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|In: Business Ethics|Last Updated:

“Device giants shed integrity agreements” read the 9/27/2014 StarTribune business section headline.

As explained in the article, an integrity agreement is a signed commitment that a corporation will, while the agreement is in force, obey the law.

Temptation is, for us Sarcastics Anonymous members, so, so hard to avoid. After all, we natural persons have to obey the law even when we haven’t signed an integrity agreement.

But it turns out that while integrity agreements really are evidence corporations aren’t people, too, this isn’t why. U.S. government agencies make use of integrity agreements, not to give corporations an obligation to obey the law, but in recognition that just because its CEO and board of directors want a large corporation to do something, that doesn’t mean it will.

Integrity agreements specify that signing corporations will implement organizational structures and processes designed to ensure they do obey the law — a compliance officer and committee; written standards and policies; a comprehensive employee training program and so on.

They’re recognition that corporations are different from us “natural persons” in a deep and fundamental way. Our brains don’t need committees or organ training programs to get our bodies to do what they’re supposed to do.

A few billion years of evolution have resulted in systems that let the brain control things because for us natural persons our tissues and organs all share a common set of interests. More or less.

Anyway, unlike us the “organs” and “tissues” that make up a business … its departments and employees and please don’t push the metaphor! … have very different versions of what self-interest means. Reducing the gap is one of the most important responsibilities business leaders have, and reducing the extent to which employees and departments act on the gap that remains is one of the most difficult.

What’s the solution? Processes and organizational structures, according to the federal agencies that require integrity agreements. Were we to be unkind we might call it bureaucracy, or perhaps the Compliance Police.

Not that we should sneer. In the turn-executive-intent-into-organizational-action game, business pundits and consultants of all stripes tend to converge on these answers, usually adding metrics as a critical element.

And all of these, with the possible exception of metrics, are important. They just aren’t the lead story. But first, a few words about the futility of metrics, in the form of a question: How exactly might a corporation measure its current level of law-breaking?

Not the number of lawsuits, indictments or prosecutions. These measure the number of times the company got caught, and even there the metric will lag the infractions by years.

Internal Audit? It has its hands full looking for accounting irregularities.

We’re talking about something that’s difficult and expensive — choosing a random sample of decisions and actions in all parts and at all levels of the company and digging into them to see which ones fail to adhere to the letter and spirit of all relevant laws and regulations.

Good luck with that.

Which gets us to the lead story: Culture change. It’s the lead story for most business changes — your takeaway from this tale of superficial absurdity.

Culture change is usually relegated to business change management — a follow-on complement to business process change whose role is reducing resistance to the desired change, whatever it is.

Business leaders need to change their thinking on this (me too). Culture is “how we do things around here.” According to ethnoscience it’s “the learned behavior people exhibit in response to their environment,” as my anthropologically-educated business partner explained it to me.

It’s a set of unwritten, socially enforced rules that determine how executives, managers and employees make decisions and act on them. It’s the lead story for most change, or should be.

Some companies rely on controls. But controls mean the answer is always no until you can persuade the controls committee (the word is “governance”) to change the answer to yes.

Controls are why corporations are slower than entrepreneurships. They’re why “I’d rather ask for forgiveness than for permission.”

In a very real sense, controls exist to prevent the corporate culture from taking charge of things.

How sad is that?

But what’s the alternative? In the case of obeying the law, it’s to bake compliance into the corporate culture. This make compliance the lines painted on the pavement and not the guardrails at its margins.

Which do you prefer to rely on to keep your car on the road?

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|In: Business Ethics|Last Updated:

You’re General Shinseki.

What happened to him could happen to you. Here’s how to prevent it:

But first, let’s get two facts straight.

Fact #1: The scandal at the VA isn’t that the VA provides awful care to veterans. Veteran satisfaction with VA care is on a par with private-sector care. An acquaintance who heads a chapter of the Vietnam Veterans Association and has been involved in the current inquiry confirmed for me that care quality isn’t an issue.

Fact #2: Nobody in the VA delayed care or treatment. Veterans seeking care were scheduled into the earliest timeslots available.

The “scandal” is that managers throughout the VA required staff to fudge the numbers to make it appear the agency was meeting its required service levels.

The VA’s leaders, from Shinseki on down, didn’t act on chapter 3 of the KJR Manifesto. They didn’t, that is, avoid Metrics Fallacy #4, which is, in case you need reminding, extending organizational metrics to individual employees. It’s a fallacy because the moment you do you won’t be able to trust your numbers any more.

What was true for Jeff Skilling and Ken Lay at Enron is just as true for a low-level manager at the VA: When your performance is gauged by numbers, you have an incentive to fudge the numbers, which in turn makes the numbers useless for gauging organizational performance.

If you lead a large IT organization I’d bet good money it’s happening to you right now.

Start with time tracking. Employees all know that if the numbers show they’re under-utilized they’re more vulnerable to the next round of layoffs. Think they don’t allocate some of their open time to various categories of doing something productive?

Of course they do.

Now think about Agile. Many Agile variants use some form of backlog management, the “backlog” being the project’s to-do list of desired new or improved system capabilities. These are usually described in terms of “user stories,” which describe what’s needed.

Each user story receives a consensus degree-of-difficulty rating from the Agile team. Agile teams become very good at this, which in turn means Agile projects forecast delivery more accurately than traditional waterfall projects.

It has to be tempting to use weighted user-story development time to rate developer performance.

Resist the temptation. Succumb and here’s what you’ll get: padded degree-of-difficulty estimates, slower development because developers will live down to their inflated estimates, and inflated performance numbers, because of the same padding.

Then there’s the Help Desk. Help Desk managers have a lot in common with VA scheduling managers, in that the amount of staff time available to resolve reported incidents is often quite a bit less than the time needed. Think your Help Desk staff don’t quietly close incidents they’ve touched but that aren’t really resolved, to make their close rate look better and their incident backlog smaller?

Which brings us to the most astonishing aspect of this whole sorry mess: General Shinseki apparently acted like a manager, not like a leader, and not a very good manager, either.

Shinseki, that is, relied on reports, his 12-level chain of command, and extensive time spent with the VA’s regional medical directors.

None mentioned the metrics-fudging. Why would anyone expect them to?

Generals are supposed to know that if they want to know what’s really going on, they need to talk to the soldiers. I’ve encountered no hints that Shinseki did much of this.

Look, fudging management reports to make performance look better is a time-honored tradition in the world of organizational dynamics. This isn’t a scandal in any meaningful sense of the word.

If there’s a scandal, it’s that the metric that mattered most … a metric on which lives depend if it’s the VA, and your relationship with the business depends if it’s the Help Desk … was jeopardized by the insistence on measuring individual performance. That metric? Demand/Capacity. So long as it’s enough less than one to cover day-to-day variations in demand, veterans will get the care they need when they need it and users with failing tech will get the fixes they need.

Turns out, in the VA it’s nowhere close.

Which in turn reveals Shinseki’s true failure.

The VA budget has increased significantly during the past two administrations, yet somehow that budget increase hasn’t turned into sufficient capacity.

With money to spend, Shinseki and his predecessors failed to make sure it was spent hiring and retaining doctors and nurses. That’s a scandal.

I trust the parallel is clear.

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