Tag Archives: PCMM

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.

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.

Book Review – “Workforce of One” by Susan Cantrell and David Smith

I was scanning the shelves of a book lending library, when I came across this book – the title intrigued me, so I picked it up and browsed through it. Based on the title, I had imagined an extraordinary organization of one person (me!) – it turned out to be something else, but interesting enough :-). Anyway, I borrowed the book, read it, and here is the review.

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

  • In the last few years, retail customer experience has been highly customized by internet based enterprises (e.g., Amazon, Netflix, Dell) with a great degree of success.
  • Employee experience too can be customized, to provide an environment to motivate each employee to deliver his/ her best for the organization.
  • This is required because people’s expectations have changed due to their experience as customers, because other organizations are already doing it, because it enables higher employee retention, engagement and productivity, and because it increases the ability to attract high potential employees. “One size fits all” is no longer a desirable approach.
  • Customization has become feasible because of the variety of tools and technology that are increasingly available.

According to the book, workforce practices have evolved from chaotic, ad-hoc, person-specific, unstructured, unfair systems to something that is monolithic, over-controlled, one-size-fits-all, and over-standardized. And now it is time to make the systems more flexible, tailored and customized.

The authors propose a four pronged approach to this customization, comprising:

  • Segment the workforce on dimensions like geography, tenure, career level, role, age, etc. to understand the requirements and needs of different segments.
  • Offer modular choices, in areas like compensation, working hours, learning methods, working place, etc. The modularity ensures structure and equity while providing flexibility.
  • Define broad and simple rules, instead of defining very elaborate policies and procedures. This will permit flexibility while ensuring that the values of organization are adhered to.
  • Foster employee-defined personalization by making people aware and enabling managers to guide employees to make appropriate choices.

The book covers multiple areas of people practices that can be customized. Some of them are rewards and recognition, learning, work place, work time, career growth pace and choices, assignment mix, performance goal setting and feedback mechanisms, compensation mix, benefits, and work place tools/ technology.

The authors use examples from organizations like Best Buy, Microsoft, Accenture, Procter and Gamble, Deloitte, The Container Store, Royal Bank of Scotland and others.

As a reader, I found some of the examples (illustrating the concept of customization) as being trivial. For example, the authors use the fact that a multi-national organization provides company transport to employees in Hyderabad (while it does not do so elsewhere in the world) as an example of customization (geographical segmentation). To me, this is like saying that the company follows Indian labor laws in India :-).  Since the organization has set up their office far away from the city’s residential areas and the city does not have adequate public transport, there is no choice for the company but to arrange transport for the employees.

The problem with trivial examples is that on reading the examples, many people will go, “yeah, we do that, actually we started that 10 years ago”. And miss the whole concept of the customization approach.

The book is easy to read and grasp and proposes a powerful concept worth investigating. Definitely worth reading for senior HR folks and CXOs (just ignore the trivial examples :-)).

Here are some details of the book:

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

Front Cover - Workforce Of OneBook Title: Workforce of One: Revolutionizing Talent Management Through Customization

Authors: Susan M. Cantrell, David Smith

ISBN: 1422147584; ISBN-13: 9781422147580

Binding: Hardcover

Publishing Date: Nov 2010

Publisher: Harvard Business School Publishing

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.

How do the concepts covered in the book align with the People CMM®? Well, that is the subject of another post, some other day! :-).

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.