Month: February 2021

Maybe you’re not in a position to lose $900,000,000 for your company.

 

But, if you’re like most leaders, you don’t know all the ways in which the things you’re responsible for can go drastically wrong.

 

Even if you’re very good at your job.

 

Even if you’ve been at your company for a long time.

 

Even if you know the technical ins and outs of the business.

 

Good leaders know the limitations of their knowledge. They have what I like to call “objective curiosity” about their work and their systems. They’re asking about what might go wrong, sure. But they’re also asking about how things work. They’re continually refining their mental models of the work that they’re responsible for.

 

It’s dangerous not to.

 

If you need convincing, take this story from Citibank as a cautionary tale.

 

In 2016, an operations group at Citi in charge of managing payments for loans—the bread and butter of finance—accidentally wired some money outside of the bank.

 

And by “some money,” I mean $900,000,000.

 

The story is almost comical in its complexity (my favorite finance writer, Matt Levine, dissects some of the high points).

 

The transaction itself was complex, involving the refinancing of a large commercial loan. Some lenders were participating in the new loan, some were not.

As a result, Citi didn’t actually need to wire any money [1]—but, because of the way their systems were set up, they couldn’t facilitate their client’s loan transaction without at least pretending to wire a bunch of money.

 

So, there was a work-around. The operations group handling the transaction could create an override by wiring the funds to an internal Citi account, instead. All they had to do was check a box and put in the number of the internal account (called a wash account because the transaction washes out). The operations person who created the transaction did that. He got two others to look at it (a “six-eye review process”). It looked good to everybody, so they put the transaction through.

 

The next day, operators realized that they had incorrectly wired out nearly a billion dollars.

 

As it turns out, they understood the transaction, but they misunderstood their systems. They had put in an override. They checked the override in the “PRINCIPAL” box and put in the number of the wash account.

 

But, as Levine reported, they needed to check three boxes:

 

[The manual] explains that, in order to suppress payment of a principal amount, “ALL of the below field[s] must be set to the wash account: FRONT[;] FUND[; and] PRINCIPAL”—meaning that the employee had to check all three of those boxes and input the wash account number into the relevant fields.

 

Whoops.

 

It’s tempting to blame the operations folks, isn’t it? But we’re not going to do that. The operators were doing their best in the system they were in. To really learn from something like this… you have to believe that you might have made the same mistake in their shoes.

 

This example from Citi highlights three specific lessons that can help you in any complex project or work setting. You need to be sensitive to the strengths and limitations of your people, develop awareness of how your processes really work, and seek out the unvarnished truth so you don’t ignore important issues:

Trust humans—but expect them to make mistakes.

 

We cannot expect humans to be perfect. We all make mistakes. And we will miss the mistakes others make.

 

So, you can’t just add more checks. You can’t just add more instructions.

 

Instead… add transparency to the system. 

 

Generate a big, screaming graphic that shows that $900,000,000 will be wired out of your bank.

 

Use a Sharpie to put a big “X” on the side of the patient where you will operate.

 

Create a system that says “Pull up, pull up, pull up” when you are about to fly into the ground.

 

Make blindingly obvious what is happening—so it’s easy to see and correct.

Pay attention to work-arounds.

 

Safety experts talk a lot about the gaps between “work as imagined,” “work as prescribed,” and “work as done.”

 

Work as imagined: Managers get together in a conference room for hours of discussion about how something should work.

 

Work as prescribed: Managers then write a procedure (or maybe external consultants do) to tell operators how the work should actually be done.

 

Work as done: That procedure is given to a new group of people. These folks aren’t in a conference room. They don’t always have the right tools, the right resources, the right information, or the right amount of time. But they’re expected to do the work! And, mostly, they do.

 

But there are gaps—gaps that require operators to skillfully “work around” the constraints of the system and the work as it has been designed.

 

These gaps are an inevitable part of operating in a complex system.

 

Good leaders realize this. They create feedback loops to understand what’s actually being done. They listen to operators. They learn and adapt, closing those gaps over time.

 

But what happened at Citi was a bit different. The procedure itself was a work-around for a fundamentally flawed system. It was far too complex. It wasn’t logical. And there were few checks for when things went wrong.

 

Instead of accepting work-arounds… pay attention to the places where you’ve made them a part of your system. They point to places where complexity can cause failure.

 

Ignore them at your peril.

Seek out what’s not working.

 

I’m willing to bet that Citi’s system was not a topic of conversation among its senior leadership.

 

Why not? Obviously, it could cost them hundreds of millions of dollars.

 

Many organizations deal with (and ignore) systems like this all the time.

 

That’s dangerous. Beyond being a source of risk, I’m willing to bet that Citi’s system was an impediment to agility, innovation, and competitiveness.

 

I don’t know for sure. But I’m guessing that even leaders who had operational experience and deep knowledge of the business accepted the terrible system as just part of “how we do things.”

 

Instead… good leaders seek out the unvarnished truth about their systems. They need to know what works and what doesn’t. And they have two sources of information they rely on to know what needs to be fixed:

 

1. Their teams: By creating a psychologically safe environment—one where people feel encouraged to share their true thoughts and feelings—leaders can learn about underlying problems and start to work on them.

2. Outsiders: Part of the challenge of running a complex system is normalization of deviance, or comfort with increasingly risky setups. Outsiders can point out blind spots in your operations (“Wait, what? How does your system work… that’s kind of nuts!”).

 

Outsiders can also help you see the idiosyncrasies of how you operate as a team—the assumptions you make. The way you talk to each other. The presence or absence of hierarchy. A skilled outsider can help you see your strengths and your opportunities for growth.

 

Are you a leader who works in a complex system? Book a free 15-minute call with me if you’d like to talk with an interested outsider.

 

[1]This isn’t quite true—they needed to wire around $7 million for some accrued interest. But not the $900 million of outstanding principal that they had to “trick” their system with.

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Jim Riley had what seemed like an impossible problem.

 

How could he and his team of dynamic and creative teachers keep their focus on the University Cooperative School’s core mission: to help its pre-K through fifth-grade students learn without giving up the wonder of childhood.

 

The crux of the challenge, of course, was the global pandemic.

 

While online school ticked a lot of boxes, it also created massive gaps. There’s not much “wonderful” about being stuck inside a Zoom box, as I’m sure many of you have experienced.

 

But, more importantly, Jim and his colleagues observed that kids weren’t getting the kind of social-emotional development that was at the core of the school’s mission.

 

What was he supposed to do?

 

Jim faced the kinds of problems that many leaders I work with face: lots of moving pieces. There were numerous constraints that he needed to satisfy. The stakes were high. And there wasn’t a clear path forward.

 

Even as the school installed more sinks and new air filtration systems, Jim and his fellow teachers discussed how to move forward. In one of those discussions, a good idea bubbled up: starting out the fall with outdoor education.

 

But an idea is far from a solution.

 

One thing that became clear as I spoke with Jim for my podcast was how much he engaged with other stakeholders about the issue.

 

Complex, consequential problems require novel solutions. But novel solutions can’t be imposed. If they are, people resist—and they won’t be convinced by data.

 

So, Jim and his colleagues engaged. They sought out the advice of a group of physician parents who created a detailed plan for wellness-screening to help keep everyone safe from the coronavirus. Teachers packed wagons to haul their supplies around. Kids donned muddy buddies to keep them dry and insulated from the elements. And parents hacked together outdoor toilets (“fun buckets”) in portable pop-up tents that could be set up and taken down in Seattle’s public parks. (When a parent initially proposed this idea, people thought it was a joke).

 

Pivoting is not something that you do for fun or on a whim. It is leveraging your core skills and experience to make a shift.

 

To pivot successfully, you need to embrace an attitude of learning. You need to be willing to try things, experiment, and be comfortable not knowing how something will work.

 

That’s ultimately what Jim, his colleagues, and the entire school community embodied as they took on the challenge of outdoor learning.

 

I work with many leaders in big companies who face the same challenge: they have to solve a big problem with an as-yet-unknown answer.

 

The ones that succeed look a lot like Jim: they willingly acknowledge that, even though they don’t have the answers, they’re excited to be on their journey.

 

It took me years to realize that the value I provide as a consultant isn’t knowing the answers (I don’t!). The value I provide comes from my presence, from being a part of a leader’s journey as they walk their own path.

 

What about you? What’s an impossible problem that you’re working on?

 

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As I prepared for my recent interview with journalist Tim Harford, I was struck by the diversity of the output he produces—from books to a weekly Financial Times column to his Cautionary Tales podcast (it’s fantastic, check it out) and BBC radio series(es).

 

Beyond being an interesting and broad set of activities, there’s something about this pattern of activity that is self-supporting. Like Bach’s Goldberg Variations, there’s a core theme layered with deviation, a center to return to while playing around the edges.

 

My theory is that working across a lot of media is a way of both being focused and producing high-quality, diverse work.

 

As we discussed on my podcast, the theme underlying Tim’s work is an understanding of economics and social systems, plus the ability to tell a story. And the variation—consistently applying this core skill set to different media—elevates the work by creating many opportunities to get feedback and improve.

 

In many ways, as I’ve shared before, being prolific is the antidote to mediocrity.

 

I see this show up in my work. As I work with more and more organizations, I learn more about the underlying challenges my clients face. I learn more about the ways that I can be helpful, which sharpens my focus and simultaneously lets me experiment to find the right skills needed for a given situation. I learn a lot about myself and the work along the way.

 

Choosing diverse ways to work on a common focus is something that we all learn from.

 

Let’s say, for example, that you are managing a team of engineers tasked with process innovation in a large company. You’re undertaking a big, complex project with lots of moving pieces: a training/upskilling component, a component around how you work with data, and a component around implementing a new system to track work-in-progress (WIP), so managers get better visibility into what they’re doing.

 

You might create a plan for the year and break it into quarters, tackling a little bit of each aspect of the project as you go. That can work.

 

But consider an alternative: prioritizing your work around an area of focus so you start to get feedback early and build your capabilities as you go. Working on training and data during the first quarter, for example, might better prepare line managers to use your new WIP system.

 

As an example, as my team makes The Breakdown™ podcast, we’ve searched for aspects of our work that would complement the progress we’re making and the skills we’re getting, like making and editing videos.

 

Being prolific is something that I see some of my most successful clients doing, as well. They’re not afraid to try and combine different aspects of their work.

 

Consider a law firm that I work with. My client there, a litigator, recently came across a group of clients whose cases required arbitration instead of traditional litigation.

 

He realized that, thanks to the systems that he spent years building to make his practice more efficient, he could take on the arbitration cases (and likely succeed). Yes, the application was different, but he saw the power in being able to apply the same system that he had spent years building to a slightly different kind of problem.

 

What about you? What’s a variation to your core strategy that you might try?

 

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