Thursday, November 04, 2010

Scoping the decline in organisational performance

Sunday Essay - why who signs what is important, a post on my personal blog,  discussed two examples of changing approaches to management that I thought had contributed to declines in organisational effectiveness over recent decades. This drew a comment from an old friend and colleague, Winton Bates.   

Winton was a senior official with the Industry Assistance Commission/Productivity Commission. There was, he suggested, some improvement in public service management in Australia during the 1980s and early 1990s when there was effective delegation of responsibility to a more appropriate level. Unfortunately, this had not been maintained.

For background purposes, I have repeated the post and the comment below in full. In this post I want to make a few general points and then ask for help.

One of the points about management theories and concepts is that their validity or otherwise finally depends on their practical application. Anybody who has worked for an organisation, or started a new business for that matter, knows this. It is the nuts and bolts, the systems and practices, that finally determine effectiveness.

My continuing discussion about what I perceive to be a decline in organisational effectiveness in the private as well as public sectors rests rests on this point.

So far as the public service is concerned, I think that Winton is right in suggesting that there was some improvement in public service management in Australia during the 1980s, although I would put both the start and end dates earlier than  he does. So we had improvement, and then decline.

I am not alone in talking about this perceived decline. Just at present, a considerable number of my older colleagues are are following similar lines, although the reasons given vary. One could argue that we are just getting old, but I think that it's more than that. There is a feeling of general unease, nor is this limited to the public sector, although it seems to be most pronounced there.

This brings me to the help I am seeking.

I would be interested in comments from fellow managers. Do they also perceive a decline? If so, when and why did they first form this view? Here I am especially interested in specifics, actual dated cases or examples, that might allow us to both test the argument and plot the process.

My original post follows:

"As a manager and adviser over a now considerable period, I have worked through a number of different sometimes overlapping management fashions. I think of them in my own mind as authoritarian, delegated, entrepreneurial, corporatised and now command and control.

I mention this because of a conversation last week over lunch during which those present returned to a common theme, a perceived decline in both the efficiency and effectiveness of modern organisations.

Organisation and management always takes place in a social context set by the society or societies within which the organisation works. That context plays an important role in the decline as we see it. However, put that aside. In this short essay, I want to look at just two features internal to organisations themselves.

I asked one of my colleagues, a former senior public servant, at what date he stopped being responsible for pieces of paper going to the Minister. He blinked, and said he always remained responsible. I rephrased the question: at what date when you were a branch head were you first required to get your Division Head's signature on it before you could send a piece of paper to the Minister? He then took the force of the question, and thought that it was around 1992.

A year or so back, I first had cause to do some work inside the NSW Public Service system. I found a multiple signature system on briefing notes, author, manager, branch head, division head, even CEO. 

So what do we have? In the period that I was a Commonwealth Public Service branch head or acting division head (1980-1987), I made the decision as to who signed the piece of paper to the Minister. My ability to sign myself was critical to getting things done. By around 1992, my colleague at the same level had lost that ability. By 2008 in NSW you had multiple signatures.

A small thing? Maybe, but let me ask you two questions.

First, on this type of paper, who has final responsibility? I think that the answer has to be the highest signature level appearing. As organisations have become more centralised, more command and control, final responsibility for many decisions has moved up the line. The practical effect is a reduction in flexibility, in the capacity of the organisation to respond quickly to the myriad of changes taking place in the world around.

Secondly, on this type of paper who now has ownership? Ownership is important because it is directly related to another question: who is going to make things happen? No sense of ownership, no drive. The problem with multiple signature systems is that no one in fact may take ownership. At one end of the chain, the nominal originating staff member may feel no ownership because he/she is just a drafter whose words and ideas may have been changed many times. At the other end of the chain, the final signatory is likely to be just too busy to take real ownership.

The second related feature that I want to look at is formal systems of delegation. Delegation systems are very important because they determine who has authority for what. They also provide part of the basis for financial control.

One of the things that I did in the two years I was CEO of the Royal Australian College of Ophthalmologists was to introduce new budget systems along with financial delegations that gave the CEO power to approve things within budget, subject to monthly management reporting. This replaced the previous system where individual expenditure items no matter how small required Finance Committee approval. The net result was a considerable improvement in College efficiency.

I make this point because I am in fact a strong supporter of properly structured systems of delegation. They can really aid efficiency as well as accountability. 

One of the things I have noticed over recent years, and this parallels the process I was talking about in regard to who signs what, is an apparent rise in the detail and complexity of formal delegation systems. This gives rise to several problems.

One is simply the time and complexity added to decision and reporting processes. A second is a growing disconnect in some cases between formal statements as to who can approve what and the realities of authority and responsibility in centralised organisations. No matter what the formal delegations say,  managers will not approve something where they feel that decisions might conflict with the realities of decision making power within the organisation. They will try to shift it upstairs.

More difficult still are cases are where managers are expected or directed to approve something in their power when the actual and specific decision has been made above them. Most sensible managers will simply protect their backs by documenting the decision/direction, "I approve this because", but it remains an issue and a risk.

One of the practical realities of management is that concepts and theories are always tempered by what actually happens on the ground. My purpose in this essay is to document two practical examples that show why modern organisations may, as I and my colleagues argue, have become less effective."

Winton's comment was:

An excellent post, Jim.

The only point I would like to make is that I think there was some improvement in public service management in Australia during the 1980s and early 1990s. For a period I think we had effective delegation of responsibility to a more appropriate level.

It is unfortunate if that hasn't been maintained.

Perhaps it is in the nature of public sector activities that responsibility tends to drift upwards. The success of the program manager is judged on the basis of vague criteria, including protecting the Minister from criticism. It is a lot easier to hold a manager responsible for decisions when she is responsible for a profit centre within the firm.

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