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Very good project managers have been trashed over the misuse of best practice. The example I have in mind is a client financial firm (Firm X) that wanted to buy another firm in order to grow and lower the probability of being bought themselves. The chairman was able to win the battle but lost the war. It happened by his leveraging the firm’s reputation and applying spin to “best practice.”
Strategic Positioning
A little background will help. This happened when consolidation was occurring in the financial world. Firm X had a very positive, understated reputation on Wall Street. They usually exceeded their performance predictions. Consequently, the chairman’s word had a great deal of cache.
In order to gain leverage in buying the other firm the value of Firm X’s stock needed to increase. Here is where spin comes into play. The chairman cashed in on Firm X’s reputation. Wall Street analysts were told that plans were underway to improve operational efficiencies in credit card processing – a large area of operations for Firm X. Also, there would be economy of scale by applying the improvements to the merged entity.
The chairman simply made empty promises. No one down the food chain was consulted (the critical nature of which we will look at later). The organization was simply told, “Make it so if you want to survive.”
Win the Battle
As predicted, the value of their stock increased. The other firm couldn’t compete with this and was purchased by Firm X. All seemed well and good.
A Blood Bath
Everything was fine until it was time to publish the results of the methods of improvements – those best practices that were to be put into place. Not only were there no improvements in operations, costs actually soared tens of millions of dollars.
Inside Firm X it was a combat zone. In IT they went through project managers like little kids eating M&Ms. As the reality of the actual numbers began to surface desperation set in. Bonuses were offered to anyone who would sponsor a project that would give the desired results. Imagine a Greek trireme going into battle and the captain promises a bonus to the piper (the guy who beats out the rowing rhythm) if the ship could just go faster.
Lose the War
The chairman got what he wanted – the merger. He also got something else – the boot. When the numbers were published Wall Street told the chairman in the future he would have a hard time borrowing even a dollar. The board had to react and did so by removing him from office except for overseeing the credit card operations debacle. His title became, “Chairman of Special Projects.” As in any other organization, one might as well have leprosy as have “Special Projects” as one’s title. Three months later, the chairman resigned. The top two tiers of IT were replaced with people from the firm that was bought. They were conservative in practice and a more stable organization.
Chaos and Best Practice
Most mergers fail. One possible reason being spin, i.e., propagating the belief that if one knows the rules better than anyone else then a highly reliable model can be generated that will predict the outcome. The blindness associated with this approach and how it can backfire was addressed earlier in the Black Swan blog.
It is important to remember chaotic systems are rule-based. The difficulty lies in the fact they are unpredictable and can turn on you in an instant. Knowing all the rules does not guarantee the desired outcome will be achieved. The chairman in this case thought he could dictate top-down what the results would be. The reality is solutions emerge from the bottom-up.
Wanting to buy a competitor or merge for some perceived gain is fine. The trick, though, is to be humble, realize the realities of chaotic systems, and strive to work together to dampen the distractions and amplify the opportunities through a bottoms-up approach while leading the way towards the goal.
Through his hubris the chairman blinded people to the reality of the situation by spinning best practice in a chaotic situation. “Doomed” is too small a word.
To my knowledge, none of the sacrificed PMs were rehabilitated or reinstated to there former positions.
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