Management Mythbusters Where did all the common sense go

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Management MythbustersWhere did all the common
sense go?

• LOMA Financial Inforum 2008
• Bonita Springs, FL -- 7th May 2008

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• The great enemy of the truth is very often not
  the lie -- deliberate, contrived and dishonest --
  but the myth -- persistent, persuasive and
  unrealistic
• John F. Kennedy

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Some myths that need busting

• Detailed budgets are a good thing
• Six sigma is all that matters
• People are paid for performance
• Retaining all your best people is essential
• Critical success factors
• The balance in Balanced Scorecards
• IT has strategic value
• Outsourcing reduces costs

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• Are planning and budgeting the most valued and
  loved management processes?

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• Thats a very detailed budget.

Complement or criticism?
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The Pain is Real

• Time consuming
• Detailed
• Financially driven
• Too many allocations
• Single point estimates
• Sandbagged
• Calendar driven

• Accounting oriented
• Simplistic forecasts
• Limited materiality
• Little accountability
• Spreadsheet dominated
• Manually intensive
• Exhaustive (or is it exhausting?)

But, the real danger is the potential for making
bad decisions
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Plan What Matters

• Whats important
• Acquiring customers
• Retaining customers
• Retaining talent
• Fostering innovation
• Managing projects

• Whats budgeted
• Salaries and wages
• Facilities expense
• Telecom costs
• Travel
• Depreciation

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Pay for performance

• The Problem
• Incentives are tied to a fixed plan or budget
• The Impact
• Managers are motivated to be conservative
• Unexpected events can result in windfall bonuses
• Targets maybe exceeded even though performance
  falls short

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The Fix

• Incentives are measured across two dimensions
• Absolute improvement over the prior period
• Relative performance to the market or a defined
  set of peer companies

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What do these companies have in common?

• Westinghouse (88)
• Motorola (88, 02)
• Xerox (89, 97)
• Cadillac (90)
• IBM (90)

• Texas Instruments (92)
• ATT(92, 94)
• Dana Corp (96, 00)
• Merrill Lynch (97)
• Boeing (98, 03)

They all won the Baldrige National Quality Award
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Quality means nothing without

• Need
• Desire
• Utility
• Price
• Availability

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The Balanced Scorecard
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Redefine Balance
Financial
Operational
Lagging
Leading
Internal
External
Accounting
Business
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Talent Retention
Explanation 1 Youre paying them too much!
Explanation 2 They are not as good as you think!
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Failure is not an option
Criteria for Abandonment
Critical Failure Factors
Critical Success Factors
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A Credibility Gap?

• CIOs have a much higher perception of their
  effectiveness than do the executives to whom they
  report
• Optimize December 2006

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IT delivering value?

• The World We Compete In
• Volatile
• Competitive
• Uncertain
• Innovative
• Deal driven
• Global
• Time compressed

• Our response?
• Standardization
• Simplification
• Shared services
• Enterprise systems
• Consistency
• Data

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Measuring Results

• Cost per transaction
• Cycle time
• Cost per user
• On time / on budget
• FTEs per billion
• Cost as a of revenue
• Total cost of ownership

• Delight customers
• Dominate markets
• Drive innovation
• Deliver insight
• Manage risk
• Assure integrity
• Guarantee compliance

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• IT Services Market
• 2006 674.1 billion
• 2011 964.4 billion

Source Gartner
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Why do we outsource?

• Reduce cost?
• Source skills?
• Mitigate risk?
• Increase flexibility?

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The outsourcing argument
1. Lower absolute cost
2. Lower relative cost growth
Current cost
Outsourced cost
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•  When do you stop pouring resources into things
  that have run their course?
• Peter Drucker

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Contact Details And Resource Information

• The Sonax Group
• Willow House
• 1464 Willow Lane
• Akron OH 44333
• o 330 668 4773
• m 330 310 2558
• e daxson_at_sonaxgroup.com
• w www.davidaxson.com

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Thank You

• Questions?