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T
FEDERALIST PAPERS
by
CAP PARLIER
PREFACE
25.November.1999 This is the background behind these
articles.
FEDERALIST No. 1
20.May.1999 The classic tension between Federalists and
state's right advocates is not confined to government. The argument can be
constructed around centralized and distributed decision-making in the corporate
world. This paper sketches the basics of my management/leadership philosophy.
FEDERALIST No. 2
24.May.1999 Planning is the key to distributed management.
The pressure for centralization usually grows from inadequate or poor planning.
The lack of planning causes institutional confusion and non-productive
conflict.
FEDERALIST No. 3
29.May.1999 Given the principles of management presented in
the papers above, this paper constructs a federal or corporate administration
that enhances operations.
FEDERALIST No. 4
3.June.1999 Conflict resolution with any organization can be
difficult. Conflict resolution within a matrix structured organization can
approach nearly impossible without clear, broad planning, an established
process and a sense of equality among the various groups.
FEDERALIST No. 5
6.June.1999 There is no perfect organization. The
effectiveness of an organization depends upon the mission, personnel and other
performance factors.
PLEASE EXCUSE THE use of Alexander Hamilton's title, but it seemed to be appropriate given the context of reorganization. For the real Federalist Papers, go to http://www.mcs.net/~knautzr/fed/fedpaper.html. Now, why did I use Hamilton's title? Facing any reorganization task, as the founders did as they constructed what would become the greatest democracy in history, there are a number of fundamental principles that should guide the discussion just as Hamilton, Jefferson and others did in the early days. As is usually the case, the question of centralized versus distributed decision-making defines the skeleton upon which reorganizations are often built. Specific references have been removed since they are not relevant in a general essay. These five papers were created to establish my views regarding reorganization.
Federalist No. 1 – The Basics
Federalist No. 2 – Planning
Federalist No. 3 – Federal Administration
Federalist No. 4 – Conflict Resolution
Federalist No. 5 – Organizational Structures
These papers are certainly not exhaustive or particularly complete since the debate that fostered these papers was truncated without further exchange.
It will not be difficult to see that I am Jeffersonian by nature in that I believe decision-making is best done at the lowest possible level. There are very few issues that an omnipotent Federal administration can value; among these are, national defense and international relations.
So, for whatever it's worth, help yourself to my view of federalism.
There are
certain management principles I hold dear and have enabled me to be successful
in leading people.
1. Manage
things, lead people. The two skills are fundamentally different & both are
needed to be successful. Management implies decision-making by a set of rules,
guidelines or constraints; by its nature, management is inanimate. Leadership,
on the other hand, could almost be seen as antipodal; that is, having very few
rules; decisions are adaptive to the individuals and situation.
2. Empowerment
is essential to success. Empowerment is a critical ingredient in team building
& performance. Failure of empowerment is a failure of management, not a
failure of people. Decisions made on high are rarely successful. Decisions are
best made at the lowest possible level. The difficulty for management is
defining the limits of empowerment and the communications of those constraints,
usually done via detail annual planning. Likewise, the delegation that is
common with empowerment must be monitored to be effective.
3. Empowerment
requires a strong but non-intrusive management. Empowerment is successful by
providing good leadership, involving people in the decision process, sharing
ownership in plans, and maintaining constructive exchange through periodic
reviews and updates of plans. I want the team to be the most obvious; I prefer
to work in the background helping to guide the team. I describe this as, regal
versus participative management, i.e., centralized versus distributed
decision-making. In the regal or centralized model, decisions are made at the
highest level; there is little ownership of those decisions other than through
loyalty to the 'king.' In the participative or distributed model, decisions are
made at the lowest level in accordance with a detailed plan of execution and
monitored via planned performance metrics; the key in this model is the plan.
4. Planning
is the mortar of a strong organization. I believe in putting down on paper
where you think you are, where you want to go, how you propose to get there,
and subject that plan to peer review. I want each member of the Cabinet to
share ownership in our plan. In an ideal situation, the leader is never sought
to make decisions of performance, but rather focuses his attention on vision,
guidance and long range planning. I believe the vast preponderance of a
leader's intellectual capacity should be devoted to vision development and
planning.
That said, the Federalist debates are upon us. [Deleted as irrelevant] We must now decide how this new structure will operate. In this debate, I am predominately Jeffersonian with some modification. I might add, this applies to my relationship within [my organization] or any other team I have been involved with, for all the reasons identified above. I believe the real work; the real accomplishment; the real productivity is in the hands of our people [thus, my conviction re: empowerment].
I espouse a thin, federal administration that provides strategy, policy guidance, standardization, and oversight to ensure consistency. ALL operational decisions and activities must be in the operating units at the lowest possible level. I want the guidance from the federal administration regarding rules, operating constraints, direction, etc.; homogenization of the nervous system, if you will, with the muscle where the work is done. I do not want operational decisions made at the federal level, i.e., hiring/firing/promotion, leadership/management, etc. The ideal federal office is an executive with an administrative assistant; anything more would be too tempting to meddle in operational decisions/activity, i.e., excess capacity at the federal level; a Federal administration incapable of doing work. Conversely, I absolutely agree that operating units cannot & should not operate independently, i.e., oversight in the form of periodic [monthly or quarterly] reviews and performance metrics are essential for a healthy organization. The key word in my mind is balance. There must be a good balance between federal & state; too much of one or the other would be injurious & not stable. This balance should create or enable a constructive tension within [an organization's] leadership/administration.
I acknowledge that my federalist views are not shared by all, thus the need for the Federalist debates. If the heavy Federalist model is used, I do not see the need for [operating unit managers]. Likewise, if the heavy state's rights model is used, we have a loose confederation, at best, and anarchy more likely. If operating decisions are made at the federal level, then [operating unit managers] are simply flak catchers; they take the heat for bad decisions [through the imposition of a 'poor execution' accusation]. Authority must be coincident with accountability; anything else is simply a disaster waiting to happen. While there will probably by tacit agreement, the real debate will center upon 'what is an operating decision.' In my mind, any decision that affects the day-to-day or annual performance of a unit is an operating decision, thus my view regarding hiring/firing, etc. [Deleted as irrelevant]
PLANNING IS THE most fundamental foundation task in any organization. Shared planning is also the only way to find balance in a matrix management structure. I would like to offer some views on planning.
In a multi-unit organization and especially one striving for uniformity & consistency in its voice, consistency and uniformity in the planning process including review and approval are mandatory. Planning must define specific tasks to be performed in any given period and must also include the resources to accomplish the task, time to complete the task and metrics to establish satisfactory progress and completion. In the new organizational structure, development and execution of plans must rest with the operating units. Approval of unit plans, to ensure consistency and adequate performance, should have broad ownership including approval by President via Cabinet presentation/review.
I would propose the following standard plan structure & format for [an organization] plan:
[Deleted as irrelevant]
Each business plan should contain at least the following
sections:
1. Market
Assessment, Business Forecast & Objectives
2-6. [division
plans]
7. Human
Resources
8. Information
Technology
9. Facilities
Plan
10. Capital
Plan
11. Budget
(Yr 1, detailed, Yrs 2-5, proposed)
Each section should use the following format:
a. Objectives
b. Current
State
c. Future
State (5 year projection)
d. Gap
Analysis
e. Implementation
Tasks (Yr 1, detailed, Yrs 2-5, proposed)
For planning to be successful, it must be routine, continuous, and supported at all levels. The various elements of a plan should be constructed from the bottom up using a basic principle – the smallest budgetary unit must define the tasks in detail for the next year's operations that become the direct basis for the budget. Each task must be have sufficient detail to justify the resources requested for that task including the time to complete, and the metrics to establish progress, performance and success.
Reviews should be carried out as appropriate at each business unit. Each business unit leader should present their plan to the Cabinet as part of the budgeting process annually. As previously agreed, budgets should be updated semi-annually by a forecast submittal and Cabinet and adjustment to respective plans.
A proposed annual planning process is:
Performance Reviews 1.May-30.June
Planning Guidance Meeting Second
week August
Issue Debates September
Department Plan Reviews Mid-October
Lockup Business Plan Mid-November
Business Budget Review First
week December
Final Proposal Mid-December
Submit to [HQ] Mid-January
Cabinet Review First
week February
Financial Committee Meeting Third
week February
Board Approval Second
week March
Execute the Plan 1.May
Ideally, each business unit should report performance against the plan using the pre-determined metrics. Since our 'business' changes relatively little month-to-month, quarterly or semi-annual performance reporting might be sufficient. The reporting interval should depend upon the level of risk and the amount of funding at risk.
PAST THE FUNDAMENTAL requirement for institutional, standardized planning, the next most important topic of debate is the content and scope of the federal administration. As indicated in Federalist No.1, I am an advocate of a thin federal administration.
At the most basic, the federal administration should be focused on strategic, long-range, external issues. Conversely, the operating units should be focused on tactical, annual, internal performance and issues. This is not to say there are not elements or aspects that crossover, the orientation should be a balanced alignment.
The ability to delegate or empower subordinates can only be legitimately done by those who hold the authority. This is the essence of the conflict between centralized or distributed decision making, or federal versus state management. Further, for those who manage via empowerment, the question of authority and delegation become critical if not absolutely vital. It is not appropriate to dictate the management style of any leader or unit. The success of a unit should be judged by performance against an approved business plan. When the decision-making process or authority is in conflict with the management process, the organization will not be in balance. The result will be most likely confusion within an organization. The secret to successful teams is detailed prior planning with broad ownership and empowerment to enable decision making at the lowest possible level to execute the plan.
[Scope & Vision Chart]
To all allow leaders to focus on the future . . . planning, empowerment and periodic review of performance metrics enable progressively senior managers look farther into the future. As illustrated in the attached chart, the more a senior manager deals with daily decision-making, the less time they have to devote to the future. When delegation and empowerment are not utilized, lower level managers and employees do not feel the ownership and accountability that is crucial to overall team performance. If one group delegates and another does not, an inherent conflict is established that forces all decision to point of decision making however high that may be.
[Deleted as irrelevant]
If we are to achieve the management balance in the entire organization, we must find a consensus in the structure, policy and management of the organization. Since the headquarters unit (UA) is generally not a revenue generation unit, it is overhead that must be supported by the revenue units, i.e., the operating units. Thus, size of the overhead becomes absolutely critical to the performance of the operating units (OU), i.e., taxation, or in more polite terms contribution. The OUs need services and support from the UA, but they do not want too much. Sizing of the UA is an economic issue as well as functional one.
UA: policy, standardization, coordination, monitors performance, external communications, strategy
OU: execution, development, planning, tactical implementation.
[Deleted as irrelevant]
Definition of the roles for UA & OU is essential to organizational stability and minimization of internal conflict. The control, authority & accountability must be placed in the hands of those responsible for execution (production). Further, we must find the minimum service required of UA in order to allow maximum performance of OU. The weight or capacity should rest with the execution, not the monitoring or oversight.
I HAVE ARGUED for some time for a thin federal administration [UA] to minimize the overhead to be carried by the operating units [OUs] plus enable OUs to exercise operational control over their respective business plans. Furthermore, authority must be vested in OUs to facilitate empowerment. Most positions are not required at the UA. UA staff can and should exercise their strategic function as well as coordination/monitoring activities through OU functional managers.
[Deleted as irrelevant]
The relationship between UA & OU staff is critical, as it is in any matrix organization. By design, functional managers have dual reporting responsibilities. Managers must seek policy guidance and report performance to their functional leader to facilitate the monitoring & oversight task, and to their operational leader for daily/annual activities including hiring/firing/promotion. Managers seek policy guidance from the UA and operational direction from the OU. Again, as in all matrix organizations, the personnel actions should be a collaborative endeavor, just as it has been in recent selections. Likewise, UA personnel actions should be equally collaborative with emphasis in the functional position.
The weight of personnel resources and capacity must rest with the OUs where the operational work is done. While the leaders of functional areas report to the OU leaders for hiring/firing, promotion & other personnel action as well as operational direction in accordance with the approved business plan, they must also seek counsel and policy guidance from the UA staff.
Guidance and direction should be exercised through the planning process rather than in daily decision-making. By approving the business plan, both UA & OU leaders define the limits of authority [empowerment] for each OU and functional areas. Once approved, the executive [both UA & OU] should avoid daily decision-making or the requirement for consent. The executive must focus on monitoring performance via metrics utilized to establish performance. Thus, most decisions should be made at the functional or lowest possible tactical level to enable decisions to be made where the work is done.
Conflict resolution becomes a key element of empowerment. The primary means should be collaborative, collegial debate and decision at the working level. Secondary, the resolution would go the UA/OU leaders, as appropriate. If Cabinet members cannot resolve issues, then either should go to the Cabinet or the President for resolution. The leadership must strive to force decisions to be made at the lowest possible level, or the lowest level at which conflict resolution can be achieved.
There are numerous functional areas that the UA must exercise its coordination role [Deleted as irrelevant] to avoid duplication of effort. If the functional managers are working together properly, the coordination should be carried out at their level. There may also be some functions that are not highly active operational tasks that might be coalesced into a single position at UA rather than fractionalized at OU.
There are some functions that should be retained at the federal level -- chart of accounts, enterprise IT, database management, et cetera. Most other functions should be resident where the work is done and distributed to the OUs. UA exercises its influence over operations via the business planning and plan approval process, not through the operational decision process.
WHILE ORGANIZATION CHARTS and structures do not accomplish anything, they often establish the tone of how things work. Thus, they do take on a significance that does affect the performance of an organization. There are a myriad of organizational structures tailored to suit various and often unique organizational requirements. However, these structures can be crudely boiled down to two fundamental categories: centralized versus distributed management, i.e., where are decisions made? As is all endeavors, there are benefits and burdens attached to each. Likewise, the decision to adopt one form or another is usually predicated on the needs of the business.
BENEFITS OF ORGANIZATIONAL STRUCTURES
Centralized: Distributed:
control agility
efficiency broad ownership & accountability
stability detailed planning
clear modus operandi less risk
personal leadership trust in colleagues
less planning requires balance
less confusion & conflict emphasis on people
takes less to develop diverse
homogenous
The most efficient form of governance is a benevolent dictatorship and the least efficient is a democracy. Organizational decisions made on efficiency alone will significantly favor centralized management.
Centralized structures tend to be homogenous, having common values, standards, processes and decision-making to gain the efficiencies. For small, singular organizations, the owner demands & needs centralized management . . . it is her/his money, reputation and dreams on the line. In larger, complex organizations, the attraction to one structure or another is usually driven by other forces & stimuli. This is not to say, common values and standards are not required for distributed systems as well. The less standardization, the inefficient a distributed system will be. The essential question for large organization is what are we trying to accomplish [vis-a-vis organizational processes]?
These are not exclusive. Variations can be tailored to bias processes for crafted benefits in one aspect or another. For example, although detailed planning is not required for centralized systems, rigorous planning may have other benefits to a centralized organization. Likewise, the extent of unit planning and the rigor of the approval & performance measurement processes may require much longer time to allow federal acceptance in a distributed system. However, the more blending that is attempted, the higher the risk of institutional confusion, i.e., what do we do in this particular case or situation? The more precisely an organizational structure and the concomitant processes can be established, disseminated and accepted, the better any organization will perform. The essence of any organizational debate is what do we expect of our people?
Agility or speed by which decisions can be made is a key element to this debate. Centralized system can also distribute decision-making authority via delegation. However, the critical concern becomes who has ownership in outcomes -- decision versus accountability. Decisions made at the lowest level provide greatest accountability, in that they are the easiest to establish. The higher up decisions are made, the less accountability by those who must execute those decisions.
Thus, in a reorganization, we must decide what are the desirable attributes needed for the near and far term objectives. How fast do we want decisions to be made? What level of accountability is needed? What performance is required, and how do we define it?
