The Price of Everything

My buddy Mark measures physical properties like outer diameter, durometer, and Young’s modulus when he builds custom rubber parts for F500 companies. He’s constantly improving quality along whatever dimensions his customers need. That’s life in the ISO-9001 world.

Business took a page from the manufacturing book with an adage from Edward Deming, “you can’t manage what you don’t measure”. Unfortunately, the quality guru never said it - because many important parts of your business can’t be gaged well. This applies most to employees.

Humans are much trickier to measure than rubber boots for submarine telecommunication cables. People game the metrics to look good.

Look at software. Programming managers like to measure software bug counts and lines of code. Coders naturally respond to bug counts by arguing with the testers about bugs instead of fixing them - or even avoid the bug tracking system. If you measure lines of code written, developers will tend to write bloated, unmaintainable code. Either criteria will cause worse performance.

Expect similar fun in banking:

• Measure number of incoming customer calls handled? The call center will cut the customer short.
• Pay branch managers according to deposit growth? They’ll push harder for unprofitable rate exceptions.
• Pay tellers on customer satisfaction? They’ll waive fees too easily.

Employees are a little like subatomic particles - the very act of measurement will change them. Even if the yardstick is not explicitly linked to pay, people know that you are measuring because it’s important.

So what’s left?

• Make the measurements ungameable: combine multiple measures together to make sure there’s no way to adversely affect the numbers. For example, profits measured with funds transfer pricing are much less vulnerable to bad rate exceptions than deposit growth. Or just stop using rate exceptions completely. Note: Fair Isaac’s James Taylor rightly points out that decision automation has side benefits of reducing gamesmanship while focusing employees on the customer.
• Allow your employees to skew their outlook: it may not be a bad thing if tellers are solely focused on the customer - even if this drops fee income a little.
• Manage subjectively: Throw out the worst metrics and replace them with good judgement.
• Inspire your employees: Most people want to do the right thing. Make sure everyone understands how important banking is to the rest of society - a world without mortgages or savings accounts puts people in worse homes and keeps money hidden under the mattress. Explain how better customer service lets someone’s grandmother relax a little when worrying about money; higher profits allow the bank to help more people. Listen to their own ideas for how to improve.

Bankers: We rely heavily on yardsticks - and even more since SarbOx came along. Take the time to ensure these measures clearly transmit the right information and help the business.

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Hire slow, fire fast. This classic advice is powerful and I’ve only violated it to my regret. Far better (for everyone on the team) to wait to bring on someone amazing. Even if that means overwork in the short run.

The opposite is true for tools - especially certain types of technology. Tool overcapacity is good.

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Microsoft is famous for “dogfooding” their software - they use their own software internally.  This demonstrates Microsoft’s confidence in their own products.  Even more important, dogfooding makes sure the software teams experience the same pain as real customers. 

We dogfood here.  And banks are starting to do the same - or at least the hedge funds that own them.  Tom Brown and the rest of Second Curve Capital recently explored all of the bank branches in their Manhattan neighborhood.  From the NYT: Read more »

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Dogfooding is the practice of using your own products.  The term comes from marketing slang - “will the dog eat the dog food?” - shorthand for the idea that the product may be amazing, but ultimately, it only matters if the consumer likes it.

Dogfooding was made famous at Microsoft, but has spread well beyond Redmond, Washington.  Lots of companies dogfood their products now.  Some choose more palatable imagery.  For example, Siebel Systems calls it “sipping your own champagne”.

Whatever you call it, the thought is right.  Otherwise, the annoying nuisances in the product never completely go away.   Read more »

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The Wrong Way:

I vividly remember my first experience in the corporate world after college.  I was hired by an enormous engineering firm to program some small subsystems for a multimillion dollar simulation of a power plant in Canada.

I was pretty excited.  I had a cool job for a respected company where I could learn a lot.  Plus, they paid me an adult salary. 

After my first day at my new desk with a multicolor employee manual, corporate vision statement, and new stapler, I was still raring to go.  But the next day, I was assigned to investigate the “library”, a small office filled with various piles of disorganized correspondence about the project.

I spent weeks in that room.  My eyes wore grooves in the paperwork as I read and reread - trying to make sense of the project and my part in it.  I bulled my way through it and eventually, the project engineer let me out of the room.

I organized the mess so no one else would needlessly suffer.  I created a thermodynamic heat balance so our 30-engineer team could work effectively together.  Then, I created a paper-based version  of the distributed control system (the video game the operators control the power plant with) so everyone could see who was working on what - and where the holes were.

I hated being the new guy.  Turns out, the experience stuck with me.  Read more »

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“Wiki”. Even the word is silly.

Say wiki out loud among responsible adults and get the same look you’d expect if you brought up your Dungeons & Dragons fairy character with strength = 10. Over Scotch at the Algonquin.

Last time, I quickly covered by bringing up wikipedia (amazing encyclopedia built with a wiki). My companions were relieved that I was not speaking complete gibberish. We hurriedly changed topics before they risked hearing about my comic book collection.

But wikis really are that important to banks, software companies - virtually any organization that has access to computers. While wikipedia is amazing, it has very little to do with the true power of a wiki in a company. Read more »

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SmartRate was first cobbled together in Microsoft Access and Excel.  When I demonstrated SmartRate was good enough to move forward, I developed in a slightly archaic language - Visual Basic 6. 

By almost any measure, .NET is a superior language to VB6.  Development is faster, cleaner, and the third party tools for .NET are far better.

VB6 has one feature to recommend it.  Its bad reputation among architecture astronauts repels the people we really don’t want.  Many geeks care more about gaining experience in the latest hot technology than shipping good product.  Code that works and can be modified without a PhD is just too boring for some people.  Read more »

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