The Cost of Digital Micromanagement

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The Cost of Digital MicromanagementWe do love our project software. It used to be that employees were held accountable and kept on task by managers. Physical proximity, body language, and job performance observations helped managers to motivate, correct and train while accomplishing tasks. Rarely did managers query their charges with the question: “What do you plan to do to accomplish your task. Indeed, employees were expected to know how to carry out the necessary steps to accomplish a given task. Back then, it normally wasn’t the job of a manager to intervene until problems became evident. But, with the development of project management software and more outsourced work, the management dynamic has changed to a form of reporting micromanagement tyranny.

As a consultant, I recently became an outside observer of a company who made a costly transformation from excessive micro-management to grossly excessive digital micro management. Indeed, the ERP concept was impressive and its basic concept sound: having employees plan and record a parent task and its micro tasks should greatly improve productivity by the logical effect of pre- planning each step in advance. Moreover, remote employees and contractors can be monitored more closely than if working in the same location. By having employees enter tasks and micro-tasks and constantly requiring daily updating, the goal is more control and more efficiency. But when I noticed a number of time employees were spending entering their updates and reports, the more I became suspicious of the actual value of digital micromanaging.

Firstly, employees felt they were spending too much time reporting and not enough time spent on actual implementation. Employees also felt that management did not trust them to do the parent task correctly nor leave room for spontaneous creativity. Before any variation of the recorded micro task could be changed or altered it required approval from supervisors. Given that supervisors were now being tasked with reviewing the growing mass of reports and requests for variations, getting timely guidance was slowing the whole process down. Moreover, the ERP had its internal communications channels that only added to the confusion. Often, messages and internal emails were sent via the wrong channels and sent multiple times adding to the inefficiency. After almost six months after company-wide implementation, the information overload and quantity had created a created not only a decline in morale but also pushing some key employees to the edge of burnout.

Understanding that the quest for efficiency and control was posing a threat of increased turnover of key staff and a potential loss of efficiency, I decided to make the case to ownership that the ERP procedures needed to be modified. However, ownership loved their ERP and what it was supposed to be doing.

All owners and managers are eventually focused on financial results.  I decided to make my case using the financial approach. The company had over 35 employees wrapped into the ERP “grind.” and I took a survey of how many hours per day each was devoting to ERP entry and reporting. Of course, the caveat is the truthfulness of the survey input given the desire to see the ERP requirements go away; I came up with the average employ spent about 2.5 hours per day reporting to the ERP. Given the average burden labor cost of the $48/per hour, any monthly gains in efficiency are offset by $76,563 in monthly data entry costs. Using historical data, it was determined that pre-ERP project costs were not significantly different compared to the small six-month sample.

When I presented ownership with my observations, there was an adamant denial, most likely due to the cost of the ERP. However, when I asked them what reports from the ERP were they using on a daily basis and what reports they felt were vital to the operation?

Well, you guessed it: they hardly used the ERP data except to see if employees were on task. They still depended on the KPIs they had established years earlier! “Well, at least it forces them to think beforehand of how they will execute tasks,” came the rebuttal. As my duty as a consultant is to help them by providing input, I suggested that they define what information was needed, how often. Indeed, it was ok to have employees define how they want to perform a task and modify when needed, but to me, it made little sense to require daily detailed updating the work in progress unless it there is a significant push back from the estimated completion date. Besides, in my mind,  management’s insistence on digitally micromanaging told me they didn’t have much faith in HR’s ability to hire the right people or if the organizational structure should be modified. The room suddenly became quiet and there were quick glances exchanged and body language that told me somebody’s ox was getting gored. Finally, one manager volunteered what was being silently implied: “We hire a growing number of freelance consultants-many are offshore. We felt the labor cost savings would pay for the ERP but perhaps  we need to look at streamlining the process.” That made my consultant’s heart skip a beat as the potential project formulated in my consciousness. The takeaway is to look carefully at the cost-benefit of new technology and identify the ability to modify and best use Enterprise software.


Additional Reading

Operational Excellence for Agile and Adaptive Companies

Developing Leadership in the Digital Age

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