The lumpy carpet syndrome

When Alan Mulally became boss of an ailing Ford Motor Company in 2006 one of the first things he did was demand that his executives own up to their failures. He asked managers to colour-code their progress reports—ranging from green for good to red for trouble. At one early meeting he expressed astonishment at being confronted by a sea of green, even though the company had lost several billion dollars in the previous year. Ford’s recovery began only when he got his managers to admit that things weren’t entirely green. (Fail often, fail well)

The sea of green is the lumpy carpet syndrome. It is common and particularly true when donors are the source of revenue.

Over $750 million has been spent on elections in Afghanistan, over the past 12 years. Not one has been credible. Almost two thirds of the money has been spent on building the voters register. There still is no voters register in the country.

This figure barely registers in the waste the Office of the Inspector General has exposed.

And yet the reports from the offices responsible for these projects read of glowing success. The difference is the lumpy carpet. Anything that looks bad is hidden. After all, no-one wants to spoil their prospects for promotion.

If someone tries to expose the waste, then it’s time to shoot the messenger.

More at:
Fail often, fail well
SIGAR Quarterly Reports to Congress
If it’s broken, IT can’t fix it

Multi-tasking is a myth

The cell-phone was the start of the slide. Now with the ubiquitous iPhone and Blackberry, it’s become worse. 

Unless they have multiple processors, computers that do multi-tasking, do each task at a proportionately reduced speed. But, at least usually, each task is done properly. With humans, because they believe that they are able to multi-task, it’s not only the speed that’s affected, it’s the quality of the output.
Multi tasking
In meetings and conversations, people devote half (or less) of their attention, and with that comprehension disappears. So they agree to things they would not otherwise have done, and mistakes happen.

The e-mail responses one receives from people who write them while also otherwise engaged often reflect the same inattention. They reveal that the respondent, instead of reading the original missive, has often jumped to a conclusion of what they think the content is, and send a reply that is way off track.

Now as social media has entered the fray, attention has become a rare commodity, and otherwise intelligent people start to look more than a little stupid.

At least the phones are smart!

More at:
Cell-Phone–Induced Driver Distraction
Drivers on Cell Phones Are as Bad as Drunks
Hands-Free Talking, Texting are Unsafe
M is for Meetings and Multi-tasking
Stop Multitasking in My Meeting!

If it’s broken, IT can’t fix it

Schumpeter, the Economist’s business contributor, appears not to understand government. His recent article, Fixing common affairs, suggests why. The article implies that by harnessing the power of IT, government can become more efficient.

Government tries to harness IT’s benefits, they just do it badly.

The introduction of IT only mechanizes the processes, when there isn’t a simultaneous redesign of the existing controls. With mechanization the quality control sample is reduced to two (n = 2). By testing the first item in a batch, and the last item in the batch, when both samples meet the production standard, one is sure that the complete batch meets the production standard. But if the production standard is poor, mechanization won’t improve it.

When systems are not integrated, it requires human intervention to get controls to work. If a payment system requires that the person doing the authorization has had a specific training, integration with the training system should confirm that automatically. If the systems are not integrated, it requires that a second person checks the authority levels, and in the event that the person does not have the necessary authority, sends an email that the authorization is invalid until the course has been taken. Then, when the course has been taken, a second chain of emails needs to be sent, so that the payment can be made.

This goes to the heart of the difference between procedures and systems. Procedures simply provide evidence that something has been done. Systems ensure that what should have been done has. In a properly designed system the end event taking place proves that all the intermediate steps happened.

Sometimes reconciliation to external data is necessary to ensure that all the transactions have been correctly recorded. For example, in an accounting system the bank reconciliation checks that all transactions in the cash book appear in the bank statement, and all the transactions appearing on the bank statement have been recorded in the accounting system, and that any differences can be explained. Without the reconciliation there’s no guarantee that all transactions have been recorded.

Without these systems and complementary controls IT can’t change anything.

Sometimes IT makes things worse. Take the reply-all button. People who work in government will tell you that two days away from the office will result in an inbox with hundreds of emails. Fighting the tide becomes the dominant task on return to work. That’s hardly productive.

Many of governments inefficiencies can be also attributed to the complexity of the management structures and unbridled ambition.

There far to many layers of management and matrix structures, where people at lower levels are accountable to two or more bosses, are a norm. The inefficiencies that matrix structures create are the reason why business schools teach that they should only be used as a last resort.

The ambition that runs rampant in government creates a situation where bad news is concealed to avoid the possibility that it will taint a golden career. Schumpeter in his article “Fail often, fail well” describes how Alan Mulally, on taking up his tenure as Ford  CEO, discovered that although the company was in crises, executives were unable to admit to having any failures. Once managers learned to admit that things were going wrong, and to invite help, the company turned around, and was the one motor manufacturer that did not require rescuing in 2008 when all the others were bailed out.

Having seen some well written fiction in government reports makes this correspondent believe that the same medicine would go a long way towards making public institutions a lot more efficient.

Government must work smarter, and when that happens, IT will help.

More at:
Fixing common affairs
Fail often, fail well

A Diamond in the rough

As our earlier article explains, the deviation for some of the other banks reporting their LIBOR interest figures were worse those of Barclays. Robert Diamond, the former CEO of Barclays, has been making that point too.

His response is a little petulant: the others were also naughty, so why are we being punished?

Perhaps because in Barclays’ case there’s irrefutable proof.

But he does have a point. What is being done about the other banks?

The conversation between Mr Diamond and Paul Tucker of the Bank of England on October 29, 2008 that Barclays figures were higher than the others also raises some questions. Manipulation of LIBOR was already an issue after the Wall Street Journal published it’s proof in May 2008.

In that context, it seems improbable that Tucker’s query about the higher rates would be an attempt to induce the manipulation of LIBOR.

So far we don’t have the notes from the conversation between Mr Diamond and Jerry Del Missier, the former Barclays executive who took Tucker’s question as an instruction to manipulate the LIBOR figures.

Perhaps they don’t exist – anymore.

More at:
Diamond Says Rivals Lowballed Libor, Blames Regulatory Inaction
Barclays: MPs query Bob Diamond evidence
Did bank greed cause the crash?
Banksters

Unacceptable

Tim Johnson, the chairman of the Senate Banking Committee, opened the hearing into the $2 billion trading loss that JPMorgan recently incurred. In his address, Johnson said “it was an out-of-control trading strategy with little to no risk controls that cost the company billions of dollars. …. we can, and must, demand that banks take risk management seriously and maintain strong controls. …. I expect Mr. Dimon to be able to answer tough, but fair questions today.  A full accounting of these events will help this Committee better understand the policy implications for a safer and stronger financial system going forward.”

Johnson made the objectives almost impossible to achieve from the outset, limiting each senator to 5 minutes. It was clear from the questioning that no strategy had been agreed between the Senators, and so a number of them were left with unanswered questions.

In Dimon’s prepared testimony, he ascribed the losses to a change of strategy, that instead of reducing risk, increased it.

It was a reporter for CNBC, not one of the Senators, that questioned Dimon on the email that he’d been copied notifying him of the change. “I paid virtually no attention to it. I didn’t think it was significant,” he said. The portfolio is worth $350 billion.

If that’s not significant, what is?

Dimon, at least, is open about his mistakes.

Dimon says that clawback provisions will be applied to recover some of the losses from responsible officers.

It’s a pity that the Senator’s salaries don’t have similar provisions.

More at:
JOHNSON STATEMENT ON JPMORGAN HEARING
Testimony of Jamie Dimon Chairman & CEO, JPMorgan Chase & Co. Before the U.S. Senate Committee on Banking, Housing and Urban Affairs Washington, D.C. June 13, 2012
Dimon Says Overconfidence Fueled Loss He Can’t Defend
Dimon Fires Back At ‘Complex’ System In U.S. Senate Grilling
Jamie Dimon of JPMorgan Chase leaves Senate banking committee in the dust
Senators Suck Up to Jamie Dimon, Get Paid for It
Top 20 Contributors Senator Tim Johnson 2007 – 2012
Senate Banking, Housing and Urban Affairs Committee
Dimon, JPMorgan Chase Have History with Senate’s Banking Panel
Jamie Dimon’s Risky Business
Dimon has now joined the Lou Club