the business representation in numbers and also the accompanying metrics for measuring the activity’s success. You can then see if the activity actually generated the beneficial behavior for the business that was targeted. If the value of the proposed activity cannot be defined, then there is a pretty good chance that the activity probably doesn’t need to be given a high priority.

Measurements against any other type of criteria will yield nothing more than some sort of a track against a non-critical objective, and will most probably drive a behavior that is not in alignment with the objectives of the business.

The Process versus simplicity paradox may be a little more difficult to counter, but again I think we can get it down to a business case. I think the idea for all those that would like to create, add to or extend a process is again to ask them to quantify what they are trying to correct or improve, and what resource they expect to expend on the improvement. In other words we need to create a Process – Simplification equation:

Man Hours required to implement the process
Less
Man Hours saved / removed from the business because of the process
Equal
Net Business Simplification.

The nice thing about physics is that it can be clearly expressed in terms of numbers. Postulates and theories can be readily proved or disproved via experimentation or observation. I think we need to look at returning business to this sort of practice as well. There is the proposed theory to reduce and align the metrics with the financial value metrics in the business so that all members of the organization are clearly working towards the same goals. This will make sure that the behaviors on the macro-organizational level are fully aligned to the individual or quantum level within the organization.

I believe and agree that some process is required for the proper running of an organization. The question is when do we start experiencing the law of decreasing returns when it comes to adding more process? By requiring at least a business case proposal and defense of the quantified value of each incremental process I think business can begin to regain the focus on the value that each process is supposed to deliver and start to move away from the current approach that appears to be more process as the solution to every issue.

Business like Physics is a numbers oriented discipline. Good processes in business are like good theorems in physics. People may like to believe in them, but they need to be proven out in the numbers and measurements before they become accepted as natural laws.

Process


If there is one word that should strike fear in the heart of business leaders it should be the word “process”. Please don’t get me wrong. I understand the need for and support the idea of some form and amount of standardization of business conduct. There are efficiencies that can be gained. A certain amount of uniformity of methodology will remove customer variability and should improve satisfaction. I get it. But as the old saying goes: Too much of a good thing is bad, and process is no exception.



Simply put processes are defined as a sequence of events. They are a model of the flow of how things should be done in an optimum environment. The idea being that by establishing a process for an aspect of a business you will remove unwanted variance from the way the business operates. Reduced variance should mean more consistent performance and increased efficiency in the business. Consistent performance and increased efficiencies should lead to more satisfied customers and more profitable operation. What’s not to like about that?



Process was initially introduced into the manufacturing or production environment, where the variation in the end product produced was an undesirable outcome. The idea was to assure that each product was manufactured the same way with a resulting uniformity in the output. This uniformity of output or outcomes seems to be the driving force behind the drive to apply process science to non-production oriented business functions.



If a little bit of process formalization delivers significant returns, then a full scale push toward total business process formalization should be the answer to all our business needs, right?  This direction leads you down the path toward higher order, more complex controls and processes, and as many of the old maps would indicate about uncharted territory, “here there be danger”. The problem is that as the process gets more complex in its efforts to be more broadly applicable, it becomes more cumbersome to document, follow and apply. This necessitates a greater process staff whose task it is it to marshal the process to assure that it is being followed.



By creating a process staff you are now introducing another drag on the business. The process staff is not focused on achieving the goal. They are focused on how you go about achieving the goal. Incremental staff associated with documenting and implementing the process means incremental costs that must now also be offset by additional process efficiencies before the business improvement driven by the process can contribute in a positive manner to the business performance. We now find ourselves in the position where the law of decreasing returns comes into play. The more we depend on the process for improvement, the more people we must have to support the process. The more people we have supporting the process the more improvement the process must provide in order to overcome the incremental costs associated with the increased number of people supporting the process.



Circular logic now ensues. The process gets bigger trying to drive more savings. More people are required to sustain the process. The process has to get even bigger to cover the extra costs of the incremental people.



The major issue that I have with processes is that as they evolve and grow and become bigger, more complex and more all encompassing, they have a tendency to become too focused on how things are being done and seem to lose their focus on the objective of what is being done.  Business is about getting things done. If you can get more things done, and done right than your competitor you should have a competitive advantage. When you start to expend increasingly greater amounts of resources on how you should get things done as opposed to the quantity of resources focused on actually getting things done you have probably hit the point of decreasing returns for your process investment.



The idea of process and process refinement came about when the market was primarily involved in a production and production worker environment. As we have evolved into a knowledge and knowledge worker environment we still seem to be increasingly focused on formulating and formalizing the way we want our knowledge workers to work. We are in effect trying to dictate the way our knowledge workers use their knowledge. This also seems fundamentally flawed to me.



Henry Ford ushered in the mass production process when he stated anyone could have a car in any color they wanted, as long as it was black. He built the ultimate no variability process. He built black model A’s. And that worked for a while. Mass production gave way to mass customization in the manufacturing environment. At one point not too very long ago you could buy any combination of features and colors on just about any car model you wanted.



 It was during this period that a number of car companies started going out of business as their processes, amongst other issues had become too cumbersome to be profitable. The process that worked well for the simple did not hold up as well for the multiplicity of options or the complex. And so the pendulum began to swing back toward far fewer and more simple groups of options or option packages, in order to reduce option complexity. This seems to be the current status of the production process in the automotive industry.



It appears that knowledge worker processes are still going through the “mass customization” stage of application. It seems that the processes themselves are becoming more complex in an effort to address the multiplicity of variables that are present in the knowledge worker environment. We are creeping ever closer to potentially strangling ourselves with the very processes that we hoped would be our profitability generating salvation.



Processes need to provide guidelines on how to deal with the known as well as unknown in business. They need to have enough specificity to provide direction, but also need to allow those that are working within them the ability to vary and adapt them to the changing needs of the customer, company and environment. One size process cannot fit all unless it is so big and so complex as to be able to handle all variables present in the business. Why would you want to build a process, or a model of how you are to conduct business that is as complicated as the real business is? Processes are supposed to simplify things, not mirror their complexity.



We need to keep our processes simple, the staffs associated with them minimal, and allow enough flexibility so that those operating within the process can react and adapt to new situations. Trying to expand the process to work in every instance of business inevitably leads to increased complexity and decreased returns for the effort.

Work Backwards


Process Reengineering and Process Transformation seem to be the new popular catch phrases for business these days. We continue to evolve and place more emphasis on the “process”. We like to define them, and map them, and engineer them, and reengineer them, and transform them. We even now have global “Process Owners”. The goal of all this additional and incremental work that is being applied to the process is to make the process more efficient. I understand the almost obsessive approach to processes that businesses are exhibiting these days. I am just not quite sure yet whether or not I agree with it.


This approach seems to be consistent with the idea that the most efficient process to build a staircase is to gather a number of previously defined and constructed steps and start to assemble them until you reach your goal, whether it is the second floor of a house or the top floor of a high rise building.


To me the simple definition of a process is a way to get something done. We used to want to standardize the way we got things done in order to be as efficient as possible. This was particularly effective when we were primarily a manufacturing / production oriented economy. We have continued to change from a production based economy to a product / services / knowledge based economy for quite some time as the production function has been moved to lower cost environments.  We are now trying to standardize the process – the way we get things done – for this new service / knowledge based business environment in much the same way we did for the manufacturing and production based structure. The new catch phrase for standardizing Service and Knowledge based processes is to “Industrialize” them.


Here is where I think we may start to run into trouble with this industrialization approach to processes. For quite a while we have strived for a diverse workforce. This diversity is a very good thing. Different people think differently. The diversity of thought and approach that results from having a diverse workforce helps prevent the group think phenomenon from happening, where similar people all see things the same way. If everyone saw and did things the same way there would never be any way to improve the process because everyone would see it the same way.


So now we are looking at trying to industrialize a process in order to make it more efficient, which if we are fully successful at will make it difficult to ever modify or improve in the future because we will all be doing it the same way. To go back to our steps and staircase example, if you are going to standardize on only one set of steps, you will only be able to make one type of staircase.


A further complication to the industrialization drive occurs when we look at the variations in service and knowledge that are to be applied either internally to the business, or externally to the customer. Manufacturing efficiency was driven based on a relatively few sets of variations to the end product. You used to be able to custom order your car with the specific sets of options that you wanted. Can you do that anymore? The last time I looked most car models came in approximately three option package variations: Standard, Enhanced and Luxury versions.


Because the knowledge and service needs of each specific customer will be unique to that specific customer, it may be difficult to fully industrialize the process of satisfying their wants and needs.


I have always been a goal driven individual, even when it comes to the processes that I must use. I have found that if I know the goal, I can begin the process of decomposing it into sub-goals or milestones and from there into logical tasks and steps. You can use this approach differently for different goals and that will result in a somewhat different process, and in different tasks.


If we have a goal and know what we need to get done, then we can work backwards from it to break it down into the steps that need to be taken to achieve it. This method of work definition provides a general framework or process to work from, but also enables individuals to see and do things somewhat differently in the pursuit of the goal.


As long as there are guidelines that are known (example: Bank robbery is not an acceptable solution to increasing the profitability of a customer engagement….) and responsibilities and ownerships (approval levels, etc.) are defined this generic process of working backwards from the end goal can provide a flexible framework that will enable the multiple variations of deliverables that customers require, while also enabling the business to efficiently and effectively adapt to each customer engagement.


The current push to industrialize and define each step of a process can be very useful if all you are going to do is provide straight staircases. This approach will work very well if all every customer wanted was a straight staircase. It starts to have real problems when you try to apply it to circular, elliptical and spiral staircases. These types of customer engagements while having the potential to utilize some industializable aspects of the process normally need to be customized to each specific engagement.


The final ingredient to a successful process is ultimately going to be the people using. We need to work at creating the ability within our people to recognize and adapt to each new engagement, to build the appropriate stairs and staircases that our customers want and our businesses need, instead of trying to industrialize a process to the point where all they can do is to try an assemble a predefined set of steps, in the hopes that it will more efficiently meet each new set of business and customer needs.

No More “Work Arounds” – Enforce Change

We have all been in the position where an unexpected issue arises. It can be a product capability shortfall, or a process application mismatch, or just about anything in between.  Our first impulse is to find a “work around”. Something quick and dirty that will get the job done and allow us to move on. We have all done it.


 


The problem with this approach is that it requires two “fixes”: the initial “work around” and then the revisit of the issue to put in the correct long term change. The “work around” allows us to stay with the existing process or capability, when by the very nature of the need, we are seeing that we need to change. In today’s short resource, profitability and resource challenged environment, the “work around” has become too expensive.


 


The normal issue with a “work around” is that since it is working, we never seem to get around to implementing the correct long term solution. Change doesn’t (need) to occur and the “quick and dirty (re: inefficient) becomes the accepted process. It becomes the standard by default and gets (re)coded into the process going forward. The quick and dirty has solved a short term need, but has not generated the needed change to achieve long term efficiency and profitability.


 


In today’s economy when you encounter an issue, more often then not the correct course of action is to implement the long term fix – make the change. It may take a little longer than the quick and dirty fix to the existing system, but the end result is a cleaner, longer term solution. The business also ends up stronger, more efficient and more profitable.