Wednesday, September 10, 2008

Analogy #206: The Magic Tool

When I moved from Minnesota to Ohio, I seemed to have lost my toolbox and tools. Apparently, my old tools got all intermingled with my son’s tools in Minnesota and now I don’t have them any more. So I went to Sears and got a cool new toolbox (“softsided”) and have been slowly filling it up with tools as I buy them when needed.

This got me thinking…how valuable are tools when they are located five states away from where you live? Can a tool be of much use when the human element is so distant? Wouldn’t it be great if we had “magic tools” that could do all of the work by themselves without a need for a human? Then I could stay at home and just send my toolbox to get the work done.

Let’s say I needed to build a house in Florida. If I had magic tools, I could just send the toolbox to Florida. The tools would jump out of the toolbox and do all the work. The saw would cut the boards all by itself (no humans involved). The hammer would hammer nails without the need for a human to hold it. When they were all done, the tools would jump back into the toolbox and be sent back to me here in Ohio, where I spent the whole time reading a book on house architecture.

That would be great! Sign me up for some of those magic tools.

House builders are not the only ones who would like magic tools. Business leaders also seem to be always looking for “magic tools”—tools to help make running a business easier and/or more profitable. Every year, bookstores are filled with books describing the hot new business tool. These books sell very well.

All that money being spent on finding the latest magic business tool creates quite a feeding frenzy. Software developers also claim to have the latest magic tool for business. Just plug their new software into your IT system and your problems are solved! Management consultants never seem to be at a loss for having new magic tools, either. Just call them up. I’m sure that they would love to sell you the tool (at an outrageous price).

It all looks so tempting. Let the magic tools do their thing, while management just sits back and counts all the extra money they are making.

Unfortunately, a tool is just a tool. My hammer cannot hammer without me. I am the one doing the hammering—the hammer is just I tool I use in the process. Put an axe in the hands of a lumberjack and you will get a pile of firewood. Put an axe in the hands of an axe murderer and you will have gruesome deaths. Don’t blame the axe. It is just a tool.

The same axe can produce either firewood or death. The outcome depends on the one using the tool.

The same is true of business tools. Their effectiveness depends upon the one using it. If you expect the magic tool to do all the work on its own, don’t be surprised if the outcome is a disappointment.

Most of the modern business tools today rely heavily on fact-gathering. If you can just gather enough of the right kinds of facts, the “tool” will produce “metrics” that can be displayed on “scorecards” or “dashboards” to tell you exactly what to do. Taken to an extreme, you get someone like a boss I used to have. He claimed that everything he did was “fact-based” and he would not act until all the facts were in and they had been run through one of these fancy tools.

Unfortunately, the principle of this blog is that “fact-based management” is not really management at all. Facts are like tools. If all you do is let “facts” dictate your actions, then you are acting as if the tool is doing all the work by itself. There is virtually no human element involved—just do what the facts say.

Just as a hammer works best when in the hands of a skilled craftsman, facts are most useful when interpreted by a skilled strategist/businessperson. They need to be actively managed as part of a larger strategic effort.

Average tools in the hands of a skilled craftsman will create better houses than top-of-the-line tools in the hands of an idiot, because the quality of the craftsman is more important than the quality of the tool. Similarly, the quality of the human business leader is more important than the quality of the latest magic tool for business.

I was reminded of this principle when reading today’s Wall Street Journal (September 10, 2008). There were two seemingly unrelated articles in this issue that caught my eye.

The first article praised a new magic business tool being used by retailers. The tool collects data on the productivity of store salespeople. Then it uses that data to schedule the employees. The most productive employees get scheduled the most hours and the busiest hours. The less productive employees get fewer hours and hours when the store is less busy. In the example in the story, the tool discovered that the optimum level of time it should take a salesperson at the store to make a sale was 5 minutes. Therefore, when scheduling employees, the computer staffed the hours on the sales floor based on exactly 5 minutes per sale, with estimated sales broken down into 15 minute intervals.

At first, this sounds great. It should optimize productivity by having only enough people to serve the demand (no excess payroll), and by getting a higher percentage of the time on the floor be with your most productive sales people. Human error was taken out of the system because the computer did all the work.

What was the actual result? Well, due to the nature of the program, weaker employees were given weaker time slots. This made it even harder for them to hit the quotas, so they got even weaker scores (no fault of their own).

Second, if an employee had something else going on in their life which required some flexibility in scheduling, it was ignored, because there was no human element to work out a schedule with. This created ill will. In addition, when you schedule people in 15 minute increments, you create unrealistic schedules for people to live lives around, further demoralizing the employees.

From a customer’s point of view, this productivity measuring caused employees to fight over customers in order to get credit for the sale. In addition, the old strategy of spending time with customers to build up a strong rapport for long-term lifetime sales had to be discarded to try to make a sale right now in just five minutes. So now the customer experience was diminished.

The result? Terrible morale for the employees and a less satisfactory experience for the customer.

Does this mean the tool was bad? No. It just needed to have the human touch applied in order to use the tool more wisely. Rather than abdicating management solely to the computer, it needed to be seen as a helpful aid in the hands of a human manager.

The second article in the paper talked about how UAL got punished in the stock market because of a computer error. Apparently, an old 2002 article about UAL’s old bankruptcy court filing appeared in Google as a new news item. Computers which blindly scan for new news articles picked it up and gave the UAL bankruptcy prominence. Suddenly, everyone was selling off UAL stock thinking there was a new bankruptcy there. The lack of any human intervention here caused a real mess for UAL.

Put these two articles together and you can start to see the problems of relying solely on fact-based management. Namely:

1) Not all facts are really as factual as you think. Flaws get into the system…false stories about UAL…false readings on employee productivity due to how busy the store is when they are scheduled.

2) If you accept facts blindly without question, you will end up making bad decisions…like selling off the wrong stock or ruining the relationships with both your employees and your customers.

3) Near-term “facts” may cause decisions which create long-term disasters, because the long-term impacts are not yet at a point where your tool can manage them. For example, that store tool cannot measure lost productivity long term when you destroy morale, or lost future sales because customers are no longer being wooed for lifetime sales.

4) Truly monumental improvements to strategy (as well as true innovation) cannot be found in historical “facts.” Great leaps of innovation have to look well beyond a historical reservoir of data. Creativity has to look at future possibilities, not measured history.

5) By the time all the facts are in, the game is usually over. The innovators who invented the new opportunities have already grabbed the business. Business implies taking risks—acting before all the facts are in. By the time all the data is in to eliminate the risk, the rewards for taking the risk are gone.

6) By the way, given the dynamics of the marketplace, all the facts are never in. By the time you think you have all the facts, the market will have moved a bit, making them less relevant. If you wait for all the facts before acting, you will wait forever.

Management tools are nothing more than tools. The real value is in the quality of the person using the tool. Blindly following fact-based tools without human intervention is a dangerous path to take. “Facts” are not the end-all and be-all of management. They are just one element which needs to be synthesized with human intuition, compassion and insight. Let’s put the management back into fact-based management.

In the Disney movie Fantasia, Mickey Mouse had a magical wand which allowed him to get tools—like brooms—to do the work without the need for humans. At first, everything looked great, but in the long run, Mickey ended up with a disaster on his hands, because when brooms work without human intervention they create a real mess. Don’t fall into Mickey’s trap. Put direct human management into the mix.

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