Tag: managerialism

Fire and be dammed, the poor management at tech companies

Quick firing firing of employees who make mistakes shows a weakness in the management of many tech companies.

Microsoft manager Adam Orth has joined the ranks of those fired after some poorly thought out comments found their way onto the Reddit discussion boards. The firing of Orth illustrates a weakness in the management of tech firms.

Orth’s firing follows the “forked dongle” affair where two developers lost their jobs over sexist comments at an industry conference.

What’s notable in all these firings is how Playhaven, SendGrid and Microsoft’s management all summarily fired their employees for what at worse could be described as a ‘lapse of judgement’.

One of the conceits of modern management is that risk can be eliminated, the mark of a poor manager is to act quickly to get rid of anything that could potentially be a risk.

These tech companies are good illustrations of this – neither Adam Orth, Adria Richards or the Playhaven developer deserved to lose their jobs over this, all it required was an apology and commitment to be more careful about what they post on the public internet in future.

All of us, including the sensitive and incompetent firing managers, have something on the internet that could embarrass us or our employers. In an era where people are quick to take offense, it’s easy for something taken out of context to spin out of control.

That’s a risk beyond the control of middle managers at software companies.

Hiding from risks or attempting to purge them is not the way to run an organisation. Strong, good managers can do better than that.

Management manual image by Ulrik through SXC.hu

Corporate palaces and the new Ceasars

An opulent corporate headquarters is often the indicator that management’s mind is on things other than customer service or shareholder’s return.

One of the key traits of managerialism is executives spending vast quantities of shareholders’ money on opulent corporate headquarters, is Apple the latest company to succumb to this disease?

Building a new headquarters is fun for managers. One company I worked for in the early 1990s was debilitated for months as executives spent most of their time moving walls, rearranging desk positions and changing lift designs to reflect their status as grand visionaries.

For the company gripped with delusions of management grandeur a flashy head office is the must have accessory. It’s the corporate equivalent of the Skyscraper Index and is almost as good a predictor that a change in fortunes is imminent.

Apple’s new headquarters is nothing if not impressive. Bloomberg Newsweek reports the building which, at two thirds the size of the Pentagon, will house 12,000 employees is currently estimated at costing five billion dollars, sixty percent over the original budget.

The plans call for unprecedented 40-foot, floor-to-ceiling panes of concave glass from Germany. Before the Cupertino council, Jobs noted, “there isn’t a straight piece of glass on the whole building?…?and as you know if you build things, this isn’t the cheapest way to build them.”

With over a $120 billion in cash, Apple can certainly afford to spend five or ten billion on new digs despite the grumbling of shareholders who have had to settle for a stingy 2.4% dividend from their shares.

The big question though for Apple shareholders though is whether a project like this indicates a company that has peaked with management more intent on building monuments to itself or its genuinely visionary founder rather than deliver returns to owners or products to customers.

On the latter point, there’s no evidence of Apple losing their way with their products yet, but it’s something worth watching in case management becomes distracted with their building project.

For the company I worked for, the distracted managers all vanished one day when the main shareholder of the Thai-Singaporean joint venture discovered they’d been fiddling the books. They probably needed to pay for the office fit out.

Technology Cannot Save You – the limitations of relying on IT

Managerialism will always trump technology which is why IT can’t solve problems caused by management incompetence.

One of the great conceits of modern times is that technology can solve any problem – the problems of Sydney’s transport system is an example of how IT can’t overcome managerial incompetence.

The irrepressible New Australian has a good post about Sydney transport system and its battles with the opal card.

Australian governments have been troubled with smartcard ticketing systems for decades, the Opal Card itself was promised in time for the Sydney Olympics thirteen years ago. Little has been done since.

The fundamental problem is that governments are being sold technology solutions to fix management and political challenges.

In Sydney’s case the problem is a complex fare structure and a Balkanised public transport system  – check the situation for a commuter wanting to travel from Parramatta to the city.

  • Ferry fare $7.20
  • Train fare $5.00
  • Bus fare $4.60

The above fares are the standard single journeys, to make matters worse there’s a mind boggling range of concession, off-peak and periodic fares whose structure owes more to political opportunism, managerial incompetence and agency jobsworths protecting their turf than any logic or fairness.

Without a logical or consistent to calculating the fares, computer algorithms have no hope – managerialism trumps coding every time.

Basically Sydney has no chance of getting their system working properly without having an integrated fare and management structure. Technology cannot fix this problem.

This is not just a Sydney problem A great example of how incompetent management can screw up what should be a straightforward implementation is in Melbourne which has a comparatively simple time based price structure.

Melbourne’s Myki card has had a similarly troubled life being delivered decades late, hundreds of millions over budget and being so user unfriendly it seems designed to solve the city’s transport overcrowding problem by chasing away passengers.

Basically management incompetence by arrogant bureaucrats and ignorant ministers doomed Melbourne’s project from the start.

Australian governments aren’t the only organisations that fall for the fallacy that technology can solve their problems, around the world corporations and public agencies have made the same mistake.

This is something technologists, and more importantly taxpayers and shareholders, should keep in mind when a CEO or minister is trumpeting the latest technology to fix their organisation’s woes.

Image of the Opal Card brochure courtesy of The New Australian

Too many presidents spoil the enterprise computing broth

Oracle has an interesting management problem as revenues stagnate.

Last week Oracle, the world’s third largest software vendor, had an eight percent drop in its stock price  after the company missed earning estimates.

Part of the research for are article I’m writing on the company involved digging into the organisational structure of the company and interestingly it has a pair of ‘co-presidents’ – Mark Hurd and Safra Katz.

Safra is the Chief Financial Officer who has a pretty powerful CV and seems well qualified for the job of controlling the finances of a $150 billion dollar company.

Mark on the other hand is my favourite IT executive, his tenure at HP is a case study in the entitlement culture of modern managerialism and no small reason for that company’s present day problems.

The analyst briefing (free subscription might be required) following Oracle’s disappointing reports betrays a little bit of tension between the two. First Safra;

We’re not at all pleased with our revenue growth this quarter. So it didn’t help that our quarter ended on the same day as the sequester deadline. What we really saw is the lack of urgency we sometimes see in the sales force as Q3 deals fall into Q4.

Since we’ve been adding literally thousands of new sales reps around the world, the problem was largely sales execution, especially with the new reps, as they ran out of runway in Q3.

It seems there’s a touch of ‘dog ate my homework’ in mentioning the US political sequester, but the message is clear – “what we really saw is the lack of urgency we sometimes see in the sales force.”

These are IT sales people we are talking about, ‘a lack of urgency’ is an insult to a group of people who have been known to work 120 hour weeks and sell their grandmothers if it means getting a fat commission.

Mark is in the poo. We quickly learn why when it’s his turn to speak,

We’ve added over 4,000 people to the Oracle sales force in the last 18 months. We’ve significantly expanded our customer coverage. We’ve seen material growth in our pipeline. But Q3 [conversion rates] were below what we expected, while our actual win rate went up.

An investor would hope there’s material growth in the sales pipeline when you’ve added 4,000 salespeople to your workforce.

In Oracle’s case though revenues have fallen .8% for the year and are only up 2% over the time Mark’s added all those go-getting Willy Lomans to the company’s payroll.

The interesting thing with Oracle’s figures is the company has spent nearly $400 million on restructuring costs over the last year, has hired over 4,000 new sales people and yet total operating costs, and margins, have barely moved in that time.

Which indicates somebody in Oracle is bearing the costs of Mark’s hiring spree.

During Hurd’s tenure at HP, he was notorious for penny pinching and cutting worker’s benefits. While staff were finding they were stuck in economy for international business meetings, Mark himself was staying at some of Europe’s best hotels and showing off his bank account to attractive employees.

Hopefully history isn’t repeating itself.

Probably the most perplexing thing with Oracle today are Mark’s and Safra’s roles of c0-Presidents. What on Earth are those roles?

Most telling with the co-Presidents is that they aren’t really in charge – if Larry Ellison, the CEO and founder, wakes up one morning and decides either Safra or Mark have to go then they’ll be out of the company well before lunchtime.

Along with carparking spots, inflated executive job titles are good indicator an organisation’s management is focusing on it’s perks, benefits and privileges rather than delivering for customers and shareholders.

Perhaps Oracle’s analysts and common stock holders should be focusing more on management’s behaviour more than the details of the company’s sales performance.

Walmart pays for cutting staff

Cutting staff numbers is costing Walmart dearly as customers desert the retailer for better stocked competitors.

Along with the carpark test, a lack of customer service is one of the best indicators that a company has lost its way.

Unattended reception desks, closed cash registers and deserted delivery docks are reliable indicators management has focused on short term staff savings which will ultimately cost the business dearly.

Walmart is the latest example of this with Bloomberg Businessweek reporting that US shoppers are deserting the chain because shelves are empty and stores don’t have enough staff.

The claim stock is piling up out the back of stores is particularly concerning, the just in time inventory management of modern retail chains means there’s little room for error as outlets don’t have a lot of space whil the cash flow of the business and its suppliers is based on getting goods quickly into the hands of eager consumers.

Some of Walmart’s pain will be spread among suppliers as the store’s contracts will push undoubtedly some of the costs of rejected deliveries back onto logistics companies, effectively creating problems through the entire supply chain.

No doubt there’s plenty of angry suppliers and truck drivers who are grumbling about lost time and payments on Walmart contracts. That won’t be good news for the company’s buyers when contracts come up for negotiation.

Even though Walmart’s management can throw some of their problems over the fence, the fundamental issue of losing customers can’t be missed.

Walmart’s isn’t the only retailer who’s fallen for the short term fix of cutting store staff to give a quick profit boost as department stores and big box outlets around the world struggle with the damaging effects of not being able to serve customers.

That Walmart, one of the industry’s global leaders, would make such a mis-step shows the pressures on managements as economies deleverage and credit wary consumers decide that don’t need more junk in their homes.

Cutting costs isn’t going to address those bigger trends, it’s going to take original thinking and management commitment to adding real value to customers.

Service is just the start of a long process of refocusing the retail empires.

Image of Albany Walmart courtesy of UpstateNYer through Wikimedia

Privileges and princelings

Many companies have developed a culture of executive privilege in an era of easy money.

A strange thing about Australian business reporting is that its often full of gossip and name dropping as any third rate scandal magazine.

In a perverse way, treating business executives like the Kardashians gives the average mug punter – and shareholders – a glimpse into how these companies do business. Like this story in the Australian Financial Review;

Hamish Tyrwhitt was unaware of the latest drama unfolding within the Leighton board as he relaxed in the Qantas First Class Lounge in Sydney on Friday morning.

Indeed, the contractor’s chief executive officer was busy chatting to former Wallabies captain John Eales while waiting to board a flight to Hong Kong where he was due to close a recent deal to build the Wynn Cotai hotel resort in Macau and enjoy the Sevens rugby tournament.

The timing was not good. Tyrwhitt had only just boarded the flight when the news broke that chairman Stephen Johns and two directors had resigned. Tyrwhitt was forced to change his plans and is expected back in Sydney for a board meeting convened this weekend.

Nice work if you can get it.

A few pages further in the day’s AFR is another gem;

One July evening about four years ago, off the south coast of France between Cannes and St Tropez, two men sat in the jacuzzi on the top deck of a 116-foot Azimut motor yacht. It was about 3am and the sea was rough. The spa water was sloshing about and had given the latest round of caprioskas a distinctly bitter taste.

Dodo boss Larry Kestelman was telling his good friend, M2 Telecommunications founder Vaughan Bowen, about the challenges of growing his internet service provider business.

It’s tough doing business when the spa waters are choppy. One expects better from a seven million dollar boat.

That second article raises another point that’s often overlooked, or unmentioned, when reporting Australian business matters.

on Thursday the 14th, something unexpected happened. At 12.30pm, after no activity all morning, shares in the thinly traded Eftel started to rise sharply. By the time the market closed at 4pm, Eftel had soared 44 per cent to 39.5¢. Someone with knowledge of the deal was insider trading.

Insider trading? On the Australian Security Exchange? Somebody had better call those super-efficient regulators who were responsible for Australia cruising through the global economic crisis of 2008.

Somebody obviously wanted their own 116ft luxury yacht or corporate box at the Hong Kong Sevens.

Both of these stories illustrate the hubris and privileges of corporate Australia and its regulators.

One wonders how well equipped these organisations are for an economic reversal when their leaders are more worried about caprioskas and their spots in the first class lounge.

We may yet find out.

First class airline seat images courtesy of Pyonko on Flickr and Wikimedia.

Does Google have corporate Attention Deficit Disorder?

Are Google paying the price of not paying attention to their core business?

The news that Google were releasing a service called Keep designed to store things you find on the web for future reference received a hostile response yesterday.

It seems the company’s dropping Google Reader into the deadpool proved the final straw for many of the tech early adopters who’d invested too much time building their feeds and other digital assets only to find services taken away from them.

This isn’t just Google Reader, various other services are suffering; Google Alerts has become functionally useless while the Frommers guide book franchise is slowly dying after the company bought it from John Wileys.

Corporate Attention Deficit Disorder

Google are suffering corporate Attention Deficit Disorder (ADD) where management find a bright shiny thing, play with it for a while then get bored and wander off.

This is trait particularly common amongst cashed up tech companies. In the past Microsoft and Yahoo! were the best examples, but today Google is the clear leader in the Corporate ADD stakes.

Corporate ADD requires a number of factors – the main thing is a big cash flow to fund acquisitions.

In companies with this luxury, bored managers find themselves looking for things to do with all the money flowing through the door and when a hot new product or market sector appears those executives want to be part of it.

So a company gets acquired or a project is set up and the advocate drives it relentlessesly within the corporation, usually with lots of PR and write ups in the industry press.

Then something happens.

Usually the advocate – the manager or founder who drives the project – gets bored, promoted or sacked and the project loses its driving force within the organisation.

Without that driving force the service stagnates as we saw with Google Alerts or Reader and eventually company closes it down.

This has unfortunate effects on the marketplace, users invest a lot of time in the company’s service while  innovators in the affected market struggle to get funding as the investors say “we can’t compete with Google’.

A changed perspective

What’s interesting now though is the sea-change in the attitude towards Google’s Keep announcement – rather than dozens of articles describing how competing services like Evernote are doomed in the face of the search engine giant entering their market, most are saying this validates the existing startups’ investment and vision.

More importantly, most commentators are saying they are going to stick with the services they already use because they no longer trust Google to maintain the product.

This is what happens when you lose the trust and confidence of the market place.

One of the mantras of the startup community is “focus” – focus on your product and the problem you want it to fix. That large businesses lack that focus shows how far from being a lean startup they have become.

Google’s real challenge is to regain that focus. Right now they have rivers of cash flowing through their doors but in an age of disruption, it may well be that they could dry up if no-one pays attention.

Ritalin image courtesy of Adam on Wiki Images

More National Broadband woes

Australia’s National Broadband Network project hits a hiccup with installation contracts.

This is not good for the National Broadband Network project; contractor Service Stream announced it was handing back the Northern Territory rollout contracts to the Australian Security Exchange this morning.

It raises serious questions about the timetable of the project.

Service Stream advises that Syntheo, a 50/50 joint venture with Lend Lease, has reached agreement with
NBN Co to hand back the remainder of its design and construction activities in the Northern Territory. Syntheo is committed to working with NBN Co to complete its work in Western Australia and South Australia.
Given NBNCo abandoned its construction tender in April 2011 amidst hints of price fixing by contractors, this is a worrying development that indicates those ‘overpriced quotes’ may have been closer to the money after all.
I’ll be writing something up later today for IT News.

The high cost of new media experiments

The BBC’s expensive exit from their Lonely Planet investment shows the costs and risk for old media empires as online business models evolve.

The BBC yesterday sold Lonely Planet to US media company NC2 Media. Their £80 million loss on the venture puts them in good company as established media struggle to find new online channels and revenue streams.

While the losses aren’t trivial, they are not quite in the league of News Corporation $545 million loss on MySpace or Time Warner’s billion dollar adventure with AOL.

All three stories show how tough it is for ‘old media’ adapting to a new landscape.

The problem is there for ‘new media’ as well, most ventures struggle to make money and many of the success stories like Huffington Post rely on a combination of free content and a greater fool buying them.

No-one has really figured out what the new media revenue models are; not the established publishers or the online upstarts.

Lonely Planet’s online success was due to their forums which, like most web discussion boards, can feature discussions politely described as “robust”.

This was always going to a problem for the BBC’s public service management culture and it resulted in the shutdown of the Lonely Planet Thorn Tree forums over Christmas.

So it’s not surprising that the BBC has decided to end its experiment and now the corporation’s management is dealing with the criticism of those losses.

While it’s easy to criticise the BBC for the deal, at least the broadcaster was attempting something different online, doing nothing is probably a poorer strategy than buying MySpace or Lonely Planet.

Over time, we’re going to see a lot more experiments and many will be public embarrassments like those the BBC and News Corporation have suffered, but there will be successes.

Someone will crack the code and they will be the Randolph Hearsts of this century. It could one of the Murdoch heirs, it could be the owners of NC2 Media or it could be some young, hot shot developer working in a Rio favela or the slums of Kolkata.

But it will be someone.

It’s an exciting time to be in business.

First we kill email, then Powerpoint

French company Atos intends to eliminate email, Powerpoint and meetings from their business. Few organisations are brave enough to follow them.

Two years ago French technology firm Atos raised eyebrows after announcing the company would go email free.

Atos CEO Thierry Breton said at the time,

We are producing data on a massive scale that is fast polluting our working environments and also encroaching into our personal lives. At [Atos] we are taking action now to reverse this trend, just as organizations took measures to reduce environmental pollution after the industrial revolution.

Eighteen months on, the Financial Times reports Thierry is well on the way to eliminate the office pollution that is email. Lee Timmons, one of Atos’ Vice Presidents, tells the paper,

“At the 2012 London Olympics, we were able to zero-email certify some processes – a first – and (we) look set to be email-free internally by the end of 2013,”

Now Atos is looking at eliminating other business distractions, notably Powerpoint presentations and meetings.

Eliminating inboxes, Powerpoint and meetings from the workplace seems a noble cause. Few organisations would be prepared to even consider this.

For many staff and managers, spending hours sorting email, attending pointless meetings and futzing around with over-elaborate Powerpoint presentations is how they justify their time.

It’s going to be interesting to see how Atos goes with thier objective of streamlining the workplace and how many other companies are prepared to copy them.

Man sending an email image courtesy of Bruno-Free at SXC.hu

Door to door blues

How short term management thinking caught energy suppliers and telecommunications providers short.

The news that energy companies have decided to drop direct door to door selling in the face of prosecution is the latest example of poor thought out performance metrics and managers unsuccessfully trying to shift risks out of their business.

Electricity and gas distributors Energy Australia and AGL embarked on a door-to-door sales campaign to gain more customers. Like most modern corporations, they don’t do this stuff themselves and engaged outsourcing companies who in turn took on commission salespeople to do the ground level selling selling.

It didn’t work well and in face of complaints, both companies had to back away from their campaigns after suffering legal and reputational damage.

The sad thing this has happened before, at the time of telecoms deregulation in the 1990s telcos did the same thing to grow their market share. Door to door sales teams fanned out across the suburbs to sign households up to telephone plans.

In one example, a company hired dozens of backpackers, bussed them to outlying suburbs and sent them out on the streets to sign up as many households as possible.

Initially the campaigns were a success with providers reporting increased signups, greater market share, fat executive bonuses and happy commission earning salespeople.

Then the complaints began.

Customers discovered they’d been lied to, or in some cases falsely signed up, as hungry salespeople did everything they could to get a commission.

At first the telcos thought they could throw the problem over the fence so they blamed the contractors. Eventually the damage became so great the telcos had to back down on their door to door selling as problems multiplied and consumer protection agencies expressed their irritation.

At the heart of the problems with this type of door to door selling is the mismatch of incentives – for managers, contractors and the teams going door to door in the suburbs.

Door to Door Blues

At the coalface are the salesteams trudging around suburbs. In the 1990s telco boom they were largely made up of backpackers whose interests were to sign up as many customers as possible in order to fund the next stage of their travels.

Often, the telco or its contractor would only discover a sign up was the family dog or toddler long after the traveller was sunning themselves at Koh Phi Phi.

Using Indian students as the energy contractors were doing largely fixed some of the worst excesses of the 1990s but it didn’t address all of the problems

Management misalignment

Driving the rush for sign ups are usually poorly designed  management Key Perfomance Indicators – a dumb set of executive benchmarks rewards poor  behaviour and creates unforeseen risks. Particularly when those KPIs are focused on short term metrics.

Very quickly the risks in the short term focus become apparent and managers back off from these programs.

In this case it appears Energy Australia’s managers heeded the early warnings and backed off before the problem became too great, unlike the telcos who let the sales teams run rampant before reigning them.

What’s saddening about Energy Australia’s and AGL’s problems is they were totally forseeable and those who warned of the risks in a door-to-door customers acquisition strategy – and there were almost certainly some in these organisations – were overuled by enthusiastic executives aiming to bust their sales and market share metrics.

Sometimes we are condemned to repeat history repeatedly in business.

Employment’s changing face

Is it management’s and white collar workers’ turn to deal with the change of contracting and business process outsourcing?

Last Thursday recruitment company Talent2 launched its 2013 Market Pulse Survey looking at the employment trends across the Asia Pacific.

According to the survey, things are looking good with 61% of businesses across the Asia Pacific forecasting growth and 45% expecting to hire more staff.

However there’s an interesting underlying theme to the good news, employment is changing in large organisations.

One of the give-aways is the fact that while nearly two-thirds of businesses expect to grow in 2013, less than half intend to increase staff. Businesses are doing more with less.

Part of this is because of increased automation. Despite the headlines, productivity is increasing in workplaces – particularly offices – as technology automates many business functions in fields like logistics and workforce management.

Another aspect driving the lack of employment is outsourcing, Talent2 say the proportion of Australians working as full time employees dipped below 75% in 2012 with a four percentage point drop over the year.

With more businesses contracting work out, one could expect the number of sole proprietors to be increasing. However this seems not to be the case.

The number of non-employing Australian businesses

According to the Australian Bureau of Statistics, the number of sole traders is barely moving – between 2006 and 2011 the number of “non-employing Australian businesses” only increased 5% while the population grew over 8%.

This implies the proportion of contractors in the workforce is actually shrinking.

Much of this is probably due to the work going offshore, particularly to Business Process Outsourcers (BPOs) in countries like the Philippines, Malaysia and Sri Lanka.

Saturday’s Australian Financial Review looked at what the BPOs are doing in the Philippines and they aren’t carrying out the call centre and basic clerical work that’s made up most of the outsourcing over the last twenty years. Now it’s management roles that are going offshore.

The bigger issue confronting Australians, however, is not call centre workers being relocated to the Philippines. It’s low- to mid-level professional jobs, being moved out of companies, accounting firms and law offices.

Legal outsourcing has been growing for a decade as large law firms have moved many of their para-legal and routine tasks offshore to countries where legal graduates are plentiful but work at lower rates than their western colleagues.

An interesting aspect in legal offshoring is that much of the work that was done by young lawyers has now gone to overseas contractors, which probably means there’s going to be a shortage of experienced legal practioners in the medium term. This is going to have profound consequences for law firms and their partners.

It’s also going to mean law and associated degrees are going to be less popular with school leavers as career prospects dwindle.

The biggest impact though is for managers – we’ve grown used to the assumption that management jobs stay at head office while the lower level jobs go to the lowest cost provider.

Now is those lowest cost providers are offering good quality management staff along with support desk and call centre staff.

During the restructurings of the 1980s and 90s, it was blue collar workers who were the most affected by change. Now it’s the turn of the office workers and managers.

It will be interesting to see how many of the people who thought they were secure in their roles deal with the uncertainty they now have. For some it’s going to be a tough decade.