performance measures

Complex But Not-So-Adaptive

How the Usual Engagement Model Doesn’t Foster Quick Self-Adjustment in Corporate IT

Your organization is a complex, open system[1]. Open, because it needs to interact with its environment to exist. Complex because it is made of a great number of interacting components, is hard to understand, is difficult to change and often yields unpredictable results. 

The General Systems Theory and its adaptive cousin Cybernetics have been around since the mid-20th century and still provide a useful, high-level understanding of what systems are and how they work. At the most distilled level possible, adaptive systems —such as your organization— can be viewed with as little as a box and a few arrows, as shown in figure 1.  

Your organization is a complex, open system[1].  Open, because it needs to interact with its environment to exist, and complex because it is made of a great number of interacting components that are hard to understand and change with unpredictable results.  The General Systems Theory and its adaptive cousin Cybernetics have been around since the mid-20th century and still provide a useful, high-level understanding of what systems are and how they work.

At the most distilled level possible, adaptive systems —such as your organization— can be viewed with as little as a box and a few arrows, as shown in figure 1.

Figure 1

The grey box is your organization, a complex system.  What’s inside the grey box is of little importance at this point; it simply represents daily interactions happening within your business.  Your organization is a system, with its inputs, its outputs. Inputs can be anything that gets in, from the obvious resources (e.g. financial, natural, human, etc.) required to produce the output, but also, all other environmental inputs that your organization requires to take into account (e.g. legal, social, cultural, and more).  Outputs are what your organization aims at providing to justify its existence.  These outputs are targeted at customers or whomever benefits from what you are producing.    

This highly-simplified view of your organization is to allow me to draw your attention to something very important: your organization is an adaptive system.  It adjusts itself, as most adaptive systems do, or it would have died long ago.   Adapting means changing the internals of the system —the grey box— so that it continues to receive its inputs and to produce its outputs.  In order to survive through adaptation, your organization benefits from a feedback loop, which provides useful data about how well the system is doing. 

For most organizations, this response takes the form of ‘customer feedback’.  Feedback is sought through mechanisms such as surveys, focus groups and other tools to get better information on how happy the customer is about what your organization is doing.  But the most important feedback information type of all —the most effective one at triggering actual adaptation of your organization— is sales. 

Sales can be called market segment penetration, gross revenue, property taxes, or traveler miles, but let’s use that word to represent revenues coming back from your organization’s outputs. Positive feedback of this nature will signal your system to continue to operate in the same fashion.  Negative results in sales will trigger rapid change.  An important detail about sales: not only does it provide a very effective feedback, it also has a short to mid-term impact on one crucial input to your system —namely, financial resources.  If sales plummet, so do revenues, and revenues from sales represent, for most organizations, the sole source of financial inputs. Sales feedback is directly linked to the survival of the system, to the viability of your organization. This is one of the reasons why this type of feedback is so effective at affecting change.

The feedback loop allows your business to adapt.  One of the most effective types of response is revenue (or any other variation), since it has a direct impact on the existence and survival of your organization.

What about corporate IT in this simple but effective scheme? One could rightfully point out that the IT function of the organization is simply one more component within the complex system.  That’s true, but it would not serve the demonstration well.  Furthermore, IT’s business is not your business —unless of course your business is IT, in which case this whole demonstration does not apply to you.  Corporate IT’s business is to provide to your organization goods and services that compose the technological solutions that support the value streams and capabilities that allow your organization to still be in business.  Corporate IT has always been and still is a support function to the greater whole, regardless of the levels of collaboration and teamwork between IT and non-IT staff in your organization.  This statement might look hard or even outdated in light of the current trends of meshing business and IT and declaring out-loud that it sums up only ‘one team’.  This has great value at the shop-floor level to create processes and instill a culture that promotes efficiency. Whether you’re in the road construction industry and make very little use of information technologies, or you’re in the banking industry and your operations are totally meshed with IT, I nevertheless insist: it does not change IT’s position as a support function to the greater whole.  Corporate IT teams are composed of individuals with clearly different education, training, work culture and career paths than the rest of your organization.  They are not in the business of off-shore drilling, commodity investment, communications, banking, or social caretaking.

Now let’s add to this simple scheme another complex system representing corporate IT.  This function of yours can be viewed as a provider to your business within a larger value chain.  IT’s inputs are likewise resources comprised of technical apparatus, skilled individuals, and projects that provide requirements and funds for the IT function to create as outputs the technological solutions that will mesh into your bigger business’s value streams. This interaction is depicted in figure 2.  

Figure 2

So far so good, right? The latter figure looks like a copy-paste of figure 1. It is indeed very similar, at least from a cybernetics point of view. But there is a catch, and it hides itself in the feedback loop.  The most effective feedback mechanism, sales, is not part of the equation. 

In the case of your own business, customer feedback through focus groups or surveys is collected, analyzed and leads to action because it will help improve sales, or at least help you understand why sales are not what they should be.  If you don’t make money, your business imperatively has to change, or will soon die.   But in the case of the IT function, something crucial is absent for there is no survival component; no presence of the ultimate incentive for improvement.  

Figure 3

There isn’t any survival component that could keep your IT staff on the alert. But there is more: they witness, from year to year, a steady flow of IT investments coming from your business. Projects come and go, priorities fluctuate, business strategies evolve, but the level of IT investment is in general correlated to the financial health of your business as a whole.  It is certainly not tied in any way to the level of satisfaction you have towards the corporate IT subsystem, or to the feedback given.

Corporate IT’s business success is totally dependent on your own business success.  In three decades of working in corporate IT, I’ve seen budgets vary, waves of layoffs, staff optimizations, outsourcing, offshoring and nearshoring.  But never have I seen IT-budget variations based on pure IT performance.

That is why the IT complex system can delay adaptation for quite a lengthy period of time. As long as the mother system —your business— can adapt itself and survive in its respective industry, corporate IT has little to no survival twist to the feedback it receives.

How effective would your organization be at listening to your customers, collecting feedback, or analyzing their behavior if it wasn’t linked, directly or indirectly, to sales increase?  How good would you be at rapidly adapting your business if you had witnessed, for the past decades, an uninterrupted flow of yearly funding, always commensurate with your client’s financial health, regardless of its satisfaction towards your products or services? Probably a pale imitation of what your organization can do today to improve customer experience or optimize revenue streams. 

And pale it is, indeed.   In this article, I describe the truly important measures of performance in corporate IT.  You will discover that job-keeping accountabilities are always paired with quantitative measures of performance.  There are two broad categories of accountabilities for corporate IT teams. One represents the run-of-the-mill responsibilities for which there is little space left for interpretation. These include the availability of systems, application response time, pace of deployment of new versions, call-center wait time, new employee set-up delay, etc.  This category is definitely the one for which corporate IT is best equipped, tooled and prepared. It is no coincidence that the run-of-the-mill chores of IT are also the ones that are best supported by cross-industry standards, are regularly purchased from third parties, can be outsourced more easily, are the most easily auditable and are supported by the most comprehensive set of benchmark services.  When performance issues in your work can directly lead to dismissal or when the provided service can be purchased from external sources, you’ve got the survival component mentioned above.

The second category of corporate IT accountabilities is related to its capacity to provide business change through new or revamped IT-based solutions.  This includes the realm of investment projects, deployment of new platforms, digitalization, and all the names given to the endeavors that require mobilizing business and IT to deliver something new that will make your business strive. This category is supported by little-to-no cross-industry standards, is highly customized to your company, doesn’t get outsourced easily, is costly and difficult to audit, and is supported by benchmarks that are too high-level or don’t fit with the peculiarities of your organization. That’s why most business people fall back on the only quantitative feedback they can understand: on-time and on-budget metrics. But there is a severe limitation to the effectiveness of these enshrined measures; namely the budgetary and temporal targets are set by the same team that is being measured for their attainment.  IT people do lose their jobs for not attaining such targets but it is fair to say that these are the rare cases. The impact of failure in this second category is nowhere near the acuteness of the repercussions of a faux pas in the first category.   There is no survival component in the latter.  

The rest of the feedback for change comes in the form of qualitative appreciations that are admittedly useful but do not make the cut since their impact on triggering adaptation within the IT function rarely represents a threat for people or teams. Moreover, because of the huge knowledge gap that exists between tech-savvy team members and the rest of your organization, most of these qualitative feedback items require substantial effort to be translated into actionable improvements at the technical level. No-one is against improvement, but when time comes to put the effort, the exertion is in direct competition with project priorities and the short term objectives of on-time and on-budget delivery.

The feedback loop that helps corporate IT to adapt and improve the delivery of change projects is weakened by the absence of a component that links it to true survival. Compared to most businesses, corporate IT has little skin in the game and not much to lose by perpetuating the status quo or making only small changes to its modes of operation.

The engagement model between corporate IT and the rest of your business is at the deepest root of many issues that impede their ability to provide more value to your organization. It is also one of the fundamental reasons why you may have the impression that the IT function is in an everlasting state of immaturity.  To get a better understanding how your corporate IT works (or isn’t working), I invite you to take a quick read of this book: What You Should Know About Corporate IT But Were Never Told.

You will realize that changing these patterns requires radical change in the way corporate IT engages with the rest of the business, and more specifically, how accountabilities are distributed and measured.  Nothing less than a major revolution, triggered by business people, will allow IT to become a true adaptive system that can change itself to provide what you deserve.



[1] The working definition at MIT for complex systems is: “A system with numerous components and interconnections, interactions or interdependencies that are difficult to describe, understand, predict, manage, design, and/or change.”
– Magee, C.L., de Weck, O.L., Complex System Classification, Fourteenth Annual International Symposium of the International Council On Systems Engineering (INCOSE), June, 2004