Tuesday, March 31, 2009

The tragedy of modern management approaches

Over the last few years I have tried to argue consistently and persistently that what are now classified as modern management and associated performance management systems no longer work.

In arguing, I have used case after case, many drawn from my own experience if somewhat disguised. I have also tried to show how the current simplistic almost mechanistic approach to management in general, public policy in particular, cannot work at a principal level.

Just at present we are dealing with the after effects of a huge and systemic collapse in the global financial system directly associated with the way that the performance of very clever people was measured and rewarded. We note this, but then go on to do more of the same at an ordinary operational level apparently far removed from the financial crisis.

Worse, in looking at the responses to the crisis, at ways of preventing it happening again, we actually apply the answers (a rush to regulation) that have helped create the crisis the first place. We do not properly ask why it happened, nor do we address the fact that, at least as I see it, the crisis was centrally due to management failures.

In this post, I want to pull together a few examples of what is wrong. In each case, I will provide a statement of the problem, and then illustrate by an example.

I have written about the increasing rigidity of our systems, about the way in which manager's and professional's freedom to respond to changing needs had been reduced.

To illustrate the point, I took the example of a "modern" public organisation. I pointed to the way in which cascading performance agreements and associated reporting requirements increasingly locked managers into rigid responses. I pointed to the impact of centrally imposed priorities further reduced freedom and flexibility. I suggested that this problem was made worse by increasingly complex hierarchical decision processes.

On 29 March,Indigo Jo blogs reported on a tragic UK case in Target culture and the low rape conviction rate.

The facts appear simple enough. Sexual assaults occurred in 2001 and 2002. The perpetrator was not caught, going on to commit more crimes.

Upon later official inquiry, however, it appears that the offender could easily have been identified and prosecuted. It seems that it did not happen because the official priority at the time was on car crimes. Resources were simply not available.

There are always priorities. However, in a well managed system, an official or manager faced with a problem is expected to seek help and additional support. Once priority setting becomes so rigid as to preclude this, systems fail. This appears to have happened in this case.

We live in a measurement world, one of targets and key performance indicators. However, these indicators do not of themselves necessarily say anything about real performance.

The NSW Government announced a State Plan overloaded with performance indicators. When I analysed this against New England's needs, this is the area of NSW I know best, I concluded that even if every performance indicator was achieved, the outcomes would not address New England's problems. 

In somewhat similar vein, when I looked at Mr Rudd's Bridging the Gap proposals to intended to close the gap between Indigenous and non-Indigenous Australians, my gut feeling was that they were statistically unachievable because they were based on national averages.   

Even if this were not true, the approach will still fail for reasons I have also outlined: they fail to take into account the variety in Indigenous conditions.

A key problem with rigid performance indicators is that they force people to comply with them regardless of on-ground reality. In worst cases, people lie.

At Shellharbour Hospital in NSW:       

On April 28, 2006, Shellharbour Hospital boss, Michael Brodnik, distributed an email. A decision had been made, he wrote, to set up a new unit within the emergency department.

"The unit will be … four beds, conceptually down the right hand wall of ED but using the concept of 'virtual beds'," he told colleagues. Patients who arrived at emergency and needed admission would be assigned a virtual bed if no official in-patient bed was available, remaining physically in emergency. Brodnik said he had no control over the change, reassuring staff: "It really is a paper exercise."

The rationale was to get patients off the emergency department's books within eight hours of arrival - a watershed imposed by government as a so-called "key performance indicator" or KPI, amid political pressure over backed-up hospitals and ambulances unable to offload patients.

It appears from the story that Dr Simon Leslie who revealed the case to the Garling Inquiry has been punished for his temerity.

In a similar case down in Victoria, it appears that the Royal Women's Hospital has been falsifying waiting lists for a number of years in order to meet Government imposed KPIs.

When managers and professionals feel the need to falsify data, you know that there is a problem and at several levels. It's not just the manager, its also those who place pressure on him or her.

We create measure after measure after measure after measure.

Leave aside the compliance and reporting nightmare, if we abolished this in schools we could perhaps add 3,00 teachers for the same money, its the climate.

We are all to blame for this.

In playing to our concern over child sex abuse, the NSW Government introduced mandatory reporting requirements whose load brought the entire NSW child welfare system to the point of collapse.

The victims were children at real risk. Their fate led to an inquiry that in some ways simply confirmed what most people knew. 

Will things change? I don't think so, at least for the present. I think that it is going to take more failures, more tragedies, before we recognise that our own management and political approaches lie at the heart of the problem. 


rummuser said...

Jim, as you probably know,I retired from a life of so called business management. I was glad to. My by line "wiser by hindsight" sums up all my experience in business management.

I have seen all kinds of management at close levels, British, American, European and Indian besides a wee bit of Japanese. Bar the last, the rest are inevitably management by crisis. True Management with foresight and planned progression to what is foreseen is rare, very rare. The only organization that truly does that is the Shell group of companies. A close second could be Unilever but I have not come across any others, large, small, public or private. I am too cynical about Management as a profession I think.

Jim Belshaw said...

Hi Ramana

I do understand your feelings on this one. I have felt that, too.

Perormance measurement and other standards based approaches have been superimposed without changing management by crisis. That actually creates another tension.

Winton Bates said...

Very interesting, Jim.

I was reading something the other day which made the point that the Soviet Union was actually very good at providing incentives. The problem was that it was not very good at providing the right incentives. I remember now - it was Tyler Cowen's book, "Discover Your Inner Economist" pp 45-6. Tyler's point was that you need a system that encourages trial and error experimentation (i.e. capitalism).
So, the obvious solution to the problems associated with the perverse incentives provided recently in financial sectors is more government regulation. Hmmm.

Jim Belshaw said...

Exactly, Winton. In Victoria Health, they combined measurement with incentives. It seems to me that people had to cheat to do their job!

Legal Eagle said...

Couldn't agree more about the problems of modern management - people try to achieve the "goals" set, without caring whether or not they actually provide the service or do what they are supposed to do. I call it attack of the bean-counters.

Jim Belshaw said...

I guess that we are all beancounters now, LE. The position I am occupying on a temporary basis just at present has the title planning and reporting. There is a lot of reporting, far less planning!