Using Commitments to Manage Across Units


The Fall 2005 issue of MIT Sloan Management Review included an excellent article titled Using Commitments to Manage Across Units that discussed the defining characteristics of this approach, compared it to other approaches, and discussed some essentials for making a commitment-based approach effective in an enterprise.  For a full copy of the article, order reprint #47114 from www.sloanreview.mit.edu
Below are some of my notes from this article:
  • Standardized workflows and skill specialization are necessary across an organization in order to have reliable and efficient operations.  However, the differences in culture, vocabulary and perspectives make forming commitments across business units difficult.  Those differences should be recognized and addressed as necessary facts - they should not be demonized - in order to make a commitment-based approach effective.
  • Commitments need not flow only from the recipient to the provider, from the customer to the supplier, or from the boss to the subordinate.  Healthy enterprises foster an environment that allows performers to take the initiative and suggest or offer commitments.
  • Commitments legitimately come with conditions.  For example, a provider of IT support may offer a commitment to respond to outages within a certain time window provided they receive regular logs from the equipment during routine operations, have access to the facilities at time of the outage, are assigned a manager to make certain decision, etc.  The provisions should not be seen as "cop outs" but as valuable part of how commitments span the enterprise.
  • Appropriately couple, neither too closely nor too loosely, personal commitments to corporate information.  An estimate of the customer service events in the 4th quarter of next year is not the same as a commitment to be able to gratify a certain number of customer service events.  However, that commitment wouldn't be meaningful without historical measures of customer service activity or credible estimates of future needs.
  • Commitments require mutual reliance in order to be effective.  The recipient of a commitment undermines the commitment by neglecting to make any reliance upon it.  The reputation of the provider with the recipient, and others, must genuinely rely upon satisfaction of the commitment.  If either party fails to place any reliance upon the commitment,  it becomes a self-fulfilling prophesy that the commitment will go unsatisfied.
  • Commitments must be public. The commitment must be public but not all the details.  Often providers are reluctant to make commitments public since it damages their reputation to fail in a commitment - a legitimate expectation and one with a necessary role in the commitment strategy.  Providers are more willing to make commitments public when doing so contributes to the likelihood of success - e.g. that their subordinates and colleagues can contribute to the commitment now on their own initiatives.
  • Commitments must be active.  Commitments negotiated and reviewed at the beginning and end of the year are not likely to be effective.  Any commitment of significance will require on-going shared understanding of the commitment by the stakeholders.  Essential is the concept of re-negotiation either because unforeseen events complicate delivery.  There is a difference between events that couldn't have been foreseen and events that wouldn't foreseen relative to if a commitment should be re-negotiated or is unsatisfied. Consumers of commitments have a responsibility to let providers know if they no longer need the commitment - not doing so is a failure on the consumer side.
  • Commitments must be voluntary and made by mutual agreement.  Direction to a subordinate is not a commitment - and not as effective.  "You will do X for Y budget..." is not a commitment - "I am willing to pay Y for X" and "I am willing to do X for Y money" is a commitment.  Essential to the commitment approach is that providers are not "under the thumb" of consumers and that consumers are not "captive" to providers.  The voluntary element of commitments not only increase the personal investment in the commitment but provides an organizational mechanism to re-align consumers and providers in productive ways.  A "no" requires conscious effort that is valuable and often necessary in an organization.
  • In the commitment-based approach, people fulfill the needs of the organization - not working groups or departments.  This creates opportunities for flexibility.  However, it works less well for business activities that are necessarily routinized and may create opportunities for employees to come to local agreements that are sub-optimal to the organization as a whole.  The commitment-based approach is more suitable to non-routine or initially non-routine activities.
  • Silence is not consent.  Neither providers nor consumers can assume they continue to understand the commitment based upon an agreement at a past point in time - on-going negotiation, examination, and management of the commitment is required from both sides.  Consumers of commitments must be willing to provide on-going rationale for the commitment in order to improve the probability and quality of the provider's solution - consumers bear a responsibility for their own satisfaction. Assuming stability is ineffective.
  • Consumers of commitments have a unilateral, but not arbitrary, role in evaluating the satisfaction of the commitment.  Consumers bear a responsibility to evaluate commitments not on what they want now, or what they wanted originally, but what they asked for and supported.  Similarly providers cannot make commitments to a 3rd party who is not a genuine consumer of the commitment and providers do not get to self-evaluate if they satisfied the commitment. 
- Brian
 

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