Difference between Building Something and Managing Something

The ever enlightening Art Petty has a post over at Tanveer Naseer's blog that got me thinking.  What is the difference between building something and managing something?

To me, when you're building something that hasn't existed previously, there are a series of steps what you're building goes through:

1. Ok - what ever you're building is "Ok", meaning it solves the problem for which you're building a solution.
2. Better - The thing you've built solved the problem and now you've improved it.
3. Well - You thing does the job well.  For all practical purposes, that means you show it to people without apologizing.
4. Good - People are impressed enough with what you've built that they show it to other people and say it's good.

There are levels above good, but they are refinements that are distinct without necessarily being different.

Now, if you are managing something, it already exists.  Hopefully it's "Good", more likely it's "Ok" and could be made "better".  The import point is that it's purpose for existing has already been identified.

In this case, managing something is about refinement and continuity.  Maybe there are parts that are replaced, tuned or refined, but continuity is the defining characteristic.

Maybe it can be better thought of like this:  Building is about creation, managing is about continuing.  

Alignment in IT Management

Glenn Whitfield over at his excellent blog IT Business Alignment ask an interesting question CIO, 

No Leader Wanted. While I agree with a lot of what Glenn says, here is asking about alignment and 

alignment is a management issue. Is everybody going in the same direction? Leaders, by definition, do not go in the same direction as others.

My point isn’t to get into an argument about semantics, but one of direction. Company ‘leaders’ need a little management. When there are good times and everyone is flush with cash, it is easier to let people go in their own direction and not worry about the trade offs. We have had almost 25 years where that has been true and discussions were about possibilities that could recover any cost. That time is gone.

Now, discussions will be about trade offs. How much is something going to cost, where is the money going to come from and what has to be cut to pay for the project we go forward with. Many projects (over 60%) need to be cut. Considerations will revolve around what are the core initiatives that will move the business forward as a successful, ongoing enterprise. Those are the ones that will be funded. That will drive alignment.

Cutting 60% of the projects means people will not be spread so thin and the projects will actually succeed. Successful people will be judged on their ability to make projects succeed, not the possibilities they promise. Also, it means that many of the people with their own agendas will be corralled. Finances will dictate that there will be much more alignment than there is today.

Understanding what’s of core importance to the business and how to deliver it efficiently and effectively will be the calling card of the successful CIO. The successful executive CIO will talk about ROI and NPV in analyzing which project go forward aligned with the business.  ROI and how project will be paid for and pay for itself are what need to be discussed. That is what leads to alignment. 

Three Degrees of Separation

Pawel Brodzinski opened an interesting discussion about why executive management seems to be disconnected.  I responded with my previous post and both Pawel and Josh responded.  My perspective of why executive management seems detached is different from theirs, because I believe we approach the whole topic from different philosophical perspectives.  In my last post, I outlined management from the ground up.  This time I'll set my contextual perspective and then describe management from the top down.

Why Businesses Came into Existence

My outlook on business derives from why businesses first appeared and why they were structured the way they were.  The modern corporation came started in Britain in the early seventeenth century, when wealthy, land owning nobleman  realized that if they gave up a portion of their capital and entrusted it to an organized group of intelligent, motivated and hungry workers, they could make themselves much wealthier. However, to make sure that these workers didn't run off with their money, they set up structures and oversight and put two or three of their own people, the executives, in charge of running their businesses.  

The CEO, CFO and Chief Legal Council could be put in and with little background experience in the particulars of the business, they could ensure capital was effectively deployed, dividends were paid.  They did not have to know the working details in order to effectively manage it.  

Few businesses had over 500 people and with three people, the business structures were created so that skills and goals could be organized into departments to make the work most effective.  The people in those departments (operations, sales, accounting etc.) needed to know the details of their area, but those people could be promoted from within the ranks.

So Why Do You Say Executives Are Different? (Degree of Separation One)

An executive's responsibility is to people outside the business.  Whether it's Board Meetings, sitting on Boards of other companies to create synergies, conducting financial analyst conference calls, meeting with bankers or participating in closing large sales; their focus is external to the business.  When they allocate their time, depending upon the type of business, 30 to 60% of their time is devoted to people external to the business.  

The Importance of Structures (Degree of Separation Two)

This is as it should be.  Within departments, there are managers, usually several layers of them.  One problem with setting up structures is that if you don't respect the structure, you render it useless.  As an executive, if you say something to someone at a lower level in the business that contradicts what their manager has told them, you have rendered the structure ineffective.  

The difficulty for an executive is that they don't know what mid level managers have said.  They can't check with them every time someone asks them a question.  So what are they going to do?  Either, they limit access to pleasantries in the hallway and large company events or they find themselves pulled into the quicksand of internal management that they are paying mid-level managers to do.  Additionally, they then cannot focus 30 to 60% of their time to parties external to the business that need attention if the business is going to continue to grow.

Where They Come From (Degree of Separation Three)

It's a taboo subject, but there are classes in the US.  Historically, less than 20% of the population went to university.  A university degree from an elite institution was a clear socioeconomic indicator.  Even though the number of people going to university has increased tremendously, your college degree still largely determines who you'll work with, who your friends will be and the jobs you'll take.

If you graduate from Yale or Harvard or Princeton or Stanford, you'll enter the business world in a way and level that will determine much of your future career.  If you graduate from a state university, that will also determine the way, level and expectations people will hold of you.

Very few people start in the proverbial mail room and work their way up to executive.  I'm not saying that it never happens, but it is pointed out as news when it happens specifically because it is so uncommon.

Those are three degrees of separation that make executives seem distant.  They have different responsibilities, different structural concerns and different background and expectations.  

This is why I think inquiries into alignment are so interesting.

Are Corporate Executives Clueless?

Pawel Brodzinski brings up some excellent points in his blog about why top management often seems disconnected from what's happening in their businesses.  While he might be right that they are disconnected, I don't believe they are as disconnected as some think and that there are good reasons they never seem to be available.

In my experience, executives have very time constrained schedules and rarely ever know more about the details of what is happening than the people working for them. This is not a cut on executives, it is reality. Let me explain why I say this.

When an someone comes into a company, they are brought in to do a particular thing. Maybe it's technical, maybe its not, but at some level, junior employees are brought in to lay bricks. Determining who's productive and who's not is as easy as counting the number of bricks they lay.

Our brick layer is productive and get's promoted. He's now managing 10 brick layers. It's still very easy to determine if he's productive. But now, let's promote him one more time. He's now managing 10 people who are in turn managing 10 other people. You can see it's a little more difficult to judge productivity, but his job is still focused around laying bricks. He is in middle management and is still responsible to know about brick laying. But let's promote him one more time.

Now our man is an executive. One of his departments lays bricks, but he's overseeing 5 other departments. One digs moats, another mines stones for the bricks, another ships the bricks, another handles the international taxes involved in importing bricks and exporting castles and then there's this other god awful depart that does something called IT.

Our executive might have experience in one area, brick laying, but he is responsible and really needs to focus his time and attention on the four other areas. And when people working for him come to him to make decision, they spend all their life in the details and give him a 5 minute summary from which he has to make decisions consequential to the business about an area where he's had 5 minutes of preparation. And there are 10 other things going on that he needs to prepare for.

Most executives would love nothing better than to be able to focus on things they know about and build deep relationships with people whose knowledge and dedication are crucial to the company. Unfortunately, that is not reality for executives in large companies that I've seen.

What is Work? 3 Levels of Work

Physics defines:

Work = (Force or Energy) * (Distance)

In the work world, it means we must apply energy to something and move it in the direction the business needs it to go.  If we take the simple example of building a building, hopefully I can articulate my three levels clearly.

3 Levels of Work

1. Work - This is energy applied to building the building.  For example: digging foundations, putting up girders, building walls etc.
2. Support Work - This is energy applied to things which are necessary to build the building, but they do not infact help building the building.  For exmple: buying insurance, filing government paperwork, corporate negotiations, buying office supplies etc.
3. Make Believe - This is energy applied to things that are not involved in building the building or in support of building the building.  People might make believe this is necessary to building buildings, but infact it is not necessary.  

How can you tell if what you're doing is work, support work or make believe?

Imagine there's a dail that measures how complete the building is.  Before the building starts and before anything happens, the dial is at zero.  When the building is completed and ready for people to walk in the door, the dial is at one hundred.  You measure the amount of work you actually do by how much you move that dial from zero to one hundred.

If, no matter how much energy you apply, you are not moving the dial or supporting someone moving the dial, then you are doing make believe.  

If the energy you apply moves the dial, then you are doing work.

If the energy you apply supports or enables someone to do work, then you are doing support work.

Are you moving the dial and working or supporting or are you make believing?

Firms Urged to Try and Keep Staff

This story from the BBC should give everyone cause to pause.  While it came out a couple weeks ago, it only recently came up as part of discussions with UK personal.  While the idea is well meaning, the reality is that firms have to operate within budgets.  If they are not generating enough revenue, they cannot carry staff.  While no one enjoys laying people off, if cash-flow cannot cover expenses, choices must be made.  Even if they are driven by short-term thinking, if you cannot meet obligations, there is not long term.

Redundancies should be a "last resort" as firms trim costs in the economic downturn, the Chartered Institute of Personnel and Development (CIPD) says.  Planning for recovery by keeping staff is a better approach, it added, saying an average redundancy costs employers £16,375 before any savings are made. 

The CIPD has put together a formula to estimate the financial cost of redundancy:
(n × r) + (x × h) + (x × t) + ny (h + t) + wz (p - n)
n = number of people made redundant
r = redundancy payments
x = number of people subsequently hired
h = hiring costs
y = percentage quitting post redundancy
t = induction/training cost
y = percentage quitting post redundancy
w= average monthly staff salary
z = percentage reduction in output per worker caused by lower morale
p = number of people employed prior to redundancies

Source: CIPD

Layoffs should be the last resort, but however compelling the equation is in theory, it doesn't change the difficult reality many firms face.  No one like making these types of decisions, but the decisions must be made.

Understand the Long Term Effects of Decisions

Many times people get so focused on what is happening day to day that they miss the larger, slower moving things.  If you are going to intelligently make long-term decisions, make sure you understand the long-term direction of the business you work in and the industry that it works in. [Editor: You don't really want to ask that question, do you?]

Today Michael Lewis has a wonderful article explaining how decisions made by John Gutfreund, the Sr Partner and CEO of Salomon Brothers, changed finance.  

When investment banks were private partnerships, the partners who ran the firm were risking their own money.  Their interest were aligned and they balanced the opportunity to make a profit with controlling the risks their traders were taking.  When Salomon and then the other investment banks IPO'd, it absolved partners/CEOs/directors from having to understand the risks by transfer that risk to stockholders.  People running the firms kept the profits, while the investors and ultimately the goverment held the risks.   

Now, there are no investment banks and Wall St is essentially dead.  The article is a wonderful and humorous description.  Michael Lewis became famous with Liars Poker and he continues the tale with this article.

http://tinyurl.com/EndWallSt

It's a wonderful article relating how a CDS is similar to Fantasy Football, how Steve Eisman worked out the perverse logic that subprime loans were going to be the ultimate undoing of the financial system while sitting in a conference for subprime brokers, and includes the delicious line: "You can’t really tell someone that you asked him to lunch to let him know that you don’t think of him as evil."

It's a wonderful example of looking at how people didn't look at the direction of the industry they worked in, the companies they worked for or what was happening in the world.  As the world changes over the next few years, these will be important questions you want to ask.  If firms like Goldman Sachs, Merrill Lynch, AIG and others can be brought to their knees, how are you and your firm and your firm's marketspace doing?

Photoillustration by: Ji Lee