After obtaining the sustain of HR and Finance, it was the turn to obtain the one from the Business Units managers. Let us have a talk with them.
Paul, the quality coordinator of BIT, invited for lunch the System I solutions and Infrastructure Business Unit manager (B.U. managers) to talk about Kanban as a method to manage queues. Every IT manager is familiar with the behavior of the ques, even if they have never studied this subject. It is their day-to-day practices that makes this concept familiar to them.
Paul showed a chart taken by
Donald G. Reinersten in his book “The Principles of Product Development Flow” and told them to interpret the Queue Size on the vertical axes as the number of angry phone calls they receive from the business; the measure on the horizontal axes is the percent capacity utilization of the IT system (as whole: computing, storage and networking components) that they manage. Then, he asked them if the relationship showed in the chart made sense to them. They totally agree that this chart matches indeed their experience.
Paul went deeper on the interpretation of this chart and asked both managers what should be the “optimal” utilization of their IT system and why. Both agreed that the optimal level is around 75%. It is not advisable to go above that percentage for two reasons: 1) even if we talk about “hardware”, the performance of an IT system is not linear in relation of their demand; 2) the request from the business is variable. It is necessary to keep a “reserve” in order to cope with this random behavior. Paul asked them; “What happen if you have a capacity of your IT System around 100%”? “Well,” they replied, “any unexpected new workload must be rejected or we must delay the running tasks. In any case, we will have at least one manager knocking at our door (or after Covid period on our chat) escalating to have their job done quicker. “. Conversation is becoming now more intense: let me change style of presentation to follow the rhythm. Paul: when there is more than one manager escalating, who is deciding the priorities for the running (and competing for resources) tasks ? B.U. Managers: it is always a tough battle. We try to reach it by consensus but most of the time become a political game. Everyone hates it, but sometimes we must escalate the case to the General Manager. Paul: it reminds me the situation that we have when we have to agree on the priority of projects. Am I wrong? B.U. Manager: indeed; the nature of the conflict it is the same and the stakeholders are also the same. Paul: well, I have good news. Finance is proposing a “mathematical” approach to help in prioritizing the choice of the project: Cost of Delay. You could apply the same principle if you want. After a brief silence pause. Paul: What about if we could reduce, if not even eliminate, the use of prioritization in your day-to-day activity? B.U. That will avoid for sure a lot of “unproductive” time we spend in discussion. What is the trick? Paul: It is a quite simple approach to the chain of value, born and applied in Toyota but now used also outside the automotive field; even in services. It consists of establishing a work limit for each phase of the value chain, just as you do already for your IT system. B.U: Wait a minute. Are you telling me that I should allow my human resources to have “idle” time? Well, no, we pay a salary higher than average of the market; we give them a good training; defined process and modern laptop. So, they must be active 100% of their working time; that is how we make rentable the business. This is a fundamental economic principle. Paul, at this point, took a long breath to think about the answer. His first instinct was to go back at the current practice of the B.U. managers of utilizing at 75% their IT resources and challenge them why for Human resources should be different. However, he had the feeling that he should go deeper on the root of this objection of the BU. Paul: Let us give a look at the Company balanced scorecard and then to your team scorecard. Is the 100% utilization mentioned as one of the scores? Is the finance manager or the general manager asking that? If not, on which base did you arrive to the conclusion that 100% utilization of your human resources is a fundamental economic principle? B.U: embarrassed silence. Paul: there is only one obvious principle in economics: profit = turnover – costs. All the other measures might be linked (correlated) to this basic low. So, in the industrial time, when you have one machine dedicated to one task, it was easy to correlate an increase in capacity utilization with an increase of profit. The same it was true for the person(s) working on that individual machine. But now the machine are working together, just like your mean, to perform several, different tasks. If something unexpected happens to one of this machine (or to a man) all the interconnected tasks are delayed. And what happened when a delay happens in production? the inventory increase. The same happens when a team delays his work: the inventory increase: the only difference is that with a team the inventory is not visible; but this does not mean that it is free. There is a cost in delay the work and guess what: our finance team has found a way to calculate. B.U: OK but if I don’t use the 100% of the available resources of my team, what they should do during their idle time? Paul: That’s an excellent, question. It’s even a key question and deserves a dedicated post.