It takes time and experience to learn the job, not so much because it is difficult to perform the particular task, but because it all has to be coordinated. [from “Max Weber: On Bureaucracy” by R.J. Kilcullen, 1996]
Large organizations have a hard a time implementing organizational change because coordination of work is harder than the tasks alone. This coordination of work is rarely documented; the process is normally situational and varies more than most process people would like to admit.
(Recall the Hyper-Modernists who must make everything visible to those who step in from outside, even if it means gross inefficiencies.)
The process revolution of the past decade has been driven by the desire to penetrate this opaque layer of process. Companies like PeopleSoft, SAP and Siemens made good coin by creating a ERM that forces companies to rationalize their internal coordination. A friend of mine, an expert in PeopleSoft systems for university financial aid systems, says that the disaster of the product is that if you don’t have set processes (ÃƒÂ la ISO 9001 or the CMM Level 2) it forces a standard set on you.
Where’s the problem? Don’t companies need to rationalize their operations in order to have consistent and continually improving product?
Why shouldn’t we implement the Best Practice across the entire corporation?
Maybe a story will help.
BIG Insurance Group (BIG) wanted to automate the application process, reducing the number of forms that had to go back to the human actuaries. Working in the standard field of auto insurance, the managers felt sure that this would be a major win for their corporation. After several months and millions of dollars, IT finally delivered a product. When implemented, it reduced the load going back to the human workers by a whopping 4% or so. There were just too many variables, too much that the people working in the back office had created culturally to handle a massive amount of variation. They didn’t need to simply automate an application approval process: they needed to retool their entire application and approval process, including doing high-level anthropological analyses of the coordination efforts in the central office.
Progressive may have the most IT-intensive operation in the auto insurance industry right now, and the level of complexity that they deal with is simply staggering. According to a 2004 study of Illinois insurance pricing by InsurQuote and McKinsey, for a risk for which BIG had less than twenty price points in Illinois Progressive had 114. They have over a billion pricing cells, ten times as many as second highest. This is a level of integration of IT that is categorically different.
Coordinating of other people’s efforts is the essence of management. Managers coordinate the efforts and work of others, even while adding value of their own. IT staff rarely value coordination — comes from suffering under managers too small to add value to their work.
We take massive risks when we rationalize the complex, multivariate processes inherent to any culture. By reducing their massive complexity to a single Best Practice, we run a large risk of bringing down the entire organization as the many little adjustments and changes can no longer be made. Which is exactly what unsuccessful ERM implementations have done.
Image Credit: © alphaspirit. Shutterstock.