All Posts in Policies and Procedures

|In: Leadership|Last Updated:

One of the dumbest bits of political commentary in the past several years came from Jonah Goldberg. Commenting on somebody-or-other’s accusation that somebody else … somebody else Goldberg happens to like … was a hypocrite, Goldberg said, approvingly, that in order to be a hypocrite you first have to have principles.

Readers of Keep the Joint Running, being more sophisticated than readers of Jonah Goldberg, recognize the difference between having principles and espousing them. Some, concerned that I might be on the wrong side of this distinction, asked how I could have spent more than a month touting the advantages of de-regulating the PC, and then written a column that used fairly harsh language to describe governmental deregulation and its consequences.

The reason starts with the Economist‘s delicious phrase, “An analogy isn’t the same thing as being the same thing.” Here, the offending analogy is that a business is like a marketplace.

Some business leaders do run their companies as marketplaces (instituting, for example, charge-backs instead of effective governance). I’m sure this must be a good idea in some situations. I don’t know what they are, but in an infinite universe everything allowed by physical law must occur somewhere.

Mostly, marketplaces and businesses have only this in common: Absolutely nothing.

Businesses … well-run businesses, at least … have a purpose. Three purposes, really.

They are (1) organized to achieve their mission (which rarely has much in common with their mission statement, but that’s a different topic. They are (2) concerned with survival and self-perpetuation, although less so than you might think: Boards of directors have no compunction about selling the companies they govern should that seem more lucrative for shareholders than continuing to operate independently.

And, (3) the best companies regularly reevaluate their mission (and strategy, and vision, and “theory of the business” to use Peter Drucker’s term) making adjustments to ensure continuing relevance within the marketplace in which they operate.

Well-run companies coach, redirect, or terminate those individuals, supervisors, managers and executives who set their own direction, ignoring the company’s purposes.

All of this is the opposite of a marketplace. Marketplaces are inanimate spaces where businesses with independent purposes and direction interact. If the Cubs were a professional baseball team (we can only wish), Wrigley Field would be its marketplace — the space where it interacts with its competitors.

In baseball the need to regulate the marketplace is clear. Baseball needs rules, and has them. For example, the third baseman isn’t allowed to clothesline a runner to prevent him from scoring.

The rules need enforcement or they would be meaningless, hence the presence of umpires. Very important: The enforcers don’t consider the enforced to be their customers. Were they to consider anyone to be their customer their role would be at risk. (No one team is their customer, for obvious reasons; the fans likewise. Neither is Major League Baseball. If it were, and if those running MLB were to decide they would make more money if the season were scripted, pro wrestling style, then umpires would be paid to rig outcomes.)

Umpires, to be effective, must be loyal only to the principle of fair enforcement of the rules.

In professional sports we expect playing fields to be fair, level and impartial. If one of the officiators violates that expectation, he or she quickly becomes an ex-officiator.

Americans expect business marketplaces to be fair, level and impartial as well. We expect rules to be written so as to favor no one competitor over the rest. We expect enforcement of the rules to be fair and equitable as well.

Well, no, actually we don’t. Not anymore. Now we expect businesses to back up their ability to lobby for rules favorable to themselves with large campaign contributions. We worry about regulators viewing those they regulate as their customers. And, we are told on a regular basis that regulation never works anyway, due to the cleverness of the regulated.

It’s nonsense. Were that the case, top executives would consider insider trading laws to be a joke, the power industry would pollute with impunity, and we’d have experienced one Enron each year since Sarbanes-Oxley took effect.

We haven’t.

The impact on you: You’re regulating a business, not a marketplace. That implies alignment to a common purpose, which leads to a different level of trust, which in turn should result in much less regulation than what’s needed in a marketplace.

If this description doesn’t fit your company, there’s something seriously wrong with your company.

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|In: Industry Commentary|Last Updated:

Favorite themes from Keep the Joint Running in the news:

Zero Tolerance Policies: The use of process is the difference between effective management and bureaucracy. Effective managers keep the goal paramount. Processes guide action, help the organization learn, and are ignored whenever they don’t fit the situation.

For bureaucrats, the process is the point. Following the steps is all that matters, never mind the outcome.

In another example of zero tolerance being a synonym for bureaucracy, we have a six-year-old boy who swatted a schoolmate on the bottom.

The principal, citing the school’s zero tolerance policy for sexual touching, called the police. They, unlike the principal, showed good sense and dropped the matter. Sadly they did not show more good sense by arresting the principle on general principles.

Internal customers also made the news.

Well, not exactly. Misuse of the word “customer” is what made the news.

Customers are properly defined as the people who make buying decisions. Many business consultants define it, incorrectly, as those whose inboxes receive the contents of your outbox.

That use of “customer” is an analogy, and as the Economist points out, “Being an analogy … is not the same thing as being the same thing.” This particular analogy caused serious flight delays over the past couple of weeks.

A story brought to my attention by sharp-eyed subscriber J. MacKenzie (“Airline Safety Alarms Unheeded,” Washington Post, April 4, 2008), reports that FAA inspectors were told the airlines are … yes, that’s right … their customers.

More than told. When they tried to enforce the safety rules their supervisors sided with the carriers, threatening the inspectors (according to testimony before the House Transportation Committee).

The good news is, the FAA’s top safety inspector isn’t giving the usual “few bad apples” speech. He’s acknowledging a systemic problem. That’s an excellent first step in accomplishing a useful result.

The FAA episode reinforces the importance of industry regulation — a concept that has become unfashionable over the past few decades.

Industry regulation is needed when the results of pure, unfettered competition are not in the public interest. It fell out of fashion because its downsides — added expense, extra steps, lots and lots of paperwork, and entanglement in government bureaucracies — received excessive emphasis, while propagandists explained away its obvious successes (one example: The Cuyahoga River is no longer flammable).

Speaking of deregulation mania having resulted in even more inconvenience than the regulations themselves, the tipping-domino-like state of the world economy is also in the news. In one of the most insightful articles yet written on the subject (“Chaos on Wall Street,” Fortune, 3/31/2008), Allan Sloan dissects both the situation and what we can and should do about it.

Most past downturns were caused by a weak economy dragging down the markets. This one is different: Weak markets are dragging down the economy. The last time this happened? 1929.

As Sloan convincingly demonstrates, you can’t create a mess like this with just one mistake. It took several. One was, clearly, a too-weak regulatory environment.

Following the Great Depression came minimum capital ratio regulations for banks — basically, how much cash they must have to cover their risks. And only banks, even though brokerages and other financial institutions are now allowed to act in bank-like ways.

The result: The bank-like entities don’t even know their risks. Many of their “assets” are portfolios of portfolios of portfolios of loans, packaged as investment vehicles.

It’s the financial equivalent of spaghetti code. It works until it stops working, and once it does it’s very hard to repair.

What possible relevance does all of this have for a working CIO with a job to do? Quite a lot, as it happens.

  • The importance of eschewing (gesundheit!) zero-tolerance policies is, I hope, clear. Policy is a poor substitute for clear principles and good judgment, and should be reserved for situations where everyone must be treated exactly the same, always, rather than being treated fairly and well.
  • Treating those who use IT’s services with respect, without pretending they’re customers, is a key to the ongoing success of most 21st century CIOs. Those who work together in a business should collaborate as peers, not serve each other as suppliers and customers.
  • Recent KJRs have emphasized the desirability of deregulating PCs. As with business deregulation, PC deregulation has a number of benefits.

Also as with business deregulation, once a good thing starts to be too much of a good thing, it can become a bad thing.

Balance matters.

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