Welcome back to another round of The Update. This week I thought I would regale everyone with some tales from my time inside the Big Machine, or rather a few different parts of the Big Machine.
Not swash-buckling stories of corporate conquest, or complex, machiavellian corporate politics.
These are depressing examples of how little value generating work some upper execs actually do, and how much time is wasted in modern corporate life.
There is a lot of debate about productivity going on at the moment. Our illustrious new Prime Minister's focus on innovation is nothing more than an attempt to make people, companies, industries and in fact the whole country more productive.
The theory being that increased innovation leads to increased productivity, which is the key to future economic growth.
And productivity, once again, is about increasing output given the same amount of inputs. And the easiest way to measure input and output is in dollars spent or dollars earned.
So, how would everyone feel if I shed some light on how some of those dollars of inputs were spent? I would suggest equal parts glee, embarrassment and anger.
I want to start with a quote from a Head Honcho at an Australian bank, who I once heard say; "Regional Manager is the last role in this bank where you actually have to do any work."
Now, I know those guys upstairs have to go to a lot of meetings, run teleconferences, listen to reports, and sometimes make the big calls, but surely they must actually DO something?
But apparently not.
To be fair, I suspect what he meant was Regional Manager was the last role where you were directly involved with customers, and performing tasks that had a direct correlation with increasing revenue or reducing costs.
Still, not flash, is it?
That particular bloke was only in WA for a short while before being whisked away back to the East Coast where he was promoted to Senior Head Honcho, or Super Executive Director Manager of National Something.
He was obviously rewarded with this promotion for his productivity while in WA; that and the fact he was regarded as a "smart guy" (something I used to hear a lot about upper execs).
Frankly, I wish I was that well-regarded...
And that made me think about dollars of input for dollars of output. If a Head Honcho is being paid $250,000 pa, and there are, say, 5 of them in Australia at that one institution, that's $1.25m in inputs for a self declared $0 in output.
Made me reflect that maybe that $1.25m could have been spent in a more productive fashion.
Or am I wrong?
Is it possible that these large institutions, regardless of industry, could do without some of their execs? After all, it is meant to be a free and competitive market. One based on a Darwinian system of survival of the fittest.
When executive pay is challenged the response from upper execs is put in economic terms: leadership talent is a scarce resource, and the only way to ensure your firm has the best talent is to pay the market rate.
But the counter argument to that should be; aren't we supposed to be trying to extract the greatest benefit from those execs in return for the compensation? And I don't mean hours worked.
I mean improved staff and organisational performance. Better morale. Outstanding customer satisfaction.
I only suggest this as there doesn't seem to be a strong link between these staff, their performance and the performance of the company, or the satisfaction of their customers.
I'll share another anecdote that might show nothing terrible happens to these behemoths if they do get rid of a large whack of their "leaders".
My old man worked for CommBank for almost 40 years, before being made redundant around the time CommBank floated.
A large proportion of their middle and senior execs were made redundant at the same time, and were told they could re-apply for their old positions but would only be considered if they had tertiary qualifications. An easy knock out for a large number who had started their careers straight out of high school.
CommBank didn't fail, or struggle without strong leadership as a result of this cull. On the contrary, it flourished and has become the most profitable Big Bank in Australia.
Well, how about looking at another way of measuring input and output.
I worked for a couple of Major Financial Institutions in a lots of sales roles, and one of the first things I was told in most of these jobs was "We want you to be out on the road 80% of the time, meeting people."
Reason being, that's how you find new business and "grow the balance sheet."
Now, unless there was 400% of time available that just wasn't going to happen. In not too much time I had so much non-work to do that I was basically tied to my desk for 50 hours a week.
Most of the time, despite explicit instructions that I should spend 80% of my time on the road, there was an implied expectation I would be at the office by 8am and still there at 6pm.
In addition to the paradox represented by these instructions and expectations I had to drive 45 minutes each way to get to the office, and, as stated above, I had to go to the office every day.
This is where we start to look at time from an economic perspective: a scarce resource from which we seek to extract the greatest value.
So, I spent 7.5 hours driving every week, which over a year equated to 390 hours of driving.
That's about 16 full 24 hour days spent driving each year. If I divided those days into work days of 10 hours each, that's 39 work days each year spent driving.
I only worked 20 days a month (or at least I was supposed to, but it tended to be more), so that equated to almost 2 full months of work days spent driving.
And it's not like you can be productive when driving as you can't talk on the phone unless you have bluetooth or hands free...and talking on the phone is the only work related activity you can conceivably do while driving.
And you can't say to your employer, "Look, I spend almost 2 month each year driving to work, so any chance I can get some days in lieu or extra wages to compensate me?"
No, you just leave for work earlier and get home later than otherwise. OK, no problems.
Then, I also spent, by my own estimation, another 3 hours each week in UTTERLY POINTLESS meetings. I mean, really, deeply futile time spent listening to my colleagues talk about their own performance relative to mine and everyone else's.
Or giving someone a verbal summary of what I had been doing all week and was going to do for the rest of the week.
Or listening to someone else from somewhere else within the Machine talk about what they were doing, and how it was critical to me, even when it wasn't.
That's another 156 hours each year spent unproductively. That was another 6 full 24 hour days, or a further 15.6 10 hour work days spent doing NOTHING.
And apparently Australia has a productivity problem. No way...
So, a total of 55 work days each year spent doing nothing?? No wonder I had to work late nights and weekends. Just to make up for 11 weeks of actual work time spent in transit or sitting, staring into space.
Now, I haven't put that into dollar terms yet so here goes.
My hourly rate was about $60, so 550 x 60 = $33,000 each year in inputs that were worthless. Utterly value free.
I don't know about the reader, but that pisses me off. There were lots of managers at my level within that one bank; maybe 30 in WA alone, and if that level of wastage applied to everyone, then that means there was close to $1m in wasted time each year just within that one job category, at one company, in one state in Australia.
Then add to that the wages of all the execs above regional manager who don't actually work, and you have a LOT of wasted dollars of input.
And banks are some of the most profitable organisations in Australia.
I have to stop here and say "I am not bank bashing." Seriously. I still work in the industry and make a living from banks and their loans. I am a student of the industry and find it fascinating AND a ubiquitous part of today's modern economy.
But I hate the following things:
- the paternalistic attitude professional services executives have towards their staff. The need for constant supervision and direct, visual scrutiny in an age where we have the technology to both work, and have our productivity measured, remotely.
- Executives, who are often nothing more than managers, being revered as geniuses and titans for simply being lucky enough to be in the right place at the right time by being in charge when their industry and area goes through an upswing.
And I also need to point out I am aware that offices are a critical part of working life. Have a look at Ed Glaeser's "Triumph of the City" which talks about the economics of cities and why they are the most enduring form of mass human collaboration.
One of the points Glaeser makes is humans are social animals, and we produce our most extraordinary insights and leaps forward when brought together at a time and place where there is a critical mass of new technology and intelligent people with new ideas.
So, if the office I was working in was a place like that, I'd be pretty keen to spend serious time there...but it wasn't. In fact, I can only recall ONE job I had in the finance sector where the manager created an environment like that.
And I flourished there...
I met some great customers, and helped them and solved their problems. I made the bank a lot of money and got paid and looked after very well.
But unfortunately most Big Corporate offices are places of fear, uncertainty and ruthless competition. Places that are Churches to GE's ex-CEO Jack Welch and his method of relative performance evaluation, where the bottom 10% of staff are either fired, or using the common euphemism, "performance managed" until they quit.
Not really a very productive way of managing a bunch of humans.
There's another fella whose work I like; Nassim Taleb, author of "Black Swan." Another of his books talks about practices or technologies that have unknown "negative convexities."
Basically refers to stuff we treat as a common work practices because, at the start and for a while afterwards it seemed to be efficient and have a positive impact, but in the medium to long term turned out to have REALLY bad side-effects.
Like smoking, or using asbestos to build houses or burning coal to create electricity.
And that's this Big Corporate culture that's so embedded these days with which I have a big problem.
Create a highly competitive environment tinged with danger and the threat of dire consequences. Measure everyone's performance and conduct regular "performance reviews". Publicize the results using league ladders or leader boards.
Reward high performers with money, more work and higher targets.
Ultimately reward high performers with promotion to the ranks of the executive class where there is no longer any need to practice or use any technical skills, hence no further need to actually generate revenue or deal with customers.
These non-working executives then continue to enforce the status quo, by talking about the leader boards, the need for greater productivity and how new, innovative work practices will allow a greater work life balance.
So, what AM I suggesting as an alternative?
Well, something that's already happening really.
This age is being referred to as The Age of the Entrepreneur, as Big Corporate realises it needs to get smaller and move back to just performing the core function that generates its revenue.
As this happens, employees are shed and replaced by micro contractors who perform the same function as the ex-employees, but on a fee for service basis.
In many industries these micro contractors retain the direct customer relationship, which works better for all parties.
Big Corporate hopefully becomes smaller, and flatter, and less de-humanising, resulting in an improvement in culture.
That's a very brief summary of my view, but hopefully provides food for thought...