29 Sep 2016

KPI gaming

Came across this excellent, in-depth article on the failure of Target Canada. One of the issues was that products were routinely out-of-stock in the stores (leading to upset customers) while registering as in-stock in the company's SAP system:
At one point, Target Canada had printed a weekly flyer in which nearly every single item featured on the front cover was out of stock.
Eventually, they find one of the causes of the problem:
A small group of employees also made an alarming discovery that helped explain why certain items appeared to be in stock at headquarters but were actually missing from stores. Within the chain’s replenishment system was a feature that notified the distribution centres to ship more product when a store runs out. Some of the business analysts responsible for this function, however, were turning it off—purposely. Business analysts (who were young and fresh out of school, remember) were judged based on the percentage of their products that were in stock at any given time, and a low percentage would result in a phone call from a vice-president demanding an explanation. But by flipping the auto-replenishment switch off, the system wouldn’t report an item as out of stock, so the analyst’s numbers would look good on paper.
Chapter 12 of Agile IT Org Design is on metrics. It argues that we have to be very careful of elevating measurements to targets and KPIs. Case in point. 

12 Jul 2016

Bimodal IT and two-speed IT miss the point

We can't trade-off reliability for speed in the medium term. Models that make this assumption are inherently flawed. If you really want to think in terms of a two-pronged approach, think strategic and utility as I describe in my post on business-capability centric orgs. Martin Fowler seconds it.

5 Apr 2016

How Product-Centric IT Disrupts Portfolio Management

One of the key functions of Project Portfolio Management (PPM) in IT is that of allocating finite funds to a subset of projects that vie for funding. When it works well, PPM becomes an effective agent of capital allocation within enterprise IT by funding promising projects and terminating underperforming ones. In principle, this is not very different to how a venture capitalist might manage their portfolio by investing in promising ventures and freezing funding or writing off investments in ventures that don’t show promise. But in practice, PPM tends to work very differently in a typical setup. Read more

16 Mar 2016

Decision Records For Accountability

Although we need to arrive at an operating model that allows for autonomy, mastery, and purpose, we need to balance it with mechanisms for accountability and alignment. This has to be done for each dimension of the operating model.
In the area of decision making, we allow for autonomy by letting outcome owners have decision rights while others who support the outcome have input rights. That said, we have to ensure that people with decision rights do not disregard the opinions of those with input rights. Decision records are the balancing act. They provide a transparent audit trail for important decisions.

Recently, Michael Nygard of Release It fame argued for architecture decision records. That's one more reason to consider them.

10 Mar 2016

Metrics, Targets and Incentives

Chapter 12 of Agile IT Org Design is on metrics. It argues that we have to be very careful of elevating measurements to targets and elevating targets to incentives. In this post, I'll continue to add relevant articles around the internet as and when I find them.

Powerful People React More Unethically to Incentives (HBR, March 2016)

Martin Fowler's infodeck on sales commissions at Thoughtworks

Telling stories of incentive malfunction across the spectrum of business.