The Arithmetic of Life and Death (12 page)

B
usinesses almost always perform better when each employee in the business knows what his or her objectives are. That is why a technique called Management by Objective, or MBO, was invented. Unfortunately, MBO may not be the most commonly practiced form of the discipline in some companies, which may explain, with the assistance of Reginald DeNiall, the insertion of the
U
in MBUO.

After Cryptogram’s management team had so much difficulty in reaching a consensus on market expansion, Reginald DeNiall had no choice but to convince the board of directors to accept a revenue growth objective of just 33 percent for the succeeding financial year. Being a firm believer in Management by Objective, Reginald began the process of parceling out the annual goal to his management team within days of the conclusion of the board meeting.

Most of the goal-setting process was not difficult. The exception was sales. Since the consensus had taken so long, there would be no revenue from the new market in the coming year. But the diversification would absorb virtually all of the company’s investment capacity, so the existing sales force would have to shoulder the burden of company growth.

Reginald believed that his sales force had the capability. However, like many executives, he worried that the best of them would not close all of the sales they were capable of closing. Called “putting the order in the drawer,” it was a common practice, especially among sales representatives who made quota well before the end of the year. Given a 33 percent revenue growth target in a slow growth market, Reginald knew that he could not afford to have any business postponed into the future. So Reginald decided to increase the sales quota slightly, by only 12.5 percent, which made the target a total of $54 million, an $18 million increase over the previous year’s business.

The vice president of sales was intimately aware of the conditions in Cryptogram’s existing market. But he also knew that arguing with the $54 million objective could be construed as a sign of weakness. So instead of debating the point, he focused on figuring out how to distribute the revenue objective among his sales managers.

On the surface, it appeared that each of the six sales managers would be required to shoulder a new year revenue objective of $9 million. But the vice president was worried that only three or four of them would be able to reach the goal and that the failure of the others would drag down the overall performance of his group. To make sure that his best performers performed at their best, he decided to
increase the revenue target for his sales managers slightly, to an average of $10 million each.

The six sales managers, who had produced an average of $6 million in sales revenue the current year, were not enthused by the 67 percent growth in their quotas. Given the conditions of the market, it was not at all clear that the average representative could increase sales by so much in the coming year. Obviously, some stars would be needed to lift the overall performance of each sales team. So the sales managers conferred with each other and decided to raise individual sales quotas slightly, from an average of $1.67 million to an average of $2 million.

Thus, by the time that new year’s revenue target reached the field, it had increased from the CEO’s objective of $48 million, or $1.33 million per sales representative, to an average of $2 million per salesman and a total sales target of $72 million.

Over the course of the ensuing year, the sales team worked very hard. Eight of the thirty-six sales representatives actually made quota, producing an average of $2.5 million in sales revenue each. Sixteen representatives, however, failed to reach the target, producing an average of just $1.5 million, or just 75 percent of quota for the year. The other twelve sales representatives left the company before the year’s end. Although new salesmen were hired, they had to restart activity in their respective territories after being trained. As a result, the twelve territories affected by attrition produced just $8 million in revenue for the year, only $667,000 per territory and less than 34 percent of objective.

So, overall, Cryptogram produced $52 million in sales revenue, 8.33 percent above the Board’s target for a
“tough” year and 44 percent above the previous year’s performance. The sales vice president, however, finished the year $2 million below his quota of $54 million. As a result, he was excluded from the spring sales trip, he was chastised for unplanned attrition within his organization, and he got no raise in salary.

The six sales managers produced an average of $8.67 million in revenue, up 44.5 percent from the previous year’s average of $6 million. But four of the six failed to make their $10 million quotas and two of them were subsequently terminated.

Eleven of the sixteen sales representatives who finished the year but who failed to reach their $2 million quotas eventually left the company, continuing the decimation of the sales force into a second year. Even so, they had increased their personal productivity by an average of 50 percent, from $1 million to $1.5 million, which was better than the company as a whole.

Nevertheless, it was a very successful year for Reginald, who, despite a downturn in profits due to heavy end-of-year discounting, got a raise, a one-year contract extension, and more stock options. In the following spring, which turned out to be his last as CEO at Cryptogram, he took his eight star sales representatives and two star sales managers on a business trip to the South Pacific.

Management by Objective can be a good thing. Certainly it is far better for employees to know their objectives than to guess at them. But if the original objectives are stretched at each layer of management, even slightly, then they will compound. It is an arithmetic certainty. Thus, MBO at the board level can quickly escalate into MBUO, which means Management by Unobtainable Objective, by
the time it reaches the bottom rung of the company where actual work is done.

Cryptogram’s management team had an alternative. Instead of being seduced by MBUO, they could have increased the average quota of its sales force to $1.33 million and hired six to nine new representatives in anticipation of attrition and expected growth. As a result, objectives would have been equalized up and down the organization and everyone, regardless of level, would have had the same chance to succeed or fail—together.

M
anagers have been with us since the beginning of history. It is well documented, for instance, that managers were involved in the construction of the Great Pyramids of Egypt. And the Greeks invented education managers, whom we call teachers, although no one knows who invented principals. But even before the Egyptians or the Greeks, there were chieftains in virtually every known tribe. And long before that ancient time, there were cave managers, commonly called parents, who formed an institution so resilient and successful that it survives today in some of the planet’s more primitive regions.

In the postmodern age of information, management has become a science, just like everything else. Its most advanced forms, like MB(U)O, are most often encountered in business. But ironically, the most complex management
challenge of contemporary times may be the executive branch of the U.S. government. This is a single, cohesive organization of some 2,800,000 employees, all of whom work for the president of the United States under the watchful eye of freshman Congressman Reginald DeNiall and his colleagues.

A lot of those 2.8 million federal employees are managers, perhaps too many. And managers, by definition, do not do real work, especially middle managers. So, what if, with the exception of the president, all of the management positions in the executive branch were eliminated?

As enticing as this may seem, especially from a cost saving point of view, there might be a few complications. Most important, the president would have to communicate government policy directly to each and every one of his 2.8 million federal employees. (This is the humane management elimination model, wherein all managers are given real jobs rather than being terminated—which, no doubt, the affected managers would also do if faced with a similar challenge.) In the perspective of an average, fifty-six-hour workweek, the simple task of communicating to each employee turns out to be a daunting challenge, even for a very succinct president. And, arguably, a succinct president may never have been elected in the entirety of American history.

Nevertheless, if a recently managementless but uniquely succinct president undertook to speak to the entire employee population of the executive branch in groups of ten every month, and if the president devoted fifty-six hours per week (and four weeks per month) to this important task, then he (or she, someday, presumably) would be able to devote approximately 2.9 seconds to each meeting, exclusive of preparation and travel time. It is not likely that
2.9 seconds per month would be adequate time for the full communication and discussion of federal policy, much less day-to-day workload. Over the course of a full four-year term, the president would be able to spend only about two minutes and eighteen seconds with any group of employees, certainly an insufficient amount of time for discussion, bonding, or the establishment of camaraderie.

If the average group were increased to one thousand federal employees, which would probably eliminate any opportunity for bonding or camaraderie with the president, then the average monthly get-together could last almost five minutes. However, if 50 percent of each meeting were devoted to questions and answers, and if the answers were no longer than the questions, then each employee would have just .07 seconds to ask a question. Worse, the president would have just .07 seconds per answer, which would limit most presidents to a paragraph or two.

Luckily, our government does not suffer from such a self-imposed dearth of management. In fact, the president is required by law to appoint the more senior of them after election. These appointments are the most important positions in government: secretaries, undersecretaries, agency directors, commissioners, and ambassadors. So the task of selecting the best person for the best job must be taken very seriously.

For a similarly critical job in business, it might be expected that the chief executive would spend at least an hour with five candidates for each position, another hour with each of two finalists, and one hour cementing the relationship with the surviving applicant. (In comparison, every Intel interviewee, regardless of position, is required to undergo at least five interviews.)

However, according to the Office of Personnel Management, each newly elected United States president must make 2,899 such appointments, more than 110 of which report directly to the Oval Office. Assuming a fifty-six-hour workweek and eight hours of interviews per position, the president would be able to appoint only seven new government executives each week. At that rate, assuming no vacation time, it would take the president a little more than 414 weeks to fill all of the appointed jobs in the executive branch. Four hundred and fourteen weeks is just two weeks short of two full presidential terms. This would mean that 99.6 percent of government business would be left unmanaged for eight years, which may explain one of the more popular theories in the general electorate.

Of course, the president does have a few things to do other than interview federal management aspirants, one of which is getting himself reelected. So, obviously, some hiring shortcuts have to be found. If, however, the president commits to completing all of the necessary appointments in the first six months of his term, and if he can devote an average of sixteen hours per week to this critical task, then he can afford to spend an average of just under nine minutes per appointment. This is probably insufficient, even for the heads of the Panama Canal Commission and the Marine Mammal Commission, both of whom report directly to the Oval Office. And nine minutes is almost certainly an inadequate amount of time to qualify even a single political candidate to direct the Office of Government Ethics.

There is no commercial enterprise of any kind that imposes such a burden on its chief executive. In fact, most modern corporations tend to operate with an average span
of control (the number of direct reports to each manager) of between eight to one and twelve to one. If the executive branch of government were organized along the lines of a similar model, perhaps a span of control of eight or nine to one, then the president’s job would be dramatically simplified, as follows: