Back in the first week of January – so happy Christmas, and here's hoping 2012 can do better than 2011!U

John Carlisle - Tue, 21st Feb 2012 10:59

hi, The worm in the Apple: It's ironic that we are discovering how Apple Blossomed - at the expense of its supply chain, especially in China, where warnings have been emanating from for some time now. It finds itself in the invidious position that Nike did so some years ago. When a company makes that much profit only the naive would not wonder who pays the real price.

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‘FiReControl’ (don’t you love the cool modern branding?), PFI hospitals and the NHS’s National Programme for IT. In this week’s extraordinary tally of shame, we learn that the public sector ‘completely wasted’ £500m on a network of regional control centres for fire services that will never be used, will pay the private sector £70bn for PFI hospitals worth £11bn, and is dismantling the health IT programme under which it has so far paid £6bn for an email and a booking system.

As the US senator said, why, a billion here, a billion there and soon we’ll be talking real money.

Any one of these losses is bad enough – but three? Worse is that they are all the same mind-numbingly repeated mistake. A superficially attractive idea is seized on and worked up at the centre (‘I know: why don’t we… bring the fire authorities under control… build some new hospitals and get them off the books… make people’s medical notes available anywhere in the country?’) without any realistic estimate of feasibility or even desirability, then handed over to consultants and IT providers to impose on reluctant end users.

For those willing to unpick, the three comprise a veritable house of horrors of modern management error (strategy, procurement, leadership, change management, project management… ). But there are two points I want to focus my outrage on.

The first is accountability. Accountability is the unicorn of management, a fabled beast that is constantly evoked but never actually seen. It’s no different in the private sector – how many bankers went to jail, how many CEOs see their pay go down as well as up? – but for all the talk the reality is a system that not only enforces no accountability, it actively disguises it. The permanent secretary in charge of FiReControl, Sir Peter Housden, has been knighted and promoted since the debacle. PA Consulting, which picked up £40m for its work on the project, glides effortlessly on to the next government project. EADS, too, the lead contractor appears not to have suffered at all for its performance. Trebles all round!

The second thing is that we know how to do this stuff, for God’s sake. IT is the last thing to put in place, not the first. Indeed, anything that relies on arguments of scale and large-scale IT should evoke extreme suspicion and a precautionary principle against it – just as any other 19th century solution would. The procedure is as John Seddon has outlined in relation to shared services:

This is what we should be doing with the new Universal Credit, which Seddon believes could be delivered by existing benefits offices with minimum extra cost. Instead the heart sinks at the news that, guess what, a vast new IT system is planned to automate it. We know the result in advance. Because it is designed from the wrong end, it is guaranteed to be inflexible, unable to deal with the variety of claimants’ circumstances and vastly to overrun the estimated cost. Wanna bet?

To repeat. We can decide not to throw billions on the fire. We don’t have an economic or deficit crisis. We have a management one. When will anyone in government recognise it?
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Donal Carroll - Mon, 3rd Oct 2011 19:29

RE The 'Ed's right' ARTICLE: funny how Peston still fuels the myth abt the 'most ambitious people' going into finance (rather than those attracted to greed)and how it's ok for WB to talk abt class war but when anyone else, it's 'political'. Good stuff

Donal Carroll - Mon, 26th Sep 2011 12:19

Good-shd be a lead article in the FT! But something else: in at least 1 of these, the 'real' agenda being 'managed' was political, to (as you say) remove public expenditure in our watch - which was 'succesful'... As for 'good ideas', these always entail a disorderly pipeline into practice and most fail. However, a culture of rapid pioting, soft strategic handling, + increasing the rate of learning will enable grtr success + stronger ideas... BUT who is going to teach Government -and managers- th

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I’ve just learned that there’s an All-Party Parliamentary Group on Outsourcing and Shared Services.

Its purpose is ‘to raise awareness of the benefits and best practices of the outsourcing and shared services industries; to address the issues that face the industry; and to promote dialogue and understanding between industry representatives and Members of Parliament’.

Its secretariat services are helpfully provided by Butler Kelly, ‘a consultancy’, ‘on behalf of its client, National Ousourcing Association’.

Why are MPs lobbying for a commercial interest group?

There are two issues here. The fact that OSS are almost always the wrong answer to the wrong problem, locking in outdated ‘solutions’ and making service worse is bad enough (and one I shall come back to another day). When faced with a proposal for OSS, ‘best practice’ for customers is usually to take Raymond Chandler’s advice in another context and depart rapidly in several different directions.

But even if OSS were more often the right answer, neither government nor ministers nor regulators have any business specifying method.

Lesson No 1 on Day 1 in regulators’ nursery class is: focus on outcomes, not technologies. Specify a desired outcome – better service at lower cost, say – and let the market do its work of sorting good methods from bad. The whole point of a market is that there is constant competition between solutions. Prescribing a monopoly solution and demanding that everyone comply with it stops innovation in its tracks, provides a lucrative and comfortable business for entrenched suppliers, and builds up massive vested interest against radical improvement. It’s the exact opposite of the desired outcome. And that’s where we are with outsourcing and shared services.

Are MPs just naïve?

Haven’t they learned by now that ‘free marketers’ are the last people to look to to tell you how markets work, or capitalists to be proper stewards of capitalism?
 
Whatever next? An All-Party Group on Mumbo-Jumbo with secretariat supplied by the Magicians Association? A Flat Earth Group with a secretariat from the Creationists? A South Sea Bubble Group serviced by Alchemists Unlimited? An All-Party Group on Mergers and Acquisitions with secretariat courtesy of the investment banking industry?
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Donal Carroll - Tue, 20th Sep 2011 12:46

Great piece -deserves wider publicity (can you employ a lobbyist?!) The 'influencing' of MPs is a deeper scandal than the expenses one. My own MP -newly elected- whom I lobbied for more equitable Middle East policies to redress historical oppression, sd she was 'intensely invited' to join particular powerful grps aiming to do njothing more than extend the status quo.. In USA is it something like 5 lobbyists to each Senator? Keep going More of this DC

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In this month's Vanguard newsletter, instead of the usual compelling collection of news items from behind the looking glass of public and private service (sign up here), John Seddon writes an interesting essay on the practicalities of the Big Society.

He finds a number of reasons to be optimistic:

But there are also examples where the 'official' Big Society is itself perversely killing off the innovation and experiment that it calls for. One of the ways it does so is through the government's new enthusiasm, commissioning. Making the same mistakes as in the past, the centre is insistent on commissioning (and getting others to commission) the delivery of services against detailed specifications, with a preference for signing contracts with large organisations that can offer 'scale' and, so the thinking goes, reduce cost.

Unfortunately, such commissioning doesn't reduce cost, because the resulting service is fragmented and standarised and fails to meet the variety of people's individual requirements – so the lower unit cost of transactions is irrelevant. As Seddon points out, 'Meeting specifications is about as far as you can get from meeting purpose [as defined by the customer] and, ironically, meeting purpose would drive costs down, as the examples I began with illustrate'. What's more, commissioning is reducing choice. By insisting that providers do scale, it is forcing many local voluntary or social enterprise organisations to merge or go out of business, diminishing the precise small-scale, highly local engagement that the Big Society is supposed to encourage.

Commissioning thus contributing to the relentless thinning of public provision and dilution of public goods that caused the need for their reinvention as the Big Society in the first place. In a brilliant chapter in his eloquent critique of the way we live now, Ill Fares the Land, the historian Tony Judt describes how the contracting out of services previously provided by the state has led to an 'evisceration of society' in which the material gains of (some) individuals have been dearly bought by the dissolving of the collective cement that bound us all together. Judt joins Seddon in the conviction that functioning public services, the legitimacy of the state and public engagement are tightly linked – something that governments from Thatcher onwards, including to its shame New Labour, have completely forgotten. With benefits and services contracted out to private intermediaries, notes Judt, 'the thick mesh of social interactions and public goods has been reduced to a minimum, with nothing except authority and obedience binding the citizen to the state'. With a minimal, discredited state on one hand and 'a glut of grasping private profiteers' on the other, the scene is set not just for apathy and disengagement, but political extremism and the breakdown of that ultimate public good that cements us together, the law – intimations of which we  have been seeing on the streets of our cities in the last few nights.

These thoughts came together as I was reflecting on the life of William Barnes, a friend and mentor, whose obituary I am commissioned to write. William, 91, was one of a generation that, coming of age in World War II, believed without even thinking about it that if you were lucky enough to have brains and education, you put them to the service not of self-interest but the society of which you were a part.  One of the monuments he left behind is the campus of London Business School, the UK's first business school of which he was the first secretary (although I wonder how as a Quaker he would have viewed the 'me-first' mentality that has come to be one of the business-school movement's chief products). The other is the social housing of Camden, where he was a visionary housing director in the 1970s, instituting a comprehensive regime that reduced the waiting list to 12 families and created streets of mixed class and race that in Kentish Town and other places still function as unshowy neighbourhoods and communities and resist the onward spread of the segregated ghettoes that breed only reciprocal ignorance, fear and indifference. William resigned when Margaret Thatcher cut off housing funds to councils, in effect striking down his policy.

There was a double symbolism to this. First, Thatcher's initiative launched the thinning of the state whose indirect consequences we are now dealing with. But secondly, although much less visibly, it announced a switch of mentalities: the era of those, like William, who weren't in it for wealth or a gong or even recognition, was over (remember Thatcher's scornful remark that anyone over 30 who still took the bus was a failure?). William's death is a reminder of what we've lost, and it may be the most serious loss of all, since motivated public-spirited individuals underpin all the rest.

So to the trio of functioning public services, a legitimate state and engaged citizens, we need to add a fourth key ingredient for the Big Society: honest, upright, entrepreneurial public servants like William Barnes. How many are there around?




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The House of Commons public accounts committee verdict on the NHS computer project is predictably scathing. Won't work, waste of £6.4bn so far, care records system unworkable.

Ironically, the latter idea – an electronic patient record that could be consulted anywhere – intuitively made some sense (although I've never seen any detailed justification). What brought the project to its knees was naive overconfidence in computers in general, turbocharged by equally naive faith in economies of scale.

The same lethal combination crops up like a disfiguring and disabling plague across the public sector,  from the rigid computer-aided childcare system implicated in the Baby Peter tragedy to the probation service's dismal National Offender Management Service, which was slagged off last week by another Commons select committee for a 'box-ticking culture' that led to officials spending 75 per cent of their time at their desks and just 25 per cent dealing with prisoners.

In both these cases the casualties are professional discretion, otherwise known as common sense, and cost (providing poor service costs more than good because it has to be repeated at least once). Yet managers in both private and public sectors perversely continue to use computers for things that humans should do (making judgment calls) and vice versa (bean counting).

Is the idea that computers will cut costs through automated consistency just naive? In the case of large management consultancies that make much of their revenue through lucrative IT contracts, vested (and conflicted) interests are certainly involved.  A more sinister interpretation is suggested by Caleb Crain in his blog Debtmageddon vs. the robot utopia. His point about robots in manufacturing is exactly the same for software in services:

But 'robots aren't altruistic beings; they're capital investments; and though robots may not ask to be paid, their owners demand a return on their investment. We now live in the robot utopia, which isn't one. Thanks in large part to computerized mechanization, manufacturing productivity in the past century has increased many times over. Standards of living are higher than they ever were, but we no longer need as many humans to work as we once did. Perhaps not coincidentally, human wages, in America at least, have stagnated since the 1970s. If humans made no more money in the past four decades, where did the wealth created by the higher productivity go? Toward robot wages, as it were. The owners of the robots took the money—that is, the capitalists. Any fifth-grader can see where this leads. At some point society has to choose. Either society accepts the robots' gift as a general one, and redistributes the wealth that the robots inadvertently concentrate, or society allows the robots to become the exclusive tools of an ever-shrinking elite, increasingly resented, in confused fashion, by the people whom the robots have displaced' .

Or, in the case of services, enslaved and downgraded. So as well as being customer-unfriendly and inefficient, inappropriate computerisation is also part of the Wal-Martisation, or if you prefer McDonaldisation, of work that is such a striking feature of the non-recovery. Shall we just say no?
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I'm not sure what's more dismaying, the morality of the NHS trusts that are imposing a minimum wait of 15 weeks for routine operations to save costs, or the sheer bleeding stupidity.

To take the moral question first, it is a key element of the Hippocratic oath to do no harm. As a doctor explained on Today this morning, many conditions can get worse over three months, causing pain and suffering that is unprofessional, unnecessary and cruel, since the op is going to be performed anyway. This is a reversed-out travesty of the NHS: a National Harm Service.

Enter here the my second cause of indignation. Unprofessionalism, meet bleeding stupidity. Principle #1 of service management is that the more quickly and precisely you can meet a demand, the lower the cost (because less resource is wasted).

If a hernia gets worse as a patient waits, the operation to mend it will be more complicated. And costly. And the stay in hospital will be longer. And more costly. So any short-term 'saving' will be more than cancelled out by bumping up costs later on. Duh. It's the end-to-end cost that counts, not the cost of the individual transaction. 

On the news today was the case of a man who was suing the NHS for refusing him a gastric by-pass because he wasn't fat enough to qualify. So now he has a perverse incentive to make himself fatter, and iller, to get the intervention that will make his life better and his demand on the system less in the longer term. Double duh.

But it doesn't stop there. The excuse given for this miserable queuing is that 'with demand ever increasing, we have to find ways of spreading the cost'. Now, we know from the few cases where the analysis has been done that for many conditions, once the noise has been stripped out, demand on the NHS is both stable and predictable. This is true, for example, for strokes, for emergencies going into A&E, and for patients presenting at GPs' surgeries.

Refining this further, Vanguard Consulting's John Seddon tells me that from work being done by by his firm in one NHS hospital, while non-elective demand (ie emergencies coming in through the door) is stable, elective (ie planned, scheduled) demand shows much more variation and unpredictability.

What does this tell us? That management is 'tampering' with the system, making demand more unpredictable and the system harder to manage. Consider our hernia patient. Instead of being attended to immediately, with minimum processing, he or she goes into a queue which has to be managed, with all the possibilities for error, cancellation, no-show, lost notes and other complications that hospital administration entails. More management, more tampering, less smooth passage through the system, more cost.

Conclusion: it's not a question of professional morality or stupidity being worse than the other, because they're two sides of the same coin. Imposing a minimum waiting time is the public-sector version of the short-termism that has turned the private sector into an acute health hazard for the economy. On the other hand, doing the right thing for the patient is doing the right thing for the system. too. The right thing is the right thing, full stop.
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Donal Carroll - Wed, 3rd Aug 2011 00:44

Good stuff Simon. The odd thing is this -10 years on frm yr pioneering Observer stuff and probably because of it- this isn't polemical anymore... and in a sense, do we need Martin's HBR (your article) to verify the feelings in that piece? What shd we do: start guerilla management, stakeholder-strategists, effectiveness-extraverts...? Any managers out there who want to embed what Management 2.0 started: kill capitalism before it kills 'management'? What do people think? DC

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Ten days away from it all, and after three days reading the papers again I'm ready to be carted off to A&E.

Although maybe not... One of the things raising the blood pressure was Amelia Gentleman's series of articles in The Guardian on the NHS. Sober and well-reported, they recounted life in an outpatients clinic for obesity, an A&E ward, and an elderly care unit at Birmingham's busy Heartlands hospital.

Each unit was having to make cuts in ways which will make things infinitely worse. Obesity: PCTs are raising the bar for interventions, as Gentleman points out thus giving already ill and desperate people a perverse incentive to make themselves even iller to get the attention they need. A&E: admissions for really serious conditions are pretty stable (duh), but non-acute demand has gone up by 50 per cent in a few years because of inadequacies elsewhere in the system (primary care, NHS Direct). So they're rushing to get people who shouldn't be there treated within four hours, to the detriment of serious cases – and, obviously, of the budget, through no fault of their own. As for elderly care, the unit was again full of people who shouldn't be there but couldn't be dismissed because because social services budgets are being cut and there's nowhere to send them.

Then on Friday Peter Wilby's article in the same paper repeated the usual doom and gloom... ageing population ... elderly care timebomb ... how can we pay...

Yes, none of these things are easy – if they were, they'd have been solved already. Yes, on present assumptions the situation is pretty desperate. And yes, we don't know in detail what the shape of the solution to the problems will actually take.

But the blood-pressure-inducing thing is that we do know that large-scale top-down reforms such as that being foisted on the NHS will create confusion and absorb energy rather than providing lasting solutions and that unjoined-up cost cutting as above will raise costs, not reduce them.

Most importantly, and positively, we do also know how to work out what real solutions to the problems would be.  One more time (repeat after me): 1) you analyse demand from the citizen/patient/customer point of view. This will almost certainly reveal glaring inefficiencies and tons of 'failure demand' (demand which you don't want and shouldn't be there, like the un-urgent patients in A&E, who are only there because of a previous failure by you or someone else in the system to solve their problem the first time); 2) you get the people who do the work to devise an approach that does solve the presenting problem at the first pass, with minimum fuss. This almost always puts the experts at the front of the system rather than hiding them at the back, and dealing with the issue before it gets serious – ie the opposite of the current crude rationing approach; 3) you get the managers working to get rid of the failure demand, and to relax the systemic bottlenecks or conditions that make it difficult to do the primary work (like the bed-blocking in elderly care).

Devising a system that can cope with variety like this does two things. The first prize is an effective service geared to  individual needs, not abstract targets. The second prize is reduced, and reducing, system-wide costs as the reasons for the hidden failure demand are investigated and eliminated in their turn.

So instead of wringing their hands and wittering on and on about choice and competition (ie, shoving responsibility on to the citizen for choosing between profit-driven mass providers – Southern Cross, anyone?), what ministers should be committing to is 21st century service, not 20th or 19th: that is, personal service.  Delivering individualised services is the next public-service frontier – and counterintuitively it will brings costs systematically down rather than push them chaotically up.

And I haven't even got to the white paper yet.


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Donal Carroll - Wed, 20th Jul 2011 22:59

Comment on Wapping article: Brilliant! It shd be sued anyway under Trades Desc Act because of its title -it's really Anything BUT the NOTW! More like news for the hard of thinking and how to stay thatv way? Keep writing DC

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I'm taking a short break this week and next – so expect the next update around 13 July. Upcoming pieces when I get back: essays on trust and companies that break the rules; also interviews (exclusive, dare I say) with Charles Handy, Umair Haque and a number of other leading business thinkers. So watch this space. Login or register to comment

If anyone in government or on the Independent Banking Commission had thought to consult the management literature, they'd have found good reason to be wary of the ringfencing solution they have put forward to separate the retail utility banks from investment banking casinos under same ownership.

Quite simply, ringfencing is very difficult to do. Work by Ashridge Strategic Management Centre's Andrew Campbell and Michael Goold on corporate parenting shows pretty convincingly (I remember because I helped edit it) that it it is near impossible for managements to run two businesses employing quite different logics at the same time. It stands to reason. The qualities that make you successful at Pizza Express are unlikely to be much help in running Le Gavroche. Brilliant Zara-style supply-chain management does not equip you to to succeed in haute couture.

This explains why companies are on the whole sensible to specialise strategically. For example, no airline has managed to combine full-service and low-cost operations under one roof. (Can you imagine a group CEO who is a cross between Michael O'Leary and Willie Walsh? Neither can I.) Each requires a different strategy, different priorities, different ways of dealing with customers and different hardware. Synergies between them (always more elusive in practice than theory anyway) are practically non-existent.

Note that this is not the same as saying that conglomerates can't work (although Campbell and Goold argued that 'pure plays' were easier). It's operating opposing models in the same business that is schizophrenic. Companies find it hard enough to be simultaneously operationally excellent and innovative (being 'ambidextrous', as it it is called in the trade) never mind having to cope with two different business models as well. The difficulty is keeping the two as separate as they need to be. It's all too easy for one to dilute or infect the other, either damaging the weaker or ending up with both businesses uncomfortably in the middle, neither pure fish nor pure fowl.

These considerations, incidentally, help explain why the 'integration' of the Guardian and Observer newsrooms was such an destructive and difficult experience. To a consultant, the fact that both are newspapers makes the idea of sharing staff to save costs irresistible. But along with a quite different working cycle, the daily differs from its Sunday sibling in news priorities, editorial policy, commercial strategy, readership and political leaning. For the journalists, juggling the demands of the two is a daunting and disorientating experience, wrenching loyalties and blurring accountability. The urgency of the daily agenda inevitably dominated the weekly; although the Guardian didn't suffer, the Observer certainly did. While integrating some back-office functions, other newspaper groups, as at the Times and the Mail, have more prudently kept their daily and weekly newsrooms apart.

In the case of the banks, it's easy to see why maintaining retail and investment banks under the same management could end in buckets of tears. Experience shows that it is difficult for organisations to ringfence different models even when they want to. But the banks don't. As John Kay points out in a characteristically penetrating FT column, they 'have no intention of abiding by the spirit, rather than the letter, of any regulatory rules', and indeed have developed lucrative businesses in arbitraging those very rules. Their cheery response to the commission's proposals suggests that they agree with Campbell and Goold: ringfencing won't work.




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Fresh from the Department of the Bleeding Obvious: according to a report published in the American Accounting Review, convoluted and jargon-ridden corporate prose doesn't just mystify ordinary investors: it baffles professional analysts too.

Says a former head of the SEC: ‘This study underscores that verbose and hyper-technical disclosure documents waste the time of investors and analysts alike. Worse yet, unreadable SEC filings lead to less accurate analyst reports -- illustrating anew George Orwell's observation that uncertainty is both the result and the cause of muddled thought.’

Duh.

The authors reached this conclusion after the mind-numbing experience of subjecting 33,00 annual reports to Fog analysis. The Fog Index uses sentence length and syllables per word to compute the number of years of formal education required for a person of average intelligence to be able read the document once and understand it. As a yardstick, Readers Digest has a Fog score of 8, the Wall Street Journal 12.

By comparison the mean corporate score was 19.53. The foggiest industries were insurance and healthcare, where the mean was more than 20. And – so much for the argument that jargon and technical language are necessary to convey complex meaning – the cloudier the language, the more trouble analysts had making sense of it: their recommendations were all over the place.

Since unintelligible communication is so obviously an oxymoron, the question has to be asked: why do companies do it?

The research doesn't address this issue. But hang on: does the fact that the filing requirement aims at disclosure give us a clue? Thinking of it in that light, there might be three possibilities. 1) Incompetence – companies don’t know what they mean and can’t express it (the Orwell thought above). 2) Cynicism or worse – they do know what they mean and are deliberately hiding it. 3) The unconscious at work – the tortured language and fractured meanings are a faithful reflection of the conflicts and contradictions at the heart of most companies. (For more on this see my article in FT Business Education here.)

Whatever the answer, the signal they all give out is a resounding ‘SELL’. It confirms the rule of thumb that the longer and more complicated the description, the less the substance beneath. At the university where my wife works, her department’s senior administrator has been pooled in a separate unit where she has a lesser job and the title of 'senior resources and information officer'. No, she doesn’t know either.

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In a recent blog, Beth Ingalls wrote:

'I don’t know about you, but despite the fact that I’ve been using LinkedIn for more than a year, I didn’t get a personal invite to the IPO or a special offer for LNKD Series A preferred stock. That’s because to LinkedIn, users are not customers, they’re commodities.'

She went on: 'A commodity is “a basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often used as inputs in the production of other goods or services. The quality of a given commodity may differ slightly, but it is essentially uniform across producers.”  Bet you felt more special than that, didn’t you?'

That's a powerful thought. And nowhere are we made to feel more unspecial, more like 'inputs' into the production of other, more important products – company profits, for instance – than in retail. including, and especially, the banks.

At a Good Banking Summit hosted by the New Economics Foundation, Daily Mail City editor Alex Brummer remarked: 'Banks are screwing their customers, not looking after them.' If Sainsbury was run like the banks, he added, 'they'd have no customers left.'

Unfortunately, bank customers don't have much choice. One small-business owner interviewed after the banks were shown to have missed their lending targets described her shock at being summarily turned down for a loan after 20 years with the same bank. When she got her overdraft (because she wanted to expand) elsewhere, she was shocked again to be charged interest at 16.9 per cent – on money the bank was borrowing practically free. 'The relationship has totally changed,' she said regretfully. 'Or rather there isn't a relationship any more. It's just a transaction.'

Even more so for the ordinary non-business customer, whose only contact with the bank is through an ATM or a disembodied voice in India, the physical and metaphorical distance deeply symbolic of what the company thinks of us: commodity transactions to be managed by computer.

Pace Brummer, the supermarkets are not much better. They too  prefer to treat customers as commodity inputs out of which they make their profits – literally: not only by serving ourselves but now ringing up their tills as well,  thus allowing them to dispense with even the poorly paid till-staff they have left. Surprisingly, the worst offender is Marks & Spencer, whose CEO, Marc Bolland is currently in the papers boasting of his intention to match the content of stores better to its demographic.

Well, at our  central London branch, I can tell him that the local demographic is people, and while it minds some about the content of the shelves, the latter is much of a muchness with nearby Tesco and Sainsbury. No, it minds much more that the store thinks so little of it as flesh-and-blood customers that there is quite often no one on the tills at all (although there is always someone on hand to enquire if you'd like help to use the ubiquitous machines).

To which the answer is: No, I wouldn't. And Bolland should be careful what he wishes for. Commodities and transactions don't have loyalty or relationships. And if this local demographic doesn't find people to relate to in his stores, it'll walk the extra half mile to shop in Waitrose, which does.
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Another day, another top-down reorganisation. Yesterday was the turn of the railways. In his review, commissioned by the previous government, Sir Roy McNulty, former chairman of the Civil Aviation Authority, is calling for measures to save £1bn a year on the network. They include raising fares and cutting staff costs.

It’s true that both costs and fares in the UK are far too high. But as an opening gambit this beggars belief. Does no one in government ever learn anything?

Also yesterday, the National Audit Office delivered a damning report on another centrally-mandated and planned organisational upgrade programme, the NHS National Programme for IT (NPfIT). Nine years and  £6bn into the programme, practically nothing of value has been delivered and in the case of the electronic patient record, never will. But for the ‘aircraft-carrier syndrome’ (we don’t actually need a new carrier, but it’s dearer to cancel the contract that to build it) it would probably be scrapped altogether.

Not to mention Andrew Lansley’s vastly ambitious and completely unproven NHS reorganisation, which has drawn so much flak that it is now in A&E for urgent remedial surgery.

What takes the breath away is the recklessness with which such vast decisions are taken. If these people were drivers, they’d now be serving lifetime bans. In his FT dissection of the NPfIT disaster, Nick Timmins notes that the 10 Downing Street seminar that set the framework for the programme was ‘like a revivalist meeting’. The health department’s head of R&D was given just 10 minutes to make his presentation, and when he said the first phase would take three years, Tony Blair (who never touched a computer) demanded: ‘Two?’

Likewise, where did Lansley’s plan come from? It’s not so much that it wasn’t in the manifesto – what evidence is there that it will work? The short answer is that there just isn’t any. It’s as arbitrary as the decision to hack £20bn off NHS spending and get rid of 33 per cent of health managers. Why 33 per cent? Why not 60? Or 10? How does anyone know how many people can be sacked without affecting frontline services? Without knowledge, they don’t and can’t.

As W. Edwards Deming used to say, ‘By what method? ...Only the method counts.’ Both aim and method are essential. The one without the other is useless. Whoever thought it was a good idea to lock the rail unions into solid resistance to imposed change, instead of coopting into the process of getting knowledge and redesigning the work? In a recent Bad Science column, the Guardian’s Ben Goldacre notes that ‘Politicians are ignorant about trials, and they're weird about evidence’. The railways, the NHS and NPfIT are Bad Science on a truly stupendous scale.Login or register to comment

Last week I wrote about Big Consultancy's role in management's 'Groundhog Day' – reinforcing the status quo with 'leading-edge conventional wisdom' which ensures we just keep doing the same old same old, with lots of IT bells and whistles to make it look 'cutting edge' and up-to-date.

Lo and behold, as a couple of correspondents instantly pointed out (many thanks), yesterday brought an example I wouldn't have dared to invent – Deloitte's extraordinary demand that the government should 'ration' face-to-face and telephone contact and 'drive' the public online to interact with public services.

'The public sector needs to emulate the corporate world by driving citizens towards ever cheaper and more efficient ways of doing business,' pontificated Joel Bellman, Deloitte's director for public service.

'The time is now right not just to open up new online channels, but to mandate their use and restrict expensive channels such as paper, telephone or face-to-face contract to those people who really need them.'

The mixture of self-satisfaction and self-interest is enough to burst blood vessels. Yeah, let's make public services model their service on Sky, BT, Virgin and the mobile phone companies! It so happens that I wrote an open letter to Sir Richard Branson about Virgin Media's appalling service a couple of weeks ago. 'Just awesome: Virgin demonstrates the innate superiority of private sector-provided services,' tweeted (and retweeted) readers ironically.

How many more times? The 'corporate world' is no better than the public sector at delivering service, for the good and simple reason that both deliver it in exactly the same misguided mass-produced, Fordist manner designed and sanctioned by big consultants like Deloitte, that have to their enormous benefit commandeered the yardstick.

Driving people online simply won't make public services better in any sense recognised anyone who receives them – per citizen it will alos make them much more expensive. It may well make them cheaper as a rationing mechanism, by making service so difficult and impersonal to access that many claimants just drop out. See Charlotte Pell's terrific piece here for a telling commentary on how systems based on technology already fail real people with real human problems. Is that what we want? Because 'mandating online' will make matters much, much worse.

The truth is that Web 2.0, the very model of leading-edge conventional wisdom, is a godsend for the big consultancies. Applying it to public services provides them with lucrative IT contracts, usually structured so that there is no incentive for them to improve service, only to make it worse. And it locks the client, whether public or private, into a dysfunctional delivery design that ensures it will need another round of expensive consultancy in two or three years time. Nice work.


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In a recent Schumpeter column, the Economist commented that the metaphor of the company as a legal person is central to capitalism. In Citizens United (2010), it noted, the Supreme Court reinforced the idea by controversially ruling that the constitution’s first amendment gave companies the same right to free speech as real people – so they have as much right as individuals to try to influence political campaigns through advertising. Liberals charge that this opens the floodgates to massive corporate funding of presidential and congressional campaigns; by overturning the 20-year-old ruling that barred companies fom paying for political adverts, it could have a profound effect on future elections.

That is indeed a worry. There is mounting alarm at the degree to which the US political process has already been captured, and subverted, by the corporate interest – as these articles in Vanity Fair and Rolling Stone testify.

But there are a couple of other human angles that the Economist doesn't engage with.

One is that real humans are mortal. Although many corporations do expire, going bankrupt or being consumed by other, hungrier entities, death for companies isn't inevitable. Stora, the Swedish paper company, traces its origins back to the 13th century. Our banks, auction houses and breweries are two or three centuries old. This is an extraordinary privilege. What are its implications? Should there be a euthanasia clause for companies that become a burden on society, causing more harm than good?

Second, except under the unacceptable regime of slavery, a person can't be the property of other persons. The implication of that for companies is both surprising and profound. Although everyone (including the Economist) assumes the opposite, 'the law provides a surprisingly clear answer. Shareholders do not own the corporation,' wrote professors Loizos and Luh Luh Can in Harvard Business Review, no less, last year. Directors owe their duty to the company itself, including all its members. Unbeholden to shareholders, they 'are to a great extent autonomous.'

'The corporate interest' is thus not actually what most corporations, their managers and shareholders think it is. If corporations are persons, and not the property of shareholders (a concept that is anyway incompatible with limited liabibility), the way is cleared for the common-sense but ideologically-obscured view that companies can only thrive in symbiosis with a flourishing broader society in which they are embedded. They have a duty to all their stakeholders.

Most companies show scant regard to such duty now. As law professor Joel Bakan observed in his 2004 book 'The Corporation', if corporations were people, psychiatrists would currently diagnose most of them as psychopaths: dysfunctionally single-minded, incapable of empathy, obsessed with getting their own way and vociferously offloading the costs of their behaviour on to society as a whole.

Psychopaths are dangerous. If they can't be cured, their ability to harm themselves and others has to be constrained. Being a person carries obligations as well as privileges. Perhaps the Supreme Court should be asked to rule on that, too.
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Any reasoned discussion of pay is welcome.

Putting Will Hutton, of The Observer and Work Foundation, in charge of a report on fair pay in the public sector was an added bonus. Yet, much as I like and respect Will, why do I get the feeling that he has been nobbled by the Treasury, which published the report and supplied Hutton's research team?

For a start, the definition of fairness. Hutton's concept of 'just desert' is an interesting one, which would surely attract wide support. But in practice, for my taste (admittedly like almost everyone) else he gives too little emphasis to just deserts internally and too much to external benchmarks. True, the proposed 'fair pay code' makes a nod to 'the social nature of organisations', the need 'to take account of the relationship between senior pay and that of all employees', and proposes that there should be a workforce representative on the remuneration – all good.

But that should be central, not peripheral. Second, Hutton gets lured into the minefield of performance pay. Pay for performance is attractive and plausible, but fiendishly difficult to get right. Research suggests that pay is more likely to be a demotivator than a motivator, and the report's 'earn-back' and bonus proposals, like all such, risk focusing public-sector executives on the pay rather than the job in hand.

Finally, while nodding to some findings from (rightly) fashionable behavioural economics, Hutton ignores others. For example, that intrinsic motivation (doing a good job) is often more effective, as well as a lot cheaper, than extrinsic. And that social norms, roughly equivalent to a 'public-sector ethos', need cherishing much more than market norms, since when the two collide it's the market that wins and it's hard to restore the social. Would you rather be treated by a hospital that has your welfare at heart or one that is fretting about breaching the 4-hour target for being treated in A&E?

PS Of course, as with pensions, the real issue isn't public-sector pay but private. Here's what Robert Peston said about it on his BBC blog:

Now, in the case of RBS, its chief executive's pay of £7.7m is equivalent to about 233 times typical pay in finance, compared with other FTSE100 bosses who on average earn 120 times typical pay.

As for for top civil servants, well, they tend to earn around £160,000 a year, around six times a typical public official's salary.

Or to put it another way, RBS's boss, Stephen Hester, seems to be handsomely paid for public sector or private sector.

Why? It's because he's a banker.

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Last week's police pay review was one more example of the coalition's shaky grasp of the mechanics of change.

It's true that pay arrangements can often be an obstacle to change, setting up incentives that become perverse when the circumstances that originally justified them change. The coppers are no exception. The last major police pay review took place in 1978, and structures set up then have helped to lock forces into patterns of behaviour that now run counter to what looks like common sense.

But it's through-the-looking-glass to tackle police pay now. Large-scale change is looming as a result of the public-sector squeeze. The force faces cuts of 20 per cent over the next four years, which is much higher than most other public services. Up to 28,000 jobs are likely to go, 16,000 of them uniformed offers. Coming on top of a two-year pay freeze, the new scheme, which will cut some officers' pay by £3,000, already has police blood boiling. It will make radical changes in working practices needlessly harder to negotiate.

It's also illogical. 'Reform' – as in 'doing police work better' – is certainly necessary. But to be done properly, it will need to go diametrically against the grain of the demoralising IT-driven, mass-production paradigm which is being promoted all over the public sector today. Pay likewise needs to be decisively severed from the targets and make-work jobs of the current regime and reattached to rediscovered purpose.

Only when the work has been redesigned against demand can pay issues be tackled – with the advantage that by that stage what first looked like a daunting obstacle has become uncontentious. Pay is the last brick that completes and solidifies the unified edifice of reform, so it's shape is obvious. Interesting work is going on in this area in at least one brave and intelligent police force – rather what you'd hope for as a citizen from your police, no? Watch this space for more on the cops at a later date.
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The coroner's rant about 'management speak' at the inquest on the victims of the London 7/7 suicide bombers was well aimed. Lady Justice Hallett is so obviously right that 'the use of plain English... would make everybody just that little bit more effective' that the idea that anything else should be the case, particularly in an emergency service (help! fire!), is totally, mind-bendingly, bonkers.

But then, perhaps not. Management as we know it is a tortured, conflicted, contradictory mess, so it's hardly surprising that the language used to express it should reflect that inner turmoil.  Put round that way, the fact that managers in emergency services such as the Fire Brigade feel unable to express themselves in direct, plain English ('Emergency? It's a flammable combustion situation') is a perfect embodiment of the blind impasse management has run itself up.

Often management speak is straight Orwellian hypocrisy, meaning the opposite of what it purports, concealing meaning and accountability and covering arses rather than revealing them.  How could it be otherwise?  It's hard to talk straight and authentic if you're trying to persuade shareholders you're being ruthlessly efficient on their behalf, employees that they're the most precious asset and the community that you're a socially responsible citizen, all at the same time.

Or in the public services that you care about the individual when you're really reporting to government paymasters against abstract targets; or simply defending the indefensible, like bank bonuses.

Some of the mealiest-mouthed offenders are organisations whose business is, or should be, the clearest of expression: universities and business schools, which end up sounding gratingly like corporate marketing departments ('customer experience', 'brand promotion', 'world-class institution', 'cutting-edge research') instead of what they are, the guardians of the human flame even if on occasion it's against business.

Offhand, I can think of just two organisations that have understood the power of telling it like it really is: Apple and Berkshire Hathaway. You don't have to be an Apple freak to acknowledege that its communications, whether user manuals or (as the sceptical Lucy Kellaway pointed out in not one but two notably laudatory FT pieces) app guidelines or customer dealings, are models of straightfowardness and, by contrast with any other IT company. a joy to read. Wow, Apple talks to customers as adults. So does Warren Buffett. And you know what? We like it!

Organisations that use plain words can do so because they have their values and goals in register; they're comfortable with themselves, their customers and the society in which they're embedded. Others, don't and aren't.

So here's a modest pledge. Companies that can't or won't be bothered to express in direct, understandable and – why not – appealing language what what they stand for and how their products are made, aren't worth supporting. We shouldn't invest in them, work for them or buy from them. In the public sector as in the private, they don't deserve to survive.

In other words, if you don't talk to us properly, on equal terms, we'll fire you. Is that plain enough?







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Women on boards: quotas, yes or no?

Yes. Here's why.

The starting point is to ask why there are so few of them now. After all, the glass ceiling ain't a new issue. It comes around with wearying regularity, evoking the same ineffectual handwringing every time.

The answer, inconvenient but true, is that conventional business is invisibly but inherently male. Out of all the forms a business could take – network, cooperative, democratic, clustered, open source, partnership – why is the dominant model, adopted by the overwhelming majority, functional and top down with the troops under the command of a single leader: in other words, an army? Why are the dominant metaphors around competition and warfare?
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I'm kicking myself for failing to mention the most notable exception to the general business school neglect of systems thinking – the wonderful Russ Ackoff, the Anheuser-Busch Emeritus Professor Management Science at the University of Pennsylvania, to give him his full title, whom I met several years ago in London on a promotion tour for his perky Management f-Laws, published by the enterprising Triarchy Press.

Ackoff, who more or less invented 'social system science', was 89 then, and as full of ideas and provocation as a 20-year-old, only a lot wiser. It was one of most enjoyable interviews I ever did. (My two worst were both with Bill Gates, but that's a story for another occasion.) I was helpfully reminded of my omission by correspondent Barry Warr, who sent me this link to Peter Day's interview with Ackoff on his In Business programme of 17 January 2010, a few months after Ackoff's death. If you don't know Ackoff, or indeed if you do, have a listen – and there's the bonus of a comment from my good friend and colleague Stefan Stern, then the FT's management columnist, now at Edelman (whose excellent blog you can still read here).

Stern's view is that systems theory never took off because it was hard. I tend to agree. Although it has an elegant simplicity, and is eminently actionable, you have to get it first. Simple, as an engineer once explained to me, is not the same as easy. With something like systems, to get to that elegant simplicity, you have to go through stages where you first oversimply and then overcomplicate – and you don't know you're doing either. Not surprisingly, politicians and managers with short attention spans and horizons never get to getting it, and we're all suffering the consequences.

All of which is not Ackoff's fault, since never was a profound thinker easier or more entertaining to read. How we could do with his wisdom today.
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In the course of a fascinating BBC Radio 4 programme on finance and science (thank God for R4) yesterday, Andrew Haldane, the Bank of England's director for financial stability, made a remarkable admission. Before the 2008 crash, he admitted, no one was looking at the banks as a system; only at individual nodes in it, like Northern Rock.

No one has picked up on this – or else they don't think it's important, which would be even more depressing. Since 2008, Haldane has written some interesting papers looking at finance through the lens of  complexity theory, which the programme also drew on to reach the conclusion that scientifically speaking the present banking mono-culture was a recipe for system fragility. Something like Glass-Steagall, obediently repealed by President Clinton in 1999, should be reinvented to separate the casino and utility sides of banking. Without reform we are left with a banking system that is a nightmare Darwinism in reverse: the survival of the the fattest.

Why is systems theory so ignored? With a couple of honourable exceptions (let's hear it for Hull Business School), it's not taught or researched in business schools. Economics pretty much ignores it altogether. And that, of course, is a good part of the answer to my question. Being the study of wholes rather than parts, it sits uncomfortably with the atomised, individual actor view of conventional market economics; and its concepts are similarly foreign to the reductive, mechanistic assumptions underpinning conventional management.

There is are more 'political' factors, too. Because it's holistic (or 'joined-up') it appears complex, which puts off managers and politicians with short attention spans. (In fact, as the criminally neglected W.E. Deming showed, and many others have proved since, it is supremely actionable in business terms.) A systems view of organisations is incompatible with command and control, which doesn't appeal to the alpha-male commanders and controllers who claw the way to the top of most of our organisations. An additional disadvantage is that it recognises that outcomes are uncertain, which also discomfits those who want hard numbers even when they are guaranteed to be wrong.

Deming (originally a statistician and therefore careful with numbers) said that 95 per cent of a system's performance was attributable to the system itself and 5 per cent to the people, while management attention was exactly the reverse. Let's hope Andy Haldane takes the implication to heart.



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