Jun 5, 2024 | Governance, Leadership, Management
The word ‘argument’ has many meanings, depending on the context. It can mean a friendly difference of opinion, a negotiation point, a statement of reasoning a lawyer might use, to an expression in a mathematical formula.
A quarrel is far more specific, requiring a disagreement, the cause of which is often lost in the chaos of emotion a quarrel elicits. The only other meanings of the word I can think of is as a collective noun for a group of energetic and opinionated mammals noisily exchanging insults, such as monkeys, squirrels, cooks, and lawyers. It also refers to the tip of a crossbow bolt.
There is a standard three step formula for making an argument stick in the minds of the receiver. It is evident in every news cast you ever heard, the ‘newsreaders secret formula.’
- Tell them what you’re going to tell them. This is always called ‘the headline’.
- Tell them. The story, or series of stories.
- Tell them what you told them. Restate the headline, and any conclusion or resulting actions that emerged.
To win an argument, as you would a negotiation, debate, or in court, you need to modify the news readers trick by adding a step.
That step is analysis of a guiding fact, or set of facts.
This enables you to analyse those facts in a way that leads you to the conclusion you are arguing for.
For the sake of ease of use you can break this into a pneumonic ‘CRAC’
- Conclusion. State your conclusion.
- Rule. Identify the fact or facts upon which your conclusion is based.
- Analysis. Provide an analysis of how that rule makes any conclusion other the one you’ve reached invalid.
- Conclusion. Restate the conclusion.
This CRAC process was used very effectively recently by an acquaintance chairing a community group that was protesting a pending building approval decision of their local council.
She stated that the approval, if it was to proceed, was in defiance of the councils own regulations.
She then cited the specific regulations.
She then pointed out the specific parts of the pending approval that was in breach of the regulations, and why they breached them.
For good measure she also pointed out 2 other proposals similar to the one that appeared to be about to be approved, that had been rejected on the basis of the specific parts of the regulations stated previously.
She then repeated the conclusion that the project was in defiance of the council’s own regulations, and therefore should not proceed.
It was an impressive performance, well planned, well executed, and ultimately successful after some embarrassing back downs by several councillors.
With a bit of practise, it is easy to use, and always better than resorting to a quarrel.
Header cartoon credit: Scott Adams and his mate Dilbert.
May 24, 2024 | AI, Management
Management is all over the place, scrambling to ‘get AI’.
A common failure of that scramble is a reality: rubbish in — rubbish out.
Outcome quality depends on two factors:
- Data quality. The quality of the data that is used to generate that outcome. The quality, depth and breadth of the data is dictated by the databases on which the system was trained,
- Instructions given. The instructions you give the machine will drive the type and weight it gives to the available data in response to your instructions.
AI is a ‘machine’, an electronic warehouse of information it makes available on request.
They are machines, not people. They cannot ‘think, they do as instructed, using predetermined ‘training’ to prepare an answer.
Most people are radically unprepared for the changes coming.
The best known problem solving metaphor has always been Einstein’s.
He observed that if he had an hour to solve a life defining problem, the 1st 50 minutes would be spent defining the problem, the rest is just maths.
It is identical in the deployment of AI.
It seems to me that when a system ‘hallucinates’ it is a sign that it has been inadequately briefed. Think about the briefing as you would explaining something to any intelligent 10-year-old!
Keep it simple.
Explicitly define what information is to be used.
Explicitly define the objective to which the information will be directed.
Explicitly give any contextual information that may be helpful.
Explicitly define the range of outcomes you might be looking for.
The key to leveraging the speed and depth of data made available by AI systems is in the preparation of the data and the matching of that data to the problem being addressed.
If you use this simple process, the one you should have practised on your children, you can dodge the expensive and largely useless ‘prompt engineering’ courses, books, and gurus that have sprung up like mushrooms after rain. They are there to drain your pockets by offering seemingly easy solutions to difficult challenges.
There is no such thing as an easy solution that negates the necessity to ‘do the work’.
Header credit: DALL-E.
Mar 8, 2024 | AI, Management
Cash flow is often described as the lifeblood of a business.
While it is correct, it leaves a lot on the table.
If cash flow is the lifeblood, you also need a heart to pump it around the body. The leaner and more efficient the body in which the heart resides, the easier it is to pump, reducing the stress on the mechanism, reducing risk.
Similarly, to be effective blood requires oxygen to be attracted and distributed through the system.
Oxygen is what keeps everything working, it is the source of the power required to run the system, without which the system rapidly grinds to a halt.
In a business context, the oxygen is the input of information, the lungs and heart are the analysis and leveraging of that information, and the culture of the organisation is the body that holds it all together.
You go to the doctor to get a physical, where do you go to get a ‘commercial’?
An accountant will give you part of the picture, based on the books.
A ‘lean’ expert might offer many insights into the operational processes, particularly in a factory, and at the same time offer cultural insights.
A ‘6 sigma’ expert will deliver an arithmetic analysis of the efficiency of each part of a process.
A marketing expert (if you can find a bullshit-free one) will give you opinions based often on questionable and partial information, and usually biased towards their particular view of the role of marketing.
A sales expert will opine that everything else will be OK if you just get more leads for them to convert, and here is how!!
The point is that each will give you a picture of your business as they see it based on their experience, training, predisposition, domain knowledge, and their own assessment of WIFM.
Finding someone who ties all that together, and offers a complete, unbiased, and expert picture is a challenge.
Dec 18, 2023 | Leadership, Management
At this time of the year, there is much thinking going on in relation to the manner in which incentives will be applied in the coming year, for which you are preparing the budget.
There are many and varied schemes, most of which are geared in one way or another to a threshold, above which the incentive kicks in.
It can be anything from a sliding commission, to share allocations, holidays, and goodies from the local store.
99% of those I see have one common characteristics: they are known, the thresholds are clear, as they are seen as the motivating factor. They can also be gamed in all sorts of ways, particularly by those in sales. When the commission is based on revenue alone, that can be achieved by giving big discounts, the timing of invoices can be varied, ‘channel stacking’ becomes common.
These sorts of incentives are usually ineffective, because they become taken for granted, and are always ‘gamed’ by staff.
In the early 50’s psychologist B.F. Skinner did a series of experiments, using rats and pigeons as subjects, since validated widely. He used a box that became known as a ‘Skinner box’ in which he placed the hungry subjects, and a lever. The rats and pigeons pushed the lever, and could gain an intermittent reward of food. They soon learned that pushing the lever sometimes delivered a reward, so they pushed it more and more, each intermittent reward reinforcing the behaviour. The variability of the reward when it is intermittent tends to increase the speed with which the subjects pushed the lever, a few will keep pushing despite the calorific value of the intermittent rewards being less than the calories required for life.
This behaviour can be seen in any room containing poker machines. Some players will, despite knowing the odds are against them, keep pushing money into the machines, hanging out for the intermittent reward of the clatter of coins in the tray, and the psychological reassurance that goes with it.
Why not use the same sort of thinking to manage your incentive programs?
Oct 24, 2023 | Governance, Management, Small business
Most SME’s I meet have at one time or another contemplated, and often invested considerable resources in the quest to obtain public grant funds.
Rarely do they approach this exercise with any understanding of the disconnect between the way the commercial world, and the bureaucratic one work. They assume that what to them is normal and obvious is reflected in the bureaucratic processes.
Wrong.
For context, 25 years ago I ran a small grant-funding outfit called Agri Chain Solutions that had been outsourced from the then Department of Forestry, Fisheries and Agriculture at the express direction of the then newly elected Prime Minister Howard. ACS was a Company, limited by guarantee with a largely commercial, board with two members from the senior ranks of AFFA and Austrade. The chairman had been a very successful MD of a very large business in the food industry. I was recruited as a senior manager with extensive experience in FMCG and agriculture.
Following are some relevant observations from that time about how the bureaucracies operate, which from what I can see, remain accurate.
- Departmental budgets are set annually in line with the governments policies and priorities. While program budgets are often spread over a number of years, they are reviewed and changed as necessary, or for a hundred other reasons, annually.
- Departments put in their ‘bids’ in the pre-budget preparation, which includes the costs of running the department, as well as the cost of the programs for which they are arguing.
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- Departmental overheads have been progressively cut over years by shedding heads, which are then contracted back as an ‘off the books’ expenditure, usually netted off against program costs, or just classified as an unavoidable cost overrun.
- The status of public servants is measured by the number of reports, direct and indirect (i.e., reporting to someone who reports to them) they have, and the size of the budgets they manage. This leads to an ongoing turf war between departments, and sections within departments for status, and public service grades that determine pay and advancement.
- Public servants are typically held loosely accountable for the expenditure of money compared to the budget allocated. This has absolutely no relationship to the outcome generated by the programs they manage. To my mind, this mismatch of expenditure and accountability is at the core of much of the waste that occurs. It is also the factor that leads to the mad rush to ensure that budgets are all spent before June 30. An underspend will be seen as a sign that a cut is possible, while an overspend is seen as bad luck, with no recriminations, or understanding of the drivers of the overspend.
- Program reviews done by an ‘outside’ neutral agency are built into the program costs, but neutrality is a joke, as the current PWC fiasco demonstrates. In ACS’s case, the review was done by KPMG, who had to do three revisions to get to a program report AFFA was happy with, in order to get paid. As you might guess, draft 1 was OK by me, draft 2 was nonsense, and draft 3 was total bullshit that bore no relationship to the success, or otherwise of ACS expenditure. I was bitterly and noisily opposed to the final report submitted, but was advised that my disagreement while noted informally, was not relevant. I could not change the world, so I should just get on with life.
- Grant program budgets allow a percentage of the total program to be held back for ‘Administration’. In the case of ACS, that amount was 20%, a laughable amount, as the total expenditure on all ACS overheads and project management was around 6% of the program budget. All AFFA did was use the withheld amount as a slush fund.
- Program budgets are broken up to make keeping track easy, bearing no relationship to the way money should be spent to optimise the outcomes. In ACS’s case, we had $9 million over 3 years, minus the withheld admin cost. The department broke the total into 12 equal quarterly amounts and insisted that was the budget. Pointing out that it took 18 months to get good projects up and running, during which time little grant money would be allocated had little effect. In the last 18 months more than the quarterly ‘budget’ amount was to be allocated, which caused great angst in the department. I also pointed out that at the original sunset of 3 years, there would be projects that had not been completed, that ACS and AFFA had a moral if not contractual obligation to see through. After much discussion, we negotiated a 12-month extension for nominated projects that were then shuffled into the follow up program, the National Food Industry Strategy, with a contractor to administer them.
- Senior public servants speak about accrual accounting as being the base of their accounting processes. ‘Nonsense. It is cash accounting, there are no accruals involved, anywhere.
- There is a myriad of ‘allowances’ that foster rorting and destroy accountability. I came into contact mostly with those relating to travel. The intent is sensible: make the management simple. However, the effect is to enable officials travelling to rort the system. E.g. A level X official is allowed an amount/day for meals and accommodation, without any paperwork showing expenses incurred. Predictably, they travel as much as possible to places where they have friends and families, claim the whole amount, and pocket the lot, or stay in a cheap hotel, eat as cheaply as possible, and pocket the difference.
- Finally, for all the babbling about innovation that goes on, it represents the antithesis of the cultural abhorrence bureaucracies have with risk. Innovation is impossible without risk, and risk seen in hindsight is always weaponised as a mistake by those who oppose. As was once said to me by a senior bureaucrat in a well lubricated social setting “my job is to ensure my minister is never seen as stupid, and you know who my minister is, so you know how hard my job is’.
None of this is to denigrate public servants, quite the contrary. As individuals, they are generally a well-educated and potentially powerful force for good, frustrated by the constraints of the culture within which they work. The challenge is changing the culture that has been encouraged to grow around them, a task belonging to those with the power to do so, the politicians.
Oct 20, 2023 | Innovation, Management
Investing in dead horses sounds like a pretty dumb idea, but it happens all the time.
Projects, ideas, products, people, that have little or no probability of returning revenue and margin from the continuing investment should be stopped. Not only do you save the money and management distraction, but you have the opportunity to leverage the freed-up capacity against the opportunities otherwise passed over.
Opportunity Cost flipped to be just Opportunity.
Over the years I have seen many projects that have persisted long past any reasonable time, never seeming to move forward, but never getting the chop.
When resources have been invested in a project, particularly when it has a favoured place in the psyche of some manager, killing it is often hard, resources just get budgeted, absorbed, and ultimately wasted.
Voltaire observed that: ‘Perfect is the enemy of good’ This leads to the idea of Minimum Viable Product (MVP), getting an idea out to the market in some form to test if it really has sufficient traction to deserve the allocation of resources over alternative uses. ‘Ship and Iterate’ should be the cry, assuming that each time you iterate, you learn from the outcomes, and better understand the commercial reality you confront.
Prudent investors and managers take a ‘portfolio approach’.
They know that not all initiatives are equal. Differences abound in the resources they consume, the opportunity offered, and the odds that the opportunity as visualised will become reality.
Daniel Kahneman established quantitatively that we value what we stand to lose much more than what we stand to gain. This is the magic power of continuing to invest to avoid accepting a sunk cost. Flogging a dead horse by another name.
Stop investing in dead horses, they will not come back to life no matter how hard you wish it were different.
