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|In: Industry Commentary|Last Updated:

Just because something looks stupid, that doesn’t mean it is stupid.

Take, for example, the process you go through when buying or selling a house. There’s sheet after sheet of paper you have to sign, every one of which has exactly the same information: Yes, all parties want to go through with the transaction.

This being the 21st century and all, shouldn’t there be an easier way?

Yes, and in fact it’s quite easy to envision a much, much easier way:

1. Review all of the documents, or, rather, review the content that’s contained in all of the documents.

2. Sign once using an electronic signature pad.

3. Store all of the results in a central database.

Nothing to it.

Nothing to it, that is, other than persuading an entire industry to adopt the system in question.

Did I say “entire industry”? Were it only that simple. The task is to persuade all of the companies in several different industries — realtors, mortgage underwriters, mortgage servicers, title insurers, every registrar of deeds, and HUD, to name a few.

And it isn’t just a system. They’ll all have to adopt standard information formats, and to modify their processing systems to accept them.

All of which starts with an industry standards committee.

If you think this is easy, you’ve never been involved in an industry standards committee.

Just because something looks stupid, that doesn’t mean the people trapped in the system are stupid. More often than not, the stupid system is the best system possible given the constraints everyone is operating under.

Which leads to one of Lewis’s Laws of Business: Stupidity is more stable than effectiveness.

Look at most stupid systems and you’ll see similarities to the closing process:

  • Blinders: Nobody who works in the system or manages part of it has much influence beyond their narrow purview.
  • Self-interest: Mastering the stupidity provides job security to those who have mastered it.
  • Lack of incentive: No matter how stupid the system is, there’s little obvious business benefit to be had from improving it.

The usual view of these things — in particular among practitioners of Lean and Six Sigma — centers on the importance of dealing with the end-to-end process, along with making sure someone has responsibility for it. Both are lovely sentiments, and there are business situations where it’s possible to achieve both of these preconditions.

In particular, there are business executives who recognize how poisonous persistent organizational siloes are to their competitive success. It’s these executives who are most likely to assign the label “core” to one or a handful or business processes, and to assign an owner to each one, usually on the theory that this gives them “one throat to choke.”

To be fair to all parties, they usually do manage to improve the functioning of their core processes. That’s because improving processes that are truly at the core of the business has a strong and clear connection to increased revenue, decreased operating costs, or better management of important risks to the business. The financial incentive is clear.

It’s also because more often than not the business is already organized around its core processes. Each one constitutes a functional area of responsibility — think sales, manufacturing, and distribution and you’ll understand the point. So the blinders issue isn’t in play, either.

But processes that are real-estate-closing stupid are rarely at the core of the business. They’re processes that have been cobbled together by less-influential managers and staff, with no tools beyond Excel to help with automation and with silo owners doing their best to maintain the blinders that might, if removed, allow the sort of collaboration that would result in a cleaner way of doing things.

The three root causes of real-estate-closing-level stupidity are why the still-popular practice of organizing a business as a marketplace … with shared services providers charging delivery functions and each other for their products and services … is a near-guaranteed cause of long-term competitive decline.

The practice is popular because of a deep-seated misunderstanding of the nature of marketplaces of all kinds. They’re widely thought of as a way to create “efficiency.”

And they are excellent ways to create efficiency, except that the efficiency in question is the balancing of supply, demand, and price.

There’s nothing at all in economic theory to suggest markets self-organize into efficient cross-business processes. Businesses maximize their own profitability. They won’t sacrifice it should that be required to make overall delivery more efficient.

And even if there was such a theory, all theories are subordinate to the “ugly little fact.”

In this case, the ugly little fact is ugly indeed. It’s called “buying a house.”

* * *

Want to buy a townhouse in scenic Eden Prairie, Minnesota?

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|In: Business Ethics|Last Updated:

“Do the right thing” is to ethics as “best practice” is to business processes. They’re phrases that sound just like they might mean something.

Except that they don’t.

Case in point, based on a recent request for advice: You’re on a team. The team’s job is to figure out a better way for the company to do something or other.

In the early stages of analysis two alternatives came into focus as potential solutions. Neither was obviously wrong, but over time a team consensus has emerged as to which of the two was the better path forward.

When the time comes to report the preliminary solution to the project’s sponsor and steering committee, though, the project manager presents the other alternative. He’s completely within his authority. You and the rest of the team simply disagree with him.

The ethical question: You’re on the team. Your company’s Values Card makes it clear you’re supposed to do the right thing.

What, however, is this “right thing” you’re supposed to do?

The most obvious approach is to blow the whistle. That’ll show him.

And it might. Or it might not, but the telltale here is “that’ll show him.” Blowing the whistle might in fact be the right choice, but you’d have no way of knowing, because what you’d be doing is satisfying your urge to vent, not holding yourself to high ethical standards.

There is, after all, a reason mutiny on the high seas is frowned upon, even when the captain’s orders appear highly dubious to the crew. Blow the whistle and it won’t be just the project manager’s standing that is lowered in the eyes of the project sponsor — the entire team will look bad whether or not you persuade the sponsor to overrule the project manager.

Add to that the impact on ongoing team dynamics. Your ability to work with the project manager will be permanently impaired. So will your ability to work with many of the other members of the team, who, while on your side with respect to the design itself, disagree with your decision to escalate.

As an alternative to whistleblowing you might simply leave the team. Except, you can’t just leave the team. You’ll have to provide a reason, or perhaps three reasons — one for the project manager, one for your reporting manager, and one for your soon-to-be-erstwhile teammates.

For each audience you can either be honest about the reason or you can make up a plausible excuse. Plausible excuses being convenient falsehoods, this branch probably won’t survive ethical scrutiny, while honesty will result in everyone who knows about what’s going on concluding you’re a prima donna who bails whenever something doesn’t go your way.

So far, so bad: Two alternatives, two unsatisfactory outcomes.

Here’s another one: You can confront the project manager. “What the fleep do you think you were doing!?!?” you might calmly ask at the next team meeting, or, if you’re in the mood to be discreet, privately.

If the project manager were the sort to accept that he’d done something wrong, he wouldn’t have violated the team’s consensus in the first place. If you choose the public option the blow up you’ve just engineered will further damage the ability of the team to function. If you do this privately you’ll merely damage your ability to work effectively with the project manager.

Either way, you won’t change the outcome.

Hmmm.

Another possibility: You can accept the project manager’s decision and move on from there without comment. This avoids all the previous downsides. It does, on the other hand, encourage a repeat performance.

The point of this little tale of woe? It started as a what-do-you-think-I-should-do inquiry, and from that perspective my answer is simple: Keep your mouth shut and document the event. That way, if everything does fall apart as a result of the project manager’s poor choice, you have some hope of salvaging your own reputation.

But there’s a difference between doing what’s most prudent and taking the most ethical course of action.

Those who advocate doing the right thing generally imagine the main barrier standing in the way of right-thing-ness is fear of the personal consequences.

That may be so in some situations. But in just as many, to my way of counting, the biggest barrier isn’t timidity.

It’s the difficulty of figuring out just exactly what the right thing to do is.

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