Category Archives: CMMI®

Time and Material Business Model is Injurious to Process Improvement

An incident in a large software development organization:

Here is a part of a conversation between a Sig Sigma Expert (SSE) and the Delivery Head (DH) in a software development/ maintenance organization where most projects were run on a T & M or Headcount based billing for their customers.

SSE: “Initial analysis shows that with minor changes in the processes and the use of some spreadsheet macros, we can eliminate some non-value add steps. This can reduce the effort required by 25% for the current mix and volume of work.”

DH: “But that will reduce my head-count and billing by 25%! My target this year for improving efficiency/ productivity is only 5%. Maybe we can implement the changes a bit every year, and not all at once. If I implement all these change right now, I will miss my revenue and headcount targets – these have the highest weight in my performance objectives.”

Another incident in a different organization:

A Project Manager’s project end bonus was slashed because she delivered her project at a much lower cost than what was estimated (the estimate was done by someone else). She was informed that her lower bonus was because the project total billing was much lower than the project estimate.

Both these incidents occured in situations where the projects were being run in a T & M (Time and Material) mode by a software service vendor organization.

The T & M mode of engagement basically shifts the cost related risks and benefits (cost overruns, cost efficiencies) to the customer, while the vendor organization has a steady return, and cannot make large profits or losses. The T & M mode is suitable in many situations – e.g., when requirements are unclear and likely to change, when the customer wants to work closely with the vendor team, when the customer wants more micro control (sometimes interference), or when the customer-vendor organizations are in the initial phase of establishing a relationship. A variation of this is Committed Head Count, where the customer and vendor agree on a fixed number of staff assigned to the customer’s work over a period, independent of the actual quantum of work. Another variation is the dedicated ODC (Offshore Development Center).

As against this, there is the Fixed Price (FP) mode, where the billing amounts and billing timelines are fixed based on an agreed value and agreed deliverables. The FP contract may have penalties and incentives built in (for delivery dates and/or  quality). Effort overruns are the problem of the vendor, and effort savings are additional profits made by the vendor. Variations of the FP model include billing by volume, quality and timeliness of work done. In such cases the vendor is usually free to utilize the staff in an optimal way (maybe on multiple projects).

Many engagements between customers and vendor organizations start off as T & M, for good reasons. However, they continue in the T & M mode, even when the FP mode would serve everyone better. This could be because of inertia, because no one wants to rock the boat, or because no one has examined the issue for that engagement.

Structurally, the T & M model does not create incentives for the vendor to initiate and pursue improvements that will reduce the effort and headcount. The software industry has got addicted to T & M model to such an extent that head count growth, and billable person-days have become stated performance objectives for senior executives in many software services organizations.

Maybe the title of this post should have been “T&M model kills process improvement”, like the changed statutory warnings on tobacco products. Or is that overstating the case?

Please feel free to share your views, experiences or queries, using the “comments” feature available at the top of this article/ post.

Notes:

Nothing Official About It! – The views presented above are in no manner reflective of the official views of any organization, community, group, institute, or association.


I am Rajesh Naik. I am an author, management consultant and trainer, helping IT and other tech companies improve their processes and performance. I also specialize in CMMI® (DEV and SVC), People CMM® and Balanced Scorecard. I am a CMMI Institute certified/ authorized Instructor and Lead Appraiser for CMMI® and People CMM®. I am available on LinkedIn and I will be glad to accept your invite. For more information please click here.

Organizational Alignment using Strategy Maps and Balanced Scorecard (BSC) – a Presentation

Organizational performance alignment has been given increased emphasis in the latest versions (V1.3) of the CMMI® model. The significantly upgraded process area renamed as Organizational Performance Management (OPA) requires process performance and improvement goals be derived from overall organizational business goals.

The People CMM® has always insisted on the linkage between business goals and units goals, workgroup goals, individual goals, and process performance goals.

The Balanced Scorecard (BSC) framework (with Strategy Maps) has been in use for many, many years, and many organizations have reported considerable improvement in their performances with the use of BSC.

CMMI® and People CMM® implementations can be significantly strengthened with the use of BSC.

The concept of BSC has been explained in the slide presentation linked / pasted below.

In case the presentation does not load, use the link http://www.slideshare.net/naik.rajeshnaik/organizational-alignment-using-strategy-maps-and-balanced-scorecard

Other presentations covering CMMI®., People CMMI, Balanced Scorecard, Strategy Maps and Competency Frameworks on AlignMentor are available here.

Please share your views, experiences or queries, using the “comments” feature available at the top of this article/ post.

Notes:

Nothing Official About It! – The views presented above are in no manner reflective of the official views of any organization, community, group, or association.


I am Rajesh Naik. I am an author, management consultant and trainer, helping IT and other tech companies improve their processes and performance. I also specialize in CMMI® (DEV and SVC), People CMM® and Balanced Scorecard. I am a CMMI Institute certified/ authorized Instructor and Lead Appraiser for CMMI® and People CMM®. I am available on LinkedIn and I will be glad to accept your invite. For more information please click here.

Book Review – “The Checklist Manifesto: How to Get Things Right” by Atul Gawande

I had earlier read two engrossing books by Atul Gawande – Complications and Better. So when I saw The Checklist Manifesto while browsing in the neighborhood library, I decided to pick it up looking forward to an interesting read (some reviewers had strongly recommended it). The title also indicated that it may a good book to review for this weblog.

Well, I was partially right – it was suitable to post a review on this blog. So, here goes…

The main theme of the book/ book summary is as follows:

  • Over the years, many activities have become extremely complex.
  • Even experts struggle to master and remember all the tasks they have to perform.
  • Use of checklists can minimize human errors of oversight. In many cases this it can improve the performance significantly.
  • Use of checklists can also help the experts focus on the difficult, tricky parts of a situation, rather than worry about the mundane activities.
  • There is need to create better checklists, organize them for easy use and ensure that they are used.

The author uses examples from multiple industries and situations. The best ones are from hospitals and medical emergencies (Dr Gawande is a surgeon :-)). There are other examples from the airline industry (where pilots use checklists for normal as well as abnormal situations), construction industry, retail, and restaurants.

There is a whole chapter dedicated to research where the impact of the use of checklists in hospitals was studied. The research showed that there was a significant reduction in deaths (47% reduction) and major complications (36% reduction) for surgical patients. One interesting finding was that though only 80% of the hospital staff found the checklists useful, 93% of them said they would want a checklist to be used if they were themselves getting operated!

The book sometimes extends the concept of “checklist” beyond its normal usage. Here are a few examples of things that are treated under the concept of checklist in the book (though I believe they are different concepts, with their own place in “how to get things right”):

  • Preparing detailed project plans, dependencies, action items, schedules and list of deliverables (example of a building construction project)
  • Use of collaboration meetings (of experts) to handle non-routine situations (e.g., a building floor developing unforeseen problems)
  • Empowerment for doing something extraordinary (how Wal-Mart employees went beyond their formal authority to help people affected by Hurricane Katrina)
  • Use of focus, expertise and wits (how a pilot saved lives by crash landing on Hudson river in 2009 – by focusing on flying the plane, not on using a checklist!)

In trying to bring everything under the umbrella of “checklists”, the author dilutes the concept and utility of checklists as well as other equally important concepts of detailed planning, collaboration, empowerment, dedication, competence and focus. Maybe the title “The Process Manifesto” would have been more apt.

For people who are already convinced about the use of checklists, procedures, plans, collaboration meetings, etc., this book can provide you with interesting examples to relate to process skeptics in your organization. It can also provide process trainers with interesting case studies to relate to the class. You may also consider gifting this book to colleagues who resist the use of formal processes – the book is an easy read and is able to hold the reader’s attention reasonably well.

If you are looking for readymade checklists that will help you reach some level in CMMI®/ People CMM®, then this book is not for you :-).

Those who have read Gawande’s earlier books – Complications and Better may find The Checklist Manifesto a bit disappointing – it is not as engrossing as the earlier two. This is possibly because the earlier books focused primarily on hospitals, medicine and healthcare based scenarios, where Gawande has accumulated loads of experience. And in Checklist, he provides examples from other industries (aircraft manufacture, real estate, retail stores, restaurants, and so on) where he may not have had the same level of familiarity and insight.

Here are some details of the book, in case you want to get your hands on it:

By the way, you DON’T need a Kindle device to read a Kindle ebook.

Book Cover ImageBook Title: The Checklist Manifesto: How to Get Things Right

Author: Atul Gawande

ISBN-10: 1846683130

ISBN-13: 978-1846683138

Publishing Date: Jan 2010

Publisher: Profile Books

Available at: Amazon.com, Amazon.in, and Flipkart

Available as eBook in Amazon Kindle.

By the way, you DON’T need a Kindle device to read a Kindle ebook.

Other book reviews uploaded on the same blog:


I am Rajesh Naik. I am an author, management consultant and trainer, helping IT and other tech companies improve their processes and performance. I also specialize in CMMI® (DEV and SVC), People CMM® and Balanced Scorecard. I am a CMMI Institute certified/ authorized Instructor and Lead Appraiser for CMMI® and People CMM®. I am available on LinkedIn and I will be glad to accept your invite. For more information please click here.

Size Does Matter! (for baselines and sub-process control) -Continued

Let us take the example of  examination/ test centers, that run an exam throughout the year, every day. Past one-year data shows – 30% of the candidates pass the exam and 70% fail the exam, all over India.

The Bangalore test center handles around 1000 candidates per month, whereas the Mysore center handles around 100 per month. Over the last one year, both centers have shown the same 30 pass: 70 fail ratio.

For the month of June 2010, one center has reported 38% pass and another has reported 29% pass. Which center (Bangalore or Mysore) is more likely (has a higher probability) to have reported 38%?

Well, Mysore is more likely to have the higher deviation from the average (+8%) than Bangalore (-1%), because Mysore, handling lesser candidates, has a lesser number of opportunities to “average out”. An easy way to figure this out is to take the case of a center that handles only 1 candidate. This center can have either 0% or 100%  pass percentage; a -30% to +70% deviation from the average.

Let us now get back to the process performance baselines that we create and the way we do sub-process control. Here are some things that we need to keep in mind while creating, publishing and using baselines:

1) Baseline (mean and standard deviation) for a sub-process parameter (like coding productivity) will be different depending on whether we consider each the coding phase of each project as a data point, or we consider each program coded in each project as a data point. The standard deviation in the first case (large base) is likely to be smaller than the second case (small base).

2) When we publish performance baseline data, we need to qualify it with the level of detail at which it applies.

3) When we use the baseline data to do sub-process control, it needs to be applied to the same level of detail. So, to do sub-process control on program level coding productivity, we need to use the baseline that was created using programs as data points (not each project as a data point).

4) Baselines need to be created using similar situations of the base data. For example, we cannot combine the coding productivity on large programs with the productivity on small programs. Even if the average/ mean remains the same, the standard deviation will be higher when we take data from a smaller base as against a larger base.

The above points are not just “nits” but have an impact of the usefulness of baselines and sub-process control. Incorrect usage of baselines leads to incorrect displays of process instability / stability.


I am Rajesh Naik. I am an author, management consultant and trainer, helping IT and other tech companies improve their processes and performance. I also specialize in CMMI® (DEV and SVC), People CMM® and Balanced Scorecard. I am a CMMI Institute certified/ authorized Instructor and Lead Appraiser for CMMI® and People CMM®. I am available on LinkedIn and I will be glad to accept your invite. For more information please click here.

Size Does Matter! (for baselines and sub-process control)

Here is a small brain-teaser.

Let us take the example of a examination/ test centers, that run an exam throughout the year, every day of the year. Analysis of the past one-year data shows that 30% of the candidates pass the exam and 70% fail the exam, all over India.

The Bangalore test center handles around 1000 candidates per month, whereas the Mysore center handles around 100 per month. Over the last one year, both centers have shown the same 30 pass: 70 fail ratio.

For the month of June 2010, one center has reported 38% pass and another has reported 29% pass. Which center (Bangalore or Mysore) is more likely (has a higher probability) to have reported 38%? Why do you think so?

See my post dated August 3, 2010 for the answer and implications.


I am Rajesh Naik. I am an author, management consultant and trainer, helping IT and other tech companies improve their processes and performance. I also specialize in CMMI® (DEV and SVC), People CMM® and Balanced Scorecard. I am a CMMI Institute certified/ authorized Instructor and Lead Appraiser for CMMI® and People CMM®. I am available on LinkedIn and I will be glad to accept your invite. For more information please click here.

Why Can’t Metrics be Used for Performance Appraisals?

While discussing collection and usage of metrics, one often hears an emphatic “We should not use metrics for individual performance management!”. The statement is made as if it is an unquestionable tenant of the religion called process management.

“And pray, why not?” Why should the performance management process be deprived of metrics? A process oriented organization would definitely not like to boast that their performance management system is completely subjective.

Here are some reasons why metrics should be used for individual performance management.

*    An individual performance management (including the appraisal part) needs to be SMART – the “M” stands for measurable.

*    Most individual performance parameters are the similar to and derived from the project, product and process objectives, they typically relate to cycle time, quality (defects), meeting commitments (schedule) and productivity (cost, effort and usage of resources).

*    A strong metrics system, that provides accurate, precise and valid data can support the project, process and individual performance management requirements.

*    Using the same sources of data, we can create a more aligned organization – the individual objectives are aligned to the project, product and process objectives. In this manner, individuals know that meeting their individual goals helps in meeting the other goals (and vice versa); conflict of interest is minimized.

The situations where we may not want to use process/ project metrics for managing individual performance are:

*    The metrics collection system is not stable, and there questions on the credibility of the data. In such a case, the use of the data for managing the project/ process is also diluted.

*    Usage of the data for individual performance management may make the individuals sabotage the process and the accuracy of the metrics. In which case, we need to strengthen the process and make it sabotage proof.

In the old SW-CMM® days, most metrics collection systems were unstable, and hence many experts of that time were pretty insistent on the metrics not being used for performance appraisals – some organizations even have policy level statements for the same!

We have now moved on from the SW-CMM® days for process management, so we need to move on in other aspects too.

Your comments?


I am Rajesh Naik. I am an author, management consultant and trainer, helping IT and other tech companies improve their processes and performance. I also specialize in CMMI® (DEV and SVC), People CMM® and Balanced Scorecard. I am a CMMI Institute certified/ authorized Instructor and Lead Appraiser for CMMI® and People CMM®. I am available on LinkedIn and I will be glad to accept your invite. For more information please click here.

Generating Lots of Data through Monte Carlo (a misuse?!?)

I have seen the metrics groups of organizations generating “enough” data for creating process performance baselines, from very few available data points, using Monte Carlo simulation.

Here is the method they use: Ten data points are available; using the pattern of the ten data points, they generate a thousand (or maybe a million) data points using Monte Carlo simulation. Now they feel that they have enough data points to generate a baseline.

But in reality the baseline has been generated using 10 data points. The 1000 data points only give a feeling of having lots of data and this is clearly a misuse of Monte Carlo simulation.


I am Rajesh Naik. I am an author, management consultant and trainer, helping IT and other tech companies improve their processes and performance. I also specialize in CMMI® (DEV and SVC), People CMM® and Balanced Scorecard. I am a CMMI Institute certified/ authorized Instructor and Lead Appraiser for CMMI® and People CMM®. I am available on LinkedIn and I will be glad to accept your invite. For more information please click here.