Shootout At The Business Model Corral

 

As anyone who’s attended a management meeting can tell you, the capacity for disagreement and contention in such gatherings is vast. But everyone is talking about management, right? Since the first college-level business school started 135 years ago[i], shouldn’t many, if not most management issues commonly encountered have something of a pat answer to them? That a high level of conflict can erupt in what would otherwise be considered as a fairly anodyne setting points to the fact that, despite what the faculty of the myriad business schools might have you believe, there are amazingly few standard approaches to management problems. I think a major reason that this is so is due to the fact that the various management disciplines carry with them inherent conflicts of interest, and the inability (or refusal) to recognize these conflicts for what they are inevitably leads to more of them.

The main three business model structures involving Project Management that are intrinsically tied to organizational conflict are:

1. Resource versus Facility versus Project Management;
2. Asset versus Strategic versus Project Management, and
3. …the old Quality, Availability, Affordability – pick any two paradigm.

Consider a large manufacturing or experimental facility. Any such facility is relevant, but the kinds of conflict-driven management pathologies I want to point out occur more frequently (and acutely) at highly specialized ones. The casual observer may believe that the three groupings of managers – Facility, Resource, and Project – all have a common goal, but this is so only in the equivocal sense.

• The Facility Managers seek to keep their plants’ capacity as high as possible while minimizing the number of safety (or similar) incidents that would lead to a pause, or even shutdown.
• The Resource Managers’ goal is to make available the labor and machines needed for the Project work at as close to optimal levels as possible. If they have to place resources on leave, or are placed in a position of having to tell the PMs that their scope can’t be executed due to a lack of resources, they have a really bad day.
• The PMs, of course, are interested in attaining their projects’ scope within cost and schedule constraints. When they go over on either of these parameters, they have a really bad day.

To engage in a level of hyperbole, the Facilities Managers don’t care as much about missed milestones or negative project variances as they do about keeping the facility up and running. The PMs don’t care as much about having to place personnel outside of their Project Teams on temporary leave, as long as their work is on-time, on-budget. The Resource Managers tend to care about the others’ success, but more because of how it impacts their ability to level their available resources against the demand curve than for other reasons. What we have here is an inherent conflict of interest, which can’t help to manifest in those meetings where management strategy and implementation is discussed and determined.

I’ve often made the point that Asset, Project, and Strategic Management have different goals and use different information streams to accomplish them, but it bears repeating since our friends, the Asset Managers, almost always believe that any relevant management information dealing with costs simply must originate with the general ledger. For today’s example, I’ll leave PM completely out of it by pointing out the impossibility of capturing the Return on Investment (the Asset Managers’ favorite evaluation parameter for determining whether or not a given course of action is “worth it”) on a proposed advertising campaign. Marketing initiatives, of course, do not benefit the PMO, and cost money, often times serious money. So, if they don’t benefit PMs or Asset Managers, who gains? The Strategic Managers do, since they seek to acquire more market share for the organization. Successful ad campaigns can (and do) bring in far more new revenue than their basic costs, whereas poor ones not only fail to make back their costs, they can actually harm the brand name they attempt to promote. Given that there is no reliable way to quantify the go/no go decision on launching a particular marketing initiative, what we have here is essentially a roll of the dice, and Asset Managers are not known for being fans of rolling the dice.

The last COI-revealing structure, the idea that, of Quality, Availability, and Affordability, one must choose two, is largely self-explanatory. The assertion that any viable business strategy must select which of these goods/services-providing tactics receive attention at the expense of another is simply a different way of stating that the attempt to do all three is futile.

Well-run organizations will realize that these inherent conflicts of interest among rival teams and schools of thought should be managed with the acknowledgment that there are no solutions, only tradeoffs. Less-than-well-run organizations will allow the principals of each team to battle out their points of view in highly contentious conference rooms, where the optimal approach to the organization’s problems is rarely discovered, much less implemented.

In the latter instance, though, some of those battles can become legendary.

[i] Retrieved from https://www.wharton.upenn.edu/about-wharton/ on October 25, 2021.