Tag Archives: People CMM

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 – “Fooled by Randomness” by Nassim Nicholas Taleb

I picked up Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets, by Nassim Nicholas Taleb, on the recommendation of a mathematician (Vipul Naik, my son). I was expecting a heavy treatise on economics and statistics. It was however a very engrossing book written in a lucid and conversational style, with historical events and everyday situations used freely to provide insights.

Here is the book summary/ key insights (that I picked up from the book):

1)      Human beings are wired in a way that they are unable to intuitively handle randomness and chance.

2)      We are adept at explaining everything through a cause-effect; because we just can’t handle uncertainty. And a statistical correlation does not necessarily mean one causes the other.

3)      Ignoring rare events (outliers) in building prediction models is fooling ourselves – rare events are a part of the process and environment, and their impact is rarely understood or considered by people.

4)      We try to explain extraordinary successes as the result of brilliant strategy or business model or formula or leadership skills or intelligence; while it is often just dumb luck. This is more so of domains like stock trading, marketing, and running a business. We try to learn from and emulate the “winners”, without much success ourselves (by trying to implement the so-called strategies of successful people). Basically, according to the book, many of the winners are just lucky fools :-).

5)      Nice symmetrical probability distributions cannot be expected of any human endeavor (symmetrical distributions may be used to understand controlled situations like gambling – toss of a coin, or rolling of a dice). When we simplify probability distributions and approximate them to neat curves, the results that we get are unreliable.

6)      Though Monte Carlo simulations are looked down upon (“that is cheating, it is not statistics!”) by purists, it is still be the best way to model complex, real situations and understand the potential randomness of the outcomes, and can be used for informed decision making.

7)      Past performance cannot be blindly used to predict future performance. Hence, we should not overestimate the accuracy of our beliefs just because we have been successful in the past, we should reexamine our beliefs based on logic, and always have a backup plan.

One of issues with the book is that it lacks structure and tends to jump from topic to topic. The tone is also snobbish and contemptuous at places, and it may make some people (who are secretly think that their success may be attributable to luck :-)) annoyed or even angry.

The author Nassim Nicholas Taleb is Distinguished Professor of Risk Engineering at New York University’s Polytechnic Institute. He has been a mathematical trader, essayist, philosopher, and researcher. He specializes in understanding uncertainty, luck, probability, knowledge, and decision making. Taleb has been described as a dissident thinker, maverick, irreverent, iconoclastic, and unconventional.

Another book by Taleb in a similar vein is The Black Swan – this is an earlier book, and again very interesting to read. Taleb has also authored AntiFragile, The Bed of Procrustes and Dynamic Hedging.

I recommend this book very highly for anyone involved in high maturity implementation of the CMMI®/ People CMM® models.

For people who are looking for quick-fix templates and control chart macros, this book is not for you (as if high maturity practices can be implemented using quick-fix solutions :-).

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.

Fooled By Randomness Book Cover

 

Title: Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets

Author: Nassim Nicholas Taleb

Publishing Date: First Version Around 2001

Publisher: Random House/ Penguin

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.

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

Also, please add other insights that you may have got from the book, 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.

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 – “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.

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.