Fond memories of outsourcing

With a new state government having taken the reins last week, I'm sure they'll be looking everywhere for savings and efficiencies. I can't wait for someone to pop up and mention "outsourcing".

Don't get me wrong - I'm a big fan of contracting out certain government functions to the private sector. However, I've had more than enough experience of doing that to know that if you're not careful, all it leads to is higher costs and lower service levels. The last government certainly fucked it up plenty of times - we just never got to read about it in the papers.

I'm currently dealing with a private company that's outsourced a certain function - they can get bitten just as badly as the government. In fact, big companies and big government are often as bad as each other when it comes to inefficiency, waste and plain silliness. The difference is that if the big company does it for too long, it soon becomes either a small company or a no company.

Anyway, I recently needed the outsourcer to provide us with a new service. The outsourcer doesn't provide that service itself though - it contracts that out to a supplier. That supplier then sub-contracts that out, and the sub-contractor then subs it out to the bloke that actually does the work.

So we outsource to A, who subs to B, who subs to C, who gets D to do the work. In the pre-outsourcing days, I just called D and got the job done.

D charges $100 for the service.

But in the brave new world, D sends his quote to C.

C adds 15%, making it $115.

C sends the quote for $115 to B, who also adds 15%, making it $132.25.

B sends the quote to A, who being a big international outsourcer, adds 20%. We get a quote for $158.70.

That process now takes about a month - by the time we get the final quote from A, the original quote from D is passed its 30 day time limit.

We now have to raise a purchase order for A, who then has to raise one for B, who has to raise one for C, who has to raise one for D.

"A" doesn't raise their purchase orders onshore - that's been outsourced to another company "E" overseas. The country that E is based in had problems last year - a bit of civil strife. They couldn't raise orders for weeks as their staff couldn't get to work.

So it took us a month to get a quote, and two months for all the POs to be raised so that D could finally start work.

When it comes to arranging the work, I can't contact D directly any more - I have to email A, who emails B - you get the picture.

You have to factor my time into this as well, and my time is definitely money.

I'm not sure where they're making savings in all of this - I know that when the smart sales people from A sold this to the executive, they promised bucket loads of savings. However, they forgot to add that almost every service that we require costs extra money - lots of money. Need to have an onsite meeting with D to discuss getting this thing done? You can rent a tiny meeting room - for $100 an hour. Tea and biscuits are extra. At least they supply chairs. Funnily enough, the cost savings don't seem to have allowed them to reduce their budget at all. They saved a lot up front, but they then get gouged a thousand times on the little things, and if you get lots gouged often enough, it soon adds up to a whole lot of money.

We refuse to become more efficient

Interesting story in the SMH today about "secret" cuts to education in NSW.

What interests me about the story is that it talks about cuts, but also talks about the education budget blowing out to $13.6 billion by next year if savings are not made.

So what they are saying is that the budget will still go up - just not by as much as it would have before some savings were made.

Apparently a failure to increase a budget by a large amount is now a "cut".

Here's my favourite paragraph:

One principal who chose not to volunteer for the trial said: ''The notion of devolving responsibility to principals is a deceit because in reality it is about making principals do much more with much less.''

Welcome to the real world, buddy. It's all about doing things more efficiently and effectively - that's what "doing more with less" is all about. It's about exploring better ways to do things - improving productivity and cutting wasted effort.

I'd start by sacking that useless tool. Any manager that doesn't see their role as including continuous improvement and the constant search for efficiencies is not a manager in my book. They're a blood sucking leech with a bottomless appetite for other people's money.

Willing and able - a tale of two sectors

I was having a chat with a work colleague recently, and he was raving on about the concept of "willing and able" - or if you're talking about the public sector, "unwilling and unable". For the benefit of Cav, I will now ask my "brother", the management consultant, to take over this post. (For the rest of you, just ignore the fact that I now have two voices in my head arguing with each other).

After 20 years of working in the public and private sectors, I'd have to say that the biggest difference in performance between the two is how they treat the dullards. The private sector has them, but they tend to get rid of them on a regular basis and they also tend to not allow their numbers to build up to the point where they become a risk to the company. Any operation can afford a couple of idiots - but when the number of clowns gets so large that they take over the circus, then the place turns to shit. The public sector doesn't do any regular house cleaning of staff, so over time, the number of oxygen thieves builds up to a point where they reach a critical mass, and then the performance of the whole department goes down the toilet.

As far as high performers goes, I've met plenty in both the private and public sectors. In fact I'd go so far as to say that at the top level of performance, the proportion is about the same across both sectors. There are some very bright, very hard working people in the public sector - unfortunately, they are dragged down by some absolute boat anchors.

I'm not saying that the oxygen thieves and WOFTAMs are stupid (Waste of Flipping Time and Money) - in fact many of them are exceptionally bright. Their problem is generally that their priorities are not aligned with the aims of the department. They go off on tangents and do their own thing, and sometimes work like mad to sabotage the work of anyone that isn't following their tangent. Others are manic empire builders, or serial organisational reshufflers, or followers of every management fad that ever made it into paperback. Some are lazy as hell, or spend all their time running a business on the side. I have met a few genuinely thick people in my time, but they are pretty rare. The rest are smart people doing very stupid things.

This is where we get to our "willing and able" matrix. Anyone who has ever seen a BCG matrix will recognise where I stole this idea from. Your top class performers - the "A" crowd, are willing (motivated) and able (skilled, educated, experienced) to get he job done. The "B" performers are a bit less motivated or don't have the top level skills of the "A" crowd. Those in the "C" group are just getting by - doing enough to earn their pay, and not much else. The "D" group are both unmotivated and unskilled.
I worked for one government department that looked like the above - it was quite new, so it hadn't been around long enough to accumulate any barnacles on its hull - and the CEO was also ruthless enough to sack anyone that failed to perform. That was a once-off performance; I have never seen another public sector CEO with the balls to do that (and our CEO was a woman). That department was a great place to work - it really got things done, and morale was excellent.

I've also spent a bit of time in a department like the picture below - it had been around for a long time, been through endless restructures (which always resulted in the good performers leaving) and was completely hamstrung by a huge dead weight of under performing numpties. In fact a massive amount of organisational time was spent in trying to prevent the oxygen thieves from sabotaging and destroying the entire place. Sacking them was not an option, so management spent all its time putting out the fires that the WOFTAMs deliberately lit on a regular basis. They work very hard to create a crisis, then sit back and watch the fun start. It's how they got their kicks. I suspect a fair few of them were psychopaths. Working there was the pits.

Since leaving that sinking ship, I've worked for a wide array of private companies. I spent some time with an well known entrepreneurial company - the owner deliberately employs young, enthusiastic people, and the image of the company reflects that. Unfortunately, those young staff tend to be wet behind the ears, and are not as highly skilled as older, more experienced workers tend to be. They're as motivated as hell, but sometimes they don't have a clue what they're doing. It's an interesting strategy, and it would probably work really well if the youngsters were leavened with a few older, wiser grey heads - but that wouldn't suit the hip, young image of the company, so they are left to blunder on regardless. A fun place to work, but a bit tiring after a while.
Another mob I worked for went through a takeover and about 40% of the staff were made redundant. Unlike the public sector, the redundancies were involuntary. If there was one job and two candidates, the candidate who failed got the boot. They were paid well on their way out the door, but the process had a pretty shocking impact on those that survived. Essentially, they did just about nothing for 3 months except work on ensuring they got a job. Their regular work was put aside - if they failed to get the job, they wouldn't have to worry about catching up on it, would they? Many of them ended up with jobs that they didn't really like, which upset them no end. In short, a lot of willing and able people were turned into unwilling and able - skilled, but annoyed and thus underperforming.
A company that I recently worked for laid off 10% of its workforce when I was there. They did the same a few years ago when I did another job for them. (I'm sounding like the kiss of death, aren't I?) Management worked pretty hard to ensure that they got rid of the dead wood during that process. In some cases, they had to get rid of people who were quite good - it was simply a matter of letting the bottom performers go in each team. In other cases, a team was carrying quite a bit of dead wood, but they only got rid of the worst cases, leaving a few useless ones in place. Each team had to get rid of 10% across the board. It didn't matter if one team had 5% useless and another 15% - 10% had to go. I didn't hear anyone complain too loudly - the payouts were very good, and since the object was to save money, they got rid of the most expensive people first (the CEO and a couple of other top managers).

The public sector does it all arse about though by offering voluntary redundancy. A lot of people in the "A" and "B" groups take the money and run, knowing they will get a job elsewhere very quickly. Those in the "D" group hang on like grim death - and they always seem to survive every purge. The department is then faced with recruiting more top performers (always a difficult task) and getting them up to speed in a hurry.

I'm not saying that sacking lots of useless public servants tomorrow is the answer. One challenge of being a manager is working out why people are not performing, and then trying to turn that around - either through re-training, putting an unhappy person into a different job or even moving staff around (some people just can't stand sitting next to certain personality types). If you can't fix them, then it's time they looked for a job elsewhere - they're either in the wrong industry, or the wrong company within that industry. (eg, a boat builder might be unhappy with the boss at one boat building company, but perform much better with another boat builder - that's moving between companies within the same industry. Other boat builders might just be jack of building boats - it's time they tried another industry, like running a florist or a cafe).

Here's the number one difference between the public and private sectors; in the private sector, managers are generally held accountable for the performance of their teams. That means they either motivate or improve the skills of their staff, or they sack them. If they fail, the manager gets the sack. In the public sector, managers never have to worry about losing their jobs. They really aren't under any pressure to make tough decisions - like getting rid of people.

Friday photo

I feel ripped off - I'm sure I took more than one photo yesterday! How could I go a day with taking just one photo? It's not like I dropped the camera or the battery went flat. Maybe my reactions are slowing down - I'm just not whipping the camera out quickly enough to catch the action as I zip by.

This bloke was dawdling around the Bay Run. This section is rarely used by cyclists because it essentially ends in a dead end just ahead. What's the point of riding along a section of track that goes nowhere? I ride along here because I jump onto a street at the end and that takes me towards town, but for cyclists wanting to do laps of the Bay to keep fit, it's a bit of a waste of space.

I guess it is a case of "build it, and they will come" - but only if you build it properly and complete 100% of whatever you are building. Cyclists won't use a track that is only 90% complete - or in this case, about 50% complete.

From reading the local rag, I notice the missing section is going to be built soon. However, the numbskulls in charge aren't going to build properly separated bike and pedestrian paths (like you see in the above photo - pink for bikes, black for people). Instead, they're going to but in a single, 3 metre wide shared path.

That's about the stupidest thing possible - but that's what we've come to expect from our incredibly stupid Labor government. They can't get the big things right, and they can't get the small things right. They fuck everything they touch.

Why should taxpayers pay for this?

Thanks to Andrew Bolt, we get this story about a couple aborting twin boys conceived via IVF because they want a girl:

A COUPLE who terminated twin boys conceived through IVF are fighting to choose the sex of their next child - because they want a girl.

In a case that raises the ethical question of sex selection, the couple have taken their fight to the Victorian Civil and Administrative Tribunal. They already have three sons and said they now want to have a girl after their baby daughter died.

An independent panel, known as the Patient Review Panel, rejected the couple's bid to choose the gender of their next child using IVF. They now want that decision overturned. The tribunal, which ruled it has the power to review the earlier decision, will hear the case in March.

I just hope they aren't claiming the Medicare rebates for the IVF treatment, which runs at $4,500 - $5,000.

Apart from the moral issue of aborting kids because you don't like their sex (which I think is attrocious - I'd sterilise the pair of them), why the hell should the taxpayer be funding any of this? I just hope we aren't picking up any of the tab. If they have, we should not only cut the balls off the father - he should be made to eat them too.

I've actually done a fibre cost-benefit analysis

You may not know this, but most state governments are sitting on big fibre networks. Quite a few government utilities have rolled out fibre on their own over the last few decades to support their own operations.

For instance, the electricity transmission companies have strung it along their pylons. The RTA has run it along motorways. I'm sure the water mob have laid fibre alongside their pipes. Same with gas. The railways have run it alongside every bit of track in the metro area (not worth it out in the country - surprise, surprise). The railway signalling network used to run over a copper network; most of it is now run over fibre. Not that signalling needs a lot of bandwidth - I remember being told once that it needs 9600kb at most.

Back in my public service days, I worked with a government agency on a cost benefit analysis for hooking up to one of these fibre networks. The fibre was already in place - it ran past most of the larger offices for this agency, which had premises all over the metro area. It was just a matter of tapping into the fibre and putting in the right sort of network kit.

Doing the costing was easy - we needed so many switches at such and such a cost. eg - 50 sites, two switches per site, $10k per switch. Pretty simple maths.

We brought in a cabling company to estimate the hauling of the last mile fibre tails - we needed to bore under roads and pipes and so forth, and that costed up to $80,000 (depending on the difficulty and length of the bore). We also needed to cost in the professional services required to install and configure all that stuff, along with additional power outlets in some places and all sorts of trivial bits and pieces.

Many of the benefits were also easy to quantify. Every office had a small server room. That server room had its own air conditioning and an uninterrupted power supply (and both needed maintenance and had finite lives, and the air con units had to run 24x7). Depending on the location, it would have anywhere from 2 to 10 servers, and all were life expired (ie, old and crap). We added up the cost of centralising hundreds of servers into a single data centre, where a trivial number of servers would be required, versus replacing the whole damned lot (which had to be done anyway as they were cactus). The cost of the existing backup system was incredible - each site required a set of daily, weekly and monthly backup tapes, and backup tapes and tape drives aren't cheap. I think the saving in backup tapes alone was well over $100,000.

Then there was the saving in operating system and application licences - they went from dozens of email servers to just a few. The number of backup software licences was also cut dramatically - they were over $1,000 a pop.

The costing started getting squishy when we got to the technical support aspects - how much would we save on having engineers driving all over the countryside supporting all this kit? That was hard to pin a number on, but we did our best.

In the end, I think we calculated that the project would pay for itself in about 9 months - it was a complete no-brainer.

In typical public service fashion though, the manager of the server team vociferously opposed the project as it would cut into his empire. He preferred to spend millions of dollars of our money on replacing all that kit out in the field because it would make him look more important.

Thankfully, it went ahead. I came back later to see what benefits had been realised, and how the costs had gone. Funnily enough, for a government project, the costs actually came in almost smack on the money. The benefits were realised, along with a couple of unexpected ones that we hadn't thought about - they managed to get rid of two vehicles and some satellite support offices because they didn't need so many people out in the field anymore. They could work from a desk and support stuff remotely, which meant instead of doing 3 hours of driving and 4 hours of work, they could actually do 7 hours of work per day.

We tried to quantify the productivity improvements that the users would get from a faster network - what impact would going from a 2Mb WAN link to 1Gb have? Yes, it was now possible to move large files around quickly (which was actually vital for a couple of projects that generated massive files, including lots of video), but putting numbers on it was next to impossible. You can fudge some stuff up - we did - but you end up with very questionable numbers that fall apart when anyone starts poking them with a sharp intellect.

So it is possible to do a cost-benefit analysis on this sort of thing. It actually didn't take that long - a week at most, with input from half a dozen people. If the costs and benefits are staring you in the face, it's just a matter of crunching the numbers.

That's the problem with the NBN - the benefits aren't staring us in the face. With the Snowy Mountains scheme, I think most people could grasp the benefits of generating cheap hydro power and supplying irrigation water to farmers. With the Harbour Bridge, people could grasp the improvement over catching a ferry to North Sydney and the opening up of land to the north for housing. I'm still trying to grapple with what the NBN is going to deliver.

And before people start going on about health and education, after we finished that fibre rollout for that government agency, we had a look at doing all the hospitals and schools that were within easy reach of that fibre network. It was a no-brainer as well - we were raring to do it. However, it all fell over thanks to inter-agency bickering. We could have had most public hospitals in the metro area and lots of public schools on a 1Gb network 6 or 7 years ago, but the political will wasn't there to ram it through.

NBN cost benefit analysis blah blah blah

Last time I wrote something about the NBN, I got this comment:

How many nation building projects would not be started if they had cost-benefit analysis done against them? Sydney Harbour Bridge? At what point is or should vast nation building projects be less subjected to being forced to turn a profit or not exist? Public parks are wasted real estate oh very high value in some cases, they don't make a profit, why do we allow these spaces to exist then? Where was the cost-benefit analysis of these places?

It's been a few years since I have been involved in producing a cost-benefit analysis for a major project; my last one was the Sydney Airport Rail Link. I was only a junior flunky at the time - my main role was to proof read the research, prepare presentations for Cabinet etc and ask a lot of dumb questions (something I am good at).

The rail link was never expected to be profitable for the government by itself. Most of the financial benefits to the government were to come from the following areas:

• increased land values (and land taxes and stamp duty) from converting light industrial land along the route to high density housing
• avoidance of having to pay for lots of new roads, water lines, sewerage, power lines etc on the urban fringe by redeveloping an area that already had them

The other benefits that we looked at had to do with lowering the cost of congestion and the avoidance of a lot of new air pollution that would be created by housing people out on the fringe (where they'd drive a lot).

All these benefits added up to more than the cost of building the line. Estimating them was a lot of fun though - glad I didn't have to do that. However, the thing was, experts were able to come up with rough estimates for all of them, and they were able to justify their estimates using various economic and financial models etc.

I don't get why this can't be done for the NBN - it really isn't that hard once you have identified the benefits.

The thing is, if you can't identify any benefits, then you're in a bit of a pickle.