Conference 7.286::digital

    Every Software Services manager I can find, I tell him a little
    story about accounting.  It measures (a) income (the difference
    between revenue and expenses and (b) equity (the difference
    between total assets (ie what you have) and total liabilities (ie
    what you owe).
    
    The "assets" of Software Services aren't measured by accounting
    techniques like the assets of manufacturing.  They are intangible.
    The assets of Software Services are the talent represented by Software
    Specialists.
    
    The best situation for a manager who wants to look good is to not
    replace the assets.  If I'm producing steel and never upgrade my
    steel mill, and I can get out before the mill is no longer
    functional, then my "income" will look fantastic while I can "milk"
    that old steel mill.  The value of the mill is zero, but no one
    measured me on that!
    
    The parallel case in Software Services is to look for a manager who had
    been able to retain his staff for long enough to be competent in both
    the product and application areas.  Then look for his successor to
    "raid" the group for the sake of a good fiscal quarter by refusing to
    maintain the same level of salary, training, in-house systems, and so
    on.  People complete their current projects and then transfer or
    resign.  One reorganization later, our manager is once again doing
    the same thing and still looking good on paper.
    
    This all seems so obvious to me, but it takes forever to get higher-
    up managers to see a pattern of morale busting and high turnover
    which are the hallmarks of the "short-timer" software services manager.

    re .1: Pat, all you say is true. But all of the problems emanate
    from the original premise that each Unit should be a standalone
    profit/loss center ... said premise being the basic problem ...

    I don't think that the problem mentioned here ( and allready quite
    a while ago when this conference used to be a "notesfile") comes
    solely from the cost-center system. The main issue is rather what
    the "manager" makes out of it. Where if the manager is a real manager
    it works fine, but if the manager is just an administrator, eg.
    constantly watching the figures, then it's bad. Unfortunately during
    more then 15 years with DEC I've seen more administrators then
    managers. I must admit though that lots of other DEC'ies I know
    just say the contrary. The whole issue is quite contradictory in
    itself. It's the eternal short-range versus long-range planning
    story mixed with personal versus group versus company strategy,goals
    etc... Imagine an ambitious manager trying to make it up as fast
    as possible the career path. Would he feel very much concerned about
    long range goals for the group, knowing he wouldn't be there longer
    then X months anyway ? On the other side if you had to make a decision
    yourself on a conflict between personal/group/company interest.
    What's your choice ? Of course lot's of people will say there never
    is such a conflict: The company interest=group interest=personal
    interest. True in theory, but how about the real world !
    All the answers are in the company ethics. DON't forget the first
    word is HONESTY. It's easy to spell, but just like the 10 commandments
    a lot more difficult to live up to. 
    
    Fred
    

    I agree completely with Pat. The REAL problem is not that units
    are profit/loss centers.  First of all, a SWR unit is NOT a cost
    center in spite of what some unit managers want their people to
    believe.
    
    The REAL problem is the policy in SWR at the highest levels of placing
    TOTAL emphasis on APPARENT profit margin.  This is why software
    specialists DRIVE and real employees FLY.  Hopefully, the recent
    changes in the US organization will make SWR more realistic relative
    to doing the RIGHT things.
    
    A couple of direct quotes from senior SWR managers from a few years
    back:
    
    "What we need to implement B$ST are more managers.  Technical people
    are a dime a dozen."
    
    "There is no such thing as morale - it can't be measured numerically."
    
    Both of these exhibit what Tom Peters calls TDC - Thinly Disgused
    Comtempt. 
    
    It's up to ALL of us to do the RIGHT thing in all situations and
    to use our own leadership to LEAD those around us (including managers)
    to also do the RIGHT things.
    
    Don

Managers frequently lose sight of the fact that they are here to manage 
PEOPLE, not numbers. I have yet to see a manager who could effectively 
manage people not make his/her numbers.


MartyJ

    No one replying to this topic has bothered to really discuss the
    larger implications of costcenterism, but rather try to use it as
    a forum for their favorite management theory. Also, the old
    'marketing vs. technical' thing was dragged in.
    
    Let's try it the other way: Please explain to me why costcenterism
    is a GOOD THING. And why the Sales organization, who wouldn't have
    anything to sell (or anything to say) should be treated as privileged
    employees.      
               Karl Moeller SWS Tucson
    

    Perhaps the reason that cost centers haven't been called into question
    is that no one has offered an argument against them.
    
    Cost centers create accountability.  More than one cost center manager
    has been able to flame to a creeping bureaucrat at DEC "Don't tell me
    how to do my job and make my budget, I'm accountable and you're not!" 
    
    Cost centers create an entrepenurial environment.  The cost center
    management philosophy has had as much to do with DEC's long-term
    success as our decision to build our own video terminals, for example.
    Cost centers work at Digital. 
    
    Who's made the claim that sales people should be treated as privileged
    employees?  Please clue us in. 
    
    

   1. Cc: It allows every mgr to "manage" his/her business with a "company
   owner" mind, like if they were their own boss, dealing with their own money.
   This gives better results because they are psychologically closer to money
   problems than the employee who is working for a company but doesn't care
   about saving/making money. 
   
   2. never heard such difference. As Pat said, please demonstrate.
   
   Didier

    After spending seven years in sales, my own experience is that there
    was no difference in privileges or rights between sales and other
    field organizations under normal circunstances.
    
    Let me expand. I was selling in Mexico and we weren't
    doing our numbers due to import restrictions, but services were
    since we already had an installed base, for a couple of years sales
    had a very restricted expense budget.
    
    In this kind of situations the cost center structure could produce
    some conflicts, since services personnel continued their normal
    way of doing business and sales didn't. Obviously, this is a
    very specific case.
    
    Octavio Diaz
    

    I never stated that 'costcenterism' is a bad thing when dealing
    with nonDEC clients...my position is that it is counterproductive
    when a significant portion of a department's business is internal,
    such as Ed Services. Ed Services is making a profit off of field
    and software services, as well as sales... making every transaction
    regarding training a monetary and political one, issues which should
    be peripheral to the (technical) problem at hand.
    
    Regarding sales as privileged entities, I'm only reporting what
    I've seen nationwide. Check .0 para. 2 for an example which I'm
    sure is repeated in different guises many times per day worldwide.
    
    Karl Moeller SWS  
    A

>    position is that it is counterproductive
>    when a significant portion of a department's business is internal,
>    such as Ed Services. Ed Services is making a profit off of field
>    and software services, as well as sales... making every transaction
>    regarding training a monetary and political one, issues which should
>    be peripheral to the (technical) problem at hand.

    We're back to Digital's long-term lack of decent internal accounting
    tools.  We usually DON'T know how much something actually costs
    the company; instead, we use arbitrary or overly-averaged numbers
    and pass them along to other CCs.
    
    Before coming to Digital, I managed a CC at a firm whose business
    was government cost-plus contracting.  All INTERNAL chargebacks
    were the business of the Government, since they were paying for
    them via overhead rates!  We had to justify every cross-charge (which
    was 100% of my budget).  Internal cross-charges were validated true
    costs.  External rates were the same plus (published) markup.
    
    It was quite a shock when I saw how Digital did business.  Telling
    someone to "do the right thing" is very difficult when there's no
    accurate metric.  In my particular (previous) job, the question
    often arose as to whether it was right to use DTN or local telcos
    to make calls.  Often DTN was a higher  price (sometimes MUCH higher).
    Nobody at DTN admin knew or cared what the true cost to the company
    for that particular case was; instead, DTN was "<foo>% of DDD" acrosss
    the board.  
    
    When internal costs are reflected in accurate chargebacks, "cost
    centerism" usually benefits the company.  When one CC makes a profit
    off another, the latter has incentive to "do the wrong thing". 
    And no good reason to believe that it isn't "the right thing".

    "Transfer Costs" where they are accurate and fair will let goods
    and services flow efficiently through the company.
    
    When they are not accurate nor fair, those goods and services aren't
    used, and furthermore cost center managers as consumers can and
    do complain.
    
    As for the local "why do I drive" situation in .0, the consensus of the
    replies was that this is a local problem. 
    
    As for why DECATHALON is so lavish as .0 opined, U.S. Software Services
    has a new recognition program that I won't outline here, see your
    manager about it. 
    
    Since Digital is unique in not paying its sales reps commissions,
    other incentives have to exist to attract and retain competent and
    excellent.  The Sales recognition program is part of those incentives.

RE: cost-centerism

Operation of internal service departments as zero-balance cost centers insures
that there is no abuse of the services as would be the case if they were "free."
It makes managers who use the services aware of how much it really costs DEC
as a corporation to offer the service.

In the case of Educational Services, they offer a service for sale to external
customers.  If Ed. Services courses were free to DEC-internal students, there's
a very good chance that the internal students would crowd out the customers,
who are the primary intended recipients of the service.

RE:  incentives to Sales Reps

Given that we do not pay commissions, as does most of the industry, we must
have some reward program to replace commissions.  Otherwise, all of the good
sales reps will leave DEC for greener pastures.  If anything, we don't have
enough of such incentives to keep our good people.

--PSW

    Well, I hear what you're saying about Ed Services and Sales.
    
    But I don't have to like it!

The problem isn't with "cost-centrism" as such.  The problem is with whatever
management levels exist ABOVE the cost centers involved who are not doing their
job.  At each level of management, there is some level of responsibility.  A
cost center manager is primarily responsible for his own cost center.  He has
neither the information nor the resources to be realistically responsible for
anything more - except in certain special cases, which are SUPPOSED to be
covered by the "do the right thing" commandment.  A manager of cost centers
is responsible for (a) making appropriate tradeoffs among competing cost cen-
ters; (b) setting larger-scale goals that cost centers must respond to, even
when those goals may conflict with cost-center-specific goals.  For example,
cost centers get charged "taxes" for corporate-wide services that they use.

Of course, what goes for a manager of cost centers goes for levels above
that, too.  At the top levels, fundamental decisions are made about what
kinds of goals the corporation as a whole has.  For example, it's probably
the case that many cost centers could show more profit by simply firing all
their employees, declaring themselves "financial offices", and investing
their yearly budget in appropriate banks or stocks or whatever.

Problems arise in at least two ways:  (a) Cost centers which, in practice,
have significant interactions, so that rationally some effort should be put
into making tradeoffs between them, may not share any management for several
levels of the hierarchy.  When problems occur more than two levels under all
but the very best managers, they never become visible to that manager.  This
kind of problem tends to develop with time, since old organizational structures
eventually no longer reflect the actual interactions among groups.  It also
gets worse when organizational hierarchies get deeper.  DEC used to have a
very flat organization.  Parts of DEC still do; parts of DEC don't.  (A
year or so ago, I posted a chart near my office, along with an article from the
New York Times business section on the problems with deep hierarchies.  The
chart showed that, when I started at DEC 8 or so years ago as a Software
Engineer, I was something like 4 levels from Ken Olsen.  Now, as a Principal
Software Engineer, I'm about 7 levels down.  (Actually, I don't know the
current number, since there have been some re-organizations since.)  Note
that this CANNOT be accounted for by growth alone:  Assuming - very generously -
3 direct reports at each management level, each new level in the hierarchy
allows 3 times as many employees.  DEC has grown by a factor of under 4
since I started....)

(b)  There are all to many managers, even at the right level, who are just
not doing their jobs.  One characteristic of a hierarchy is the, the higher
you go, the longer it takes to produce noticable effects.  An engineer can
cause a project to slip in a couple of weeks.  It can take two years or more
to really destroy morale in an organization of, say, 100 people; during that
time, the organization will continue on its past record, and may appear to
be doing very well.  Of course, it's running head-long into a brick wall....
Re-building the organization afterward may take as long, if it's possible
at all.  So...poor managers can survive for quite a while on short-term
decisions - often long enough to go off and get another job.  Good managers
are sometimes not given the time needed to repair the resulting damage.

							-- Jerry

    re .13 and Pat's statement
    
    > As for why DECATHALON is so lavish as .0 opined, U.S. Software Services
    > has a new recognition program that I won't outline here, see your
    > manager about it. 
     
    I'm in Ed Services, which is part of Software Services.  I
    asked my manager, who asked his manager, about the "new
    recognition program".  There isn't one for Ed Services, because
    Jack Shields "doesn't like them" (I was told).
    
Jim Stratton
    

        re .18 - doesn't like recognition programs.  I don't know
        his opinion of Ed Services. :-)

    I did not think that Ed Services "was part of Software SErvices"
    
    They have the same VP but are independent organizations (I thought)
    - Busick has SWS, Ed Services, CSS, and Software PRoducts - each
    its own entity.
    
    Pat was (I believe) referring to the Excellence Awards program which
    has been revamped for this year.  It is a Software Services program
    for field specialists.
    
    Marsha
    

        Ed Services (currently run by Pat Cataldo) was moved
        into/under Software Services (run by Don Busiek) last fall
        sometime.
        
        Someone in the corporation thinks Ed Services is part of
        "the field" - I periodically get newsletters, and the like,
        that talk about "field" (sales and field service) things
        that, while academically interesting, have nothing to do
        with my job.
        
        I wasn't trying to dump on Pat or anyone else.  It just
        bothers me a little that there is a "recognition program"
        for some groups in Digital, but not for other groups.
        
Jim Stratton
        

    Ed. Services does have an Excellence Awards program for instructors.
    I wouldn't have known this if I hadn't heard it from an instructor,
    though.
    
    					Val

    Ed Services manager of many ilks have recently been asked to contribute
    ideas for expending the current recognition program.  I don't know
    about your area specifically, Jim (you could ask your manager),
    but where I am we have been asked specifically for ideas on how
    to recognize performers other than instructors.  I don't know what
    the long term results will be, but someone is thinking about it
    anyway!