Wednesday, February 23, 2011

Infrastructure: A Mission of Government and Organizational Control

As defined in my post "The Purpose of Government", a government and other organization has a mission to create the environment or infrastructure in which it can achieve its mission.  The process of creation must ensure that the organization a) meets all applicable external and internal policies and standards, b) must ensure that the processes running within the organization are optimally effective in enabling the organization to achieve its vision and mission, while at the same time, c) ensuring that both the processes and infrastructure are cost efficient.  Of the three missions (security, standards, and infrastructure) of governments and the organizational control function of other organizations, the infrastructure is the most complex to create and manage. 

There are two reasons for this complexity.  The first is deciding what mission, as derived from the vision statement will produce the most value for the organization (be it government or private).  Does clean water and air provide more value than better medicines?  Is it better to provide an economic safety net for all individuals so that everyone can live in dignity, invest in education to enable more future citizens or employees to share in the knowledge-based economy, or invest in research and development (invention and innovation) to create more knowledge value creating jobs?  There are hundreds of these types of questions with which all public and private organization leaders must deal.  And this is where Arrow's Paradox (Impossibility Theorem) comes in.  Simply put, Arrow's Paradox is the "paper-stone-scissors" problem or the "I prefer A to B, B to C, and C to A" problem.  In these situations, there is no optimal solution.  Unfortunately, these situations occur frequently, especially when dealing with "the public good".  For example, politicians have constituents that feel the environment is the highest priority, others that feels that jobs are the highest priority and rank the health care second, and others that feel public health care is the highest priority and rank environment second; other constituents may put research and development first, and maintaining and updating the physical and communications infrastructure first.  They have to decide on the Mission (the public good) that is the highest priority--and the lobbyists are more than willing to help, for a price.  Clearly, more objective metrics for "the public good" are required--though I suspect these will still be more religious quests than scientific understandings of what is meant by "the public good".

The second deals with the measuring the value an organization has obtained by and investment for achieving its vision and mission from its infrastructure, and from achieving its mission most economically by standardizing its infrastructure.  This is value from standardization is especially true of governments and I discuss it in my post "Standards: A Mission of Government and Governance".  However, even with infrastructure standards in place, knowing where and how to invest in creating and maintaining the infrastructure in a more optimal manner is difficult at best, with metrics; without metrics it becomes rationale Ouija-boarding.

Therefore, measurement and metrics are the key to better aligning the infrastructure investments with the organization's Mission and Vision--can you imagine the US Congress or a major firm's CEO getting real feedback on their investment decisions; this is a major cultural change.

Cultural change aside, it is difficult to identify good metrics for the infrastructure and tooling of any organization because linking tooling to the processes is difficult and linking the processes through the organization's strategies to its Mission and Vision are difficult.  There are two naccent concepts that should help, Production Capability and Value on Investment.  Production Capability (after Dr. Stephen Covey in Seven Habit of highly Effective People) measures the potential of an investment to produce more effectively and/or cost efficently the same product or service.  For example, upgrading an organization upgrades its network to increase its speed and reliability to support some long-term strategic objective for increasing the responsiveness, what is the ROI?  The answer is zero.  So the Wall St. "Traders" (gamblers) who look to increase the company's ROI to make more money NOW will disallow that type of investment and punish the management by cutting their bonuses if they have the audacity to actually make that investment.  Likewise, professional politicians (those that consider filling a political position their profession) are punished at the polls for making similar decisions (e.g., roads and bridges instead of social programs). 

In this age, the reason real leader are punished for making good investments, investments that will lead (long-term) to growing or maintaining the organization's ability to create value is that the accountants and financial engineers that run most economic organzations have no metrics for Production Capability.  For example, what would the current financial engineers say to purchasing an extruding machine that will last more than 100 years?  Generally, NO; purchase a less expensive one.  Yet, as shown on the Science Channel, the Discovery Channel, and the History Channel, there are machine tools for extruding a wide variety of products that have been in service for at least one hundred years.  Now, they look like good investments.

There are at least two reasons Production Capability has never been woven into the fabric of accounting.  First, metrics of Production Capability may be non-monetary, which finance engineers and Wall Streeters cannot accept.  This is one reason that in performing a cost/benefit analysis, the benefits are almost always discounted and the risks are magnified--which leads to analysis paralysis.  Yet, there are many non-financial metrics that may be useful in deciding on future investments.  Second, because the metrics are non-financial, economic organizations have no interest in tracking them, which means there is no good way to manage them, (you can't manage what you can't measure).  Politicians have no incentive to create and manage to metrics, since it would limit their ability to spin-doctor the performance of their (right or left leaning) political perpectives.  The consequences are bridges to no where in one district, while important the bridges in another fall into the river.

What is needed are Value on Investment(VOI) metrics.  These are process metrics that link infrastructure investments to the process that they enable and support; processes, which in turn measurably link to the organization's strategies, mission and vision.  This VOI metrics should consider at least these four characteristics:
  • Do the process measurably support the organization's strategies, mission, and vision?
  • Do the processes runs more effectively because of the infrastructure investment? (Effectively means that there is a measurable process (and value) effect)
  • Are the effective processes measurably more cost efficient?  This is about the only benefit that most organizations measure--and its really third in importance, or maybe fourth).
  • and does the infrastructure investment provide process agility? (Agility is the organization's ability to successfully respond to unexpected challenges and opportunities--which are possible but difficult to measure)?
Also see my posts Security: A Mission of Government and Governance, Standards: A Mission of Government and Governance and The Purpose of Government.

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