Which day would you nominate for "Bad Management Day."

Custer's last stand. When leadership goes wrong!

In a response to my post Saturday Morning Musings - on the modern fallacy of leadership, my old friend Noric Dilanchian came up with three rather good topics for me to write about: 

•  “Desperately seeking great managers”
• “Theory and management sausage, leadership sizzle”
• “Great leaders at dawn, failed managers at sunset”

I will do so, but for the moment I am just recording his suggestions for later use, 

Searching around, I found the Custer graphic in a 2015 post by John Hollon, The Lessons of Custer: Five Things to Consider on “Bad Management Day” John suggests that 25 June should be "commemorated" as bad management day because it is the date of Custer's last stand.  

I see his point, but there are other choices. I wondered which date you might nominate to be selected for Bad Management Day?

Saturday Morning Musings - on the modern fallacy of leadership

I have commented before about the sometimes inverse correlation between the public prominence of an issue and on-ground reality. 

The 1990s were a period of restructuring during which many older workers in particular lost their jobs, many never to find work again. This was also the time when the literature and commentary focused on the importance of HR and proper people management. 

As we moved into the 2000s there was a growing focus on maximising the value of the brand. This was the time that newspapers stopped being newspapers and became mastheads instead. While the trend was pronounced at this time, it really dates back to an earlier idea, the idea that managing a larger firm was in fact managing a portfolio of businesses rather than a firm and its individual businesses as organic entities. Value maximisation came from managing the portfolio to extract maximum short term cash either directly or though buying and selling operations or trademarks. Perhaps not surprisingly, the focus on maximising the value of the brand coincided with a period of brand destruction.   

I recognise that what I have written is a bit rough and ready. I really need to go through and consolidate my business and management posts to tease things out. I have been writing on this stuff for long enough so that my posts and my own changing views provide something of an historical context, including the role of management fads and fancies. Still, it sets a context for this morning's brief muse. 

Listening to the radio I was struck by the focus on leadership and failings in leadership. In political terms we have the focus on the role of Premier Andrews in Victoria, in NSW on the extent to which Premier Berejiklian's status as leader has been diminished by the problems surrounding her personal life. In business, the problems facing Crown Casino are being attributed to a lack of leadership combined with failures in compliance. 

I'm not quite sure when this focus on leadership and failures in leadership first emerged and then became dominant. I am old enough to remember the older focus on management that was then swept away, replaced by leadership. 

To my mind, our current leadership focus is highly problematic. 

The word leader literally means the person who leads or commands a group, organization, or country. This compares with one standard definition of manager, a person responsible for controlling or administering an organization or group of staff. These two functions are different. 

Hitler was clearly a great leader, one who could command loyalty. However, he was a hopeless manager who led his country into a disastrous war where his incompetence as a manger guaranteed Germany's final loss. Alexander the Great was another great leader, but his empire fell to bits with his death. Churchill was a great leader, one whose leadership attributes were uniquely suited to the times. but he was not an especially effective manager. In business, Harold  Geneen built International Telephone and Telegraph into a great conglomerate, but his centralised authoritarian style left the company ill-equipped to survive his death.     

I have given these examples to try to illustrate the difference between leadership and management. To my mind, many of the problems that people attribute to poor leadership are actually management problems. In NSW and Victoria, the problems that emerged in the covid-19 responses did not reflect lack of leadership - both premiers were playing leadership roles in their own effective ways - but instead represented management failures.  Despite my reasonably extensive public and private sector management experience, I could not understand why the decision processes were so chaotic, why decisions were undocumented. Then I reflected on my own experience. 

Some years ago I chose to drop back down the hierarchy, to do contract work to try to support my writing addition. I ended up doing contract work within the NSW Public Service, working at a level I last worked at in my twenties. I was struck by just how sclerotic, centralised and hierarchical the system had become. As a simple example, there were five reporting levels between my policy position and the minister, each level with its own sign-off requirements. 

I was also struck by the absence of real management in the sense of managing people and resources to achieve objectives. Many old management functions had been taken over by centralised computer systems where the role of the "manager" had diminished to a tick-box compliance role. The "manager" had also to ensure compliance with a far greater range of policies, procedures and training requirements that, while no doubt important, had peripheral relevance to primary roles. Something akin to the older structures continued in some functional delivery areas for practical reasons, but in broad terms I was struck by the absence of management as I had known it.   

During this period I had to undergo ethics training. This wasn't ethics training as I had known it with its focus on the role and responsibilities, rather more training in compliance and fraud prevention. As part of the training, we were given a number of actual case studies. Talking to the trainer later, I said that the thing that stood out to me in the cases was the absence of over-sight. As a reasonably hands-on manger, I would have expected to pick the problems up early from direct observation or through the management information systems. Now there appeared to be two problems: the management information that might have revealed the problems was not necessarily accessible to the line manager, while the role and responsibility of those in "management" roles had diminished. They simply didn't have the supervisory access or responsibility that might have triggered an early response or even prevented the problem in the first place.

One feature of the decline in management has been a diminution in the role of and number of middle managers. We call this thinning out. The argument is that reducing the number of middle managers will save money and create efficiencies and responsiveness through flatter structures. This process is facilitated by modern computer systems. In practice, I have come to think that it actually increases hierarchy and centralisation, reducing the scope and role of managers.

I am, I think, a reasonably good manager measured by results and the loyalty and enthusiasm of my people. In becoming so, I went through a seasoning process combining a genuine interest in management with a staged increase in responsibility. 

By the time I became a section head I had been both 2IC and acting section head. It was a reasonably big section, nine staff, combining policy and processing responsibilities in a particular area. I then had considerable experience as an acting branch head before being appointed a branch head. Now managing branches with up to 39 staff and multimillion dollar program budgets I wasn't worried about the management role. In retrospect I was lucky because I had more scope and responsibility than equivalent levels today. 

If you had asked me during this period whether I thought of myself as a leader, I would have replied yes, but this wasn't my primary focus. I was a policy adviser and program manager focused on the management of my people to get results that I wanted. Leadership was something I tried to provide, but it wasn't my core responsibility. Management was.

Today when we talk about leadership I worry that we are talking about a concept of slippery meaning, setting up a straw horse that must lead to disappointment, that has limited relevance to what people have to do, that is hard to teach, 

Take your middle manager with limited power and authority. Now say that he or she must aspire to be a leader, that that is his or her core function. What does this actually mean? It is much easier to talk about and focus on the management role, recognising that not everybody can be a good manager. 

As we move up the organisation, leadership may acquire more meaning, but it is still a very limited and hierarchical concept, one lacking definition. Most CEO's will tell you that they want to empower their people. That is management speak, but it carries a truth: you may articulate a vision, but you require managers to carry it out. 

Many years ago when I first studied the emergence of new political movements, I was struck by a typology that said that all successful movements required three things: the agitator, the leader who articulated the need, the dream; the theoretician who codified the ideas so that they could be explained and used; and the administrator who actually made things work. These roles can overlap. 

1920 marks 100 years since the emergence of the party that became the NSW Country Party, something that I have been writing on, Within that new movement, we have Earle Page as the agitator, Drummond as the theoretician who articulated the constitutional basis for the new party, Bruxner as the practical administrator. 

If we now look at Victoria, Dan Andrews has been acting as leader who has, I think, been successful in that role. But his success, his achievement, has been sullied by management failures in delivery. Leaders without management struggle.            

  

Teleworking - a personal perspective

Back in 2006 I wrote a post on teleworking, working from home. While the post is a little dated, I thought that it was worth re-posting now that so many people are working from home because of covid-19. The challenges now are both more complex (whole families are at home and must be managed too) and a little simpler (organisations have had to adjust willy nilly whether they like it or not). However, some of the points are still valid.  

"Sometimes I wonder why I work so often from home because, frankly, sometimes it sucks! At other times, I wonder why the rest of the world does not rush to do it. So in this article I want to share with you both the pluses and minuses of the teleworking life style, focusing especially on the things required to actually make it work.

To do this, I thought that the best approach would be to focus on some of the challenges that must be overcome if teleworking is to work.

Teleworking: The Loneliness of the Long Distance Teleworker

I have rarely heard loneliness discussed in the context of teleworking. Yet teleworking can be a lonely and isolating experience.

Think of it this way.

In the normal working life, you say goodbye to the family, leave home and go to work. At work you say hi to your co-workers. You sit down and start working. Someone comes up to ask you something. You have a break chatting to colleagues. If, like me, you are still a smoker, then you pop outside to have a smoke often with colleagues. By the end of the day when you come home, you have had hundreds of small personal interactions. Exhausted, you collapse onto the couch in front of the TV and turn into a couch potato.

Contrast this with teleworking. The family leaves. You sit down and spend the rest of day in front of your computer alone. Your only interactions are email traffic and phone calls. At the end of the day your family comes home. You are ready to talk, to interact. They want to unwind, to watch TV.

Now none of this may matter to you. But the point in this story is that if you are a person who does like personal interaction but who wants to telework, then you need to find a way to build personal interaction into your weekly round.

Teleworking: The Need for Discipline

We all require structure in our working lives. In the office this is provided by the routines of daily work. We have to present in a certain way. There are working rules that we must comply with. Often, these things are implicit rather than explicit. But they are always there. We know that they are there and comply without even thinking about it.

At home these rules are all relaxed. Want to dress casually? Do so. Want to want TV? Do so. Weed the garden? Do so. Stay in your pajamas? Do so. Now all this may sound wonderful, but if you are a naturally un-disciplined person like me then you can run into problems. So you need to actively create your own working routines.

In my case, while I normally dress in casual fashion, some days I will put on a suit and tie just to reinforce the fact that I am at work even though I am at home!

Teleworking: Separating Work and Home Life

Going to work creates a natural divide between the home and work environment, a divide lacking for those who work from home. This divide is less than it was simply because the technologies that allow effective teleworking mean that even those working in conventional structures now work increasinglyﾠat home. But the divide is still important.

The danger for the teleworker in forgetting this divide is that personal and work time can simply blur together, adversely affecting both. When the home and the office are the same, the dividing lines blurred, then it is very easy to start worrying about work matters, about the things that you have not done, during what should be personal time.

In the conventional working environment you generally have to put these worries aside because the office is elsewhere. Somehow, the worries become greater if the office is just down the corridor because you know that you can do something about the outstanding issue just by walking a few places.

Teleworking: Managing Family Expectations

Another linked problem is the need to manage your family's unconscious expectations and reactions to your presence at home. You are there, so you are available to do things that would simply not be possible if you were working elsewhere. Would you mind hanging out the washing? Can you pick me up at such a time? And so on.

Now normally you may be happy to do these things. After all, one of the reasons for teleworking is to give you greater flexibility. But at the end of the day you still have to work so many hours to achieve your targets. And every hour taken out of your normal working day makes that more difficult.

Take my own case as an example. I have a 45 hour weekly time target. This is a real time target, not just elapsed time during the normal working day.

Because of the nature of my work I keep time sheets. When I stop work for whatever reason I log off. So when I pick the girls up from school, tidy up the house so that the cleaners can actually clean, or hang out the washing, all this is dead time from a work perspective. The result is that I find that to achieve my 45 hour target I have to work in the early morning and at at weekends. The family then thinks that I am working excessive hours, that I am always working, when the reality is that I am simply trying to catch up.

Now I am not complaining. The point is that if you want to telework, you have to lay down rules with your family so that they understand that just because you are at home does not mean that you are available for other things. Unless, of course, you wish to be.

Teleworking: Managing Unconscious Work Expectations

Now something of the same type of unconscious expectation applies to the teleworker's work colleagues.

I first came across this problem some years ago when I was working with AT&T preparing their first Australian country plan.

AT&T were in advance of their times in that they were prepared in some cases to allow flexible working arrangements. My direct client, the manager in charge of the project, had been given approval to work from home because she had a new baby. She experienced some real problems because of the unconscious expectation at work that she would in fact be available in the same way as an on-site staff member.

Just to tease this out a little. When people work together, the assumption of almost instant availability is built into the working round. I am working on a problem, an issue comes up, I pop down the corridor or even to the next desk to sort it out. Both formal and informal meetings occur frequently, often at short notice.
Now the gearing of work life to this almost instant availability can be a major problem in the normal office because it can waste a lot of time. For that reason, most time management courses include various ways of minimising the problem. However, It remains a deeply entrenched feature of office life simply because it is so easy and useful.

The off-site teleworker can suffer as a consequence. Bosses and co-workers continue to work as they always have. Because the teleworker is not there, he/she may simply be excluded from relevant meetings. Work and responsibilities flow away from the teleworker to on-site staff. The teleworker becomes isolated and alienated.

In this context, it is not surprising that one area where teleworking has spread successfully is among senior managers and partners in professional services firms because they can control the game to some extent. So long as billings and management tasks are maintained, colleagues and staff have to adjust, to learn how to work with the teleworker.

Ordinary staff do not have this type of power position. The only solution is to ensure that the individual teleworker, his/her managers and the organisation itself work through the issues in advance. As part of this, the teleworker needs to learn how to proactively manage relations with colleagues downwards, sideways and especially up.

Teleworking: When Things Go Wrong

Murphy really was an optimist.

While overseas, burglars stole my wife's new computer. Fortunately, they left the office machines simply because they are older. A few weeks later, my main office machine hit problems requiring a full day to fix. As I write, the fax machine is away being repaired.

The point of these stories is that systems fail. In the conventional organisation, quick back-up including other equipment is usually available, minimising adverse impact. The position for the of-site teleworker is more difficult in that equipment loss or failure brings work to a halt until the problem is rectified.

To avoid unnecessary loss of time, these potential problems need to be addressed up front. This includes the organisation of access to service people, arrangements for replacement equipment if required and the development of protocols in regard to security including just what information can be held on a hard disk.

Conclusion

There is no doubt that teleworking can be of mutual benefit to both employer and employee. However, success requires conscious action by both organisation and individual to ensure best results."

Monday now Tuesday Forum - inherent conflicts in modern management

In a comment on Sunday Essay - Can the New England media survive? Yes, but only if it changes, kvd wrote: 

This is a very thoughtful piece Jim - my thanks. 

Some of the problems recognised in your comments are, I submit more associated with country Australia than city. There is more sense of community in country, and less transient population, making for a marketplace based on a relatively static consumer base - in my innocent opinion. There are other problems of country/rural which also don't readily translate/apply to city folk - and I'm going to move to another of those that I have been following, somewhat wistfully: dairy co-ops. 

Here's the latest post from a blog I follow quite closely: A Mexican standoff as the sun sets on MG   

- and to tie it back to your comments on newspapers, this is a blog I have come to trust more completely than the reportage to be found on the same subject in either metro or even rural press outlets. I think this is partly due to the "interests" represented by Marian compared to the "interests" of the media outlets. Agree?

But carry Marian's concerns one step further, and you can get back to a wider subject of direct and current concern: AMP Society and how it appears to have "lost its way" as revealed by the Banking Royal Commission. 

Here's Marian's linked piece on co-operatives generally:The heart of the co-op  which, I believe could as well be used as a base descriptor of our "mutuals" of the finance and banking world, because it raises the very same problem at the heart of it: the rise of a "managerial class" with objectives not completely connected to the business of its prime customers/owners. 

I'd be interested to see if you can see the same connections that I can observe in the above?

I will pick up some of kvd's comments via the New England media post. However, I thought that they might also provide an entry point for a Monday now Tuesday forum topic.

I agree with kvd that milkmaidmarion's blog provides excellent reporting and, like kvd, I have been following the fall of Murray Goulburn with sadness. I suspect I agree with the idea that the country and rural media no longer provides the reflective reporting that we might once have expected. In fairness, though, that type of reflection has generally appeared outside a press concerned with the day to day or week to week. Where I think a change has occurred is that the press can no longer pick up, report on, the more reflective stuff or follow the longer stories in a coherent way.

kvd suggests that the loss of way shown by the Murray-Goulburn disaster or the AMP fiasco, something I referred to in The fish rots from the head - the Financial Services Royal Commission, is due to the rise of a managerial class. I wonder if that's true, although I accept that it's part of the problem. Rather, I wonder if we have completed a system that is fundamentally conflicted.

I do not know how to express this clearly. It's a feeling that I would like to explore in discussion. Perhaps I might clarify a little by posing a few questions:

• have we lost sight of the fact that organisations are formed for different purposes and need to be judged differently in terms of those purposes? For example, a cooperative might chose to earn a lower rate of return on its accumulated capital if that maximises the benefits to its members?
• have we created a system where narrow performance measures dominate to the exclusion of other considerations?
• have we created a system where universals such as effective governance become a distraction from, an impediment to, performance, substituting rules for a focus on ethics and purpose? 
• have we created a system where targets, performance measures and associated remuneration dominate at organisation level even though the aggregate targets are mathematically across sectors or the economy are mathematically unachievable?        .

I will leave it here. I would be interested in your comments. 

Sunday Essay - Can the New England media survive? Yes, but only if it changes

The visit to Armidale gave me another chance to catch up on media changes, especially in my little local pond. I have written quite a bit about the changing media landscape. Think of this post as a further catch-up, one focused especially but not exclusively on the regional press.

We can summarise some of the changes in this way:

• A progressive reduction in content in the print editions. 
• An increased focus on the on-line editions
• Increased use of content across mastheads
• Increased use of podcasts and videos
• Fewer long pieces, more short pieces, to fit the internet format.. 

Some of these changes are actually very good:

• The use of audiovisual material including live broadcasts. The New Zealand Herald is a leader in this area, but all the New England press is doing it too. This means that the papers compete with TV in particular. 
• While the increased use of shared content reduces the original content, it does allow the appointment of specialist reporters linked to one paper but providing content to several. The very recent appointment of  Nicholas.Fuller as the arts and culture reporter for the Armidale Express is an example. This is a completely new role. 

I am very conscious of all these changes, partly because I am a columnist with the Express, partly because I follow so many media outlets.

Let's start our discussion with the print editions of the papers. Under the traditional business model, the number of  pages is directly related to the volume of advertising. As advertising shrinks, so do the pages including news content. As the news content reduces with reduced paper size, the incentive to buy the paper falls. "I don't buy the Express" has been a popular if increasing call for a long time; "there is nothing in it." As print circulation declines, the scope for advertising supplements that used to be so profitable for the Rural Press group also declines.

Circulation declines are associated with reduced distribution. The paper becomes less available. It is many years since I saw a copy in the motels I stay in when visiting Armidale. The Express experience is not unique. The Melbourne Age, for example, has become very thin.

My column is included in the Express Extra published on a Wednesday with a claimed circulation of 18,000. It is delivered through Armidale and Uralla and inserted into the paid papers in Walcha and Guyra. "The content", Fairfax suggests, "is a mixture of hard and soft news stories, mostly feature style stories which don’t date, and interesting columnists." We columnists are indeed interesting! Actually, we are not bad.

Walking around Armidale, I haven't checked Uralla, the Extra appears to have become less readily available. Again, I haven't seen it in the motels.There does not appear to be a strong distribution focus even though it's free.

I know that people do still read the Express and especially the Extra.My columns appeal to a particular demographic, older locals. The 45 or so locals that I drew to my last talk all read the print edition of the Extra. That's why they came. They do not read the on-line edition.

And yet in terms of penetration, the Express is not pulling in the way it did.

There is an interesting test here. I have been writing for the paper for many years, week in, week out. Yet when I book into accommodation in Armidale nobody knows who I am! There is no name recognition. When I say that I write the column, I find that no-one reads the paper. I must admit to a mild feeling of pique!

While the decline in the circulation of print editions is a common pattern, it's not universal. The decline for some papers is slower, while a small number are actually increasing circulation. Those who are doing better have a clear focus on their market and on circulation. They have not given up!

Under former editors, my columns were not on-line. I was mildly miffed and asked the previous editor Lydia Roberts about that. She explained that she was concerned that if it was on-line it might affect the circulation of the Extra.That was flattering, of course, but also reflected the fact that a small number of people do actually collect the Extra just to read my column.

Editors change and my columns are now on-line. My print deadline is the Thursday for publication the following Wednesday. In fact, depending on available content, it now sometimes appears in the on-line edition of the paper on the Friday. Further, and again depending on available content, it may also be run in the on-line editions of other Fairfax Northern Tablelands papers and, it appears, other sometimes surprising mastheads as well. Sometimes it appears in those papers on-line but only the Extra print edition so far as the Express is concerned.  I do not object to this, but it raises a key question about marketing targeting.

I said earlier that I follow multiple media outlets. This includes all the Fairfax papers on the Tablelands as well as other papers such as the metro media. I have become very conscious of the extent to which they run common content and then tell me via twitter. At least two issues arise:

• For the life of me, I can't see why they should uncritically run other other Fairfax press stuff such as the Canberra Times pieces on the shift of APVMA to Armidale that actually work against the area they  serve. Note I said uncritically. I really mean without thought. 
• The commonality at least of on-line content blurs the distinctive nature of each paper. I think the papers (and this includes the metros) have lost sight of their market places and the communities they serve. They have lost the ability to differentiate. 

Let me try to illustrate. My focus is on the local press and especially the Express as a case study.

The first market served is those that live in the paper's catchment area. There are three channels here.

The first is the print edition. I have already indicated that I feel that the papers have lost sight of this channel. There is a real issue here that I have alluded to for papers serving an older demographic who are the most dedicated followers but who do not read on-line. One correspondent who was organising an event that spanned areas, put the problem this way. The only way I can get to older people interested in this event (a major family reunion) is through the print papers, but it's hard to get the papers to run stories. The apparent problem is that as the print editions shrink in size the amount of content that can be carried shrinks too, creating a rationing effect.    

The second channel is the e-editions, the subscriptions to the on-line version of the print paper in pdf  form. I get the Express in this form and it doesn't always work very well. .That is partly because I have an old box that doesn't always load. But it's also that I find the print edition more satisfying. In terms of the local market, each subscription to the e-edition substitutes for a print sale. However, the advertisements still reach the same audience. .

The third channel, really channels, is the paper websites and associated social media presences. This is the area of most dramatic change, but one where the papers have yet to work out how to monetise properly in part because of lack of clarity over audience and role. .

The main changes can be summarised this way:

• With exceptions such as the Northern Daily Leader,  the print papers are generally bi weekly or weekly. However, in their internet editions many have effectively moved towards daily publications with constant updating of the websites.  
• The sharing of content between websites is part of this. The structure of the websites now mimics the bigger papers, but for people like me who monitor a number of the papers the shared content is very obvious
• The websites now carry more varied content including podcasts, video material and live broadcasts, material that cannot be provided through the print editions
• In addition the websites, the papers also have Twtter, Facebook and, although this is poorly developed, YouTube channels. Again using the Armidale Express as an example, it has 2,417 followers on Twitters 8,246 followers on Facebook. 
• It also has multipliers, reporters and columnists who have their own handles and sometimes Facebook pages. For example, in my case I post links to my columns on Twitter (264 followers), my public Facebook page (118 followers) and the Armidale Families Past and Present Facebook group (2060 members). Some of those tweets, posts get shared. 
• The multiplier effects are quite considerable, Allowing for duplication between groups through shared membership, my rough estimate is that I reach at least 2,000 people each week who would not otherwise see the column. That's well over 10% of the print edition of the Armidale Express Extra. Not all read the column, but I think a fair number do.    .     . 

I now want to introduce a new variable, newspaper structure. When Rural Press took over the Tablelands and Slopes media, it broke up the previous linkages between local newspapers. It's solution to maiximising broader reach was via advertising supplements and multi-paper publications such as the extras. When Fairfax merged with Rural Press, it atomised the individual papers, reducing them to local markets. The broader unity was lost. Now economics dictates shared resources. Suddenly, the various Northern Tablelands/Slopes papers are again a broader entity, more so in fact. This opens new commercial possibilities that have yet to be realised. However, those possibilities can only be realised if they focus more on their markets, channels and advertisers.  .    .

Dealing with markets first.

The first market place is obviously the local, the traditional marketplace. However, each paper has a broader audience, those connected with the community who live beyond. Let me take the Armidale Express again as an example.For every person living in Armidale, there are at least five ex-Armidale people living elsewhere who are interested in the city. Some might be paid to subscribe to the print or e-edition. More would, in fact do, access a web site. They represent a largely untouched market.

Now for channels. Each channel is a marketplace in its own right. It needs a differentiated approach to determine just what the commercial value is. I don't think that happens at present.

There also needs to be a targeted approach to advertisers based around audience and channel. For example, if you are a local chain store, you really need the print edition. That is not necessarily true if you are a government agency who wants to get across a general information message. However, you might want to run or be persuaded to run an advertisement across a number of local mastheads in print and on-line or even just on-line. How might you do this?

Because each paper has its own market, because there is a regional market as well, there needs to be an integrated sales and marketing strategy. This seems to be impossible because so much is centralised across Fairfax, across Australian Community Media as a central platform. There is limited local or regional. . .

I am out of the time that I can spend on this post and will come back to this area later. Meantime, a small test for you. Say you want to run a small add on the Armidale Express on the web site about the 150th celebration of something. You can reach the local audience via the paper, but want to get to the broader expat audience. How might you do this?

Or say you are a Government agency who would like to run an ad on consultation for a regional development plan. You will put an ad in the print edition plus a story, but you want to run an ad on-line on six web sites. How might you do this? Note, by the way, that there appear to be no Government ads at all on the on-line sites.

I will extend this discussion later. For the moment, I leave you with the challenges.

Postscript

Earlier this year, the Sydney Morning Herald introduced a new website.This has now extended to the Canberra Times.  Grant Newton in Welcome to The Canberra Times' new website provides the rationale for the changes.

I didn't like the SMH changes, but didn't know whether or not I was just being old-fashioned. I found the new website a bit clunky, slowing down my ability to find what I liked. My use of the site has dropped by more than half. The initial comments to the changes on the CT web site suggest that I am not alone. Because the changes are partially geared to mobile readers, I checked on my mobile. I'm not sure that it's an improvement.

My biggest problem is that I cannot see how they will monetise the sites beyond following down the paywall route.  A second problem is that a staff response in comments on the CT story suggests that they are going to roll them out out to all the Fairfax sites. If this is done as a universal without local and regional commercial models in place, then I think that it will destroy the chances of commercial viability for the New England media.  

Postscript 2 8 May 2018

Now that we have had a bit of experience with new SMH website, I realised that while I still visit to some degree, I no longer read it properly. It's too much like hard work, takes me too long to identify what I am interested in, there is too much visual crap. I am just one person and not a member of the demographic they are aiming for. Would be interested to know what other people think.

The fish rots from the head - the Financial Services Royal Commission

I wasn't a supporter of the proposed Australian banking Royal Commission or to give it its proper title the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. For the benefit of international readers, the Royal Commission came about following sustained pressure from a small group of backbenchers especially in the National Party concerned about irregularities and injustices in the Australian financial services sector.

I believed that there had been irregularities and injustices over a considerable period, I had experienced some myself, but felt that changes were finally being made and that a Royal Commission was too blunt an instrument to address the problem. Boy, was I wrong. Before going on, here are a few of the stories from the last few days:

• ABC News: News Banking royal commissioner warns CBA for failing to answer questions about bogus financial advice fees
• The Guardian: Banking royal commission: CBA agrees it is the 'gold medallist' at fees for no service
• The Guardian: Banking royal commission: AMP executive says company put profits before the law
• The Guardian: Banking royal commission told 90% of financial advisers ignored clients' best interests
• Financial Review: Banking royal commission exposes AMP's burning platforms
• Financial Review: CBA's systems 'so hopeless', banking royal commission hears
• ABC News: Treasurer Scott Morrison 'deeply distressed' by AMP's evidence to banking royal commission

You can find transcripts from the hearings here.

We have talked here before about problems in the banking and financial services sector. Just based on the evidence to this point, those problems would appear to be far deeper and more systemic than I had realised. kvd might say told you so!

I said systemic because there are clearly inter-related problems including:

• problems with IT platforms
• lags in recognising problems and then in responding especially where there are response costs or reduced income or a combination of the two
• incentive scales and performance measures that, in combination with cross-selling arrangements, encourage behaviour that disadvantages customers
• ethical problems at individual and organisation levels where the pursuit of the sale becomes dominant to the exclusion of everything else. I couldn't help thinking here of the old saying that a fish rots from the head.  . 

One thing I find especially sad is that the AMP,  arguably once Australia's most respected financial institution,. has become just another financial institution since demutualisation.

I think that one of the problems in all this is going to be the avoidance or at least minimisation of new layers that simply increase costs and reduce choice, especially for the smaller investor.

The remarkable case of Australia's cabinet files

I have been working on the follow up post to my first post on surviving in an age of outrage, this one on survival in the public space, but this has taken longer than expected. While it's a reasonably long post, the delay reflects my difficulty in sorting through issues in my own mind. I hope to finish it soon, but in the meantime I wanted to make a brief comment on the remarkable story of the suddenly discovered Australian cabinet papers.

By way of background for international readers, the ABC reports that the story began at a second-hand shop in Canberra, where ex-government furniture is sold off cheaply.Among the items on sale were two heavy filing cabinets to which no-one could find the keys. They were purchased for small change and sat unopened for some months until the locks were attacked with a drill. Inside was the trove of documents now known as The Cabinet Files. The thousands of pages reveal the inner workings of five separate governments and span nearly a decade. Nearly all the files were classified, some as "top secret" or "AUSTEO", which means they are to be seen by Australian eyes only.

Following discovery, the files ended up in the hands of the ABC who are reporting on some of the documents (link above). Others were deemed by the ABC to be too sensitive to reveal. I wondered how this might have occurred.

It is now thirty years since I last dealt with highly classified material. Then my top level security clearance allowed me to see sensitive documents including top secret and code word protected. However, there were quite strict rules about those documents. Some I was given, but had to return once I had read them. Others could be stored in a secure heavy metal filing cabinet. A small number had to be stored in a safe. I did not have, did not want the hassle involved in having, such a safe, so these documents had to be returned once I had absorbed them.

When I switched jobs or the area was restructured, the cabinets would remain, with the keys handed over to my successor.

Against this background, I found the discovery a little surprising. I don't know what the filing cases looked like, whether they were just key opened or required a combination as well. I don't know where they were originally located, although from the sound of it it has to be in Prime Minister's and Cabinet, Finance, Treasury or a former minister's office since these were the only places that would have had access to the particular combination of cabinet documents involved.

The only way that I can explain the whole thing is that the filing cabinets in some ways became orphans. This might happen because an area was abolished or a minister lost position, leaving the cabinets behind with no-one responsible. Then they sat there sans keys until someone wanted to clear space. Even then, it's surprising with a disconnect between whoever shifted them and the person authorising the shift. They may have been seen as empty, but they were obviously heavy.

All hell is breaking loose, so we will learn more. One thing to be cautious of is the argument that the breach justifies abolition of paper files or copies. This was an error, not a leak. But if you really want to protect records from disclosure in whatever form by whatever means, keep them paper. Single disclosures of electronic records actually dwarf the total number of leaked written documents across human history.

Update Friday 2 February 2017

The photos I have now seen of the cabinets, assuming that the photo is real, show them with combination locks. At least one is labelled "Cab subs"! ASIO (the Australian Security Intelligence Organisation) has now retrieved the files. It has also been confirmed that the material came from the Department of Prime Minister and Cabinet.

In an opinion piece in the Fairfax press, Cabinet files reveal a dispiriting truth about how governments work, Waleed Aly expressed concern about the light thrown on the internal workings of government.

Put simply, we're seeing snapshots of governments that either ignore or bury independent advice they don't want to hear, that are prepared to mislead the public about the advice they receive, and that are quite prepared to intervene to politicise processes that masquerade as apolitical.

The first case he cited concerned release of cabinet documents at the time of the Pink Batts Royal Commission. There Mr Aly wrote in part:

And now we know just how belligerent prime minister Tony Abbott was in pursuing Rudd on this. We've known that when he set up the royal commission, he took the stunning step of ordering that confidential cabinet documents be handed over in violation of a century of convention. This, we were told (after it was initially denied), was based on the advice of the Australian government solicitor. 

Now we learn that this very same solicitor in fact gave the opposite advice, saying this would be unprecedented and inconsistent with "legal practice and principle". That advice was reinforced by the secretary of Abbott's own department. Perhaps there's some other legal advice out there taking the opposite position. Or perhaps we were misled.

I am not totally sure of the accuracy of the this part of the comment: "This, we were told (after it was initially denied), was based on the advice of the Australian government solicitor."  I wrote on the release of the documents to the Royal Commission at the time: - The principle of Cabinet confidentiality, Saturday 24 February 2014. If you look at the post, you will see how it evolved in light of comments and further information. This is not such a simple issue as My Aly's comment would seem to imply. 

The second case involved a request by then immigration minister Scott Morrison that ASIO go slow on its security checks of asylum seekers so the government could squeeze through changes that would deny these people permanent protection in Australia. This case made me very uncomfortable because it involved an apparent misuse of due process, of a Government determined to do whatever required to maintain its position regardless of convention. This has been a consistent pattern in the border protection arena, but has not been limited to that area.

In an apparently disconnected story, current Australian immigration minister Peter Dutton has called for public input into the selection of judges and magistrates. This formed part of his current law and order campaign. While he refused to comment on whether or not he supported adoption of the US system, his comments did seem to be going down that path. This led me to wonder if Mr Dutton understood the principles and history of our system of government. Perhaps not, or perhaps he considers them to be unimportant or outdated.

Whichever way, it is a worrying development considering his position in charge of the new mega Department of Home Affairs. To quote the Department,  this "brings together Australia's federal law enforcement, national and transport security, criminal justice, emergency management, multicultural affairs and immigration and border-related functions and agencies, working together to keep Australia safe."  With this combination of activities, Australians are heavily reliant on the willingness of the Department and its minister to follow due process and to temper what can be done with what should be done. 

Guy Debelle, forecasting, uncertainty and policy failure

......the history of economic forecasting tells us that our central forecast will almost certainly be wrong. But there are things we can do to manage this uncertainty. 

The methodology in Philip Tetlock's Superforecasting is very helpful: try, fail, analyse, adjust, try again.(Tetlock P and D Gardner (2015), Superforecasting: The Art and Science of Prediction, Crown Publishing, New York). 

It is essential to ask, after the fact, what did cause our forecasts to be wrong? Evaluating forecasts ex post is as important as generating the forecasts. This can be described in three stages: 

Where were we wrong? For which variables were our forecast misses the largest? 

Why were we wrong? There are a number of possible reasons. Was it because the model was the wrong model? Has the model changed? Was our judgemental adjustment wrong? Was our forecast for an explanatory variable wrong? Was there an economic event or ‘shock’ that we didn't anticipate?

Having attempted to answer these questions, we can then ask what can we learn? What, if anything, do we need to adjust in our forecasting framework?
Guy Debelle, Uncertainty, 26 October 2017

Useful speech by Australian Reserve Bank Deputy Governor Guy Debelle on the problem of uncertainty in economic forecasting and the development of monetary policy. He begins: "Uncertainty is one of the few certainties in monetary policy decision-making. It enters at nearly every stage of the process – from understanding where the economy is at the moment to knowing where it will be in the future"  From that point, he discusses some of the main ways that uncertainty affects things along with the nature of the Bank's responses. It's a simple and useful speech.

The problems of uncertainty are not limited to forecasting nor to macro-economic policy. They bedevil all policy making. Problems here have risen exponentially with the rise of measurement, key performance indicators and "evidence based" public policy. Policy has become locked into a strait jacket set largely by what can be easily measured in circumstances where available statistics are often scanty, lagged and with uncertain meaning. The result is policy failure on a large scale.    

Monday Forum - whatever you want

I have been bogged down. Hopefully this will now ease. Meantime, this somewhat late Forum is another as you like.

The sudden and sad death of John Clarke removed a major figure from Australian and New Zealand life. He was brilliant on his own and in conjunction with straight man Bryan Dawe. Clarke and Dawe was very much a team in which Bryan's sometimes incredulous expression and pointed attempts to gain answers provided a perfect foil to Clarke's insouciance. For overseas readers, this link will give you some examples. Others are readily available on YouTube.

The United Airlines fiasco over the forced removal of a passenger to accommodate crew needed for a later flight was quite astonishing. I won't repeat the footage here, but this is an example. The reaction on social media was instant and savage.  

The graphic is from a January 2016 piece by Bloomberg's. Drake Bennett on the airline's efforts under CEO Munoz to turn around, to recover from disaster centered in part on poor customer service. This included the infamous 2009 broken guitar case.

It would appear that United had made some progress until this case turned the whole thing around, again twisting the airline into knots. The facts of the case will be picked over and over. It should not have occurred in the way it did, although I can understand the chain of events. Once it did occur,  the responses of CEO Munz displayed a remarkable lack of human sensitivity, a failure to understand the implications of just what had happened. The sight of the passenger back on the plane with a bloody face repeating "I have to get home" in a dazed fashion will stay with me for some time.

In all this, I have learned a new word, "re-accommodate", to describe passengers who do get bumped even when they have a valid ticket and allocated seat and are sitting in that seat. While I knew about over-booking, that is one reason I book on line or get to the airport early, while I knew that the airlines had a legal right to put me off, the thought that one might get dragged off was a new one to me.

The ABC had a useful piece on the Australian legal position if you are faced with "re-accommodation." I did not realise just how limited my rights were. I think that this is a case where legal reform is required.

Update on United

The CEO of United has now provided a full apology on the matter:

Statement from United Airlines CEO Oscar Munoz on United Express Flight 3411
April 11, 2017 

The truly horrific event that occurred on this flight has elicited many responses from all of us: outrage, anger, disappointment. I share all of those sentiments, and one above all: my deepest apologies for what happened. Like you, I continue to be disturbed by what happened on this flight and I deeply apologize to the customer forcibly removed and to all the customers aboard. No one should ever be mistreated this way.  

I want you to know that we take full responsibility and we will work to make it right.   

It’s never too late to do the right thing. I have committed to our customers and our employees that we are going to fix what’s broken so this never happens again. This will include a thorough review of crew movement, our policies for incentivizing volunteers in these situations, how we handle oversold situations and an examination of how we partner with airport authorities and local law enforcement. We’ll communicate the results of our review by April 30th.  

I promise you we will do better.  

Sincerely,
Oscar 

Meantime, the Louisville Courier-Journal has been dragging up material about Dr Dao's past, something that has also attracted considerable ire and forced some backtracking from the paper. .

Sunday Snippets - lessons from the Murray Goulburn affair

Its a beautiful day here in Sydney. First load of washing hung out, second in machine. It's birthday season. Eldest's birthday was on the second, youngest today. Where have all the years gone?  I don't feel much like serious thought, so a random chat while I wait for the washing.

I briefly mentioned  the Northern Territory elections in Saturday Morning Musings - a changing Australia. The thumping that former Chief Minister Giles referred too has indeed been a thumping, with the Country Liberal Party reduced to two seats not including Mr Giles' own seat which he lost by just a few votes. There is some angst among the five independents that the CLP has been awarded official opposition status with the perks that go with that, but I guess that's the price you pay for being an independent.

I thought that I had commented on the Murray Goulburn affair. Apparently not, although  I have certainly written on cooperatives. It seems that the discussion was in comments, that I meant to write.

On its web site, the big dairy co-op bills itself (among other things) as The "Aussi farmer co-op." Therein lies the rub. Under the previous CEO, Gary Helou,  Murray Goulburn admitted external investors to raise additional funds utlising a reasonably complex financial arrangement in which the new non-voting shareholders were effectively guaranteed a return.The company pursued an expansionist policy to grow the business. In doing so, it got the milk-price wrong, creating a conflict between the needs of the business, the external shareholders and the co-op members.

I'm not sure that I fully understand the maths of what followed. However, as I interpret it, Murray Goulburn sets a milk price based on the price they expect to receive. This is then adjusted based on actual prices received. Murray Goulburn was slow to see that the market had changed. Then, when they did adjust prices, they declared that farmers had been overpaid and that this amount would need to be recovered from dairy farmers via future prices. So farmers were to receive a lower price because market prices had fallen, a lower price still to recover the "over-payment". This allowed the co-op to shift the amount of the "over-payment" from the profit and loss statement as an expense to the balance sheet as a capital item, one to be repaid by the farmers. In turn, this allowed Murray Goulburn to declare a profit and pay a dividend to the new external shareholders.

Farmers were outraged. Those who could, and they seem to be the bigger farmers, began to shift to other processors. Murray Goulburn's milk supply fell as a consequence, affecting production but also leaving the $183 million "over-payment" to be recovered from a diminishing group of farmers.

The problem now for Murray Goulburn is that the "over-payment" can only be "recovered" via future lower milk prices to producers. There is no legal obligation on farmers to repay the "over-payment", something you would expect from a capitalised item. By capitalising the item, they kicked the problem down the road a little, but also increased the incentive for farmers to move. If have interpreted the maths correctly, sooner or later Murray Goulburn is going to have to write a substantial portion of the "over-payment" off, thus reversing the previous "gain." In all, it's a bit of a mess.

Former CEO Gary Helou was clearly a charismatic leader with grand visions for Murray Goulburn. No doubt if he had got it right, much would have been forgiven. However, he lost sight of the principle that a co-op's first responsibility is towards its members and this inevitably dictates a degree of conservatism in approach. Growing the business has value if and only if it benefits the members. The business is a vehicle, not an end in itself.  

Monday Forum - what is the role of the board?

Interesting piece in today’s Australian Financial Review by Adele Ferguson reporting in part on the results of a Spencer Stuart, Harvard Business School and Women’s Corporate Directors Foundation survey of 4,000 global directors. The directors included 136 Australian based directors.

According to the survey, 74 per cent of Australian directors ranked the economy as a key political issue compared to 65 per cent globally. Whereas 18 per cent of global directors ranked political instability as a key issue, the comparable Australian figure was 27 per cent. Almost half of the Australian sample viewed the regulatory environment as a major stumbling block to achieving their strategic objectives.

The picture that seems to emerge of the Australian cohort is an inward looking group worried about their own navels, with an almost obsessive concern with compliance issues.

Adele then raises a broader question, the role of the company board. Quoting John Stanhope, the Chair of Australia Post, she poses the question how can a director who meets a few times a year set the tone for the company? The Spencer Stuart survey reports that the average time Australian directors spent on board matters each year was higher than the global average, 218 hours as compared to 158 hours globally. And yet, that’s not a lot of time to try to understand a complex business. Should we therefore limit the number of director positions a person can hold? Or can technology provide an answer by making information more accessible to directors?

In another story in the AFR, James Eyers reports on the rise of regtech in the financial sector, the use of technology to make regulatory reporting and compliance less burdensome and more accessible. Again, we have the same emphasis on technology, compliance and reporting.

In considering all this, I wonder if we have not all been guilty of over-complicating things, blurring responsibilities between board and management, creating a corporate governance overlay that doesn’t help. Corporate governance - the mechanisms, processes and relations by which corporations are controlled and directed – has always been around. However, the use of the particular words “corporate governance” and the sometimes over-whelming obsession with the concept is quite recent.

So for today’s discussion, I pose two simple questions. What is the role of the board? What is the relationship between board and management?

Saturday Morning Musings - reflections on my return to the not for profit sector

It's been a hectic week, marked at the end by a computer crash. It's power problem rather than the dreaded blue screen of death. My biggest problem is loss of emails. Hopefully the computer guy will be able to do something once I can get the box to him.

For much of the last eight years, the contract work that I have done to support my writing addiction has been back in the government sector, this time at state rather than federal level. This came after a period in both the private sector and not for profit world. It will be no secret to readers of this blog that I found the government work frustrating, triggering some now familiar themes.

I am now back in the not for profit world in a new slice that has linkages to some of the government work  that I was  doing previously. It's a national role, allowing me to see differences in circumstance and approach between the various jurisdictions. Even where concepts and language are similar, geography and political circumstance dictate difference. That's interesting.

It's also interesting looking at the dynamics internally and at a sector level. Increasingly, governments in this country and elsewhere seek to shift or at least delegate service delivery to both private and not for profit sectors. They do so partly to achieve cost savings that depend to a degree on differential tax treatment, partly seeking efficiencies, partly seeking leverage in an increasingly budget constrained environment. The idea of introduced competition is central to policy approaches: competition between public agencies and alternative delivery forms; competition between not for profit and profit suppliers; competition among not for profits.

This approach sets up its own dynamics: new sectors are created with their own culture and approach; organisations form or change to meet the new circumstances; new controls are introduced to try to manage the process; in some cases, previous voluntary activities are regulated or crowded out. I have watched these dynamics mainly as an observer, although my board membership of the New England Writers' Centre has certainly given me an internal feel in the arts space. However, now I am observing as a staff member in a defined role that includes responding to Government as a customer.

Finally, its been interesting and indeed rewarding moving back into a more nitty gritty role. In my Government contract policy work, policy came first, operations second. I could identify operational issues or problems, but there wasn't a lot I could do about them because they were outside scope in a world of choked channels. Now the operational problems, the question of how we might deliver, has to be taken into account as a central issue. There are still scope boundaries, but they have shifted.

One side effect is that I am using personal knowledge and skills that had to be put aside previously. That's actually quite challenging. It's not so much atrophy of the knowledge or skills themselves, although refreshment is required in some cases. Rather, it's the question of selecting what is important in the new circumstances, of determining new scope boundaries.

I suspect I am going to write more on this. I am a reflective person and like to share the things I learn!  

Monday Forum - corporatisation

The financial problems experienced by listed Australian law firm Slater and Gordon since its expensive and now disastrous acquisition of UK firm Quindell has received extensive media coverage. These are a few examples: here, here, here, here.

I wrote a fair bit about corporatisation in professional services back in the 2000s. For example, this is a piece I wrote in May 2007: Corporatisation, Corporate Structures and the Law - The Case For. Later in that month, I wrote:

At one level, a simple move from a partnership to an incorporated body changes nothing. Partnerships already face a variety of challenges, including the need to make sufficient profit to pay partners and fund development in a competitive marketplace. Wrapping a corporate envelope around the partnership does not change this. 

The position changes, however, if the firm actually lists in the way Slater and Gordon did because two new factors come into play. 

The first is the need to formally consider the needs of shareholders as owners. In theory at least, a partnership may decide to sacrifice profits in the interests of its clients. Again in theory, this is more difficult in a listed corporation because of the direct pressures to provide shareholder returns. 

I say in theory in both cases because I am not sure how much difference there is in practice. Indeed, in partnerships the need to maximise partner cash flow creates pressures that may be just as, if not more, detrimental to clients than the shareholder return requirement. Here a feature of the ethical discussion has been a comparison between corporate operations and the independent professional model, whereas the comparison should be with the partnership model. 

The second linked factor is more complicated, the temptation to play corporate games in an attempt to maximise the the share price and to please the market . In my view this is a real danger that can, as we have seen in other areas, threaten the very existence of the firm itself.

I don't have time tonight to tease out the issues, so instead pose two questions: can corporatisation work?; if, so in what circumstances? As always, feel free to go in whatever direction you want! 

Woolworths pulls the plug on Masters

The decision by Australian supermarket chain Woolworths to throw in the towel on its attempt to build a hardware chain to rival Bunnings did not come as a surprise. It all proved just too hard.

Nine years ago, Woolworths under CEO Roger Corbett had the then second ranking Coles' group on the ropes. Coles had been bigger and more successful, but had suffered from lack of strategic investment and from corporate games. In 2007, the then industrial conglomerate Wesfarmers made an opportunistic bid for Coles. At the time it was seen as a gamble, but it proved to be be a successful move.

The seeds for later problems are often sown during periods of apparent success. Under Mr Corbett, Wooloworths had modeled itself to some degree on the US Walmart chain then seen as the global retail success story. However, and I am now speaking from a customer perspective, the company had under-invested in its existing stores, many of which seemed old and tired.

At the time of the Coles purchase, Wesfarmers already owned the Bunnings hardware chain.Since its acquisition in 1994, Wesfarmers had grown the Bunnings chain through further acquisitions and investment in big wharehouse stores.  In doing so, it overtook the previous market leader, Mitre 10, establishing a dominant market position.

The decision by Woolworths to establish Masters in conjunction with the American hardware chain Lowes had known risks. By the time of the launch of the first Masters store in 2011, Bunnings was very well established indeed. The new venture faced two practical problems. The first was simply finding suitable space for the stores. The second linked problem was building volume to get stock costs down and margins up. In the end, Woolworths was failing on both counts, leading to continuing losses. .

The move to close or dispose of Masters has been welcomed by investors and commentators. I'm not so sure. I would have thought that a for a new venture of this type you have to be prepared to adopt a really long term time horizon. Clearly Woolworths could not afford to do so. The real losers in all this are not just Masters staff, but also the suppliers who opted to supply Masters as an alternative to Bunnings.

Postscript

Another view on the strategic errors involved in the Masters matter - and another..  

Productivity and the changing world of work

Today's short post is really an aide memoir to myself, just jottings.

In a comment from kvd on  The Greek crisis - a high stakes game marked by blindness, inexperience and rigidity, kvd provided a link to this Bloomberg piece. In commentary in the video embedded in the piece, there is a reference to games theory. I had actually forgotten that Greek Finance Minister Yanis Varoufakis was an expert in this area. Now I am wondering how this relates to the strategy being followed by the current Greek Government.

A piece in the Canberra Times by Noel Towell ('War for people' looms in the public service) looks at the aging of the Commonwealth Public Service. I have commented previously on the same pattern in the NSW Public Service. In another Canberra Times piece, Tony Featherstone asks Has outsourcing gone too far? Some of his examples struck a real personal chord. 

Over at his place, Winton Bates and I have been carrying out a conversation on productivity triggered by "Will paying for internet content raise productivity growth?". Winton has been very patient with me! My interest here lay in what I perceived to be a gap between the way productivity is measured and what I saw at firm and industry level.

All these things are loosely connected in my mind. Yanis Varoufakis appears to be applying, or attempting to apply, a highly structured set of economic theories on decision making to a very messy political process. Games theory is useful, but has very little to do (at least in my mind) with longer term decision processes. Productivity measurement and the development and application of policy prescriptions based on that measurement is likely to be misleading and even dangerous if the structures on which that measurement is based do not adequately reflect changing realities, including the existence of things that cannot be directly measured. 

Central to my thinking on productivity have been rolling changes in the way we work. This is where the Canberra Times pieces come in. Both relate to organisation efficiency in the short and long term. My thesis, if I can call it that, is that the changing way we work is not adequately reflected in current discussions on productivity nor in the policy prescriptions based upon conventional productivity measurements. 

In the workplace, we combine people with equipment to carry out functions. In conventional productivity terms, that is called labour and capital. However, the way we work actually depends upon the combination of structure (the way work is organised) and know-how (knowledge of how we do things), These change over time. To my mind, and I accept that I am speaking from an inexpert viewpoint, neither is adequately accommodated in current productivity theory. 

Putting it in another way, if in multi-factor productivity measurement, we attribute change to labour and capital as defined with all other factors appearing in the residual, then the measurement of and analysis of the residual becomes very important. 

When I did my Master's qualifying thesis all those years ago on the economics of education, the unexpected size of the residual over longish periods was attributed to improved education, human capital formation embodied in people. That may have been true then when mass education was still spreading. In Western countries I doubt that it's still true.

The changing world of work demands always that we learn new things. We do that mainly on the job. To my mind, changes now in formal education have very few positive productivity effects. Indeed, the opposite may be true. Rather, and this may well have been true in the past, it's the changing structure of work in combination with know-how that really determines the residual. 

This may sound very dry, but as a partial indicator of what I'm talking about look at the consistent complaints across organisations, private and public, about the loss of corporate knowledge, of the know-how on how things are done or indeed might be done better, because of constant restructuring. Change is inevitable, but the pattern of complaints suggests that past a certain point change becomes a drag on performance and hence on productivity. 

 This is just one example. There are many others. In analytical terms, it becomes hard to disentangle the various effects because they feed on each other. Still, I think that we need to make the effort  .     

           

The application of evidence based approaches 2 - A note on evidence based policy

This brief note continues my discussion on what are called evidence based approaches. At the start of  The application of evidence based approaches 1 - Evidence Based Medicine, I wrote:

The discussion on Monday Forum - more on evidence based approaches looked at some of the issues associated with evidence based approaches. One of the issues from my viewpoint in that discussion lay in the need to distinguish between the importance of evidence and the application in practice of what are called evidence based approaches whether in medicine, management or public policy. I thought therefore that it might be helpful, at least to me, to consolidate some previous writing on the topic, starting with evidence based medicine.

I have repeated these words to emphasise that I am concerned with the application of particular models, ways of thinking. The Wikipedia article on evidence based public policy is not especially good, but it does refer to the transmission of the particular form of the idea from  medicine to public policy.

A good expression of the idea in an Australian context comes from this Australian Public Service Commission piece, there is no date but I think its 2009, featuring Gary Banks. In her introduction, Public Service Commissioner  Lynelle Briggs  states:

Evidence-based policy-making, while not a new concept, has recently become more prominent in public debate in Australia. The Prime Minister has called it a key element of the Government’s agenda for the public service. He wants policy design to be driven by analysis of all the available options, and not by ideology. This explicit endorsement by the Prime Minister provides us with a valuable opportunity to advance the cause of evidence- based policy-making in the APS.

In Australia, the potential application of evidence based approaches drawn from medicine to policy dates back to at least 1998. As happened with me, it seems to have spread first from medicine to the idea of a discipline of practice and then beyond. 

Mr Banks and the Productivity Commission have played an active role in popularising the application of the concept.in the public policy sphere, claiming lineal responsibility for its application back to the old Tariff Board. In fact, the concept is much older than that. The economic historian C R Fay used the term evidence based public policy in 1919, and by then the approach was quite old. 

The differences between the old and new approaches is that evidence based public policy now involves the application of a highly structured top down model that, to my mind, is riven with potential contradictions that arise from its misapplication. 

I recognise that I have to argue this, I am as prone as anyone else to management fads and fancies. Someday I should write a mea culpa post looking at all the things that I have argued for that I then found did not work in practice. Because I have been a practitioner  working across a number of fields, I have found myself badly bitten by the very things I had espoused. The problem, to my mind lies not in the concepts as such, but always in their sometimes blind misapplication.

In my next post in this irregular series, I will look at evidence based management.

Postscript

I should note, for the record, that I have a very high opinion of the work done by the Tariff Board though its various guises to the Productivity Commission today.

Postscript 2

This link came from Nicholas Gruen: The Trouble With Scientists.There are several points within it that bear upon our current discussion so I wanted to record it for later use.

   .

The application of evidence based approaches 1 - Evidence Based Medicine

The discussion on Monday Forum - more on evidence based approaches looked at some of the issues associated with evidence based approaches. One of the issues from my viewpoint in that discussion lay in the need to distinguish between the importance of evidence and the application in practice of what are called evidence based approaches whether in medicine, management or public policy. I thought therefore that it might be helpful, at least to me, to consolidate some previous writing on the topic, starting with evidence based medicine.

By way of background to what follows, one of my major interests over the last quarter of 2006 and the first quarter of 2007 lay in the development of what I called a discipline of practice, a discipline focused on the way professionals practice their profession. This drew me into a discussion of evidence based approaches, starting with evidence based medicine.

The material that follows in this post consolidates the three posts on evidence based medicine that I wrote at the time. For time reasons, I haven’t attempted a complete edit, just some simplification. In later posts, I will look at the application in management and public policy.

INTRODUCING EVIDENCE BASED MEDICINE

Evidence-based medicine (EBM) is an attempt to more uniformly apply the standards of evidence gained from the scientific method, to certain aspects of medical practice. Specifically, EBM seeks to apply judgements about the inductive quality of evidence, to those aspects of medicine which depend on rational assessments of risks and benefits of treatments (including lack of treatment). According to the Centre for Evidence-Based Medicine, "Evidence-based medicine is the conscientious, explicit and judicious use of current best evidence in making decisions about the care of individual patients."[1] Cited from Wikpedia.

In this post I want to continue my discussion on the development of a discipline of practice, a discipline focused on the way professionals practice their profession, by introducing in a preliminary way the case of evidence based medicine.

I first came across the concept in 1998 when I started as CEO of the Royal Australian (now Australian and New Zealand) College of Ophthalmologists. My instinctive first reaction was to say that's odd, I thought that all medicine was evidence based. In fact, that's far from true.

To understand this, we need to look at the way in which doctors are trained, as well as the way in which new medical approaches develop.

As with all professions, training starts with the previous body of knowledge relevant to that practice. For practical reasons, much of this has to be taken for granted. The trainee professional simply has to learn those elements required to begin practice.

The trainee then has to learn to apply that knowledge in practice. In the case of medicine this is done especially in hospitals working under the supervision of a qualified doctor who passes his/her knowledge and experience onto the trainee while checking their application. Again, the trainee is acquiring the current wisdom.

These broad processes continue throughout a professional training that can, in the case of medical specialists, extend as long twelve or thirteen years.

Once the doctor begins practice, he/she continues to learn from experience with patients. Doctors also learn through contact with other doctors and are expected to maintain a program of continuing professional education to keep them in touch with latest developments. Similar approaches and programs apply in other professional areas.

None of this will seem strange to any professional from any discipline. Yet in the case of medicine the process has proved to be seriously flawed. Evidence based medicine attempts to address these flaws.

OVERVIEW OF EVIDENCE BASED MEDICINE

Evidence-based medicine (EBM) is the integration of best research evidence with clinical expertise and patient values ... When these three elements are integrated, clinicians and patients form a diagnostic and therapeutic alliance which optimizes clinical outcomes and quality of life. Centre for Evidence Based Medicine

While this quote focuses on medicine, it also captures four key elements relevant to all professions and professionals.

The first element is research evidence, essentially what works and why.

The second element is professional expertise, our capacity to understand and apply our professional knowledge in the circumstances of the particular case.

The third element is the patient or client, each with their specific attitudes and needs.

The final element is the integration of the first three elements - the diagnostic and therapeutic alliance - to provide the solution that best meets client needs.

Before continuing my analysis I should note that the Australian Broadcasting Corporation's Radio National has just completed a rather good two part series - Facing the Evidence - on evidence based medicine. The first part is available here in transcript, the second here.

Returning to my theme, when you look as I did in my last post at the standard way all professionals are trained, you can see that that training focuses on the transfer of existing knowledge and skills to the new professional, knowledge and skills that that professional then applies. The professional then builds on this base through practice, at the same time using various professional development activities to try to keep in touch with new developments.

But what happens if that existing knowledge base is in fact wrong? How might this arise? To quote from the first part of the ABC program:

Every day doctors and other health professionals use treatments that are harmful, or fail to use therapies that have been proven to work. In the US there is so much medical error that Congress has directed the Institute of Medicine to develop a strategy to improve the quality of care. In its initial report the Institute noted perhaps as many as 100,000 Americans die every year from medical errors, including the use of inappropriate treatments. That's much more than from car accidents, breast cancer or AIDS. Many more suffer side effects and unnecessary costs

How could this happen?

Part of the problem here lies simply in the placebo effect, that fact that patients respond just to the fact of treatment. So the treatment appears to work, thus supporting the original judgment.

Part of the problem also lies in the fact that individual outcomes can be affected by so many variables and over a considerable time horizon so that the fact of adverse outcomes may not be clear in an individual case or, if clear, may be due to a whole variety of factors external to the treatment itself. There is a linked issue here that relates to the size of the population.

Given that individual outcomes vary greatly, the fact that there is a problem and its scale and scope may only become clear if you look at a population as a whole. That is, the individual professional may have no easy way of detecting the problem in his/her individual cases.

A further problem lies in the nature of the models used.

All professions use models to try to explain a complex world. In economics, for example, models are a common method used to analyse economic behaviour and to suggest possible responses at firm and public policy levels. In the case of medicine, biological models are common.

The problem with all models is that they involve selection of key variables and the specification of relations between those variables. Get either wrong, and outcomes may be very different from those projected by the model.

Doctors have always been concerned about adverse or unexpected outcomes.

In 1972 Professor Archie Cochrane, a Scottish epidemiologist published Effectiveness and Efficiency: Random Reflections on Health Services. This plus Cochrane's subsequent advocacy caused increasing acceptance of the concepts behind evidence-based practice. Cochrane's work was honoured through the naming of centres of evidence-based medical research — Cochrane Centres — and an international organisation, the Cochrane Collaboration.

The explicit methodologies used to determine "best evidence" were then largely established by the McMaster University research group led by David Sackett and Gordon Guyatt. According to the Wikipedia article on evidence based medicine, the term "evidence-based medicine" itself first appeared in the medical literature in 1992 in a paper by Guyatt etal. (Guyatt G, Cairns J, Churchill D, et al. [‘Evidence-Based Medicine Working Group’] "Evidence-based medicine. A new approach to teaching the practice of medicine." JAMA1992;268:2420-5. PMID 1404801)

From this point, the spread of the concept and its subsequent inclusion in professional training was rapid.

As with any other approach, evidence based medicine has its own methodological problems. However, it also has important lessons for other fields of professional practice.

PROBLEMS WITH EVIDENCE BASED MEDICINE

In my last post on evidence based medicine, I suggested that professional training focused on the transfer of existing knowledge and skills to the new professional, knowledge and skills that the professional then applied. The professional subsequently built on this base through practice, at the same time using various professional development activities to try to keep in touch with new developments.

I then posed the question what happens if that existing knowledge base is in fact wrong, looking briefly at the reasons why this proved to be the case in medicine, a discovery that had led to the development of evidence based medicine. I concluded that, as with any other approach, evidence based medicine had its own methodological problems. However, it also had important lessons for other fields of professional practice.

The Quality Movement and Quantification

In a series of posts on my personal blog, I explored some of the changes that had taken place in public administration since the war, looking at the influences on those changes.

In one of those posts I looked in part at the way in which standards, the Quality Movement and the importance of measurement had become major global influences. I also suggested that the outcomes here had not always been positive.

Evidence based medicine forms part of the global standards and quantification revolution and suffers from some of the same weaknesses. These weaknesses need to be recognised.

Problems with Evidence Based Medicine: Perception Bias

The first problem can be called simply perception bias.

Evidence based medicine is neither value nor perception free. The questions selected for test and evaluation, a process that can be very expensive, are influenced by prevailing views. Valuable alternatives may be excluded simply because they fall outside conventional wisdom. As evidence based medicine becomes the dominant mode, the effect may, as it has been in other areas, to actually narrow fields of investigation and action.

This links to a second problem, one that I have discussed before, the tendency for all professions to see answers within a frame or world view set by their profession.

A lawyer will give you a legal answer to a problem, a doctor a medical answer. If you have a back problem and see a surgeon, he/she is likely to think about surgical solutions. Go to a chiropractor with the same problem and he/she is likely to recommend spinal manipulation. So professional background helps determine the way the problem is defined, the solution applied.

This flows through into the application of evidence based approaches because the things tested are generally set within the frame of the tester. So evidence based medicine focuses on the efficacy of medical treatment and may leave non-medical alternatives aside.

Problems with Evidence Based Medicine: Causation

As part of my history honours year in my first degree I studied philosophy of history under Ted Tapp. Ted was a reflective man who required us to think about, to debate, the philosophical underpinnings of science and scientific method.

One core problem was the difference between correlation (a and b) as compared to causation (if a then b).

This problem applies in evidence based approaches. Just because a study shows an apparently strong relationship between a treatment and positive patient outcomes does not necessarily say anything about the causal relationship between the two. This has to be deduced and further tested.

Problems with Evidence Based Medicine: Problems of Epidemiological Studies

By its nature, evidence based medicine deals with large groups, populations.

As trials become larger and more complex, it becomes more difficult in statistical terms to establish significant relationships, to separate the effects of different variables. This creates another problem, the establishment of a clear relationship between the outcomes of trials at population level and subsequent application at individual level. As the Wikipedia article notes:

Critics of EBM say lack of evidence and lack of benefit are not the same, and that the more data are pooled and aggregated, the more difficult it is to compare the patients in the studies with the patient in front of the doctor — that is, EBM applies to populations, not necessarily to individuals.

This can create very real difficulties for individual clinicians, leading Tonelli to argue in The limits of evidence-based medicine that:the knowledge gained from clinical research does not directly answer the primary clinical question of what is best for the patient at hand.

Tonelli concludes that proponents of evidence-based medicine discount the value of clinical experience.

Problems with Evidence Based Medicine: Impact of the Observer

Another problem with evidence based medicine, one often seen in all evidence based approaches, is the way the observer affects the observed. This happens at several levels.

The first problem is that the simple act of participation in the trial may have some and not clearly seen impact on individual outcomes. In medicine, this is usually managed by use of a control group using a placebo. The efficacy of the treatment is then measured by the difference in outcomes between the control group and those receiving the treatment.

A second linked problem is the impact on patient behaviour of the trial itself. By their nature, clinical trials are closely managed. This means that patient compliance with the treatment routine is likely to be high.

This need not hold in subsequent clinical use since ordinary patients are more likely to fail to follow treatment processes by, for example, failing to take medication exactly as prescribed. This means that actual patient outcomes may not be as good as the trial results.

Problems with Evidence Based Medicine: Limitations in Application

A further problem is that the most rigorous gold standard approaches dictated by evidence based medicine can only be applied in narrowly defined circumstances, leaving a range of medical approaches that have to be tested by less rigorous means.

This should not matter so long as the limitations are recognised. In practice, it risks introducing two distinct distortions into the medicine and the health system. The first is the risk that investigation may be biased towards those things that can be measured through more rigorous techniques, reducing thought and investigation in areas less amenable to measurement. The second related risk is that treatment itself may become biased.

At clinician level, this links back to my earlier point about perception bias. Doctors trained in evidence based medicine may, consciously or unconsciously, come to focus in treatment terms on those things that can be measured, ruling out other less easily measured options.

This tendency may be reinforced by actions from those managing or funding the provision of health care services who may refuse to allow/pay for certain types of services notwithstanding the views of individual clinicians.

Conclusion

These problems do not detract from the potential value of evidence based medicine, but they do illustrate the need for care in application or the cure may be worse than the disease.