Suppose there was no such thing as money and you needed to go shopping. Imagine how difficult and onerous it would be to try and have to establish exchange values for the things you had to trade and the things you wanted to buy. Money makes the whole thing so much easier. What money is, is a common standard of value.
Something similar to the bartering example occurs in businesses. Each type of work that a person is doing may be measureable, but if you have people doing different kinds of work, or different people doing different mixes of different kinds of work, it can be difficult to determine how productive everyone is.
The solution may be to create a common standard.
In one business I have been working with, staff performed a range of seven different kinds of work. The organisation knew how much time each person was at work (after deducting sick and other kinds of leave) and they knew how much of each type of work different people were doing, but they were stuck as to how to measure productivity.
They had six months worth of data for each person, so a multiple linear regression was done to determine how much time each type of work was taking. As a model it turned out quite well with an r-squared value of 0.91, indicating a strong correlation between time spent at work and amount of work completed (which is what you would hope!) The co-efficients from the linear model were used to weight each type of work in terms of a 'standard work item' which for ease of calculation was defined as taking 10 minutes. If the model said that a particular kind of work generally took 22 minutes then it was given a weight of 2.2 standard work items.
What this meant was that for the first time it was possible to define everyone's performance in terms of a common standard, by weighting the work they actually completed to give a total number of standard work items. Since the time each person was at work was also known, for each person a measure could be calculated ( minutes per standard work item) and compared to the same measure for the unit as a whole.
The results were enlightening to say the least! Some staff had productivity as low as 60% of the average while others had up to 170% productivity, with most staff fitting within the 80%-120% range. Of course, quantity without quality would be worse than useless, but using a separate measure of quality showed that the most productive staff also performed quality work.
Supervisors in this business had previously suspected that some of their staff were unproductive, but they had previously had no objective measure to enable them to quantify this. But now they could tell exactly how productive each member of their team was, both in absolute terms and compared to the other sixty staff in the business. Since the same data sources were used for all staff for time worked and amount of work completed and the work was weighted in the same way for everyone, there was also no scope for anyone to argue that they were being singled out or treated unfairly.
By creating a common objective measure, it was now possible to start having discussions with less productive staff to determine whether there were training or behavioral issues that needed to be addressed. However it was also now possible to start looking at the high performers to see how they achieved their results and whether there was anything which could be learned that might be transferable to other less productive staff.. As a result they had increased scope for improving the collective productivity of the business as a whole.
One side effect was that now that staff were getting regular feedback on their relative productivity, there was both the information and the motivation for everyone to try and improve their performance.
Sunday, November 24, 2013
Sunday, November 17, 2013
Information must be actionable - the importance of context
Sometimes we ask for information but once we have it we realise that there is nothing we can do with it because we didn't capture enough context to interpret it.
Here are three examples from one organisation:
Most of the time it would be better to capture stories. For example in the case of a staff survey, we could ask staff to describe an example of poor communication within the past three months, why they thought it was bad, what its effects were and how it could have been done better. Collecting stories about poor communication would enable us to narrow the definition of the problem into something which we could deal with rather than dealing with a nebulous amorphous 'something' which we could deal with if we only knew what it was.
But even more important is to clearly understand what sort of information will be useful and then properly designing a methodology for getting that sort of information. Survey design is sometimes thought of as a no-brainer, something anyone can do. And that is why so often surveys are a waste of time, money, and effort. Thinking it through at the beginning is more likely to yield a pay off than trying to be a psychic at the end! Use hindsight rather than foresight. If you settle for 'garbage in' then you are also settling for sorting through the 'garbage out' in the hope of finding 'something" useful.
Not a terribly exciting prospect is it?
Here are three examples from one organisation:
- An open forum was held to report to staff on some organisational changes and part of the forum was capturing staff ideas for improvement. Ideas came thick and fast and were noted as quickly as possible on butcher's paper for collation and later consideration. When managers later met to consider the merit of the ideas they spent most of their time trying to work out what the ideas meant since there hadn't been time to clarify with staff during the meeting and insufficient detail had been gathered, with most of the ideas having been summarised in less than 10 words.
- A survey was placed on the organisation's website for voluntary completion anonymously by clients. For each question where a client indicated they were dissatisfied with some aspect of the service the client was offered the option of elaborating in their own words what they saw as the problem. Twenty-five clients indicated that in letters not enough information was given explaining the decision. None of the clients elaborated. As a result the information was useless - it wasn't possible to track back to letters sent to those clients to see what they meant since the survey was anonymous and there was insufficient information to determine how the organisation's written communication could be improved. (Ironically, the respondents did exactly what they claimed the organisation was doing.)
- In staff surveys one of the issues which also comes up in staff responses is poor communication by management. Yet senior management still don't know what staff mean when they talk about poor communication: is there too much? too little? is it too detailed? is it confusing? Is the problem limited to specific managers? Or is it a general? What specifically is meant by 'poor communication'? - no one seems to know.
Most of the time it would be better to capture stories. For example in the case of a staff survey, we could ask staff to describe an example of poor communication within the past three months, why they thought it was bad, what its effects were and how it could have been done better. Collecting stories about poor communication would enable us to narrow the definition of the problem into something which we could deal with rather than dealing with a nebulous amorphous 'something' which we could deal with if we only knew what it was.
But even more important is to clearly understand what sort of information will be useful and then properly designing a methodology for getting that sort of information. Survey design is sometimes thought of as a no-brainer, something anyone can do. And that is why so often surveys are a waste of time, money, and effort. Thinking it through at the beginning is more likely to yield a pay off than trying to be a psychic at the end! Use hindsight rather than foresight. If you settle for 'garbage in' then you are also settling for sorting through the 'garbage out' in the hope of finding 'something" useful.
Not a terribly exciting prospect is it?
Thursday, November 14, 2013
Compared to What? (Pt.2)
In one organisation I have been working with, a number of staff complained that they were suffering from 'sinusitis' following a change in the air-conditioning contractor.
Sick leave statistics were requested from the HR department and sure enough the number of days lost to 'sinusitis' had increased significantly over the number of days lost to sick leave for the same reason in the previous year. So it seems like an open and shut case, right?
Wrong! Sinusitis can easily be confused with the common cold, hay-fever, influenza or certain kinds of headache by the layman, and most of these cases were not medically diagnosed. Even where the person sees a doctor the chances are that if the patient claims that it is down to the air-conditioning, this will influence the diagnosis, especially in the absence of any medical tests.
So what was the actual situation? A business analyst (himself a regular suffer of sinusitis since childhood) took another look at the data and found two interesting anomalies:
- firstly, the total time taken for sick leave from all causes had not increased since the previous year
- secondly, the number of cases of cold and influenza had significantly dropped over the previous year and
- finally, the seasonal pattern of the 'sinusitis' in the current year was remarkably similar to the season pattern of influenza in the previous year.
The general principle we can derived from this is that you can't look at things in isolation. You need to look at the larger picture and where you notice anomalies see how those anomalies relate to the event or situation which prompted the initial investigation.
In the case above, it seemed reasonable to compare the current year cases of what staff were calling 'sinusitis' with the previous year. In some situations, it does make sense to compare like with like. But where an apparent change bucks a trend then it requires investigation. Where a totality hasn't changed, the only way a part of that totality can increase is for another part to decrease and where the part which has increased is easily confused with the part that has decreased, you may be facing a classification error.
In this instance, accepting the initial data at face value could have led to corrective measures that weren't necessary. Because someone looked beneath the surface, this didn't happen.
Tuesday, November 12, 2013
You can't hitch a rooster to a wagon...
...well you can but it would have to be a little wagon and it would be more as a joke than to get any useful work done! A horse and a rooster are excellent animals in and of themselves, but you wouldn't want a horse in a henhouse or to try and saddle up a rooster, it would just be silly.
Yet we sometimes do the same thing when we come across new ideas. In one organisation I know, the flavour of the month is Behavioral Insights. Now this is a useful concept in itself and has the potential to work well where it is applicable.
But in this organisation, it has become an end in itself and without really understanding its scope of application, one of the managers is trying to apply it where it doesn't really work. It isn't that the manager has seen an opportunity to exploit, but rather that they have fallen in love with a new tool which they don't really understand and they are itching to use it. Of course, they can't point to how it can be used, but that isn't their problem: they have delegated it to someone else who is tearing their hair out trying to see its relevance.
In an episode of the Canadian sitcom "Corner Gas", Brent and his father are having an argument about whether Brent should rent videos out of the gas station. Brent appeals to his mother for support "Ma, Dad doesn't know what he's talking about" and his father responds "I don't want to know what I'm talking about". Sometimes this is what happens in management: a manager is so keen to apply an idea that they don't take the time to "know what they are talking about."
And that is the take home: without looking at and understanding the full context of a technique or process, you can generate a lot of wasteful action, but not much progress. Understand first then investigate where or if it can be applied.
Otherwise, you will end up with a rooster trying to pull a very big wagon, and unless the rooster is Foghorn Leghorn, getting nowhere.
Saturday, September 15, 2012
The power of 'other' - paving the paths your customers prefer
In Universal Principles of Design, a desire line (or design path) is a trace of use or wear that indicates "preferred methods of interaction with an object or environment". On the face of it, a very esoteric concept but in practice it is quite simple.
Many years ago, I read of a case where a new college campus was built and there was a central grassed area. Instead of laying down cement paths, the area was left for a year without marked paths. At the end of that time, paths had been worn by pedestrians taking their most preferred paths across the grass. After that it was a simple matter to lay paths over those already worn by the pedestrians. These paths, of course, perfectly matched the needs of the pedestrians.
However, the principle is not limited to physical settings. A recent example I am aware of was where a new web-based system was put in place for customers to submit a form on-line. In designing the form, the company only wanted the customers to choose a reason for submitting the form from a limited number of options preferred by the company. In order to force this, there was no 'Other' option. This was done in the belief that the customers would just select from the available options. Instead about 30% of customers couldn't find the option they wanted and so just chose a random option and then put their real reason in the text box provided. In effect, they worked around the constraints imposed by the system and in the process made it more difficult for the company to analyse the reasons why customers were submitting the form (which had flow on effects for training and work allocation.)
A better alternative would have been to provide a limited range of the most common reasons expected but also to provide 'Other' as an option. This would have allowed the 'Other' options to be analysed to see if they yielded a further set of explicit options to add. In effect, adding the 'Other' option would have allowed the customers to wear their own 'desire path' which could have then been 'paved over' by providing the additional options they desired.
Too often our preconceptions about customers blind us to what they really want. The power of 'Other' is that it gives your customers the opportunity to tell you!
As Tim Halbur puts it:
If we let our customers wear their own preferred paths and we then build over them, they are happier and we end up with more efficient systems.
Many years ago, I read of a case where a new college campus was built and there was a central grassed area. Instead of laying down cement paths, the area was left for a year without marked paths. At the end of that time, paths had been worn by pedestrians taking their most preferred paths across the grass. After that it was a simple matter to lay paths over those already worn by the pedestrians. These paths, of course, perfectly matched the needs of the pedestrians.
However, the principle is not limited to physical settings. A recent example I am aware of was where a new web-based system was put in place for customers to submit a form on-line. In designing the form, the company only wanted the customers to choose a reason for submitting the form from a limited number of options preferred by the company. In order to force this, there was no 'Other' option. This was done in the belief that the customers would just select from the available options. Instead about 30% of customers couldn't find the option they wanted and so just chose a random option and then put their real reason in the text box provided. In effect, they worked around the constraints imposed by the system and in the process made it more difficult for the company to analyse the reasons why customers were submitting the form (which had flow on effects for training and work allocation.)
A better alternative would have been to provide a limited range of the most common reasons expected but also to provide 'Other' as an option. This would have allowed the 'Other' options to be analysed to see if they yielded a further set of explicit options to add. In effect, adding the 'Other' option would have allowed the customers to wear their own 'desire path' which could have then been 'paved over' by providing the additional options they desired.
Too often our preconceptions about customers blind us to what they really want. The power of 'Other' is that it gives your customers the opportunity to tell you!
As Tim Halbur puts it:
...the human element is going to find its own way.... The people who disobey the beautiful logic of smart growth and urban design are trying to tell us something, and we need to watch and listen. We need to go back to the places we create and see how they work in real life. We need to plan for opening day, but make sure we’re also there a month, a year, five years later to adapt and refine based on how people actually use the built environment. The desire paths are there for the finding, if your eyes are open.
If we let our customers wear their own preferred paths and we then build over them, they are happier and we end up with more efficient systems.
It may not be what you think
Here is a story from Raymond Smullyan's book "This Book Needs No Title":
A third story:
These stories illustrate three points:
Once upon a time there was a man. This man had a dog. This dog had fleas. The fleas infected the entire household. So the man had to get rid of them. At first he tried to get rid of them individually using a fly swatter. This proved highly inefficient. Then he tried a flea swatter. This was also inefficient. Then he suddenly recalled: "There is such a thing as science. Science is efficient. With the modern American equivalent, I should have no trouble at all!" So he purchased a can of toxic material guaranteed to "kill all fleas," and he sprayed the entire house. Sure enough, after three days all the fleas were dead. So he joyously exclaimed, "This flea spray is marvellous! This flea spray is efficient!"
But the man was wrong. The flea spray was totally inefficient. What really happened was this: Although the spray was inefficient, it was highly odiferous. Hence he had to open all the windows and doors to ventilate. As a result, all the cold air came in, and the poor fleas caught cold and died.Another story, this time from my own experience:
A manager is worried about the backlog of work that is piling up. An employee looks back over the previous three years, does some analysis which shows that there is a regular pattern of workload every year and that the current year matches that pattern. They show this to the manager. The manager still pushes staff to get more done even though it is a proven fact that the workload will drop without any additional effort. If the backlog reduces, does the manager think:
a. The backlog has dropped because I pushed everyone to work harder
b. The backlog dropped because it always drops at this time of year
A third story:
Many years ago when I was studying epidemiology, we were given a hypothetical study to analyse in which test subjects who were suffering from a particular illness were put on a diet where they had to eat 200gms of chocolate a day. When I did my analysis I raised the following point: whatever was to happen from such a study, the result would not necessarily be because they ingested the chocolate. The result could equally have been what they had stopped eating as a result of having to eat the chocolate. Without knowing what their eating habits were prior to the study you can't determine what if anything was eliminated from their diet that could have caused the improvement in their health.
These stories illustrate three points:
- Sometimes an improvement doesn't come from an action you deliberately took, but is due to an unnoticed side-effect.
- Sometimes an improvement would have happened even if you had done nothing.
- Sometimes it isn't what you have started doing but what you have stopped doing that has resulted in an improvement.
Tuesday, July 24, 2012
Should you trust the experts?
With the volatility in world economics over the past few years, it is worth asking whether 'experts' can be trusted to provide any worthwhile guidance to protecting your financial future.
My personal view is that economics as a 'science' has about as much validity as astrology, especially given the demonstrably false assumptions on which most contemporary economic thinking is based. In The Sages, Charles Morris points to a 2008 survey by the Wall Street Journal which ranked 51 economic forecasters and found that of 102 separate forecasts, 101 were wrong and in the same direction. And since then economists have made repeated predictions which have failed to materialise.
So what do we do?
My own approach is to watch the news and to look at world events and draw my own conclusions about what is likely to happen. I watch a variety of different news programs from different countries in order to try and get a balanced view. Based on what I could see happening back in May ( the Eurozone crisis (particularly the uncertainties surrounding the Greek election), the continued debt problems and dysfunctional political conflicts in the USA), I switched all of my investments into Australian Fixed Interest investments, on the assumption that all of these changes would lead to decreased investor confidence and increased volatility in the share market. Sure enough the stock market fell. The Australian economy is still strong without the level of sovereign debt of Europe, the USA and Japan and is riding on the back of a mining boom that is expected to last at least into next year (though the boom could bust if the Chinese economy significantly slows.)
Looking ahead, the issues with the US debt ceiling are likely to rear their ugly heads again in September or October 2012 when US government spending bumps against the debt ceiling agreed last year and the Obama administration will need to seek a further increase. Given the coming US election it seems to me that this will be just as bloody as last years negotiations, if not worse and none of the options available to the US government ( increase debt, default on debt, print more money, adopt a more sensible taxation regime) is likely to bode well for the world economy. In Europe, the last debate in the German Parliament regarding the Spanish bailout made in clear that Germany is losing patience with bailing out the rest of Europe's economic mismanagement, which foreshadows future problems in the Eurozone. Based on all of this, my best judgement for my personal finances has been to keep my money in low risk, capital preserving investments with moderate yields.
I'm not saying that everyone (or even anyone) should follow my example. My background is in mathematics and statistics, not finance. However, I think it is open to anyone to look at the news and judge for themselves what is likely to happen in the world economy and invest accordingly.
I did try read a few different books which purported to provide good advice on defensive investing. However, as is usually the case with economic experts, their advice was contradictory, some predicting inflation in the US economy, while other predicting deflation. I investigated investing in gold bullion, however after looking at annual average gold prices since 1979, I've come to the conclusion that gold is likely to be the next bubble to burst. I base this on the fact that from 1979 to 2004, the average gold price was relatively flat, oscillating around $500 an ounce, but since 2004 it has tripled in price, showing the typical pattern of a bubble with greed and fear driving up the price beyond any reasonable value. Some of the books I have read claim that gold could rise to $10000 an ounce. But my gut feeling is that this is just another example of irrational exuberance. So if I invest in gold at all, I intend waiting till it drops back to less than $600 an ounce.
Investment experts will tell you that the stock market always rises in the long term. However, I believe that we have reached a point in history where the economic balance is shifting towards emerging economies and that the past record of the Western stock markets cannot be a reasonable guide to the future. You can't just look at graphs of stock markets over the past 100 years and extrapolate the upward trend; you need to also consider the changing realities that impact on the values of companies traded in these stock markets, realities which do not necessarily bode well for Europe and the USA.
So in a world of uncertainty and volatility, both economic and political, I think the prudent thing is to protect and preserve what you have, batten down the hatches and whether the storm. Once the fallout of the US election and the Eurozone crisis have settled, then it will be time to reassess the best way to invest.
As I said, I am not an investment expert and what I have discussed is purely my approach to protecting my own finances. Listening to experts who get it badly wrong more often than not is not an option. So it is up to each person to use their own judgement and assess what is best for them.
My personal view is that economics as a 'science' has about as much validity as astrology, especially given the demonstrably false assumptions on which most contemporary economic thinking is based. In The Sages, Charles Morris points to a 2008 survey by the Wall Street Journal which ranked 51 economic forecasters and found that of 102 separate forecasts, 101 were wrong and in the same direction. And since then economists have made repeated predictions which have failed to materialise.
So what do we do?
My own approach is to watch the news and to look at world events and draw my own conclusions about what is likely to happen. I watch a variety of different news programs from different countries in order to try and get a balanced view. Based on what I could see happening back in May ( the Eurozone crisis (particularly the uncertainties surrounding the Greek election), the continued debt problems and dysfunctional political conflicts in the USA), I switched all of my investments into Australian Fixed Interest investments, on the assumption that all of these changes would lead to decreased investor confidence and increased volatility in the share market. Sure enough the stock market fell. The Australian economy is still strong without the level of sovereign debt of Europe, the USA and Japan and is riding on the back of a mining boom that is expected to last at least into next year (though the boom could bust if the Chinese economy significantly slows.)
Looking ahead, the issues with the US debt ceiling are likely to rear their ugly heads again in September or October 2012 when US government spending bumps against the debt ceiling agreed last year and the Obama administration will need to seek a further increase. Given the coming US election it seems to me that this will be just as bloody as last years negotiations, if not worse and none of the options available to the US government ( increase debt, default on debt, print more money, adopt a more sensible taxation regime) is likely to bode well for the world economy. In Europe, the last debate in the German Parliament regarding the Spanish bailout made in clear that Germany is losing patience with bailing out the rest of Europe's economic mismanagement, which foreshadows future problems in the Eurozone. Based on all of this, my best judgement for my personal finances has been to keep my money in low risk, capital preserving investments with moderate yields.
I'm not saying that everyone (or even anyone) should follow my example. My background is in mathematics and statistics, not finance. However, I think it is open to anyone to look at the news and judge for themselves what is likely to happen in the world economy and invest accordingly.
I did try read a few different books which purported to provide good advice on defensive investing. However, as is usually the case with economic experts, their advice was contradictory, some predicting inflation in the US economy, while other predicting deflation. I investigated investing in gold bullion, however after looking at annual average gold prices since 1979, I've come to the conclusion that gold is likely to be the next bubble to burst. I base this on the fact that from 1979 to 2004, the average gold price was relatively flat, oscillating around $500 an ounce, but since 2004 it has tripled in price, showing the typical pattern of a bubble with greed and fear driving up the price beyond any reasonable value. Some of the books I have read claim that gold could rise to $10000 an ounce. But my gut feeling is that this is just another example of irrational exuberance. So if I invest in gold at all, I intend waiting till it drops back to less than $600 an ounce.
Investment experts will tell you that the stock market always rises in the long term. However, I believe that we have reached a point in history where the economic balance is shifting towards emerging economies and that the past record of the Western stock markets cannot be a reasonable guide to the future. You can't just look at graphs of stock markets over the past 100 years and extrapolate the upward trend; you need to also consider the changing realities that impact on the values of companies traded in these stock markets, realities which do not necessarily bode well for Europe and the USA.
So in a world of uncertainty and volatility, both economic and political, I think the prudent thing is to protect and preserve what you have, batten down the hatches and whether the storm. Once the fallout of the US election and the Eurozone crisis have settled, then it will be time to reassess the best way to invest.
As I said, I am not an investment expert and what I have discussed is purely my approach to protecting my own finances. Listening to experts who get it badly wrong more often than not is not an option. So it is up to each person to use their own judgement and assess what is best for them.
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