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Killing the enterprise by decree

July 8th, 2008 · Comments

Companies can sometimes be pretty indiscriminate with their policies and decisions. I’m all for the pursuit of the greater good but I feel this is sometimes confused for the pursuit of a one-size-fits-all. Decrees can be very useful last-resorts to get an organization to take needed action or to implement new legislation. However a common consequence is an impact on the connection the employees have with the enterprise health and objectives.

Consider medical treatments that knowingly but necessarily put the patient’s life at serious risk. Everything must be done to increase the patient’s chances of survival, and vital signs must be monitored very closely for indications that the treatment might need to be stopped and changed altogether. An enterprise should take this approach as well. When the only sensible course of action available is a decree, make sure that you create way more feedback loops in your organization than normal. They increase your organization’s chances of survival, increase the likelihood of success of your policy, and behave as your self-monitoring system. Listen to those early-warning signals and visibly adapt your policy and/or implementation strategy from what you learn. This is not a license to manage your enterprise via decrees, just a suggestion on how you might avoid total disaster when and if you have no other option but to implement a decision in this way.

A few years ago I was particularly aware of contractor tenure policies being a high-profile issue in the US. This led to global policy rollouts despite legislation in other countries being in place to clearly differentiate between employees and contractors. Companies that had no monitoring systems for this decree probably failed to detect that the contractor litigation risk was significantly smaller in other countries. In the UK for example a nationwide organized contractor population has been reducing this risk to virtual nonexistence in order to protect themselves from tax legislation IR35. In these cases, big companies that were trying to minimize risk in the US indiscriminately and unnecessarily removed UK-based contractors even from key projects thereby shooting themselves in the foot. And leg. Repeatedly.

Categories: feedback loops · people

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    I lived through that too. It seemed faintly amusing at the time. There were these guys who had been around for years, happy in what they were doing. They knew the company procedures back to front, took very little effort to manage, and had no idea how far they had fallen behind rate-wise over the previous few (millennium bug & internet bubble) years. So off they all went - to better paid jobs. And they had to be replaced with much more expensive people, whey knew so much less.

    Whilst we may giggle at stupid bureaucracy, it was a worrying feeling that if the company was doing this in the UK for no real justifiable reason at the time, how many of the other senior decisions were being similarly misapplied. I was glad I did not have a bonus for it to affect.
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    I totally agree Jason. Every time this action is taken in the industry (and we're still talking mainly about our observation of Investment Banking IT, I guess) it has a negative effect for that reason. I share your view that the ones who leave end up getting more elsewhere. Even when the ones who replace them appear to cost less, they are disproportionately less productive so the value for your money drops significantly. If you are lucky they eventually grow into the job - just in time for the cycle to complete and another sweeping 10% cut...

    Smoke and mirrors should be outlawed both as as management methodology and as an accounting practice. I wonder if senior management or the executive board or whoever comes up with these decisions are blissfully unaware that the net effect of this short term accounting fix is in fact to hurt the company.
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    The attraction of the "one size fits all" policy is that it is administratively simple - it can therefore be sold to the decision makers as efficient whereas the truth is that it simply masks the lack of good managerial skills available within organizations.

    To illustrate, another example from the contracting world (investment banking clients) where the current flavor of the day is for organizations to issue a take it or leave it 10% across the board rate cut. Inevitably this leads to the retention of the less skilled, motivated and mobile resources who will simply accept the policy - result being a lower overall skills base to draw on at the time when a more flexible and agile pool is required.

    Still, at least management did not have to make any real decisions ... except which limb to aim for this time ...
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    Thanks for offering the contractors' point of view Neil. That is another very good example. The bigger the company, the more tempting it must be to use this bullying tactic which says "we're big and you're small and there's nothing you can do about it".

    There might be a number of underlying assumptions at work, such as:
    - A 10% cut is too small to trigger a mass departure.
    - The change will be perceived as industry-wide because everyone is hit at once.
    - By making it indiscriminate contractors and managers won't feel targeted.
    - A 10% cut is better than losing one's job, in other words: "misery loves company".
    - Middle managers will welcome not having to deal with conflict resolution because they are encouraged to legitimately claim it's out of their control.
    - Those managers couldn't be trusted to make the necessary cuts anyway because they are consumed by empire-building.

    The total lack of respect implied by this action is also pretty insulting as a manager, so I suspect those who stay are the ones who would welcome having no participation in such decisions.
 

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