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Technology + Management + Innovation
30
Jul
2014
Management

Traditional Project Management is 100 Years Old. It’s Time to Upgrade.

by Jake Bennett

Project management as it’s practiced today is a throwback from the industrial revolution and it hinders innovation in today’s fast-paced, digitally-disruptive world. Agile project management is it’s logical successor, but managers need to embrace it as more than just a software methodology.

Gnatt Chart Screen


Don’t worry—we’ve all done it. If fact, most of us are still are doing it. Actually, most of us are doing it and still think it’s okay to do it.

 Part 3 in a 3 Part Series

  1. Is Your Company Operating from an Industrial-Era Playbook?
  2. Why Performance-Based Compensation Doesn’t Work
  3. Traditional Project Management Needs and Upgrade

No, I’m not talking about sneaking in a little TMZ while we’re at work. I’m talking about using Microsoft Project or Excel to make a project plan—something far worse for productivity than the worker time lost by following the latest celebrity break-ups.

Okay, I admit it: I use Microsoft Project Gantt charts at POP for planning small internal projects. And this isn’t really a problem because the time horizon for these projects is short, the complexity manageable, the impact of delays relatively minor, and the amount of uncertainty fairly limited. In short, it’s a simple tool for a simple problem.

But what happens when the project gets more complicated? When the environment in which the product operates is constantly changing? When deliverables are complex and require significant collaboration across teams and partners? When money is on the line and people’s careers hang in the balance? That’s when the Gantt chart starts to break down.

Under these stressful circumstances (which are the norm for many digital initiatives), it’s natural for our desire to exert control to increase, and with it, our desire to seek familiar artifacts that give us a feeling of control. When the going gets tough, the tough make project plans. Unfortunately, feeling in control and being in control aren’t the same thing. No doubt the ancient tribes who performed elaborate rituals to control the weather felt in-control, even though they weren’t.

more…

5
Jul
2014
Management

Welcome to the 21st Century: Why Performance-Based Compensation Doesn’t Work Today

by Jake Bennett

The science is crystal clear: performance-based compensation hasn’t worked for decades. So why is business still addicted to it?

factories


 

Almost all companies today have a compensation program for at least some employees based on performance. From CEOs who are awarded bonuses for hitting a target share price to bike messengers who are paid by the delivery, performance-based compensation is widespread today.

Part 2 in a 3 Part Series

  1. Is Your Company Operating from an Industrial-Era Playbook?
  2. Why Performance-Based Compensation Doesn’t Work
  3. Traditional Project Management Needs and Upgrade

Clearly, given the ubiquity of performance-based compensation, one would assume that a great of deal of research has been conducted to assess the efficacy of this model. Why would all of these smart business leaders follow practices that don’t work? That would be crazy. And if you made that assumption you would at least be partially correct: decades of research have been conducted to determine if performance-based compensation works. The problem is that, according to author Alfie Kohn writing for the Harvard Business Review, the research all confirms the opposite conclusion:

As for productivity, at least two dozen studies over the last three decades have conclusively shown that people who expect to receive a reward for completing a task or for doing that task successfully simply do not perform as well as those who expect no reward at all.

Huh? Say what? That doesn’t make intuitive sense. And what about the father of scientific management, Fredrick Taylor? Was he wrong about the motivation of piece rates? Actually, as it turns out, he wasn’t. Contemporary research supports his conclusion that performance-based compensation for piecemeal work increases productivity. The problem is that the tasks performed by modern day professionals are no longer piecemeal. We’re not in the 1900s anymore. Piece rates worked for industrial era factories when employees worked on simple products as they moved down the production line. And they also work for workers like bike messengers, who fulfill simple tasks. But most businesses today aren’t dealing with simple tasks. They are responsible for managing incredibly complex systems staffed with a highly educated workforce. So why would we think the same piece rate principle applies?

In fact, performance-based compensation for complex tasks actually reduces productivity. According Dr. Bernd Irlenbusch from the London School of Economics, in a 2009 study of 51 corporate pay-for-performance plans: “We find that financial incentives…can result in a negative impact on overall performance.”

Come again? But that makes no sense. Why would people perform worse when they are paid for their performance?

more…

13
Jun
2014
Management

Is Your Company Unwittingly Operating from an Industrial-Era Playbook?

by Jake Bennett

Many core business practices commonplace today are rooted in techniques developed during the turn of the twentieth century and are hindering companies from staying competitive in a business environment characterized by extreme uncertainty.


A natural result of human evolution is the desire for man to establish control over the world around him. Ever since the earliest days of civilization, long before science, man conducted rituals to foretell the future and performed ceremonies to control the environment. Fortunately for us, we learned a thing or two along the way, developed science, and switched from rain dances to irrigation systems.

Part 1 in a 3 Part Series

  1. Is Your Company Operating from an Industrial-Era Playbook?
  2. Why Performance-Based Compensation Doesn’t Work
  3. Traditional Project Management Needs and Upgrade

In fact, we were so successful using science to control our world, it was only a matter of time before we applied scientific principles to business. In the early 1900s, management pioneers like Fredrick Taylor, Henri Fayol and Henry Gantt led the charge. Taylor, acknowledged as the father of scientific management, realized that factory workers became more productive when their compensation was tied to their output, and thus developed the concept of piece rates. Fayol, considered the father of modern business administration and project management, defined the five essential functions of project management:

  1. To forecast and plan
  2. To organize
  3. To command or direct
  4. To coordinate

Henry Gantt developed the famous Gantt chart, allowing plant supervisors to monitor factory production to determine if output was on schedule.

Oh, those were good days for management. The items being produced were relatively simple (as Henry Ford famously said, “Any customer can have a car painted any color that he wants so long as it is black”). The processes required to build products were fairly straightforward. And even though the workforce was not well educated, they were easy enough to control with new management techniques in place. But most importantly of all, technology advanced at a leisurely pace, and things didn’t change too quickly.

Sadly, those simple times are over. Today businesses are faced with a much trickier landscape:

Back Then Today
Products were simple and mechanically oriented. Products are highly complex and software oriented.
Work was piecemeal. Components could be developed independently. Work must be done in teams. Components are highly interconnected.
The workforce was largely uneducated. The workforce is highly educated.
Data collection was costly and limited Data collection is cheap and far reaching
Technical advancement happened slowly. The pace of technological change is insane. Entire business models become obsolete in a matter of years.

Despite these major and obvious differences, companies today are still employing many key practices created during the industrial era. These practices are based on long-held assumptions rooted in 1900s thinking:

  • Management knows what’s best for the company, while workers are merely self-interested actors
  • The activities of workers must be tightly controlled
  • The environment in which production occurs is relatively stable

We’ll explore two critical businesses practices–employee compensation and project management–to uncover our hidden industrial-era habits.

25
May
2014
Management

Never Ending Digital Disruption is the New Normal

by Jake Bennett

Technological change is increasing at a such crazy pace, the disrupters themselves are facing existential threats from new upstarts. How can established companies hope to compete in this new world of constant change?


The rate at which technology is advancing is increasing at an exponential rate.

At first glance, this is not new news. We all know that technology is changing quickly. The Internet came along and transformed the business landscape. Old guard companies like Blockbuster (est. 1985), Tower Records (est. 1960), Newsweek (est. 1933), Barnes & Noble (est. 1873) and Best Buy (est. 1966) got hammered. Then came the iPhone. The era of the smart phone began. Now, a new round of disruption is underway, threatening another wave a companies. But who is in the cross hairs now? How about these “old school” companies:

  • Zynga (est. 2007) – The premier social gaming company was a Wall Street darling as recently as 2012. Now it is facing steep revenue declines and a plummeting stock price as users shift to mobile gaming.
  • Facebook (est. 2004) – Stumbling after its rocky IPO, Facebook made some huge defensive purchases (Instagram for $1 Billion, Occulus VR for $2 Billion, WhatsApp for $19 Billion) to combat the tide of users migrating from desktop to mobile. The strategy seems to be working for now. Investors delighted in seeing 62% of Facebook revenue coming from mobile in the Q2 2014 earnings report.
  • Apple iTunes (est. 2001) – The arch disrupter who pioneered downloadable music, is itself undergoing an existential disruption as people move from purchasing music to subscribing to it. Apple’s purchase of Beat’s Electronics for $3 Billion—which included the Beats Music subscription business—was an expensive hedge against the changing trend.

What’s particularly disconcerting about this recent wave of technological change, however, is the lifespan of the businesses being disrupted. The Internet decimated companies whose lifespans were measured in centuries and half-centuries. This latest round of change, in contrast, is disrupting businesses whose lifespans are measured in decades and half-decades. The upstarts themselves are facing existential threats only a few years after inception. Scary.

And if the innovators are born with an expiration date, how can established businesses ever hope to compete in this crazy new death match? If you are a retailer, and have seen the carnage caused by digital disruption, you are probably asking yourself: How can I remain competitive against the innovation engines of companies like Amazon, Gilt, Zappos,Square Space, Wanelo and Polyvore? Does it require rolling the dice on billion dollar acquisitions?

I don’t think it does. But it does requires a shift in mindset. For starters, companies need to stop using a playbook developed at the turn of the Twentieth Century.