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- Herausgeber: John Wiley & Sons
- Kategorie: Wissenschaft und neue Technologien
- Sprache: Englisch
DECISIONS focuses on how organizations can improve decision-making processes to improve organizational performance in a global economy. * Presents research related to problems associated with meeting requirements, schedules, and costs * Defines the scope of macro and micro decisions * Raises the issue of the role of engineering, manufacturing, and marketing in making organizational decisions * Includes references to Peter Drucker's studies on decision-making
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Seitenzahl: 598
Veröffentlichungsjahr: 2015
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DECISIONS
An Engineering and Management Perspective
Gerard H. Gaynor
3M Director of Engineering, Retired IEEE Life Fellow
Copyright © 2015 by The Institute of Electrical and Electronics Engineers, Inc.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey. All rights reserved Published simultaneously in Canada
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Library of Congress Cataloging‐in‐Publication Data:
Gaynor, Gerard H. Decisions : an engineering and management perspective / Gerard H. Gaynor. pages cm ISBN 978-0-470-16759-5 (pbk.) 1. Decision making. 2. Problem solving. 3. Management. I. Title. HD30.23.G374 2015 658.4′03–dc23
2014039299
To my family, friends, and those who stir my imagination.
CONTENTS
PREFACE
1 CONFRONTING THE REALITIES IN DECISION-MAKING
HISTORY OF FAILED PROJECTS
ORGANIZATIONAL DISCIPLINE
SOURCES OF DECISION-MAKING KNOWLEDGE
MAKING ORGANIZATIONAL DECISIONS
KEY POINTS
NOTES
2 MANAGING THE ORGANIZATION
MANAGEMENT MODEL
NEW MANAGEMENT PARADIGM
EXECUTIVES
MANAGERS
ENGINEERS AND OTHER DISCIPLINE SPECIALISTS
PROJECT MANAGERS
COMMON REQUIREMENTS FOR EXECUTIVES, MANAGERS, ENGINEERS AND OTHER DISCIPLINE PROFESSIONALS, AND PROJECT MANAGERS
KEY POINTS
NOTES
3 DECISIONS HAVE CONSEQUENCES
THE KNOWLEDGE CHAIN
EXTERNAL DECISION DRIVERS
EXPANDING WORLDWIDE OPERATIONS
DEALING WITH ACQUISITIONS AND MERGERS
RESTRUCTURING ORGANIZATIONS
INVESTING IN NEW-TO-THE-MARKET PRODUCTS/SERVICES
INVESTING IN NEW TECHNOLOGIES
ENTERING NEW MARKETS
DISCONTINUING A PRODUCT LINE
PROMOTING INNOVATION AND ENTREPRENEURSHIP
LOCATING BUSINESS OPERATIONS
KEY POINTS
NOTES
4 DECISIONS AND PROJECT SCOPE
ORGANIZATIONAL DECISIONS
LOW IMPACT TO HIGH IMPACT
SIMPLE TO COMPLEX
LOW COST TO HIGH COST
LOW RISK TO HIGH RISK
UPGRADE TO INNOVATIVE
CURRENT BUSINESS TO NEW BUSINESS UNIT
CURRENT BUSINESS UNIT TO A NEW GAME
DECISIONS IN FUNCTIONAL UNITS
LIMITED SCOPE TO EXPANDED SCOPE
STRATEGIC TO OPERATIONAL
KNOCKOUTS
THINKING BEFORE DOING
KEY POINTS
NOTE
5 MACRO DECISION TO IMPLEMENTATION
EXECUTING THE DECISION
USING TOOLS AND TECHNIQUES
DESCRIBING THE PROBLEM
IMPROVING IT PROJECT PERFORMANCE
ADVANCING PROJECT MANAGEMENT PRACTICE
MANAGING PROJECT CYCLE TIME
MANAGING WITH A SYSTEMS PERSPECTIVE
KEY POINTS
NOTES
6 MAKING PEOPLE DECISIONS
ENERGIZING THE HUMAN RESOURCE DEPARTMENT
HIRING PRACTICES
EVALUATING EMPLOYEE PERFORMANCE
ASSESSING EMPLOYEE POTENTIAL
PROMOTIONS AND APPOINTMENTS
SELECTING TEAM MEMBERS
SELECTING THE RIGHT PEOPLE
ASSIGNING WORK
TRANSITIONING FROM SPECIALIST TO MANAGER
SALARY SCHEDULES
CONTINUING EDUCATION
BUILDING A SUCCESSION COMPETENCE
KEY POINTS
NOTES
7 DEVELOPING DECISION-MAKING COMPETENCIES
DECISION DILEMMAS
LEARNING TO MAKE DECISIONS
EDUCATING FOR DECISION-MAKING
DEALING WITH AMBIGUITY
EXECUTING THE DELIVERABLES
KEY POINTS
NOTES
8 IBM ROCHESTER, MINNESOTA: THE SILVERLAKE PROJECT
BIRTH OF IBMR MINNESOTA
PROJECT FORT KNOX
IBMR FACES MARKET CHALLENGES
NEW DIRECTIONS FOR IBM ROCHESTER
FUREY ASKS THE HARD QUESTIONS
AMBITIOUS GOALS
MARKET LAUNCH
LESSONS LEARNED
KEY POINTS
NOTES
9 BOEING AND THE 787 DREAMLINER
DREAMLINER SCOPE AND EXPECTATIONS
BOEING—THE ENTERPRISE
THE 787 DREAMLINER CHALLENGES
COMMENTARY
KEY POINTS
NOTES
10 COMMUNICATION IN DECISION-MAKING
NEW-TO-THE-MARKET PRODUCT
WHAT IS COMMUNICATION?
TYPES OF COMMUNICATION
ORGANIZATIONAL CONTEXT
BARRIERS TO EFFECTIVE COMMUNICATION
ETHICAL ISSUES IN COMMUNICATION
ELIMINATING THE COMMUNICATION BARRIERS
KEY POINTS
NOTES
11 EVALUATING DECISION-MAKING PERFORMANCE
PEOPLE
PURPOSES
PROCESSES
STRATEGIC THINKING
CULTURE
PRODUCTS AND SERVICES
RESOURCES
LEADERSHIP
INNOVATION AND ENTREPRENEURSHIP
ORGANIZATIONAL READINESS
POLICIES AND PROCEDURES
EMPLOYEE BENEFITS
DOWNSIZING
GOING GLOBAL
GOVERNMENT REGULATIONS
OFFSHORE OPERATIONS
INTEGRATING ORGANIZATIONAL UNITS
GENERAL GOVERNANCE ISSUES
KEY POINTS
NOTES
INDEX
END USER LICENSE AGREEMENT
List of Illustrations
Chapter 1
Figure 1.1
Major functions and decision flow in a typical organization.
Chapter 2
Figure 2.1
Principal organizational functions.
Chapter 3
Figure 3.1
Decision responsibility at different organizational levels.
Chapter 4
Figure 4.1
Diamond diagram of the Denver International Airport project.
Figure 4.2
Comparison of Boeing 787 Dreamliner and 3M Post-it Notes. “B” represents Boeing 787 Dreamliner and “M” 3M Post-it Notes.
Figure 4.3
Proposed $500,000 new project.
Chapter 5
Figure 5.1
Common project activities, resources, and organizational infrastructure.
Figure 5.2
Integration of activities, resources, and infrastructure.
Chapter 9
Figure 9.1
Diamond view of 787 Dreamliner at time of approval.
Figure 9.2
Realistic diamond view of the 787 Dreamliner.
Figure 9.3
Diamond view of the 787 Dreamliner for outsourcing.
Figure 9.4
Diamond diagram of the 787 Dreamliner supply chain.
Figure 9.5
Diamond diagram of the 787 Dreamliner Technology.
Chapter 10
Figure 10.1
Inputs and outputs of the decision-making process.
Figure 10.2
Basic new-to-the-market product process.
Guide
Cover
Table of Contents
Preface
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PREFACE
The history of failed projects, both large and small, provides well-documented evidence that there's much room for improvement. Research shows that less than 20 percent of projects meet requirements, schedule for implementation, and estimated cost. There are many reasons which crosscut the whole decision-making structure of organizations. At one end of the continuum is a lack of sufficient operations knowledge by executives at the decision-making level, and a lack of business perspective by the engineering and professional communities of the organization at the other. Approval of a major project that involves all organizational functions for its implementation, and consumes major organizational resources, requires one decision; the implementation of that decision may require thousands and often millions of decisions. Therein lies the dilemma.
A governing body approves a major project that is vital to the organization's sustainability, without a full understanding of the impact on the organization's operational functions and availability of the capabilities and effort required to implement the project successfully. The Board approves a major cost-reduction program, but the fulfillment of the decision becomes the responsibility of people who are not identified at the time of the decision. In essence, people who make the macro decision too often do not fully understand the scope and effort required to integrate the required competencies for fulfilling the decision's objectives; too often they are too far away from where the real work that takes place. Fulfilling the requirements of a decision involves getting into the nitty-gritty details and resolving the conflicting requirements that arise among the functional groups.
Industry's track record of fulfilling the three constraints of project management—meeting requirements, on-time delivery, and at estimated cost—has not garnered any awards; as a matter of fact, a realistic appraisal might record them as dismal. Some examples include such efforts as the Chrysler–Daimler-Benz merger that after many years ended in the purchase of Chrysler by Fiat; the collapse of General Motors and reconstruction under a government-financed program; Eastman Kodak's struggle to transition from traditional photography to digital; IBM and its missed personal computer market and then a rescue by Lou Gerstner; projects like the Big Dig in Boston and the New Denver Airport that involved many delays and cost overruns; Hewlett Packard's acquisition of Digital Equipment and a succession of reorganizations and chief executive officer (CEO) replacements; the 3-year delay in delivery of the Boeing Dreamliner; the dot.com debacle; managing the aftermath of Hurricane Katrina; dealing with the earthquake and tsunami that struck northeast Japan and brought worldwide attention to the safety issues related to nuclear power; the problems associated with the start-up of the Affordable Care Act, and the thousands of other projects that fail to deliver the expected results on time and at cost. If you doubt that a problem exists, review your organization's project performance over the past five years.
Business press and management books, academic papers in journal and conferences, and other sources promoting management thought related to decision-making generally focus attention on the macro decision made at the executive levels of an organization, but seldom consider those thousands and often millions of decisions made after the macro decision sets the project in motion. These sources would lead us to believe that organizational boards, CEOs, and the highest level executives are the only ones who make decisions. The daily headlines tell the stories of the macro decision to invest billions of dollars in a new aircraft, to make the next round of staff cuts to improve financial performance, to merge or acquire an organization, or to implement the latest management panacea to guarantee unconditional success.
Decisions examines the issues required to stimulate new thinking for improving the decision-making processes to achieve higher project success rates by including implementation requirements in the executive decision-making process. Performance can be enhanced by understanding the actions and processes required to implement the decision, prior to making the macro decision. While that first macro decision initiates a project or some action, successful performance depends on how the organization manages the thousands and often millions of subsidiary decisions. Decisions considers what it takes to convert the macro decision into a positive outcome, to resolve the gap that exists between the macro and subsidiary decisions, to understand why so many decisions fail to meet expectations, to direct the mindset of the engineering community to focus on its relation to other organizational units, to perform diligently the up-front work required to meet objectives, to stop squandering valuable talent and resources, to urge engineers and other discipline professionals to take a more business-oriented approach in participating in the organization's decision-making process, and last but not least, to not only recognize the importance and role of communication in all decision-making processes, but to initiate appropriate communication processes.
Decisions also considers the critical decisions that need to be addressed in conjunction with preparations for making the macro decision. While the macro decision, made at the upper levels of management, begins the process of implementing some specific action, the preliminary effort seldom involves sufficient effort on what I refer to as the up-front work. The up-front work for approving an expenditure of resources includes developing the details of the how and what it will take to accomplish that which will be approved; this generally lacks the specifics. Those specifics, if not considered prior to approval of a project, frustrate the process of meeting requirements. As an example, many decisions involve the global economy, global participation, and global access to human and physical resources that add layers of complexity and are too often neglected. In the final analysis, a macro decision, which does not consider an implementation plan, leaves the organization to face those unintended consequences. But, these unintended consequences come about because of a lack of in-depth consideration of potential problems. We've all heard the comments; “Don't worry about it; we'll take care of it later.” Those unintended consequences are not really unintended; they come about because of faulty assumptions and a lack of thinking at the time the macro decisions are made. This does not minimize the need for financial analysis.
From my experiences as an engineer and technology executive, all organizational decisions relate to some type of activity, and hopefully related to a specific project. Every activity that requires an allocation of human and physical resources involves identifying its purpose, scope, and benefits to the organization. Projects involve those identified by quantitative or qualitative measurements; the quantitative by some return on investment measure and the qualitative on providing some social benefit. Industry's track record of managing the three conditions for acceptable project management performance–satisfying requirements/objectives, delivering on schedule, and achieving estimated cost–has not garnered any performance accolades or awards. Research shows that industry needs a new mindset on project decision-making since less than 20 percent of projects meet the three conditions. You may question the 20 percent or argue that under no circumstances can the three conditions be met, but reflection on your organization's performance should convince you that there is room for significant improvement. Further, while some projects may meet the three conditions, the results often fail to contribute to the organization's bottom line: contributing to the bottom line is the final measure of performance.
Longitudinal studies have shown that too many projects fail to meet requirements with significant negative consequences. We can argue where the responsibilities for such poor performance should be assigned, but it's more important that we consider the issues and find ways to improve performance; it's all about across-the-board organizational leadership, spanning the continuum from executive levels to the discipline professionals.
I've structured Decisions to include topics that represent the greatest challenges to improved decision-making. Dealing with these challenges involves changing the mindset of engineering and its managers and convincing executive-level management to pursue the up-front work with greater diligence prior to making commitments. The process does not include more tools and techniques; it requires more thinking, in-depth thinking, and dedication to integrating the required resources.
Chapter 1: Confronting the Realities in Decision-Making provides some observations and perspectives on what it takes to convert macro decisions into useful results that not only meet the requirements, schedule, and estimated costs, but also have a positive impact on business performance. Decision-making at the executive level has changed within the past decades because many executives have limited time to spend on operations, so it's necessary to consider the business environment in which decisions are made. Executives now depend on reliable information from managers at all levels as well as the discipline specialists in all the related organizational functions. The history of failed projects teaches that somewhere in the past we began losing some management discipline as people interaction became more complex with a global economy.
Chapter 2: Managing the Organization explores these complexities involved in integrating the many functions and constituencies involved in providing information to reach a decision and the effort required to fulfill the commitments of the decision. While organizational functions work independently, their decisions impact others' performance. Decisions are not made in a vacuum; they're made by real people with different interests, biases, requirements, and levels of flexibility. This chapter considers the roles of executives, managers at all levels, project managers, and discipline specialists in reaching decisions. Who are the organization's executives, what are their responsibilities and to whom, and what are some of the common requirements expected from executives, managers, project managers, and discipline specialists.
Chapter 3: Decisions Have Consequences deals with specific types of decisions to provide some breadth of what decision-making involves. Yes, the world is more complex, and although information systems technology has not met the needs of the decision-makers, the inputs to the decisions have grown significantly. The economic environment does not mimic that of the past, except possibly in limited and specialized circumstances. Important decisions usually begin with a blank sheet of paper; rules of thumb do not apply. Knowledge and experience allow us to describe the known, the predictable, and the controllable issues within limits. Successful execution of any major decision depends on resolving the unknown, unpredictable, and uncontrollable issues and continually verifying the known, predictable, and controllable issues based on changing requirements and conditions. Chapter 3 spans the decision-making process and the sources for several types of decisions.
Chapter 4: Decisions and Project Scope focuses on projects that need approval by organizational boards, various executive and management committees at the operational and staff levels, and by engineers and other professional specialists. This chapter emphasizes the role of engineers and other discipline specialists and their part in the organization's management and directs attention to projects with various specific conditions: low impact to high impact, simple to complex, low cost to high cost, low risk to high risk, routine to innovative, current business to new business, current business to new game, decisions in functional units, and strategic to operational.
Chapter 5: Macro Decision to Implementation reviews the issues involved in executing these macro decisions that often involve a system of systems. The implementation of a “system of systems” macro decision brings together people not even remotely involved in developing the proposal, which led to the macro decision. If the macro decision involved investment in new plants and equipment, and required input from many organizational units, successful implementation will depend on the thousands or more decisions made by not only managers and specialists but also some key plant operators and technicians. If the macro decision involves developing a new-to-the-market product or service as an example, just about every organizational unit will be brought into the act. Chapter 5 considers the issues related to executing the decision from describing the problem to managing with a systems perspective.
Chapter 6: Making People Decisions focuses on the people decisions related to building and maintaining the competence of the organization's talent base for the sustainability of the organization. All decisions must eventually take into account the capability of the people responsible for implementing the decision. While some may appear to be trivial, on the surface, the consequences can damage an organization's reputation and destroy careers. It should not take years to determine that an employee has not met expectations; it does take courage to resolve situations related to inadequate performance. Some of the major issues involve energizing the HR department, hiring practices, evaluating performance, assessing employee potential, promotions, selecting team members, assigning work, transitioning from discipline specialist to management, and manager responsibility for building a technical succession plan.
Chapter 7: Developing Decision-Making Competencies presents the dilemmas organizations face developing decision-making capabilities. How do people learn to make decisions; fulfillment of those macro decisions becomes more dependent on decision-making competence of engineers and other discipline specialists and their managers; there are no 10 easy lessons. These are decisions that generally cannot be made by acting out some predetermined business model. We learn like we learn to master any other skill–through experience. Start with the small and somewhat inconsequential decisions, learn from the bad decisions, and practice, and learn that decision-making requires practice like any other skill. Chapter 7 focuses on approaches for developing decision-making capabilities of managers, engineers, and other discipline specialists.
Chapter 8: IBM Rochester, Minnesota: The Silverlake Project (Code Name) tells the story of how a group of engineers, programmers, and planners, totaling about 2,500, transformed themselves from a not-so-successful technologically driven laboratory into a customer-focused and market-driven organization. This transformation of IBM Rochester (IBMR) shows the role of decision-making at many levels in the IBM organization in meeting organizational expectations, creating a major change in organizational culture, and taking full advantage of the competencies of the available talent. The transformation began when Tom Furey, handpicked by IBM headquarters, and came to Rochester as manager of the IBMR Development Lab. This is a story of decision-making, which integrates the activities of the technology and marketing functions in making IBMR one of IBM's most successful businesses.
Chapter 9: Boeing and the 787 Dreamliner provides an excellent case study in decision-making that spans the continuum from the executive suite to the operational levels within Boeing, its outsourced partners, and to the factory floor. Boeing embarked on the design of a totally new aircraft based on (1) extensive use of reinforced composites as a substitute for aluminum; (2) not only extensive outsourcing to suppliers but also outsourcing to investment partners; (3) dependence on an extensive use of modeling and simulation of design, manufacturing, and assembly operations; and (4) reliance on high levels of precision in managing a major global supply chain. A program that was to be completed in half the time that it took to bring the Boeing 747 to the marketplace was bogged down by problems that delayed initial deliveries by more than 3 years and then grounded by various technical programs. This was a major undertaking with major changes not only in materials and design but also in production. It is truly a system of systems. My comments should not be considered as criticism of Boeing's executives, its managers, its engineers and other discipline professionals, or others responsible for implementation. There's no single reason why the delivery schedule of the first Dreamliner was extended on seven separate occasions.
Chapter 10: Communication in Decision-Making emphasizes the need for improving communication in managing the decision-making continuum from decision to execution. Improving communication is not some new twenty-first century phenomenon; Chester I. Barnard, an AT&T top executive, in 1938, considered communication as the central theme of management and the dominant factor in the structure of complex organizations. Lack of adequate and responsive communication plays a major role in the decision-making process, which in turn affects performance. Research shows that communication is a major contributor to performance. Research also has identified five requirements for effective and efficient communication—network transparency, knowledge codification, knowledge credibility, communication cost, and secrecy. Failure to solve problems is a result of poor communications and a lack of relevant and important information. Lack of adequate communication usually plays a major role in project failure. At the same time, adequate and appropriate communication does not guarantee project success. Nevertheless, communication drives decision-making and project execution. Chapter 10 focuses on the communication required to meet the requirements of the decision to execution continuum; it does not provide a guide for developing competencies in communication.
Chapter 11: Evaluating Decision-Making Performance provides a broad outline of the types of questions that may be asked in evaluating an organization’s capability in making decisions. Not all decisions can be evaluated, time does not permit such actions, but successful and failed decisions of a cross-section of projects need to be evaluated to understand the variables that affect level of success or failure. Some answers are quantitative, others qualitative, but the qualitative should not be disregarded since they often tell as much as the quantitative, especially when dealing with people and departmental integration issues.
GERARD H. (GUS) GAYNOR
1CONFRONTING THE REALITIES IN DECISION-MAKING
Decisions: An Engineering and Management Perspective (Decisions) proposes that managing with a project perspective provides an opportunity to develop a discipline that enhances the decision-making process and a means for controlling those thousands of decisions before an objective becomes reality. In this context every action links to a specific project whether related to the Board of Directors, the Chief Executive Officer (CEO), and line and staff executives, managers at all levels, engineers and other discipline specialists in the organization's organizational units, and all support personnel. This applies to all activities whether performed within the organization or outsourced.
The business press and the management researches in academia publish volumes of information about the macro decisions made in the executive suites. Those decisions tend to be strategic, but with operational consequences. The literature on the conversion of those macro decisions into outcomes receives little if any attention. Execution of the macro decisions then becomes the domain of lower level managers and discipline specialists in research and development, marketing and sales, manufacturing, and the support functions.
Chapter 1 provides some observations, and perspectives on what it takes to convert macro decisions into useful results that not only meet the requirements, schedule, and estimated costs but also have a positive impact on business performance. Chapter 1 topics include
History of Failed Projects
Organizational Discipline
Sources of Decision-Making Knowledge
Making Organizational Decisions
Key Points
HISTORY OF FAILED PROJECTS
The world of executive decision-makers has changed significantly in the past several decades. Fewer executives have long histories with their organization and tend to focus more on the financial and strategic and marketing issues rather than the technology issues that deal with operations. Executives also place greater emphasis on mergers and acquisitions, building the business, and the next quarter's results: they promote the organization's image. It's common to be critical about the emphasis and importance of achieving quarterly targets, but a word of caution, achieving the annual target requires achieving quarterly targets. As engineers, we know that delays in the initial stages of a project seldom are recovered. The days when the CEO was able to be engaged in product development or manufacturing or marketing with engineers and other discipline professionals and their managers seldom exist today: allocating a half day for visiting a research laboratory, reviewing some new major process improvement or being in a position to have first-hand information are at best very difficult to arrange.
The global workload no longer provides opportunities for executives to become actively involved in the realities of operational issues. CEOs and senior executives of major organizations in academia, government, industry, and the not-for-profit sector seldom have an opportunity to gain first-hand knowledge of organizational operations and functions by interacting with the people responsible for meeting those quarterly financial targets. Knowing requires more than reviewing bottom-line results from a report that too often, although unintentionally, obscures or distorts the facts of the issues under consideration. The executive paradigm focuses on delegation, and while delegation is essential, executive decisions now depend on information that has been screened through several levels of the organization and presents a new set of executive challenges. These comments are not made as criticism of the executive community, but to understand that in making those macro decisions, executives often lack a comprehensive understanding of the idiosyncrasies of the organization's operations, they do not understand the complexities involved with the implementation or choose to disregard them.
The environment in which executives operate has changed. We no longer live in an age where a person in the mail room becomes the CEO. Business now moves rapidly and doesn't allow for 20 or 25 years of experience to reach the top. These people, who made the move from the mail room to the executive suite, not only grew up with the organization, but also became the organization: they knew the organization from top to bottom; they didn't have to read about it. Further, they knew the people they worked for and with over many years. Executives and senior managers now operate under a different paradigm. Jack Welch, General Electric CEO retires with three top contenders as his replacement: Jeffery R. Immelt, James McNerney, and Robert Nardelli. Jeffery Immelt succeeds Jack Welch as General Electric CEO; James McNerney becomes the CEO of 3M for about 4 years, then becomes CEO of Boeing; Robert Nardelli joins Home Depot as CEO and after a not so successful performance becomes CEO of Chrysler, then part of Cerberus, and then is replaced by Sergio Marchionne of Fiat in April 2009 when Chrysler filed for Chapter 11 bankruptcy. Carly Fiorina became CEO of Hewlett Packard and after approximately 6 years departed because of a Board conflict, then explored a run for Senator from California and failed. Delta Airlines and Northwest received approval to merge both organizations, but questions continued if the executive levels of both organizations thoroughly understood what it takes to not only make a successful merger financially, but also, execute the merger effectively and efficiently and with minimum negative impact on customers.
The history of failed projects and unmet expectations continues to grow exponentially. It is difficult to identify projects that have met original requirements, time schedules, and projected costs. I'm not suggesting that achieving project success is a minor task. On the contrary, it is a very difficult task when we consider the human interaction required for success; it is a very difficult task when we pause to realize the need for integrating the many facets of a major project; it is a very difficult task when managers are not educated managerially and engineers and discipline specialists focus more on their disciplines than on the impact of their discipline on business performance. Very few in the technical and marketing communities realize that the business of engineering and marketing is business performance. Discipline competence, while absolutely essential, must be directed toward the broad needs of the business and the major component of that business involves a focus on sustaining business performance.
Research by Paul C. Nutt1 shows that highly regarded managers often make bad decisions and the truth is that half of the organizational decisions fail. Nutt's research includes detailed analysis of over 400 decisions to assess the decision-making practices, to account for the special situations confronted, and to measure success or failure. The findings show that failure usually stems from decision-maker actions and not from bad luck or situational limitations. Examples include the Firestone and Ford tire debacle in 2000, Eastman Kodak's late entrance into digital photography, the demise of the dot-coms, the inability of the US automobile industry to maintain its dominant position, the continued negative financial performance of the US Post Office, and the delivery issues with two major aircraft suppliers Boeing and Airbus. A study of the management decisions by federal, state, and local jurisdictions related to hurricane Katrina, the Big Dig in Boston, the Walter Reed Medical Center negligence related to returning veterans, the Challenger incident, delays and cost overruns in the construction of the Denver International Airport, the Deepwater Horizon incident in the Gulf of Mexico, and the waste generated in academia, government and industry at all levels certainly focuses our attention on the lack of executives to make timely decisions to prevent such disastrous and long-reaching outcomes.
Research by Heike Bruch and Sumantra Ghoshal2 on the behavior of managers in well-known organizations shows some startling results based on measures of energy and focus. Their extensive research shows that 30 percent of managers were procrastinators (low energy, low focus), 20 percent were disengaged (low energy, high focus), and 40 percent were distracted (low focus, high energy), and only 10 percent were purposeful: purposeful being defined as highly energetic and highly focused. Such negative results definitely affect decision-making at all levels of the organization. You may question the results of the Bruch and Ghoshal research, but I ask you to reflect on the behavior of not only your managers, but also the executives, engineers, and the other discipline professionals.
Kathleen Eisenhardt3 studied the speed at which managers make decisions. Eisenhardt concluded that slow decision-makers rely on planning and futuristic information while fast decision-makers gather real-time information and in essence measure everything. Eisenhardt's research shows that slow decision-makers take 12–18 months to reach a major decision, the fast decision-makers 2–3 months. Further, fast decision-makers use more information than slow decision-makers, develop more alternatives, and recognize conflict management as a critical element in making decisions. Of course, terms like more information, more alternatives, and how much conflict are all relative and will vary from project to project and organization to organization. We cannot predict the future, we can speculate, but too much speculation leads to paralysis. The research also revealed that fast decision-making is linked to strong performance; central decision-making is not faster; cognitive, emotional, political processes drive rapid decision-making; and operational decisions follow strategic decisions.
Aaron Shenhar and Dov Dvir4 report the results of the Standish Group, Cooper, and their own research that includes a 15 year study of more than 600 projects. The Standish Group in 2000 found that only 28 percent of IT projects were successful and estimated that in 2003 the $382 billion spent on IT projects yielded $82 billion in total waste. One-third of all projects either failed or did not meet business requirements and had overruns of 200 and 300 percent. Cooper's studies on new product development showed that 46 percent of resources were allocated to projects that were cancelled or failed to deliver the expected returns. Over a 15-year period Shenhar and Dvir collected data on more than 600 projects in business, government, and the not-for-profit sector, in various countries, and found that about 85 percent of projects overran scheduled time by 70 percent and budget by 60 percent. A 1998 study by Bull Computer Corporation in the United Kingdom found that 75 percent of IT projects missed their deadlines, 55 percent were over budget, and 37 percent failed to meet project requirements.
In Innovation by Design, Gaynor5 included a chapter on the Innovation Prevention Department and listed the 25 obstacles to promoting innovation. Those related to decision-making included rejecting new thinking of any kind, focusing on single issues, ignoring the blind spots, being insufficiently informed, keeping decision processes confidential, disregarding potential knockouts in the early stage of innovation, preventing rule breaking, and disregarding the constructive mavericks.
These few examples demonstrate how the lack of decision-making capability affects organizational performance. Somehow over the years many organizations have lost their management discipline. As I reviewed this research and considered my past personal experiences and how engineers view their role in the business enterprise, I raise the question: are engineers missing an opportunity to expand their base of operation and influence and take a proactive approach in the management of the business enterprise?
ORGANIZATIONAL DISCIPLINE
What has happened to the performance levels of managers, engineers, and other discipline specialists? Organizational cultures have changed significantly in the past several decades and have been driven by some form of entitlement. This began during the early 1980s and was followed by the dot-com era that began to make headway in 1997. It was the time when organizations introduced the idea of hiring bonuses in the search for engineers with advanced competence in specialized areas. It then became easy for moving from one organization to another and in the process gaining a financial benefit by distorting salary structures. There is no doubt that the dot-com era was one of high energy and opportunities for those who wished to pursue their vision of the future: it also introduced an era where the career path involved “making a quick buck” and retiring early. With the demise of the dot-com era many managers and discipline specialists became self-satisfied with their work environment and upper management never recognized what began to occur in the early 1980s. I'm not against advancing one's career; however, long-term careers require a discipline that involves making a contribution in each move.
By mid-1980 the management situation was best exemplified by an article “Broken Bonds” written by Amanda Bennett,6 a writer for the Wall Street Journal, who presented a classical description of average mid-level managers. Realistically, the description fits managers, engineers and discipline specialists at all levels, and even applies to many executives whether in academia, government, or industry. Bennett says that most middle managers thought they had a contract with the corporation, and even though it was unwritten and unspoken, it was very specific. It said:
“Take care of business and we'll take care of you. You don't have to be a star; just be faithful, obedient, and moderately competent, and this will be your home for as long as you want to stay.”
What a stinging indictment. It appears that leadership which requires sticking your neck out, being proactive, taking initiative, accepting risk, dealing with uncertainties, meeting commitments, basing decisions on fundamentally sound premises, understanding the business environment, and having the courage to deliver bad news was no longer a prerequisite for becoming a manager. From years of personal experience, I suggest that engineers and other discipline specialists succumbed to practice similar behaviors. At the same time, many organizations stopped filling the pipeline with new entrants, who will provide a base for not only managerial and executive talent, but also engineers and other specialized disciplines.
Someplace along the line executives, for many different reasons, allowed a lack of discipline to permeate the organization. James M. Kilts7 in Doing What Really Matters cites a situation, when he became CEO of Gillette, a part of Procter & Gamble. Kilts asked the senior vice president of administration and human resources to present an overview of how Gillette was organized and their performance management system. As the senior vice president described the organization, Kilts asked about the categories used in evaluating manager performance. There were five categories: Does Not Meet Expectations, Needs Improvement, Meets Expectations, Exceeds Expectation, and Outstanding. When Kilts asked what the percentages were in each of the categories, the VP responded that 65 percent were in the Exceed Expectations and followed up by saying that's where most companies were at. So Kilts wondered how business results justified such ratings. Further, research on Gillette's 3000 worldwide managers showed 59 percent had been rated Exceed and 4 percent Outstanding, 34 percent received a Meets rating, and 3 percent a Needs Improvement or Inadequate rating. During this same period, Gillette's sales growth was zero, profit growth was zero, and earnings per share were up 4 percent. At the same time two-thirds of the worldwide group of 3000 managers were rated Exceeding Expectations and Outstanding.
This situation is not solely a problem within Gillette: it is not only a common business problem, but also a national problem affecting all segments of society. For some reason we have stopped making critical assessments of performance. There is a difference between a critical assessment and criticism. Critical assessment requires follow-up measures to improve performance. We have developed a culture that makes excuses for nonperformance and on too many occasions even rewards it. Every organization recognizes how that typical distribution curve has shifted to the right where more and more people exceed the requirements. Such actions do an injustice to the organization and the employees. Unfortunately, the future does not hold great prospects for change.
As our social culture moved from the Traditionalists (born pre-1945) to GEN Y (1980 to present), we moved toward greater entitlement, and new organizational cultures followed: both have influenced each other. The 1950s were governed by accountability; performance appraisals were more realistic; communication took place face-to-face; newly minted graduates recognized the need for experience; organizations were not involved in providing guidance on personal matters; mental-health days were unknown; meeting commitments was not a choice; and this list could continue. Slowly but surely, employees became more dependent on the organization. Historically, if unchecked, we could go back to the days where the company owned town, company owned schools and grocery stores, and the company was the provider of recreational and other personal needs. This is not to suggest that the 1950s represented some form of organizational utopia, definitely not, but to show the progression of the entitlement society.
SOURCES OF DECISION-MAKING KNOWLEDGE
Today's mega-organizations prevent executives from having hands-on knowledge, if for no other reason than a lack of adequate time: executives now depend almost entirely on delegation and trust, except on programs where their past experience allows them a level of comfort. This dependence on others, and often without even cursory knowledge of the topic under discussion, changes the managing model. Often not even those secondary and tertiary sources of information are totally knowledgeable about just what is involved in reaching a decision. As managing now involves integration of functions and disciplines, it becomes more difficult to negotiate the selection of an appropriate option. Time is a constraint. Executives face many challenges in allocating their time: consider the increase in governmental regulations at all levels, from the federal to the smallest village, and then add the international legal requirements.
Executives and managers in this twenty-first century face an almost impossible task to fully understand the issues being considered by their many organizational units, the idiosyncrasies' of the many market segments in which they operate, and the technologies used throughout those diverse product/service organizations. We know that the success of any decision requires linking the decision with an understanding of the difficulties associated with the implementation process. We know the competencies to make a macro decision to authorize some major investment differ from the competencies required to implement the decision. However, in the final analysis, implementation determines not only the future of the organization, but also the future of those who participate in the venture and finally society.
Executives now depend almost totally on other executives, managers at various levels in the organization, engineers, and other discipline specialists to provide major input to any major decision that crosscuts functions or disciplines; they require and depend on integrity and candor of the supporting managers, engineers, and discipline specialists to move the organization forward. Unfortunately integrity and candor are often in short supply; especially candor. As humans, in one way or another, we follow some identifiable philosophy of life. That philosophy defines attributes, and application of integrity is one of those attributes. Integrity is more than telling the truth. We speak of the integrity of a design. What does that mean? It means robustness which translates into everlasting. Practicing integrity allows our colleagues to know where we stand on issues and what to expect from us; it defines our value system. Candor begins by telling it like it is, but being cautious not to offend. When, as executives and managers, we fail to be candid in managing the activities of others, we begin to destroy careers. When, as engineers and other discipline specialists, we fail to deal with candor, we plant the first seeds of project failure.
The decision-makers of that first macro decision lose control once that decision has been passed on to subordinate levels of management for implementation. The world of managing has become more complex and as that complexity increases executive level management must find a way to move the macro decision to a successful conclusion which includes meeting three basic conditions—meeting requirements, schedule, and estimated cost—that requires an understanding of the implications on the implementation process.
MAKING ORGANIZATIONAL DECISIONS
A daily scan of the business press gives the impression that organizational boards, CEOs, and other high level executives are the only ones who make decisions. That's not quite the real world. Yes, they make the macro decision, but every macro decision usually requires hundreds, thousands, and sometimes millions of decisions, anyone of which can negatively affect the outcome.
There is no doubt that decision-making processes have become more complex at all organizations since the decision-makers now depend more on expertise which they do not possess and the dimensions have increased significantly: global competitiveness, technology advancements and complexities, and customer demands have introduced issues which in the past were not considered. No individual in today's organizational environment possesses all the knowledge required to make the appropriate decision. While one individual may make the final decision, that decision-maker depends on many sources besides his or her experiences and biases. While communication systems now allow for instantaneous contact across a global network, decision-making processes now involve greater consideration of the impact of cultural differences, language barriers, time constraints, business practices, political and economic situations, and working habits. While choices for action have increased significantly, these cultural differences add an element that cannot be disregarded.
There are no algorithms that guarantee the success of a decision. The algorithms can define the “a” to “b” to “n” but more is required than the sterile algorithm to reach a decision. The algorithm, if used, only provides part of the information. Developing a balance between rational decision-making must take into account human behavior as practiced in a particular culture. Depending solely on intuition can be as dangerous as depending solely on rational decision-making that fails to take into account the environment which will be affected by the decision. Decisions must take into account the human response to the decision and consequent behavior toward the decision must be considered in addition to the rationality of the decision. As noted previously, decision-making involves factual and value elements and the value elements may have an equal or higher priority. Those decisions have a significant impact on the organization's performance. In the final analysis decision-making requires judgment.
Figure 1.1 illustrates a simplified version of a typical organization with its many levels and functions that become the building block for groups of divisions, multiple groups per sector, and corporate. A typical division of an organization includes, Product Genesis, Distribution, and Services. Product Genesis includes research, development, and design. Distribution includes manufacturing, marketing and sales, physical distribution, and customer service. A group generally involves several divisions; a sector is comprised of several groups. Corporate includes all the groups. Divisions, groups, sectors, and corporate include various levels of services such as financial, procurement, information systems, human resources, patent and legal, public relations, and general administration. What each of these organizational units is called is immaterial; they are shown only to indicate a typical hierarchical organizational structure. A proposal for approval of an activity will go through a series of approvals by higher level authority and eventually lands at some corporate level for approval. That decision, as noted, then results in the multiplicity of decisions where any one of them can create delays, increase costs, and in some way, not only disappoint customers, but also force them to choose other suppliers.
Figure 1.1 Major functions and decision flow in a typical organization.
Requests for a decision generally arise from the action of some organizational unit or individual. Decisions at the corporate level include (1) mergers and acquisitions; (2) approval of budgets and capital investments; (3) expansion into worldwide markets; (4) major investments in research, new product development, and innovation; (5) personnel issues; and (6) issues that have important organizational consequences.
The process for gaining approval at any of the management levels does not provide any difficulties if the organization describes the procedures and follows them. Here is an example: Assume that a request for funding a major investment in a new-to-the-market product arises at the division level and requires approval at some corporate level that could include an executive or management committee or the board of directors. Most organizations have established policies as to level of approval for new investments. Since the request comes from a division, elements of product genesis, distribution, and services as shown in Figure 1.1 will be involved in preparing a proposal. The proposal will be fully vetted by the division management and subsequently move to the group and sector management. There could be several iterations, since the sector executive will most likely only be willing to present the proposal to the decision-makers if it meets the strategic directions of the organization and has a possibility for approval. The sector executive plays a key role since he/she has a more comprehensive picture of the organization's future directions. However, if the division and group executives communicate effectively with the sector executive and staff during the proposal preparation process, there should be no difficulty obtaining support. However, too often proposals are not socialized sufficiently to determine possible objections and then countering those objections in preparing the final proposal. Approval of the project is the first decision that launches the project. The execution of the project will be the responsibility of the division through its product genesis, distribution, and service functions. Success will require integration and timely performance of all the related division organizational units and their subunits. However, this one decision made at the executive levels for approval will now require thousands of decisions: some will require even more thought than the approval decision and of course others by rules of thumb. The process appears to be simple but unfortunately complications arise from participants with their biases and prejudices, unjustified personal likes and dislikes, and the naysayers more satisfied with maintaining the status quo.
KEY POINTS
Failed Projects
. Our personal experiences clearly demonstrate that failure to meet project requirements, schedule, cost, and business performance not only significantly reduce the return to the stakeholders, but also generate an environment that leads to lower expectations.
Sources of Decision-Making Knowledge.
Knowledge, experience, and capability no longer resides in one person. The era of Henry Ford as lone decision maker no longer exists. Success now requires integr- ation of information from many sources and the major decision-making body of an organization may be dependent on information from the depths of the organization; that new employee, who may have just joined the organization.
Making Organizational Decisions
. Organizations require some form of decision-making process. Participants need to understand what's required and it should not depend on one's level in the organization. That may be too much to expect, but nevertheless essential. No single process will meet all requirements and the greater the global reach, the greater the need for that process to be clearly defined.
Decision-making Capability
. Our daily experiences with decision-makers and decision processes can supplement the body of research that continues to show a shortage of managers, engineers, and other disc- ipline specialists who possess adequate decision-making capability. I use decision-making capability instead of skills or competence, because decision-making capability includes a combination of competencies. These competencies include breadth of knowledge; the competence to think deeply about the issues at hand; the competence to think from a systems perspective; the competence to accept the responsibility for the decision; the competence to communicate clearly and concisely; the personal characteristics of focus, self-confidence, dedication, respect, courage and integrity; and the put-it-all-together competence. These competencies describe decision-making capability.
NOTES
1.
Paul C. Nutt, “Expanding the search for alternatives during strategic decision-making,”
The Academy of Management Executive
, 18(4): 13–28, 2004.
2.
Heike Bruch and Sumantra Ghoshal “Beware the busy manager,”
Harvard Business Review
, Reprint 8903, pp. 5–9.
3.
Kathleen M. Eisenhardt, “Making fast strategic decision in high-velocity environments,”
Academy of Management Journal
, 32(3): 543–576, 1989.
4.
Aaron Shenhar and Dov Dvir,
Reinventing Project Management
, Boston, MA: Harvard Business School Press, 2007, pp. 5–7.
5.
Gerard H. Gaynor,
Innovation by Design
, New York: American Management Association, 2002, pp. 220–242.
6.
Amanda Bennett, “Broken bonds,”
The Wall Street Journal,
December 8, 1989. p. R21.
7.
James M. Kits,
Doing What Matters
, New York: Crown Publishing Group, 2007, pp. 5–14.
2MANAGING THE ORGANIZATION
Managing an organization or organizational unit of any size requires an understanding of the complexities involved in organizational decision-making at the executive, management, and the professional discipline levels, across the organization. Few decisions can be made where a decision-maker can exclude the impact of a decision on other organizational units. Chapter 2 explores these complexities involved in integrating the many functions and constituencies involved in providing information to reach a decision, and the effort required to fulfill the commitments of the decision. While organizational functions work independently, their decisions impact other's performance. Chapter 2 topics include
Management Model—what are the new requirements?
New Management Paradigm.
Executives—who are the organization's executives?
Managers—developing the competence to execute decisions.
Engineers and Other Discipline Specialists—integrating organizational disciplines.
Project Managers—reaching agreement between supporting disciplines.
Common Requirements for Executives, Managers, Project Managers, and Discipline Specialists.
Key Points
Notes
MANAGEMENT MODEL
Decision-making requires managing the organization's priorities; integrating its functional activities; communicating clearly at all levels; and improving overall organizational effectiveness and efficiency. Once a macro decision has been made, at the executive level, the execution of the decision becomes the domain of many different levels of management and numerous disciplines of professional specialists in the organization's functional units.
Figure 2.1 describes the principal organizational functions which will be used as the organizational model throughout this book. The functions, as shown in Figure 2.1, fit any organization whether that organization is classified as industry, government, or academia; working in the profit or not-for-profit sector; and whether the organization provides products or services. To simplify and at the same time accommodate the vast differences in organizational structure, the model divides all activities into three categories: creation, delivery, and administration. Creation activities include research, development, design, manufacturing, marketing, and information. You may argue that service organizations do not include manufacturing, but in reality they do; eventually those reports, models, and related support documents must be prepared in some physical form.
PRINCIPAL ORGANIZATIONAL FUNCTIONS
Creation
Delivery
Services
Research
Sales
Financie
Development
Physical Distribution
Procurement
Design
Customer Service
Patent and Legal
Manufcturing
Human Resources
Marketing
Communications
Information
General Administration
Figure 2.1 Principal organizational functions.
Delivery of products and services includes sales, physical distribution, and customer service. Successful organizations depend on sales of products and services and take on many different organizational structures depending on the industry and the history of the industry. Sales in the fast-food industry require different approaches than sales in the auto industry. Physical distribution includes all the activities from order entry to delivery to the customer and receiving payment. Customer service involves all activities required to satisfy and keep a customer. The functions listed under Administration involve every enterprise to greater or lesser degrees.
The organizational model of Figure 2.1 shows the complexity involved in successfully executing decisions. A decision at the executive level, to invest in a new-to-the-market product or service, will include all the functions shown in Figure 2.1 to lesser or greater degrees. Integrating the activities of these functions and making the thousands of independent, yet interdependent decisions, involved in project execution presents significant challenges. Integrating not only the decision processes of each function, but also the work activities and requirements of each professional discipline, requires due diligence prior to fulfilling the requirements of the executive decision.
NEW MANAGEMENT PARADIGM
Managing an organization in the twenty-first century can no longer be managed by twentieth century management policies and practices. The business practices, that guided Henry Ford in building the Ford Motor Company, and the strategic principles that guided Alfred P. Sloan in building General Motors Corporation, would prevent today's organizations from maintaining business viability. Today, the marketplace is the world, not the local community, state, or country; the transition has taken place slowly over the past 60 years. The United States no longer lives in a world with uninhabited markets; technological progress expands globally. This does not suggest that old principles no longer apply, but those management principles must be adapted to a new economic and social environment. New technologies have added more complexities. Information technologies now drive many decisions. While executives need some out-of-the-box thinking, they cannot disregard what's-in-the-box. Whether the more recent emphasis on big data will improve decision-making in the future remains to be seen.
In the 2008 No. 1 issue McKinsey Quarterly,2 Gary Hamel, author of The Future of Management and Lowell Bryan author of Mobilizing Minds, which he co-authored with McKinsey partner Claudia Joyce, discussed innovative management. They call for forward-looking executives
