Visibility is Your Friend

My post last week comparing the performance of a heavyweight hierarchy and a nimble network stirred up some insightful comments. One comment neatly summarized a central weakness of each type of organization; it said, “A combination of leadership with a collection of aligned and networking staff should beat a network of self nominated individuals with their own agendas and no sense of loyalty and cohesion. The trouble is that most companies are bags of similarly misaligned and unmotivated individuals following each other round in circles.”

There is an answer to these weaknesses and both types of organization can benefit from the same answer. I’ll start by showing how this answer addresses the weakness of a network. I know something about networks because I spent six years as the CIO of a large distribution cooperative (cooperative is just another name for a network). So how did we encourage people to coordinate their actions with each other for the good of the entire organization? How did we provide a unified and consistent level of service to our customers?

We achieved this coordination by collecting real-time performance statistics on all of the business units in the network and made this information available to everyone via web-based dashboards and scorecards. This visibility set in motion a powerful dynamic driven by peer group pressure. When people in the member companies realized that every other member company could see how they were doing they managed their own performance levels very effectively. No member wanted to be seen as the worst performer or as endangering our common business by failing to meet performance metrics agreed to in our customer service contracts.

One of the most important metrics that customers watched was a statistic called the “perfect order rate”. This measures the rate with which a customer’s orders are filled correctly, delivered correctly, and invoiced correctly. It’s surprisingly hard to nudge this rate above 90% and keep it there. And one of the most common reasons for this is that errors happen in the translation between the different part numbers used by customers, distributors and manufacturers for a given product.

This problem was compounded within the cooperative because each of the more than 80 member companies had their own part numbering systems. Each member labeled the tens of thousands of common items that all the members sold with a different part number. To handle this we decided that as orders came in from customers all product numbers would be translated from the customer’s part number into a common part numbering scheme called the Electronic Product Code or EPC (formerly known in the US as Uniform Product Code or UPC). Each business unit would be responsible for maintaining a translation table that enabled them to translate back and forth between the EPC numbers and whatever part numbering scheme they used internally in their company.  

We started a project to collect EPC numbers for the products we sold and to help the member companies set up their product number translation tables. We worked on this for more than two years; there were lots of pep rallies and meetings and memos about it. And finally, all the member companies said they were ready to go.  

On the members access area of our website I put up a dashboard that calculated every day how many translation errors were occurring with each company. Member companies got a green star if their correct translation rate was 95% or above; they got a yellow face if they were 95% to 80% correct; and if they were less than 80% correct, they got a red, frowning face. We turned this dashboard on and let everybody see how they and the other members were doing. That first week only a handful of members got a green star; some had yellow faces; and most had red faces next to their names. 

My phone rang off the hook for the first few days. Members tried to hammer on me and tell me that their score was wrong because my system wasn’t working correctly. I said no, all we do is just record every instance where we receive an invoice from a member that has incorrect or missing EPC codes.  If each product on an invoice has the right EPC code on it, everything is good. If not, even if the same product shows up with the wrong EPC code 100 times, that's 100 mistakes. The measurement was tough but the good news was; fix a bad product number once and members got tremendous improvement in their translation rate. This encouraged members to make especially sure they had good part number translations for their most popular products.

Once the members realized that all other members could see their performance ratings and the only way to improve their scores was to clean up their part number translations they got real busy and fixed their problems fast. That interactive real-time dashboard did more in a very short number of weeks than two years worth of planning, talking, and pep rallies.

Now let’s take a look at how visibility addresses a central problem of hierarchies (the problem that they are “bags of similarly misaligned and unmotivated individuals following each other round in circles”). And since it’s the President’s Day holiday here in the United States let’s look at that hierarchy called the federal government.

Luckily the founders of this country understood the power of visibility and wrote it right into our Bill of Rights. The first amendment states that Congress shall make no law “abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the government for a redress of grievances.” The power of the government is defined by laws but the only reason those laws are (usually) followed is because there is a free press that (usually) brings visibility to the actions of the government and then the people (usually) respond. There are many other countries with similar laws but unless they also have a free press to provide visibility, those laws are routinely ignored.

So there's the answer; it’s one of the driving forces of any agile organization -- visibility.