SALS Conference 1989: Tape 6 - Dan Smith on IT at Southern California Edison

Speaker A You.

Speaker B Result summaries.

Speaker C We've reorganized the department. The department head now has ten direct reports instead of three. We've removed four levels of management. Span of control is doubled. Our staffing is declining each year while our workload and computing capabilities are expanding. My projections on the dotted line that went from 600 to 670 of 735 and on up versus where we are now and where we're going to be are about 100 bodies. And I think we're probably 60 bodies still overstaffed. The problem is, in information work, that the more work you have to do, the worst thing you can do is add more people. We were doing exactly the wrong thing. And some of us have been talking about some of the computing work. Now, the most important single action a computing related organization can take if it wants to improve its productivity, is to hire fewer people. We would be better off I've used this we would be better off taking some of our extra people, buying a brand new Lincoln Company cars, send them down to the beach and count the waves. They issue an annual report and stay there. We would be more productive. Our savings to date are in the three to $5 million range within the department, and that's direct labor cost, probably productivity wise, we're considerably above that. In other little incidentals, there is probably another equal amount that we know about that we can't achieve. One of the problems that's happened and I'll stop here and then we can get into some of the discussion of the actual structures and the methodologies. After lunch. One of the things that's happened is, as a department, we've outrun the company so that today we have more organization development. One of the things that we did was we worked closely with Katie and the CRA people as well as a number of others. Elliot was out on a couple of occasions. Catherine did some work with us. Ian, you were there. Jillian did some work with us. What's happened is we have more organization development capability, more human resource planning capability, and more wage and salary compensation capability within the information services department embedded in the trained general managers than the entire corporation has. And so we have devised some new compensation systems, performance effectiveness review systems, salary planning and so on. And the corporate people are asking us to show them so that they can roll them out into the corporation. That's really awkward for my boss, because when he wants to do something, he's got to literally bring the whole corporation along. And that's tough in a political environment where there's no real general perception of the need. And so we are at a point right now where we really can't do anything more because of the limitations of the corporation. And those are not critical. Those are just its own organization change. Illustrating that, we did a little study at one point about a year ago, identified about 35 people who could be redeployed to other work in the corporations. Hear my language. We've fired no one. No one has been forced to be retired. Edison is so big with so much attrition at various points, that people can be redeployed and we can make a genuine commitment to sustained deployment, and we've done. So we've never done any projects except that way, and it's worked out great. Our problem is that in 90 days, we could get just over $2 million in savings. He read it. He looked at it. We debated it. He agreed. And he says, I can't do it. If I did, the executive committee would ask me, how in the hell did you get into that situation in the first place? And if they ever opened up that box, they'd be stuck with the problem of the massive amount of excess costing that's going on and probably would freeze everything. And it took me a while to chew on this one. Katie knows because she helped me. We ate a few burritos and debrief that one, I'll tell you. But he was right. He had to trade off that game for the autonomy and relatively low profile to keep working on other stuff. And so that's where we are at today. When we come back from lunch, I'd like to talk with you about what we've done in the specific development of our general management and what we're doing as far as the training and some of the lessons associated with that. And we can talk about what we learned and how to organize a requisite structure.

Speaker D Thanks.

Speaker C In 1984, the department as I said, 1984. In 1984, the department was around 620 people and growing at 20% per year, had grown at 20% per year since the late 70s. There is a phenomenon I've come to call the urge to group. What had happened was that on almost any known criteria, that more than two or so people shared in common. We created a supervisor to ensure consistent, unified command. So if you had two people working on a computing project and they were both trying to build an application by the same name, like Accounts Receivable, then you created a supervisor of the Accounts Receivable team. And if there were three different teams or more who happened to share in common the property that they were all working with, financial kinds of things, then we created a supervisor to ensure unified command over financial applications. And then if the financial applications were only one segment of a Edison department's project list, so the accounting department of the company had financial applications, and they also had accounting applications and revenue management applications. Then we created a supervisor who had unified command of all the computing projects for the accounting department. And then there is a quality that all of the 400 people who were involved in building computing software shared that in common. So we created a job as a project manager of all the application development and this urge to group on no logic other than just a shared criterion resulted in the following structure. Let me see if I can get this right. On top of this, there was a vice president of administration who reported to the president, who reported to the CEO, all perceived to be differential jobs. Edison has 28 salary grades, 23 of whom are used. We feel that we're lean and mean because PG and E, which is San Francisco, has 30. I was in a meeting like this and told and went to San Francisco to give them a kind of a report on what we were doing. They had invited me up and I said, we have 28, 23 of which are used. And they looked at each other's dead silence, just like you. And the Vice President of Humane Resources says, we have 30 working fine. I went on with the topic. So we had a department, this was the third level, fourth level down. How to do this? CEO, president, vice president of administration, department manager. Then we had a general manager of all computing application software appear, which makes sense, right? Because that's all the people who share in common the property that they're working on, the software. Then we had an equivalent who is in charge of operations, that's all the people who had in common that they were involved in the running of the computers and the running of the printing operation. Edison prints about $300 million worth of bills a day and runs 24 hours a day, seven shifts for six and one third days a week. There are 8 hours of scheduled production time left during the week. So if a printer fails, or if you run out of paper or the software fails, you have exactly 8 hours cumulative time during the week in order to get back on schedule, or you cannot start the next week's billing at twelve one on Sunday night. So all computing maintenance is done in the operation between actually, it's done on Sunday, Monday a. M. Between twelve one and 06:00 A.m., when the prime shift comes up. That's all of operations, about 250 people. And then we had another group that was responsible because they all shared in common the use of personal computers in workstation, desktop, office types of settings. So we were set up in a way on no rationale other than the sharing of a common property that made sense to someone. The application manager actually had an assistant manager who managed project managers. Now it gets pretty hairy. You got to follow me. You run out of titles in 28 salary grades, so you have to have some weighted job name titles. We use the word of. A supervisor of is a higher rank than a supervisor comma. Okay? And a manager of is a higher rank than a manager comma. Okay? I don't regard it as that particularly funny. So we had a manager follow it. Now then of course you have assistant associates in there as well so you can handle it. It's no problem for a skilled person. What's crazy is you talk about the systems. If you're a supervisor of that's salary grade eight or higher you get four extra inches. Now, that's when the people come out from the facilities and give you a new desk that has a four inch overhang. If you're a nine or above, you get a door because we're an open office environment. Nine or above automatically get door. Tens get an accent color, right? Twelve s are wallpaper. Vice president gets a bathroom. Obviously, this parenthetically I better say it right now as a result of all this streamlining my boss, the department manager was may the vice president. To his credit and with the very great respect of the members of the department. The first question that we asked him about, we congratulated him and we had the first question was where are they going to put the shitter? His answer was he told them he would not remodel to install a bathroom no matter what. He is not going to install his office. What they do is come and strip out all the walls and put up mahogany and then they build a bathroom. Wherever you happen to be, in whatever building you happen to be. No cost obstacles. You ever tried to put complete plumbing through concrete cord construction? We got guys that will do it. That would not have been the case four years ago. We talk about the little things like the shoes and so on. He sent a message loud and clear through the department that it mattered to him about those symbolic leadership deal. And we laughed a little bit, but we were also pretty proud of him. We were glad about that. We had a manager of you following along manager of application development and assistant manager of application development project manager, supervisor of Supervising supervisors, comma who supervised project leaders. Right. Who supervised analysts. And there were also various grades of analysts. Now, this analyst is a college degree high straightum, actually. Was it Katie? Probably ranging stratum two into stratum threes. We found some stratum three capability at the analyst level. There were cases in which we had a three who had a three on top of three on top of a three on top of three on top of four on top of four on top of three. Right. It was beautiful. And essentially the same thing happened over here in operations. We had an operations manager, had an assistant manager of operations had an operations supervisor actually was supervisor of operations managing a supervisor of various there are some points like the printing department who then had a shift supervisor in charge of the crews, each of which I missed. One, there was a lead. We felt we were running pretty lean, pretty tight machine with excellent control. We made some changes and this was me. Okay? I was fairly happy about this situation. I could not fail. There was no way. We had a supervisor of administration managing the ferry drivers. And remember, we're in different buildings, so we have our own janitor crews and a little shuttle driver, little bus system to take you from building to building to building to building. Well, that's all of this. We have receptionists in the word processing, all sorts of those kinds of things. And those are just stuff you have to do. So we made that person kind of in here, and we drew them on the chart accordingly and all that stuff. We were regarded as an outstanding data shop. We were one of, like I say, well regarded in the IBM circles. Everybody comes to visit. Rolls Royce came to visit. Rolls Royce does a little computing as well as making engines and things, and they thought we were pretty neat. And where are we today? Today we have a vice president of Information Services. That vice president has ten direct reports allocated roughly as follows 12345, 910. We have the office division we've took out. Actually, we didn't take them out at all. Redeployed them. These people, where are they? The project managers were recognized as straightum four requirement roles because their basic task was integrating multiple application development efforts in which they had to integrate and balance simultaneous investments for one or more departments in the corporation. This manager was redeployed as a manager, and I'm going to show him right here of Support Services one of the best investments we ever found. He had been regarded throughout the department as fairly questionable in ability, waiting for him to retire, treating him quite humanely. He was redeployed and has saved our bacon so many times that he is universally regarded as the most important high performing manager we have. And he has been asked several times to defer his retirement because he's that valuable for us. Yeah, I mentioned that yesterday, our earthquake experience. It was all his guys. They were sitting there ready to go, everything in shape, and they were in the building and starting repair within a couple hours. And just incredible. They paid for themselves for years on that one.

Speaker A Edison, as you know, about a year ago October, we had a fairly large earthquake very close to Edison, and there are two other major computing facilities in the same area. One of them still is back at the time, and one had to take all their tapes to Phoenix to run. Edison was up, second shift ran normally. The earthquake occurred just before eight in the morning, and then a month later, they had about how many people out in the trailers that burned?

Speaker C Oh, that's another. I didn't tell you about the fire.

Speaker A We had wonderful things that happened.

Speaker C We had 160 people in an application development division in a complex of trailers, accidental fire and so on, and they all burned to the ground overnight. All of those people had new terminals installed in new office spaces with complete sets of technical manuals and were ready to go at 08:00 the next morning. Their backup documentation had been delivered to their site, and they were notified on the company's computing system where to report. They essentially were at work the next morning and with no interruption.

Speaker A Both Dan and I attributed to the quality of this manager.

Speaker C Unbelievable. Unbelievable.

Speaker A So bringing the high level ability to bear on what we're seeing as rather mundane problems, I think really saves.

Speaker C He refers to the corporate budgeting people as Monty, Mo and Jack. Those are the name of Pep Boys Auto Service, which is in this area, sort of low grade bicycles and things. Question okay, these are division managers of Application development, with divisions of 60 to 120 people developing multiple applications for a number of departments in the company. This is, in a sense, the computing services. This is the old operations division. And then we have three other standalone individual contributor roles. One of them is organization. That's me. One of them is Applied Technology. We have a Mode Eight working at 535 year old guy who does some coding, and he constructs high tech operating software to get the full capabilities out of IBM's environment ought to tell the ultimate solution. This guy reported to one of these people that reported to this assistant manager when I got there on his own, he had built some software that maximizes IBM. The difference in performance with and without his software is equivalent to a complete mainframe. So he's making us about a $5 million capital expenditure. One time out, he was four levels down in the organization. We reorganized, created a stratum four position, which is fundamentally a technology improvement job. We had some problems. The systems are so big that they're using up all of the available memory in the mainframes. If those of you have PCs, they have that little message that comes on so and so. We run out of memory at about 16GB, I think. And our software is so big that it uses up the entire memory. And when that happens, everything just shuts down. So we called IBM and asked them, can we get a special package built for us that would allow the software memory to be expanded beyond 16GB? And IBM sent engineers over from Hersley, the Hersley lab outside of London. They studied the problem, went back, called back three months later and said, it can't be done, at which point they got a message back that said, that's okay, forget it. Harvey already fixed it. And he did. He had worked on it over a weekend. I'm not kidding. He had worked on it over a weekend. His schedule got a little bit light. He was interested in the problem. Finally came together for him. He worked through Saturday night, was testing it on Sunday and Monday. It came up and IBM sent their people over. Try to figure out what this guy did. We have established in his home a complete hardwired controller. Not no little modem box. He is hardwired to the memory and he has every piece of equipment that he wants. Our estimate is that he saved us at least two mainframes. And if we didn't have what he had, we would need not only two new mainframes, which is now close to about 14 million, we'd need a complete new data center to house them because we just don't have the space to accommodate that that's that high level individual contributor role that does do some payoffs. We also have a technology research function whose mission is to study the forward IBM technology stream and identify promising technologies for possible unfolding. In here they're working a lot in AI, desktop publishing and some other capabilities. And this guy travels around the world, been at conferences in various places trying to monitor this span of control. Went to ten from the top down. That gives you a picture of where we are. Our next basic methodology no, I'm still okay. The next basic approach was then to start study projects division by division. And we followed the rule that I was always the staff person who was supporting the project. This is one of the mistakes we made. Incidentally, it was not well, I regard as a great success, but we made the mistake of not making the department manager the formal and official head of every project. Instead, we made the manager of the division under study the sponsor of the project and gave him the authority to veto presentation of the final study results until he was personally ready to go in and take accountability for them. What that meant was that, say this given manager in operations, when we studied his operation and generated a recommendation for a more streamlined requisite structure, if he was not prepared to accept it, he could stop it. And I always honored that. And under that circumstance there were periods in which as much as a year passed between the time the study was finished and the manager was prepared to say I'm ready to live with it. That's what I will be willing to do. It had the disadvantage of that enormous time delay. It had the very great advantage that we just don't have any resistance to change because no one is being sideshot. There's none of that at all. If this guy though isn't up to his job, you're dead in the water. And so that's just a lesson from the we took this superfluous be retired as soon as possible manager. Remember that guy? And I remember my boss asking me, well, do you think we could get him to take a pukey job like this? Support services? Won't he be offended? Which point I realized that everybody had veto authority so that they wouldn't be offended. I went in and said, well, I'm offended. I want more money. It doesn't apply to you. We made him an ex officio member of every OD team. And so, in essence, myself and this person constituted a standard pair of people who were involved in every OD effort. Katie had done a significant amount of original stuff and was at all times involved in advising us and supporting us to my great advantage. A couple of times the night before the presentation, she calls me at home. It was real irritated. It was good, it was on the phone. I had that baby locked, truth and justice in my hands, ready to go in and give it to a manager. She calls the night before and says, I've been thinking about it. I think we're wrong. And she lays out this alternative. I was icy cold. I was a bit irritated. I did take a shower, as a matter of fact. Thought about this Saturday night, still reasonably irritated. But I live 35 miles from you, still irritated. While showering for church the next morning, I realized she's right. Problem is, she's never been wrong. Irritable, irritating, never wrong. And we went in and rebuilt that recommendation overnight. It's worked beautifully ever since, and that saved our bacon. That was one of those lucky accidents. And I learned never quite trust what you think is right. Always get that second and third opinion and let it season with a little time as well. The two of us formed this study team and we, in essence, then added the rule was the OD team consisted of the manager of the target organization, the two of us who were ex officio members and one other manager who would later be the manager of a sponsor of a study team. And we've worked our way through the divisions. Well, the end result of it is that all of the direct reports that have the capability and the interest and who have requested that their division be a target division are now fully qualified as practitioners as well. They also have constituted the advisory team. And when we were ready for our training time, they were ready to sit with Katie and advise on content as well. We're at the point now where we've developed the training materials for teaching them and their unit managers about stratified systems and requisite management practices, leadership and so on. And they have the experience of reorganizing their own organization. In essence. Now we're not totally through. We're through most of the big divisions. The other ones are not quite so big. I want to show you one other thing about the support services. And we've taken some heat because we wind up with about 112 out of 680 who are in support services for the first time. I think we have some data on how much investments you need to keep something like this churning. And we took some heat because it looked like it was a very big amount of overhead it has paid for itself handsomely. We have a Stratum Three budget analyst visor, or whatever the naming convention would be. Incidentally, we're using the CRA naming convention, and it works beautifully, really well. The minute you put that naming convention in. This is a Stratum Three role filled by a Stratum Three capability person, but who was being paid as a low level professional worker, low Stratum Two job classification. We changed her job title to Principal Budget Advisor, and overnight she knew exactly what was a fair treatment salary wise. Came in, knocked on the boss, said, I think you and I had a conversation. Boss said, you're absolutely right. And now you have this sense of how to fix things and that people can be told, you're right, you're not fairly paid. We're going to work on it. And it's remarkable how flexible they are. If you acknowledge the justice of their problem, they are quite willing to spend a little while letting the system process its way through. We have not had major problems of that type. We have a personnel services unit. We have an Is systems unit. This is the other thing we've learned about computing I think is very important. Up until this time, keep in mind we have in excess of 3000 PCs in associated hardware, about 8000 terminals, 600 printers, all this kind of business. About a quarter of a billion dollars in hardware. And we never had an inventory of it. We don't really know where it is. We did have a system for tracking inventory. It was on three by five cards. We had never built a computing system for ourselves, with the exception of some little stuff that was built offline. It's called the Cobbler's Kids. Cobbler's Kids always don't have shoes. That is a phrase that has taken on a quality of meaning in our department, and we laugh about it. We put together four people, three of whom were rejects and managed by a person who no one would accept as a subordinate. High ability, all of them, and they have blown the socks off that system. They've built databases, budgeting systems, online budgeting systems, online payroll. They've automated created a requisite salary system. And we even have an online system to record the organization chart of the department. And the next step is to take that organization structured database and use it as the foundation reference file for all administrative and accounting systems. Should have that in place by the end of next year. Nice bunch of losers. What's the rest of them? Facilities. We also have a resources group. These are the people that manage all that space I talked about. This guy that heads this incidentally is now fully qualified as a construction manager. And his next step will be to move to the corporate real estate department and manage large construction projects. He built a $50 million data center for us for which he received a corporate award for effectiveness. Terrific jobs what am I missing here? And when I say resources, we purchase between 20 and $30 million a year in various supplies, software and so on. So we have our own buying service that maintains and produces those contracts, oversees them and plans those resource allocations. And anybody in the department who wants to acquire something does so through our own buying system. The Corporate Procurement Department each year in the last couple of years has gradually given them more and more authority to function as if they were corporate. That's the closest we've come to that full inboarding of corporate roles. We don't need corporate. We don't need them in human resources, we don't need them in acquiring. We don't need them in the management of our facilities. We don't need them in the computing systems. We don't even need ourselves in computing. If you think about it, we supply computing to the rest of the corporation, but we could not supply it to ourselves. We would not hire ourselves. We built our own function. It validates the notion of outboarding those services. Remember those little PCs I talked about with those puppies and these kinds of teams? It's very, very feasible to talk about shifting corporate services into line departments. I think that's pretty much and then we have a technology Engineering group which is a help service for all of these people with the use of brand new tools. They're teaching us how to use the latest and greatest techniques and so on. In the application development divisions, hispanic Control is 13. Each of these are now running from ten to 16. Hispanic control is twelve. I have none. None. Hispanic Control just got changed into eight or nine. It's just flattening out like crazy. And we're changing the application development structure as follows a unit manager. This is just a big rubber stamp. It's used basically all over the place. A unit manager and a Stratum Three principal application developer. Very important lesson to position Stratum Three capability in an actual on the job task of building software. We're getting better software faster when built by the person themselves than by having them manage a group of lower capacity people working on the problem. Some managers have staffs of supervisors who supervise clerical workers only project librarians and the people who keep track of all the printouts and so on, the records and analysts. So we've eliminated project leader. They know that I will personally track them down and how do you say it? Tear the bottom out of their pants. So application development work is clearly at two and there's only two levels of maintenance between them and the department vice president. We have one little difficulty. Since 1973, we have taught all the other departments in the company that they should build a structure exactly like ours. We've done a fine job of that. Their structure looks exactly like this. So we're now like this. And we've got people from line departments threading their. Thumbs because we don't have balanced interactions. The difficulty of that comes when we have those surplus people and their own departments won't hire them back because we don't need them as advisors and helpers on a project, but they have no more jobs back in their originating department. So we had a serious problem. It has surfaced that amount of waste now, that's our training. So that's sort of the project structure, how we did it. Questions and comments what might not be.

Speaker B Clear, I can imagine relatively seasoned employees, fellow credit, broad span. But I would guess you might run into some difficulties if you had newer people. Now, you don't have much turnover, so I guess you don't have that issue up front.

Speaker C Yeah. Our turnover in data processing has dropped from the 20% figure of 1981 and 82 to around three. So is that ability our biggest problem is blasting them out.

Speaker B Is the ability to go that broad a function of material people.

Speaker C I'd attribute looking after their own psyche.

Speaker B In terms of stroking one another.

Speaker C We are probably pressing the upper limits of what our people can handle. Working very hard with some stress. The general managers are brand new to the job and are having to learn it on the way. And with spans of control that big, if they were absolutely fully mature, top flight general managers, they would still be very stressed to provide effective leadership and developmental coaching. We're having problems in that area. And if these people had had a lifelong history of significant individual autonomy and role clarity and the tars and tiers come in very important here in project work. If we'd had a lot of experience in that, we'd have been better off too. But they are really suffering because they want much closer guidance than we're able to give them. It is very, very sharply separating the high performers who are capable from those who have very limited ability. It's doing exactly what Carl said their experience was.

Speaker B I can give you the exact and specifically accurate span of the Control number, and I'll tell you how it was doing. I'll change the language slightly. There was a major row development in our general manager organization, chief organization, and by the conference, which we hold two or three times a year, right across the organization. And the argument became more and more heated, more and more vicious. And it had been going on at this stage for almost an hour.

Speaker C When.

Speaker B The answer was given by one of the very experienced people in the room who said, if they are no delete delete, delete good, three is too many. The argument sees everybody knew the answer correct.

Speaker C We have at no time if they.

Speaker B Are no good, three is too many.

Speaker C We at no time in any role whatsoever have computed span of Control. I do it for presentations because it's a meaningful, it's a useful statistic to indicate a flattening. We do not talk about it. We do not factor it into any design decisions. Anybody that raises that question gets fairly well. They are a bit afraid of me on certain topics and I've been fairly severe on purpose on questions like this. But it is no question that we are significantly stretching the capacity of our organization to provide effective leadership. And the good side of that is it surfaces capability. The bad side is it really is not as productive as you might want. Our difficulty is, I think, that there are in fact of these four people, one of these general managers, requisitely has two stratum four divisions rolled into one and another one has three. In order to properly service a company of Edison's size and have divisions where workers at the right level and reasonably well matched to the client department, we need about seven or eight. I think theoretically what that means in a corporation is that is simply, in practical terms, beyond the scope of being able to staff it, manage it and lead it within a corporate information services business unit. End result, I hypothesize the theoretical limit on what a corporate service unit in this area can deliver. And on those grounds, as well as our experience suggest, the outboarding of computing. And what should be left behind in corporation is the operation of these big high profit, high capital intensive operating centers, the network and so on. The technology roles and maybe a few divisions, but most of it ought to be out in the field. If we were to do that, Edison would be probably 200 to 300 people, fewer involved in computing. Because the only way you can make that work in a requisite line department is if the top managers built their systems the way we used our top managers to build our organization. You get systems that worked fast. We were talking about that yesterday, about in your case study. That makes all the sense in the world. So summary, my comment on that, Dan.

Speaker B Would be that down the track, when your assessment of potential and selection is clarified for the organization, you will find that you can operate with that spread.

Speaker C With 1617 at that point. Yeah, we got a good vice president, we can probably do it. Yeah. One interesting piece of corporate culture we ran into was we at this point had a change in our reporting relationship and our whole department changed the executive it reported to the first thing the new vice president or the senior vice president said when he looked@the.org chart. In a company where average span of control is less than four is, you sure have a lot of people reporting to you. How can you possibly keep an eye on those people? Okay. Remember that story I told you before about not being able to do it? We got a real boundary issue to help our executives come up to speed and that kind of a deal. Some lessons learned. This is, I think, isn't it, Carl, pretty much the GMO job that you talked about. I want to suggest from our experience three phases of that person's work. Some of you may have that kind of a job sometime or help give advice to creating it. From our experience, I would propose the first kind of task the GMO gets involved in is development within the top of the department of a commitment to be involved in development of requisite organization leading into a fairly long term OD process to restructure the department. And that's really where most of my time has gone. During the first four years, we did essentially zero management training, although we did get started in the use of CPA and career development planning workshops with our top 75 people to start to surface the talent, get acquainted and try to foster some churning. We have about seven top managers who are outposted for developmental purposes in other Edison departments on our payroll. One of the things that we did when we freed up enough people, we had extra bodies that were not needed in a way we didn't give them back. We paid the salaries for our people to work in a customer's department. So we have more people in the entire corporation who are on career development positions in other departments than the rest of the total corporation combined. And the total corporation has no executive development activity going on at this time. And we've got one of the objectives. This is the second. So first organization, then we get into the second objective, which is to assist the Stratum Five manager in the development of his subordinates once removed key focus. And so my attention now is shifting away from structural questions and more and more encouraging the development. And so Katie's current engagement with us is to work extensively in training courses for our straight up three managers and individual contributors. We make no difference except in some content of the training, but they are treated as peers in compensation as well as practice. So structure leads into a second accountability. One is structured, two is the development role. And then there's a third role that I don't know whether this is true in all organizations or I'll just tell you about my own. We're finding that our ability to operate as a department is most importantly constrained by the conditions of the corporation and the readiness of other departments to work with us in developing very streamlined project teams and so on. So my boss has given me the assignment to work with other departments in organization studies of their operations. And I've worked in the corporate governance secretary's department. I'm currently working on a project with a corporate human resources department. In essence, a commitment from their vice president to develop a requisite straightum Five human resources organization will be starting some work with the medical department, healthcare people. We run an HMO of 265 people serving the medical needs of about 50,000 residents of Southern California. Physicians, pharmacy, insurance claims, processing. It's a little health department, interesting little task, as well as other departments in the company. So about 80 right now between three quarters and 90% of my time is actually being the corporate human resource, consulting resource. And every time we clean up one of them, we find out. So when we work with the secretary's department, reduced their staffing by 50%, improved their productivity by 60%, saved 2.6 million, did it in 90 days, and all of those people were transferred to other jobs in the corporation and were in their new roles in four months. That was kind of satisfying. One of the interesting things about that one was that project then was featured at the executive offsite in discussion of how did you do this? Not one time did any executive ask that question. No executive in Edison has asked that vice president, vice president, and corporate secretary how they did it, and not one executive in Edison has asked my vice president, how did you do it? I'm a little frustrated about that. But on the other hand, that's where social analysis comes in. They keep calling because they want to make magic happen. And it's kind of fun lately, because I just heard lately some vice president in our generation area was being grilled by our common vice president, our common senior vice president. And his answer was, well, I've got a meeting set up with Dan Smith to talk about our structure, and my boss's boss welcome and backed away from the problem. The department is shifting from information Services is now not just computing, but it is also business practices advice to help plan computing. And it's in a sense, I'm in a conflict because I'm no longer internally focused. It's as if we created a brand new job called business policy Analyst, chief business practices analyst, who we're sending out into the field. There is a weakness in this structure. From lessons two, notice how we have it set up by function, so to speak. That's really wrong. Elliot's discussion yesterday, and Carl, you talked about it too, I think, of sales research and development and production at Stratum Four, the functional divisions. We are not set up that way, although we're close. I think it's one of the biggest mistakes we made. There is such a thing as this stratum Four sales work we're set up by product line. So office computing, host, mainframe computing, software production. We really should have a sales department and a research department. And that was too much of a bite, I guess. We went round around on that.

Speaker A We knew, and we'd done the analysis, and the vice president understood the analysis, but my judgment would be he felt he just couldn't make a change that radical at this time. He knows, we all know, all the people working in the roles in Stratum Four are aware of the issues but some things we can do is when.

Speaker C We can let me go back. Other comments or questions.

Speaker D Just put this I think the idea of transforming a structure in the to exaggerate the simplicity of it in changing the organization chart, we've also done a lot more than that. But just to bring up a point, seems to me to it's something probably that many of us in the world have wanted to do and done to greater or lesser extent. It seemed to me, going back to the CRA discussion earlier, that what that brought out, very importantly, was that structural changes in this sense, without a corresponding change in I don't know what to call it. The culture, the assumptions, the understanding of the central importance of the manager's proper role and proper responsibilities and proper relationship with subordinates. And manager wants to move that side of requisite organization. But until you have that there this.

Speaker C Doesn'T do much for you.

Speaker D You haven't got a great deal. To what extent do you think if.

Speaker C You were no longer there, would it go on?

Speaker D Where's your VP in all this? That's part one of the question and part two linked to your own comment a moment ago of where would this department be? Given the context of the whole corporation?

Speaker C Everybody was clear. I hope that this is absolutely non requisite, non social anecdote. I decided what they were going to get when I made the decision that SST would be the conceptual framework that would drive our management development activities. If it didn't work, I would not have been successful in persuading them and providing advice with regard to solutions to performance problems that they could not solve any other way. So it kind of validates the theory, but it was not driven by him to start with. I want to draw a curve. It's the universal curve. You can turn it whatever direction you want to describe, whatever phenomena. But if we made this 1984 and it addresses your point, Steven, I hope in 1984, if this is a chart of our gains, I want to divide this process into I want to call it five phases. The first one is preparation. The second is launch. The third is transformation. The fourth is sustaining. And the fifth is operating. Notice operating doesn't flatten out. It's just less steep. We were over two years in this phase with fundamentally no gain. The primary activity I was involved in was organization review, relationship building. I learned a lot about computing. I actually built some software as part of learning how to relate to these guys. If you don't understand what MIPS are, everybody know what a MIP is. A million instructions per second. It's a measure of how powerful a computer is. And if you can't, DASD direct access storage device. It's a disk drive virtual memory, if you know what I mean. If you can't sit down and say, do we have adequate Dazzy to handle the paging processes in the VM operating system type stuff. They just don't talk to you. I learned that because my boss counseled me on that. He says, Dan, you're asking too many questions, you ought to listen. So I said, you're right, and didn't. Two years, basically one on one, talking some very small explorations. And it was two years. It was a year before we got permission to even do a beginning exercise and ask and invite Katie to come in for some staff briefings and so on. And a year beyond that, it was actually 1986, end of 1986, when we finally made the decision the Breakfast Club had produced its recommendation and we got into the first basic change of restructuring Stratum Four. Between this time and this time. We are about here right now in 1989. We are actually focusing most of our energies right now on the systems pieces. What's happened is that that vice president used to be this manager of operations, and he's been there since day one. He's gone through every training course and he's gotten acquainted with a number of the people I mentioned before and spent time with literally everybody who was involved in the project. Carl and Elliot and Ian and Jillian, Katie, Catherine. It also got him as vice presidency because he was so far ahead on quality programs, management, development, streamlining, cost containment. He is committed and he is well known with the people in this room. He knows that I'm here. He understands these expenses. And so what's happened is that this is him now, and he is committed to driving it through and personally taught the class to his direct reports. So several things have happened. Embedded in the information services structure is Stratified language. You can go into our department and ask to have a meeting with Stratum Three managers, and the right people will show up and the memo that goes out will say, attention all Stratum Three managers, please report to Conference room A and they'll be there. You can ask the general managers, is this a straightum four individual contributor role? We use a little side trick, incidentally, when I draw an.org chart like that. If they are Carl's point about the little ball hanging off on the sign, we draw charts in which we put the titles in the middle of the box, the name in the little space underneath. If they are a managerial role, I draw a clock face with everything from twelve to nine darkened in symbolizing the majority of their task assignment. The majority of their duties are leadership of people. If they're a high level individual contributor, I draw an empty clock open circle. And if they are a high level independent contributor who has only a couple, two or three subordinates to assist them in an ado work, I draw a clock in which they only have twelve to three darkened in. Every chart in the department now is starting to show that. So people look at it, read it like an X ray and they know who's who. So Stephen, what's happened is that long preparation curve has built in pretty good deal. I'm going to be resigning, as many of you know, on April 1. It turns out I can be a better value to the corporation being hired back than I can getting past these departmental boundaries. And I want to spend time with family and other reasons as well. So I will be continuing. But in essence, there are about four or five people who are fully geared up to support the project. And all of the direct reports are knowledgeable. They don't need any consulting anymore in a way shouldn't. So that's part of it. That's part of it. I think that the long term improvements in our systems will lead to very significant bigger gains than we've had so far, and probably then closer to overall 20% to 30% productivity improvements on that one. Did I speak to your point about that involvement?

Speaker A What do you see is happening within.

Speaker C The sustaining, the sustaining period? To me, sustaining means putting all those pieces in place that keep the herd moving in the same way. I grew up on a ranch and you ever seen them load cattle? They load cattle in a chute. You don't just go up to a cow and say, would you please walk into that truck? And they build fences in a loading pin. You seen those kinds of things. Here's the loading ramp that goes up and the truck parks here. Cows are supposed to walk inside. Well, they'll build a fence that comes out like that. And then they just put a guy on a horse out here or driving a jeep, whichever you are, and the cows gets funneled down into it. The pay systems, naming systems, office equipment, we're banning all this difference. You don't get four extra inches if you're a unit manager. The way we draw our job organization charts, our budgeting system, personal effectiveness review, all of those things are like this funneling fences. And I think those are the things that we got to build. Our problem is that in the corporation overall, if this is the CEO and there is a vice president who should be in charge of group services, we have two layers. And then there are about seven corporate service business units, all of which are very seriously in trouble. One of these is human resources. We need a better human resource set of systems. They can't deliver it. One of these is facilities, one of the office space and so on. One of these is material, this whole chain. So when we sit over here in information services, our sustaining gains are dependent now on the corporation building better corporate systems. And that's where we're going to run up against the problem of requisite systems. Ultimately, I don't think it'll work. Ultimately, Edison's traditions will crush this. Not without a fight and not overnight, but the stakes right now, does that make sense? I don't know. Katie, you want to comment on that or carl, I don't want to give a negative view, but I just think that's a real on the other hand.

Speaker A The Vice President is very good friends with the Vice President human Resources, and we're putting in some new performance effectiveness performance assessment systems. And as I understand what's going on, they're cutting a deal. And it may be that some of the systems we're developing in the Information Services Department will be adopted over because they don't know what they're doing. They're in hopelessness and have been told.

Speaker C To fix things, and they don't know.

Speaker A What to do if we have something what's reasonably decent. So the opposite happens when they start changing the corporation from inside. If it's a near thing, it could go either way.

Speaker C It's right now, the systems that are built, the personnel practices, the training planning system and all those sorts of things, career development capabilities, all of that is here. And so the question is whether they can just bridge it over here it is 50 50.

Speaker D This is specifically committed to the idea.

Speaker C Of the manager very authorities and so on? Yes. Both this VP and the Vice President of Human Resources at staff meetings I have personally attended, in one case as a subordinate and in another case as a consultant to that organization, have explicitly announced to their subordinates that they are committed to the implementation of Stratified principles.

Speaker A Yeah, am.

Speaker D That's not what I asked. But have they actually set up a.

Speaker C Managerial role in Information Services? They have, and are working to disseminate that from top down. So where's my curve? Information Services is about here. The rest of the departments in the company are somewhere around in here except for corporate secretaries, which is here because of its size and complexity. The other one interesting thing about this other project, what we found is that the Corporate Secretary's department requisite organization greatly speeds and facilitates computing work. Do you mind if I tell this story? Then I'll quit. They had purchased for about $250,000 a big software system that pays the dividends to all the stakeholders. Remember the company. It's a big machine. Put in money, money comes out. Well, they care a lot about that money going out, and they want to make sure those dividend checks go out. So they bought this big, expensive software. They were nonrequisitely structured and had a low stratum three person and a stratum four job managed by a three person, managed by another three. The end result, I know that's terrible to categorize, but that's the truth. What happened was when the new system was installed, the direction Information Services was given was to disable its printing capabilities and to write new software that would produce reports that visually looked exactly like the old ones. They did not want anyone to know that they'd changed anything cost about half a million to make those changes. The reports were slow, unclear, and generated enormous frustration in executive ranks because they thought we were going to get a better thing, and they got nothing different. They didn't want to make it different. That was one of the pains that was driving the corporate secretary to want to change. And she was really pretty. I explained SST to her. She thought I was a bit strange. Went home that night and watched the Reagan Gorbachev summit. Came back the next morning and called me and says, I believe in levels of capability.

Speaker D She did.

Speaker C That's true. She really did. And then she settled down to the serious questions. The secretary's department, with three quarters of a million dollars invested in software and so on, was technologically operating. In about the 1950s, not all of their workers had telephones. They were set up with workflows so that when a shareholder would call to arrange to have their dividends reinvested and also wanted to change their address because they'd moved to Orlando, Florida. They were told by the dividend reinvestment desk they'd have to call back because they didn't have a telephone that could forward the numbers. And besides, they had two different people. That's not my job. So they forwarded over within nine months. They are the most advanced technical division in the entire company PCs, Lans, Shared Word Processing. They have a telephone system that automatically routes calls, single point of contact. And this merger, which involves essentially completely reconsolidating two pieces of stock, will be handled with no big problem. Technologically. What happened was the structural changes made very clear the systems requirements that they needed, and a very small team then went to work and changed it all back to the original system, and they were off and running. So I think actually the big gains from reorganization in businesses that are heavy users of computing will come from the savings in computing, not labor costs. Very interesting. Very interesting. So I think there's as much interest here for the computing work as for others. Does that make sense in your experience, Elliot? Could be twice as big a game in the computing arena for some of that. Can I answer any other questions about our training process and so on? Politics. Okay, then we'll take our break.

Speaker A From observing all this process. From what you've now heard from Dan, one of the things that Stratified systems theory does is allow you to think through the kind of information that's needed where, and I'm fairly well persuaded.