Myth 1: Efficiency means reducing costs
Reality: Efficiency means maximising value

Myth 2: Efficiency means cutting staff
Reality: Efficiency means getting the most out of your people

Myth 3: Efficiency means people working harder/longer
Reality: Efficiency means working smarter

As all good managers know, efficiency is about doing – and paying for – all the things that are necessary to deliver value to your customers; and not doing – or paying for – things that are not necessary.

In order to achieve efficiency therefore, it is absolutely essential to understand:

• what your customers value and
• where your current system of work is wasting money.

With more and more direct customer interface with your organisation’s systems, and increasingly computer literate customers, now is not the time to make ill-informed decisions about IT management. Cuts which eliminate waste contribute to business prosperity. Cuts which deliver a short term saving at a huge future cost will simply drive your business into the ground more quickly and more surely.

An objective, comprehensive investigation into where your current system of work wastes money, skills and time is the essential first step to improved efficiency. Only by expert, in-depth analysis of what is really going on in your organisation’s software supply chain can you work through answers to your organisation’s issues. It is undoubtedly the case that business IT has grown somewhat complacent in an economy which had money to burn on technology solutions, and it is essential in these straightened financial times for IT professionals to grasp the nettle and look objectively at how to obtain maximum value for the available budget.

The SMS Symptomatic Diagnostic of Business Effectiveness is an objective survey of your software intensive systems which shows you where waste of money, skills, or time is occurring in your processes and work practices.

Reducing costs vs maximising value

Everyone is under pressure to spend less and make the money they have go further. The global economy has spent years living on credit and the bill has now arrived. There is simply less money in the system.

IT systems management should be subject to the same discipline as all other aspects of the business. Practices based on a continual growth model are no longer viable. If there is a finite amount of money available to fund a project; a service; an activity; then the desired outcome MUST be delivered within that budget.

Efficiency is about making every penny of your budget work to maximum effect. If you don’t have an objective measure of where you are wasting money now, you cannot make the changes which will ensure you achieve the maximum benefit from current or future budgets.

The first step to better budget management is therefore to measure your current effectiveness and identify which steps in your processes add value and which do not.

Getting the most out of your people

95% of performance loss is due to the system of work itself. That means ‘employing good people’ can only ever influence performance by 5%. Staff under continual threat of losing their jobs, or having their pay cut, will disengage no matter how good their cv was when you engaged them. Efficiency and effectiveness will both suffer, and your best people are likely to vote with their feet.

Several studies have shown that while low pay is a disincentive to high performance, high pay does not of itself incentivise staff to engage in delivering the desired business outcome. Job satisfaction, a sense of worth, team spirit, the ability to apply expert skills and an open learning culture which offers the opportunity for workers to hone their skills and develop new ones are all far more important factors.

Good management practice focuses on enabling staff to use their skills and talents to deliver real value to the business. The first step to delivering better value from your people is to look at how effectively your organisation currently manages skills and talent, and where it can improve.

Working smarter: managing time

Time is a non-renewable resource. Time cannot be either expanded or contracted. Like financial budgets, time should be managed to deliver the best results not be squandered on non-value-add activities. ‘Making time’ for one thing means stealing it from something else – such as giving your highly skilled staff sufficient ‘downtime’ to think and to re-charge their batteries.

The first step to better time management is to take a long hard look at your current work systems to see where time is wasted. Are people required to spend time on activities that add no value? Are these activities essential, or are they an artefact of poor management practice?

What you measure is what you get

Don’t measure activities. Measure results – outputs, and outcomes. If the results aren’t what your organisation needs, ask why.
At least five times.

Grant Rule’s presentation to the 2007 Risk Management seminar considers the threats to achieving a successful outcome which arise when software development is outsourced, and some successful strategies for mitigating these risks.

Grant Rule’s presentation to the 2011 International Software Metrics and Estimating conference in London looks at managing software development costs and pricing using Output Based Contracts, and how these can be used effectively to manage agile delivery without comprising the benefits of an agile approach.

(This paper was presented to the ISME conference by Chris Woodward.)

Grant Rule’s quick and easy guide to accurate early estimating of software project size, costs, and viability based on clothing sizes.

Output Based Contracts_An Agile Approach to Software Contracts

Outsourcing and Trust

Many commentators have suggested that the agile, incremental delivery approach is incompatible with good corporate governance of ICT projects. Indeed, Alistair Maughan, an experienced corporate lawyer who has advised on large public and private ICT contracts including UK HM Revenue & Custom’s controversial 10-year £8.5bn deal with Capgemini, has recently argued < http://ow.ly/5Rr1F > that “Agile… won’t work in the real world” of government ICT projects. One basic argument used is that projects fail due to a “lack of trust between customer and supplier” and hence the “Agile credo of, “Let’s trust each other some more” is undermined from the start.
What do we mean by ‘trust’ in this context?

The Outsourced IT Experience

Corporate customers have learned not to trust outsourced suppliers. Their experience has been that software projects deliver late, over budget, and represent poor value. They are not looking at the reasons for this; they simply trust their own experience when it comes to negotiating new contracts. So new suppliers start at a disadvantage.
Dialogue and case history helps a supplier build a relationship with a potential customer, so that the client’s buying team can feel more confident they will not live to regret the new partnership. Many agile developers feel that the case they make for keeping in tune with the client’s needs and delivering to those needs is powerful enough on its own. But purchasers want to know, first and foremost, how much it will cost and what they will be getting for their money.
The business users value what the software does – aka the business outcome. In an integrated Lean value stream, the business users use the software to enhance the value delivered by their business to their customers. But the business users do not commission the software projects. The procurement and retained IT folk who commission projects want assured value for money – they don’t want their butts kicked by their senior management for overrunning their budgets. Their performance is measured by compliance to standard practices. Outcomes are a secondary consideration. For them, it is all about managing the cost.

Download article OutputBasedContracts_An AgileApproach to Software Contracts

Download full article: Using Models and Standards

Limitations of models

IT is at the heart of an organisation, enabling and supporting everything the organisation does from HR, to product development to customer service. In many areas of industry and public service, IT no longer simply supports other parts of the organisation to develop products and serve customers, IT is integral to the product and the way customers interact with the business.

The challenge for IT professionals is to find effective ways of realising the full potential of technology-intensive business systems. Considerable know-how and experience has been accumulated over IT’s 50-year business history, and much has been invested in devising quality models and standards. However, a great many myths also abound, frequently created or promoted by parties with a vested interest in a particular model. Quality standards show you where to improve – but not how or why.

An evidence-driven approach should be taken to the adoption of standards and frameworks, as with every other business decision:

• Understand the model-maker’s purpose, and use the guidance provided in appropriate ways. It is guidance; not a rulebook.
• Focus on the outcome not the certificate. Compliance, or the attainment of certificates and interim targets, all too often becomes confused with true business goals. This is dysfunctional; meaning it is behaviour which detracts from overall business performance.
• There should always be a sound business case for adopting an improvement programme, defining clear business benefits and measurable outcomes.
• Measure progress and business results – not compliance to the model. If it matters, measure it. And if it doesn’t, don’t. It is possible to be effective and compliant, but only if effectiveness is the focus. A focus on compliance will not deliver improved effectiveness – or the associated business benefits of improved effectiveness.
• Communication is key to successful and sustainable improvement. Good measurement practices and short feedback loops are vital.

There are many bear-traps into which numerous well-intentioned improvement initiatives have disappeared without trace. Integrated team-working, responsibility-based performance management, and many other behaviours which support value focus, continuous flow, and pull, are often counter-intuitive, especially to staff used to operating in a compliance culture. Because 75-80% of organisations are ‘average’, achieving typically poor levels of performance, few people ever experience ‘high performance’ and do not realise there are better ways of doing things than those they are used to. To achieve real changes in effectiveness, most organisations will need a specialist guide whose experience goes beyond knowledge of the models themselves.

click here to download the full article

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20101125 SMS BMIF Lean Management of Extended Supply Chains

Download pdf MarshallModel

The ITDA provides independent assurance of competence that can be used to demonstrate departmental capability. It has been developed with government backing to address the need for a single, cross-discipline accreditation.

The National Computing Council’s 43-year track record as an independent and impartial promotor of effective use of IT made it the ideal design authority for the scheme. Welcoming  SMS to the NCC’s ITDA team, the NCC’s Managing Director, Steve Fox, said: “We are delighted to welcome SMS as a partner for the IT Department business improvement and Accreditation service (ITDA). SMS’ extensive experience in performance measurement will be a great asset in taking the ITDA scheme forward.”

The ITDA is intended for use as a tool to identify departmental strengths and weaknesses as part of a continuous improvement programme. It is appropriate for internal IT departments or stand-alone IT service companies that either specialise in IT service delivery or buy-in services as clients for others in their organisations. It is scalable and suits all sizes of IT function and all sectors. SMS Managing Director Grant Rule says, “The ITDA is an excellent addition to SMS’s existing competence in CMMI and ISO standards. It is a unique, low-cost assessment which provides a department-wide benchmark of business performance.”

The ITDA measures :

1. Business Management. How well does the department manage its business resources and capacity?
2. Business Direction. How strong is the planning and implementation of the department’s business strategy?
3. Business or Service Generation. Does the department work well to promote its expertise and encourage the effective use of IT for its sponsors and customers?
4. Delivery and Operations. How well does the department carry out its responsibilities?
5. Customer Relationships. Does the department work well with its sponsors and customers? How do the department’s customers perceive the IT department?

Download the ITDA Brochure: ITDA_Brochure

To find out more about what an ITDA accreditation can do for your department, contact Philip Standing p.standing@smsexemplar.com or call the SMS office on 0843 289 5174.