by Donna Fitzgerald | February 12, 2010 | Comments Off
I recently had a few moments to particpate in an email discussion with my collegues. We were tossing around ideas about how to reduce costs (a topic everyone is focusing on in this day and age) and I found myself putting my finance hat back on and saying — Beware falling into the trap that Peter Senge calls “shifting the burden”. Essentially the logic is simple — I decide that you should be responsible for something instead of me. That takes work or cost out of my side of the equation and if I have I have more power than you do with regard to the transaction then you get stuck with the “burden”.
From a systems perspective this situation should never be done lightly since it’s the epidome of short term thinking. How much margin can you squeeze out of your suppliers before the quality of the product starts to degrade? How much margin can you squeeze out before there’s insufficient reason for them to remain in business? In the short term the answer is generally enough to make it worth while. In the long term the situation can begin to become unstable.
In many ways this rather darwinian process is a natural part of the economic system and insures that only the fit survive BUT when this same logic is applied inside a company the results aren’t the same. Many years ago I reviewed a business case for an ERP system and one of the savings the business case claimed was that it would eliminate the need for someone on the receiving dock to officially take receipt of the goods and enter it into the accounts payable system. Instead through the wonders of technology the person ordering the goods would enter it into the system themselves. Sounds good doesn’t it? A headcount removed from the equation. The problem is that it was done by transfering work to a more highly paid individual who had little desire to fill out the paperwork. Of course the business case didn’t recognize this cost transfer because exempt employees are always assumed to have infinite capacity since they aren’t paid by the hour. The problem with this thinking is that there is never an accounting for the fact that there is a productivity decrease on the other side of the equation.
The underlying error in this thinking is the failure to understand total lifecycle cost. In theory when we make a change we need to examine the process from as close to its inception as possible to the last ripple of impact it makes. On the plus side there is an answer that will help us improve this situation. On the negative side the answer requires some significant shifts in our collective mental models with regard to how we measure the value and the success of our projects and programs. I’ll be looking forward to exploring this topic more in future postings.
Category: Agile Organizational Development PMO Tags: Benefit Realization, Complex Adaptive Systems, Mental Models, Systems Thinking