Active vs. Passive Management

WHAT IS MANAGEMENT

I've been thinking a lot about management lately, especially with regards to what it means to "manage" something. Being a good internet citizen, I looked it up on Wikipedia here.

"Management in all business and organizational activities is the act of getting people together to accomplish desired goals and objectives using available resources efficiently and effectively. Management comprises planning, organizing, staffing, leading or directing, and controlling an organization (a group of one or more people or entities) or effort for the purpose of accomplishing a goal. Resourcing encompasses the deployment and manipulation of human resources, financial resources, technological resources and natural resources."

That seems like a pretty good definition as far as describing what we traditionally think of as managers. They are people who, in contrast to NON manager, primarily exist to oversee the use of existing resources to accomplish valuable goals. Embedded in that are terms like "leadership," "vision," "strategy," and "motivation." Of course there are thousands of books on the subject which goes to one of my core assumptions that you can tell how well a subject is understood by counting the number of books that are written on the subject. The more books written, the less understood the  topic. Ok... a bit cynical.

 

MANAGERS OF RISK

This definition is also similar to the traditional role of an investment professional. Their job is to use their expertise and knowledge to provide you with the most value for your resources.

These two roles have another thing in common... their track record is fairly poor. It's a well known assumption that most projects (especially software projects) fail, in one way or another. Likewise most investors (especially active investors) fail to beat indexes like the S&P500.

Why is that?

I think it is because both investment and management have large elements of risk, and significant portions of those risks are external. Competition, macro-economic shifts, customer behavior, etc have MASSIVE impact and are both unpredictable and uncontrollable.

Turning back to management, this has lead me to think about management differently. I think the managers real job is to fundamentally understand the nature of the problem, its risk and and to systematically work to do what he or she can to reduce the risk and increase the value. I call this active management, and it is fundamentally different than the definition above.

 

ELASTIC PROBLEMS

The difference is in approach to the problem. Rather than assuming that there are fixed resources that can be applied to a limited set of problems and that those problems are well understood and those resources are static in nature; the active manager assumes no such thing. In the mind of the active manager problems are elastic in nature... they change constantly and can be manipulated to fit the circumstances. Similarly, resources can be molded and stretched to match the needs of the constantly changing problem.

This change in disposition has far reaching impact. Most of the job is not working to understand road-maps, gather accurate estimates, or clearly identify customer requirements. Instead, the active manager digs deep to understand the customer's needs and desires and, if necessary, alter and focus them. The active manager works with the developers to understand their assumptions and limits and work within or beyond them. He understands how to measure risk, but then systematically seeks to reduce or remove it. He sees problems but inverts them and turns them around to try and find another way around them - or how to turn them into a benefit. To the active manager, the world does not look like a bunch of locks where he has to find the right key; the world looks like a bunch of doors he needs to figure out how to open as fast as possible. Locks and keys are just one way.

Passive management is like taking dictation.

Active management is like playing an instrument.

 

THE INTERNAL QUESTIONING ENGINE

This kind of thinking requires a constant internal questioning mechanism. The active manager has to question everything, all the time, but without getting in the way and without being indecisive. Knowing why things are the way they are, how they could be better and what is needed are always front and center. The absence of those elements should cause concern and deep inquiry.

I'm amazed at how many people drive projects "forward" without knowing why things are the way they are. Estimation is a primary area where this happens. It normally follows this pattern:

1) Manager receives goals and value.
2) Manager gather customer needs and requirements.
3) Manager identifies resources needed to breakdown requirements into tasks and estimate them.
4) Manager creates a plan based on those estimates.

Then begins the negotiation dance where we figure out which thing we can remove to make the project fit into a timetable we like while not totally erasing the value of the goal. We selectively ignore the fact that anyone who has done software project management or development knows that those estimates all have large margins of error and those requirements will almost certainly change; or the team will blindly build according to "spec" and the wrong thing emerges. That kind of evaluation is done at "the retrospective" and has no place here at the estimation negotiation table.

 

WHY?WHY?WHY?

Why does this happen?

I think it's because the manager has not actively understood WHY the estimates are what they are... why those tasks broke down like that. What takes the longest? Which assumptions were made during the process? What was in the customer's mind when she created those requirements? What problems was the team having?

Asking a group of people "how long will this take to do" assumes a dispassionate and somewhat confrontational approach. Asking a group of people "how can we accomplish this by this point in time" assumes a collaborative challenge which people can stretch to overcome. It engages the creativity and ownership of all individuals instead of treating people like machines that spit out estimates they will then be punished with when things go south.

Starting with this mindset is essential as it embeds the manager into the process of discovery required to bring the goal and the creative making together.

This process doesn't "end" once the project "begins" either. Rather, this is embedded in the process. Risk should continuously be reduced and value continuously improved. Teams should continuously stretch their creativity to reach meaningful goals in predictable time (That's Right. Deadlines matter.) It just doesn't matter that you scored the winning touchdown 10 seconds after the game ends.Thus, understanding when the game ends is really important - hint: it's often not under the managers control to decide when the game ends... all those external forces you don't control may decide that.

 

CONSTANT DISCOMFORT

I think that a well run project should have a constant feel of discomfort and nausea. I know that sounds odd, but I think the only time things feel comfortable and smooth is when enough delusion has been ingested. Even when you are winning by a large margin and it seems like "there's no way the other team can win" a great coach will always be worried that he's missing something...that there might be some way they could come back...and, of course, there's always the next game.

The team will win some and lose some... and there will be time for celebration and reflection, but the active manager will always have that internal questioning machine humming away on the next big thing.

Comments

[Peter]

Good stuff H.

What a I still struggle with these days with regards to this topic is more transparency for all individuals and managers. It seems almost all issues with deadlines arise from not having a clear understanding of scope. Often assumptions are made at many levels, without clear communication of goals, intent etc causing time and work to be wasted. And in most cases management we not responsible for those unclear messages they often come from above or even changing markets underneath you so to speak. So I'm a real believer these days in over communication and as much transparency as humanly possible. But it also does not hurt to have "visionaries" and people willing to shift and change along with an attitude from the whole team to take responsibility to understanding all as spectra of a projects goals, deadlines and assets at hand.

[Richard Kain]

The reflections here of course seem exclusively about software project management which I'm not going to pretend first hand knowledge of. Risk in investing means either plain ol' "chance of losing money" or if you're a theorist, volatility. If deadlines matter, the piece seems to say risk is missing the deadline by not delivering to the defined specs (because most frequently from a lack of trust?) If that's the case, is the cognitive load prescribed of constant questioning really helpful? Managers looking to avoid risk of missing deadlines just ask for more resources, irrespective of the inefficiency of the N+1 contributor, right?

Maybe I've misunderstood; interested in learning more could you give a practical example? Meanwhile I'll offer Peter Drucker's definition which I find helpful: "Management is doing things right. Leadership is doing the right things." Thanks for the post!

[Hermann Peterscheck]

I was specifically making a reference to how in both fields aggregated outcomes of success don't lead to corresponding criticism and skepticism of practice. Thus, in aggregate, people who manage portfolios actively have a losing track record (vs., say, the S&P500) and, in aggregate, most software projects fail. Of course, that's easy to say and I'm not offering an alternative here... but just because no better alternative exists doesn't mean the current process is good :).

I get what you mean though. It's not really an apples to apples comparison beyond that. Primarily because unlike finance, in management there is no objective scoreboard like "made x% more than the S&P" which is unfortunate.

The corrolary to active vs. passive in investing would require some kind of intervention in order to have a positive impact. Obviously most investors either can't do that (few individuals have enough money) and most institutional investors won't do it (they just sell and buy something else). In theory the board of directors should represent the shareholder's interest in making management decisions, but given that most boards are appointed by the CEO (or similar executive), and most board members are minority shareholders and derive most of their income from salaries and bonuses, there are often significant conflicts of interest.

So, in the investment world it would be more like if you saw a company that had a lousy Return on Equity Investment; rather than just selling the shares you would interfere and attempt to improve the return by lowering project risk, increasing return, changing leaders,etc. in the same way that a great project leader will attempt to reduce risk and increase value.

Personally, I have found that there is A LOT of variation in software development estimates and if you build the removal of waste into the development process and you respect and empower your developers, much of this can be recaptured.

I don't know that much about the functioning of the finance world, but I expect that similar patterns exist in all human organizational structures.