By way of example, several years ago I sold tools at Sears. Sears had spent decades building consumer confidence, particularly in their Craftsman brand. If you bought a Craftsman tool, and it broke for any reason, they replaced it, sans receipt. As a result, this warranty was transferable - there were no questions asked. While this policy certainly did not extend to every product sold at Sears, it did exemplify a commitment to service and quality: in the words of one older person I talked to once "if you bought it at Sears, you didn't have to worry."
As time went on, Sears was able to increase profit margins by slowly restricting the tool warranty, and using crappier parts. The obvious problem was that once Sears lost its reputation as a "you don't have to worry about it" store, it had to compete with stores like Wal-Mart on price.
The interesting problem here is not the Sears strategy, but the fact that it takes years for the effect of reduced quality to become obvious: in the short term, consumer confidence in the brand is still high, so the worse products are bought for the same prices, under the assumption that the quality is still high. By the time consumers on the average figure this out (when your drill wears down in 3 years instead of 10), someone that made the change has been able to demonstrate clear savings to the company and move on.
Several people have suggested solutions. The first one I hear thrown around is "get rid of executives." I think this is shortsighted in the same way that getting rid of a good IT department is. Certainly some executives are useless, but "get rid of the bad executives" is vacuous. A more compelling solution is to create incentive structures that encourage "bad executives" to be good ones, such as incentives which outweigh the short-term gains gotten by reducing, say, IT spending. For instance, I've heard it suggested that companies use long-term equity, say 15 years out. I'm not sure how that squares with moving from company to company, but it's interesting.
This is not to say that the Sears quality-first business model was sustainable, merely that there was certainly a tradeoff, the effects of which take a long time to see in total.
Things like time developers spend doing traditional IT tasks are clear to developers. But it's amazing how little of that is visible to executives. They certainly don't get an hour-by-hour breakdown of where developers spend their time. And the time to develop software is notoriously difficult to estimate even using the best techniques out there -- and most people just eyeball it. So executives really can't quantify the loss of productivity, they just hear programmers bitching.
They must have made an informed decision.
The general heuristic of pointing out information asymmetries even when they seem obvious is a good one. In fact I'd say my experience has been that most people could benefit by explicitly saying more obvious things. The reason people don't is for fear of looking bad.
The stipulation to accommodate moving from company to company could be an artificial constraint. The desired outcome goals of the company outweighs the desired outcome expressed by any individual executive. Incentive structures can reflect that.
There are many ways to accomplish this, but the reality is shareholders who wield sufficient power to enforce this goal-seeking simply are not interested in doing this. That's the real nut to crack. The incentive structure of owners and not just employees subject to the agency problem is part of the spectrum to consider.
Incentive structures all up and down the line of authority are a real tough design problem.
>For instance, I've heard it suggested that companies use long-term equity, say 15 years out.
Not going to work, they will just trade whatever they got on some secondary market.
Ignore the e and pronounce it "lows" as in "highs and lows".
Source: Lowe's radio commercials I've heard.
Most managers wouldn't dare tuch you so long as you say for every dollar put into the department, we save the business x dollars. You could even argue the margins too.
For example, IT is generally seen as filling a set of necessary roles where each person is more or less interchangeable. Sales is generally seen as incremental value adds, and sales people get paid accordingly.
So how can you get seen as an incremental value adder if you're working in IT? Simple: start projects and clearly explain the impact to the bottom line. If you show the executives that you've saved the company $2MM/year forever, and that project wouldn't have happened if you hadn't dreamed it up, that's going to get recognized. Even at large, highly bureaucratic companies.
In the last ten years Connecticut Light & Power made major cut backs on trimming the trees near its power lines. The state got slammed by a huge snowstorm last Holloween and a huge portion of the state lost power - for as long as 10 days. Not only did CL&P suffer a financial and public relations disaster in the aftermath of the storm, they decided to double their tree-trimming budget for the next year. But this just led to further problems - people who weren't used to the power company coming in with chainsaws created a fuss at town meetings about CL&P removing or damaging their trees, leading to more ongoing PR problems.
If your managers can barely describe what you do, or how you do it, then your job is just asking to be cut.
When I show my clients an update, I always focus on what "looks" or "feels" different with the user experience. I wouldn't (maybe couldn't even) convey the awesomeness of all my fandangled SQL subqueries.
Then I realized the problem with it.
Now I still try to do things right, and then try to make sure that a few key people knew what happened.
Step 2 is to have other people brag about you.
One of the things I've learned from Tom is to keep track of how I spend my time. It is tedious and frustrating, but not unlike dieting: without data, you just have no proof. If I had found myself in the situation that the OP describes, my first reaction would have been to keep a running log of every task I had done, including start/stop time and a description of the work done. I've written scripts to do this in the past that generate PDF timesheets -- you could probably use Trac somehow. I'd keep this stuff on a device I owned, and bring the logs to my reviews. Yes, this adds to the stress. Yes, you'll get criticized for it. But when someone who has no clue why the carpets are always clean starts swinging that axe, you'll be wearing armor.
Just my 2c. :)
Most of the added budget has gone to bloated off the shelf software applications, retaining duplicate/redundant staffing from a pseudo-merger, and mismanaged consultants.
The OP has added a lot of facts in replies in this post, indicating that his staff was relatively lean (1 staffer for every 50 users).
But be careful in drawing too many conclusions from one instance of anectdata.
Much like there being a "healthy" amount of unemployment (~3%, I recall?), there's a healthy amount of smaller items not met. It sounds like the company was overpaying for IT.
"Trading boredom" sets in. The executive's job is to Make Decisions and to gamble with the company culture and operations. In order to feel useful, executives pull this shit. Like "saving money" by gutting the IT organization.
What's worst about this is that the executives who do this sort of thing rarely suffer any consequences. They shift blame to subordinates whom they can fire, and if the heat is turned up on them, they move on to other jobs. The employees and the owners get fucked, but executives get to flit about from one cushy job to another on account of building a web of connections that makes them effectively invincible.
One memorable anecdote I came across was about an animation artist who was in charge of animating the queen for a 3d chess game. Because he knew his manager's weakness he threw in a duck... Yes, a duck. Fully animated with sound effects and everything.
Sure enough, when he showed his work to his manager he said "It's perfect, but get rid of the duck."
So maybe the moral of this lesson is that when things are running 100% smoothly, it's wise to toss your micro-manager a bone by doing something intentionally a little wrong to give them something to meddle with. ;-)
I've often had the opposite problem: companies where the CEO is so disconnected from the company (usually by working remotely 80% of the time) that the company doesn't have direction and languishes.
To counter this, my friend purposely leaves 3-4 fixes that he intended to complete all along un-done for the inspector to notice and fixate on. Then the inspector gets to look useful, the buyer gets a good house, and everyone's happy.
Consequently, I hate status meetings and standups and the various so-called Scr(ot)um tactics used to make people feel watched. I realize they're probably necessary as an occasional annoyance, but I think they're an unnecessary pain in the ass most of the time. Their real purpose is to intimidate people into being productive, and that Theory-X bullshit doesn't work in the modern economy.
You might want to speak to your manager next time something like that is happening, because there's no way it can be good for your productivity or the other people on your team. It's certainly not a normal practice. At the very worst, if someone isn't pulling their weight they should be dealt with in private.
Can you really say they are worth it?
Yeah, I agree that I'd be annoyed with standup at any time before 11:30, but 11:45 is perfect and basically doesn't interfere with anything. In a certain sense it doesn't cost any dev time at all if you take it for granted that your developers should stop coding midway through the day and eat lunch. (We absolutely do not eat lunch during standup - we have standup, then we physically leave the office to go eat.) Sure, some days we end up in endless meetings which mean we're stuck in the building eating takeout, but that has nothing to do with standup.
PS: You do lose a little time gathering, and people generally spend some time organizing there thoughts etc. But, keeping track of a short synopsis is useful, as is knowing what other people are working on, and most importantly when someone get's stuck working on the same things for a few days. It also adds a lot of pressure to get at least one thing done every day, which many people slack on.
The manager in the example you gave was indeed taking things a bit far.
This sort of daily communication can be really helpful. But it's also really easy for it to devolve into a long meeting that's much less useful. And if management is using it to apply pressure to get more work done, they're making a huge mistake.
... with their CVs exposing the fuckups as accomplishments: "Successfully managed a cost cutting campaign, sparing the company 2 bazillions in IT costs". The previous company won't admit it was actually a disaster.
Engineers being culturally complacent and not willing to make a fuss is precisely why companies like Google, who have revenues per employee twice as high as say Goldman Sachs, get away with paying their engineers a fraction of what financial professionals at Goldman get paid.
It's the CEO-pay debate all over again. No one who actually understands large companies would argue against the notion that it's worth $10 million per year (several times that, actually) for a company to have a good CEO over a bad one. On the other hand, shitty CEOs are paid highly just for belonging to the class of people considered eligible to be CEOs, and increasing executive compensation has paradoxically reduced quality of service: http://michaelochurch.wordpress.com/2010/11/22/pay-more-get-...
Also, I think lightweight management is generally better and I don't see why people find my insinuation that most executives should be working 2 hours per day to be an insult to what they do. If I were at a point in my career where I could legitimately justify the kind of compensation that I make now with a 2-hour workday, that would be awesome. I could go back to school, or volunteer, or take another job. I don't know why people in our culture equate working long hours with being productive. I equate it with being so unproductive that people have to make monstrous sacrifices just to reach par (although the reality is that most people are plenty capable of being productive, and the long hours come from social expectations).
1/ I don't think anyone is worth 10 million/year no matter how "good" they are.
I sure believe a good CEO should be paid adequately but those are just ridiculous amounts, and the CEO is only one part of the puzzle, even if important. As a CEO its hard to screw up (even thus many do), its hard to be very good, but its easy to be in the middle. Like most jobs in fact.
2/Working 2H a day certainly is an issue. Simply because it doesnt mean you're ultra efficient, obviously. You need more than 2H a day just to be able to talk to people in the company. One shouldn't put extremes like that as they can be misunderstood.
It's ok to work 5h-7h a day, or even less some days if you're efficient. But 2H, is just not realistic, you can't even speak that fast.
That's the idea behind high executive compensation. I agree, it very rarely works out quite that way IRL, but lots of people are quite attached to this fantasy.
PS: Plenty of stocks have dipped when well known CEO's died or left.
Viscerally, I agree. On the other hand, if we go back to 1995 or any time before it, no 25-year-old programmer was "worth" $100,000 per year. Now that's a typical salary for a strong engineer. I'm cautious about saying people "make too much" money because, ultimately, no one really knows what work is worth. That's why we have markets, and they aren't perfect but they do better for a lot of things (not all, and I'm actually pretty far left by US standards) than any kind of central command and analysis humans have ever devised for that sort of thing. Societies need infrastructure (environmental controls, welfare state) to correct imbalance but markets work. Usually. Executive pay in large companies is set by a parasitic social elite rather than a real market, so that's somewhat of a different story, but I'm not sure where I draw the line.
The difference between how a company operates when there's a good CEO vs. a bad one is easily $10 million, because CEOs have multiplier (or divider, when r < 1) effects and a billion-dollar company is in play. I don't like the message that is sent by having CEOs make 500 times what average workers do, but I wouldn't doubt for a second that the difference between a good CEO vs. a bad one, in a large company, is more than 500 times as impactful as hiring or firing an average worker. My issue with the high pay is that CEOs get it even if they turn out to be total wankbaskets.
It's ok to work 5h-7h a day, or even less some days if you're efficient. But 2H, is just not realistic, you can't even speak that fast.
Why not? Perhaps I'm being starry-eyed and idealistic, but I think there's easily a factor of 10 in variation in a person's productivity in an hour of work, and that properly motivated people can get a lot done in a short time period. Looking back over my career, I'd guess that 90% of the value that I've added occurred in 20% of the time. I think a lot can be accomplished with little time, and why not? If I were offered a $2-million job, the first thing I'd ask is if I could work 20 hours per week for half of that salary. It'd be a win-win bargain, because I'd be getting the time off, and they'd be getting 70-80% of my full-time productivity.
The purpose of the 8-hour day is to enhance the likelihood of capturing the 2 to 4 hours in which the person is actually highly productive. Companies fear (and justifiably so) that if the work expectation were a 3-hour day, people would give their best 3 hours to their personal side projects or interests and let the company have the leftovers. So they mandate a day that stretched from after breakfast to before dinner to maximize the chances of getting peoples' productive hours.
I don't think the solution of keeping people corralled in an office for what is, in winter, a full day is going to hold up much longer. I think the post-managerial vision of Valve is the future, and that once this is established, companies will be more comfortable trusting people to work 4 hours in an average day but get shit done. (Of course, there are times when it's appropriate to work 14 hours per day, but those conditions don't, or at least shouldn't, last for long.)
To make it clear, I'm not advocating laziness here. Working an effective 4-hour day is a lot harder and less lazy than working the sloppy 10-hour day that is typical in the professions.
The market for CEO compensation is clearly not very efficient. It's a big risk to put someone into the job to see how they do, so there isn't a lot of experimentation; few people get to build up experience. So the supply is very restricted, and this will inflate the price of labour quite a bit. There's not a lot of hard science between how applicable experience in one company or type of company is transferable to another, so even CVs can't be relied upon. And performance and actual value created may take some time to show up; there's a lot of things that a CEO could do that seem to create short-term value at long-term expense.
The biggest reason CEO compensation is so high is because they are in a pyramid peak position where they can skim off a small percentage of a lot of people's productivity and claim it as their own. In effect, it doesn't "cost" a lot for a large corporation to pay its executives a lot of money, compared to all the other costs.
I wonder if we'll ever have virtual economies / simulators developed enough to be able to learn / train / evaluate prospective company leaders in the future.
With employees the heuristic is (very roughly) market price + VORP (value over replacement player). If an average programmer typically adds $300k of value to your company, and market price for an average programmer is $70k, and you find one who is twice as effective-you can pay them a lot more than $140k.
> The biggest reason CEO compensation is so high is because they are in a pyramid peak position where they can skim off a small percentage of a lot of people's productivity and claim it as their own.
This isn't a bad thing. If the CEO can boost the average employee's productivity by 1%, that can be enormously impactful. The difference between a CEO who makes a 1% impact and a CEO who makes a .5% impact translates to huge sums in large corporations.
So assuming that we had the ability to distinguish between good and bad CEOs, and that good CEOs were rare, it would certainly make sense to pay good CEOs huge sums and average CEOs much less. Unfortunately as you said, no one has gotten good at evaluating CEOs yet.
As for time, I know in many companies people "work" many hours which consist of non-work chatter, coffee, etc. I'm talking of actual real work time. You can work 2H and sit 8H, then I'd say 2H work is not enough as the actual work discussions take more than that. Of course some barely even work 1H per week. But they don't get anything done, so its not that they're efficient. It's that they don't work.
Unfortunately, they're rarely content to work 2 hours per
day at their cushy jobs.
Executives as depicted are however the general standard for most companies. They generally have never created any company from scratch.
Startup founders are in a different class because there's actually 8+ (sometimes 14+) hours of work to be done in a day in a company that's fighting its way into existence.
> As for executives, they're disciplined, they can enjoy
their easy jobs and high compensation and accept the
boredom associated with rarely being needed, because if
things are running well, they aren't operationally
There really isn't much more I can say other than to quote Twain: "He who holds a cat by the tail learns something he can learn in no other way".
Go hold a cat by the tail. Then come back and re-read your post.
The fact that IT gets cut does not mean the manager is bad. You work in IT, so I'm sorry I have to break this to you, but sometimes the universe does not revolve around IT. Sometimes there are more important divisions, and sometimes IT expenses have to be cut.
There's not enough detail in the article to know if the manager was good or bad.
Sounds like a bad executive to me.
I never implied that there aren't good managers and executives, but only that most of them aren't, because most of them get caught up in "boredom trading" that doesn't solve problems, but is just managerial action for action's sake.
Second, maybe IT was running so smoothly previously because it was bloated, and was a huge drain on company resources. Maybe it was running smoothly because a bad manager refused to put a limit on anything, leading to a division whos costs were completely out of control.
We have no idea, because there are no details in the article about the company, or about the IT spending before OR after the cuts.
"Of course, it all went to shit. New employees would go a week before they had machines, phones, passwords, and ACLs. Printers ran out of paper, projectors ran out of lightbulbs, servers ran out of storage, networks got misconfigured, and so forth. The total time lost and wasted across the whole company was most certainly greater than the savings of laying off the expensive and skilled IT staff."
The guy might be a bit biased but it's completely clear from his article that even though he might not have exact numbers the company was much better off(not only in terms of total profit) with the old IT department.
Are you a manager?
All we know from the article is that IT was worse off. But we have no idea how the company as a whole is doing.
Maybe you aren't aware, but most companies consist of more than the IT dept.
You're taking this awfully personally, I'll ask again do you do in some sort of managerial position? Do you have some personal experience with this sort of thing?
Ok.. tell me about those employees. How much do they get paid? Minimum wage? What do they do? Do they even require a desk?
A week to setup a desk that the employee doesn't even need because they are required to travel constantly is not a problem.
You're taking this awfully personally
I'm not taking any of this personally. You're just sensitive because someone is suggesting that an IT dept might have required cuts.
Geez.. for people who are so scientifically-minded, you sure do seem eager to take everything in the article on faith.
The employees were expensive software developers, electrical engineers, RF signal electrical engineers, and microelectronics design engineers. There probably was one person making minwage. She was a very sweet developmentally disabled girl who delivered the mail to our desks.
In fact, since the odds of this exact management team starting a new company in exactly the same industry with exactly the same business model are close to zero, I think we can agree that it would be impossible to learn anything from this story even if we DID know all the details.
It's not a formal proof. It's a narrative of a general pattern that we might want to learn from. If we can learn from narratives that are completely false - raganwald's excellent posts come to mind - then surely we can learn from narratives that are not scientifically rigorous.
After IT was cut, he says it would take a week before a computer was on their desk.
That sounds bad. But we have no idea what the company does, so we don't actually know if this is a problem or not.
Look, every division is not critical, and sometimes that division is IT.
We have no idea how much the inefficiency costs or how much was saved by the cuts. So we have no idea if this was a bad OR good thing for the company.
That's true. The description of the company does lend itself to the belief that it was sufficiently large enough to make these things a problem. If you have people working in cubicles there is, more than likely, a need for them to have a computer, phone, etc. While it might be possible for them to not those tools, I would expect a different style of working environment if office work were not a significant component of their job.
> We have no idea how much the inefficiency costs or how much was saved by the cuts. So we have no idea if this was a bad OR good thing for the company.
From the sounds of things, they didn't have a problem with inefficiency prior to the cuts. It sounds very much like they had just the right number of just the right people on hand to keep things running smoothly. At that point, it's like you have an engine and decide, I really don't need all this oil, let's get rid of some of it. You might be spend less on the oil but then you have to deal with the increased wear on the rest of your engine or risk having it seize up completely.
Yeah, we don't know the real size of the company or what the company did but, the kinds of things he's describing will lead to a degradation of overall morale and you'll find that "broken window syndrome" starts taking over. You'll find that the IT people hate everyone and that everyone start's hating IT which makes the whole situation worse.
So the question is, do you save a little money now to find you have a massive expense in lingering in the future?
He includes no details about the IT staffing levels in the company, what the budget was, the size of the company, what the company did, what the employees did, the reason for the cuts (other than speculation), or anything else.
For all we know, it was a company with 5 non-IT employees, and a staff of 50 IT people who flipped a coin once a day to decide which of 1 of them was going to work that day.
Prove me wrong. How many people were in the IT dept? What was their budget? What did the company do?
You have no idea.. because there are no details in the article. So you do not have enough information to say if there was an efficiency problem.
FOAD, Hope that Helps, Have a Nice Day.
Disclaimer: I'm an observant end user who has worked in organisations ranging from 70 to 1200 staff total, and who has seen huge differences in basic it function. As others have pointed out, the cost of the less efficient IT support is 'hidden' in other budgets and in people 'just getting on with it'. I've seen newly appointed people share logins with established people just to be able to do anything which is an obvious security problem. My current employers have noticeably good IT support, but need to make savings, so I am worried.
You're right on that, we don't have any idea about the total size of the department or the total size of the company as a whole. So, I'll grant you that there might have been some room for cuts in the department but, that really doesn't matter for his point.
What we see is that prior to the reorganization everything worked and that after the reorganization it didn't. This looks like someone pruned way too much out of an area that they didn't fully understand. The only thing we have to work from the assertion that:
"The total time lost and wasted across the whole company was most certainly greater than the savings of laying off the expensive and skilled IT staff."
I am making what I would consider educated guess on the scale of the organization and the impact of the changes. That impact would indicate that they now have insufficient staffing in IT and inefficiencies elsewhere as a result.
WHAT?! You're making a guess based on what? THERE WERE NO DETAILS. It's impossible for that to be an educated guess.
I didn't write that, but it's clear to me that they're basing it on the results.
People match stories against their own experience. Any half-decent sysadmin probably has a story or two like this one. So yes, we do have something with which to assess the credibility of the story.
It would appear that you do not share that experience, though.
When you can't precisely measure how much is lost by doing something half-assed, it's probably worthwhile to do it right.