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|In: Industry Commentary|Last Updated:

There are days I curse Disraeli.

Benjamin Disraeli, one of Great Britain’s most distinguished prime ministers, uttered the over-quoted “lies, damned lies and statistics” more than a century ago. It’s been used as an excuse to ignore statistical evidence ever since.

I guess it’s time for dueling quotations, so here’s another: “A witty saying proves nothing” (Voltaire).

The ability to see the world in statistical terms is part of every good manager’s mental toolkit. To understand why, start with the strange case of Judge Roy Pearson. Pearson, a Washington, DC administrative law judge, sued Custom Cleaners two years ago for losing a pair of his pants. For more than $65 million in damages.

To be fair, Custom Cleaners did post signs saying, “Same Day Service” and “Satisfaction Guaranteed.”

Judge Pearson doesn’t, it appears, understand statistical concepts — like, for example, service levels. You’ll recall that these are two part measures, describing a service standard and how often a service provider meets that standard.

If Judge Pearson thought in statistical terms, he would recognize that every time a dry cleaner handles a garment it represents a statistical sample. The probability of it being properly handled is a number between 0 and 1. Were a dry cleaner to run its operations as IT does, it would define the percentage of garments per day it must handle properly — maybe 99.9%. It would next define how many days a year it must meet or exceed that standard — maybe all but two (99.5%).

The dry cleaner would then post that service level as its commitment to its customers. Assuming enough IT professionals frequented the shop to keep it in business (or that customers like Judge Pearson understood statistical concepts), everything would be great.

In business, no matter what you do, the only accurate description of your results is, in some way or another, statistical. If you manufacture, each item varies a bit from every other item. The important question is how often they vary beyond acceptable limits.

If you manage customer service, you’ll never make every customer happy, or even satisfy them. You can’t. Your influence over customer states of mind is less than your influence over manufacturing tolerances, so once again outcomes are statistical events.

The challenge when you don’t think statistically is the risk that you’ll invest in goals that are no more achievable than perpetual motion machines, and complain when others don’t achieve them.

Think you’re the exception? If you’re a baseball fan, have you never griped when a high-dollar batter failed to make a clutch hit? Statistically speaking, even the best hitters will fail in the clutch two out of three at bats.

But thinking statistically is a mixed blessing: It can turn into complacency in no time flat. After all, if perfection is unattainable, what are a few errors here and there after all? Nothing to worry about — they’re inevitable.

The statistical nature of things doesn’t have to make you a helpless spectator, trapped in the randomness of things. What it does is provide a more useful framework for making decisions than thinking perfection is possible.

The statistical nature of things is why business decisions must be framed in terms of the law of diminishing returns rather than the desire for invariant outcomes. It’s the law that tells you each additional increment of improvement will be more expensive than the last one. It’s a statistical thing: You can only predict events in terms of probabilities, not certainties. The closer you are to perfection, the more variable are the errors that remain.

So if you currently backorder 20% of all customer purchases and want to improve that to 15% (a 25% improvement), it will cost you less than if you want to improve from 15% to 10% (a 33% improvement).

Looked at through the other end of the telescope, if improving from 20% to 15% costs a million dollars in additional inventory, the next million dollars of inventory will only improve backorders from 15% to 11.25%. And if you keep on spending until you only backorder 1% of the time, the next million dollars of investment in inventory will only reduce your backorder rate to 0.75% — a barely perceptible nudge.

Does all this mean a business can’t post “Satisfaction Guaranteed” and “Same Day Service” signs without prevaricating? If the law fails to take statistics into account it could happen. We’ll all have to replace simple declarative sentences with elaborate contractual phrasing filled with weasel words, and the world will be the worse for it.

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|In: Leadership|Last Updated:

The award for best two-layer play on words in a book title goes to How to Feed Friends and Influence People: The Carnegie Deli (Milton Parker and Allyn Freeman, 2005).

It’s the tale of the best deli in New York — a place that makes its own corned beef and pastrami and turns them into sandwiches the size of your head.

It’s a nice little book, and valuable besides, since interspersed with the deli’s history are recipes — including the formulas for knishes, stuffed cabbage, and of course matzoh balls.

And, it describes the ten business principles that have made the Carnegie Deli a huge success. Regular readers of Keep the Joint Running know the difference between running IT as a business (bad idea) and running IT in a businesslike way (great idea). That being the case I have an excuse for: Listing the ten principles, offering my own comments, and counting the cost of the book as a business expense.

1. Keep it simple. The Carnegie Deli sells delicatessen food. That’s it.

That isn’t it, of course. There’s a lot of complexity supporting that simplicity. As CIO your organization has a lot of moving parts, too (138 — we’ve counted them). See if you can develop a formulation as simple as the Carnegie’s for what you do.

2. Do one thing better than anyone else. The Carnegie Deli sells customers phenomenal food in generous portions at a great price. It’s why, with lots of New York delis to choose from, they eat at the Carnegie.

You run IT, not an independent business. You still need to give your boss and your peers a reason to work with you and your department instead of ignoring you, or wishing you were someone different. What is it?

3. Create a family atmosphere among the staff. This isn’t fake. As I watched Sol Levine, the Carnegie Deli’s manager, schmoozing with his customers our server told me, unasked, “We love that guy!”

When employees trust each other … and you … it’s easy to make great things happen. When they don’t you have no chance.

4. Promote from within. Sometimes you’ll need new blood, especially when your old ideas have run out of steam. More often, managers hire from the outside because they failed to prepare anyone on the inside.

5. Have an open ear to staff and customer comments. The twenty-buck term is “organizational listening.” Managers who don’t listen to everyone they can don’t know What’s Going On Out There. That makes them ignorant — poor preparation for making good decisions.

6. Make it yourself. This is far easier when your products are corned beef, pastrami and pickled tongue than when your products are software and data repositories. Few IT shops can build everything internally. What you can do, though, is make it all your own. Once you select (for example) SAP and implement it in your company, it’s your unique implementation. You’d better have gurus who know it inside and out.

7. Own the premises. The Carnegie Deli owns its own building. As CIO, this principle should make you think hard about the consequences of, for example, rented data center space in a co-location facility. The benefits are well-known. The hazards are all related to loss of control, and you shouldn’t take them lightly.

8. Management is always responsible. The book says it best: “There’s no finger-pointing. If something goes wrong or is mishandled, management is at fault.”

More to the point: If something goes wrong or is mishandled, the manager in charge should be asking, “How could I have prevented this, and how am I going to prevent it from happening again.”

Blame is for schmucks.

9. Do not be greedy. Greed is a strategy that works in the short term but almost always crashes and burns in the long term. Greed makes managers adopt unsustainable business practices. This is true of the company you serve. It’s also true for departments with grandiose plans. Make it one step at a time, and do each step well.

10. Have fun working. Some CIOs have problems with absenteeism, and with employees who hide in their cubicles, uninterested in doing their jobs.

They should ask themselves what it is about the department they lead that makes employees want to be somewhere else.

The last time I ate at the Carnegie Deli Sol Levine told me, “We’ve been doing this for 75 years and we still don’t know what we’re doing.”

If I didn’t know what I was doing as well as Sol and his colleagues don’t know what they’re doing, I’d be a much better consultant than I am today.

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