Michael Mah is a Senior Consultant with Cutter's Agile Product & Project Management practice. He's also Managing Partner of QSM Associates, Inc., a firm specializing in software measurement, project estimation, and "in-flight" control for both inhouse and outsourced/offshore development. QSM has developed and maintains one of the largest databases of more than 7,500 completed projects collected worldwide, with productivity statistics and trends on cost, schedule, and quality from more than 500 organizations and 18 countries.
With more than 20 years' experience, Mr. Mah has written extensively and consulted to the world's leading software organizations while collecting data on thousands of projects. His background is in physics, electrical engineering, conflict resolution, and mediation. Mr. Mah's work examines the dynamics of teams under time pressure, and its role in contributing to success and failure. He can be reached at firstname.lastname@example.org.
Why IT Managers Must Learn About Negotiation
An interview with Michael Mah, Senior Consultant, Cutter Consortium
In this interview, Michael Mah addresses the importance of negotiation skills for today's IT manager. He touched upon this point in his recent Executive Report: "The Making of the Agile IT Executive."
Q: How did you get into the field of negotiation?
Tim Lister (author of "Peopleware" and "Waltzing With Bears," with fellow Cutter Senior Consultant Tom DeMarco) is a longtime friend. I was frustrated that all the advanced software metrics and estimation research alone wasn't solving the problem of industry conflict and failed projects. Also, two of my largest clients were on the verge of suing each other to death because of a huge contract dispute on a multi-billion dollar outsourcing deal. I was trying to help mediate it.
I asked Tim about this because I knew he was also a professional arbitrator, in addition to being a software expert. He said, "You should check out the work at Harvard. They have something called the Program on Negotiation at the law school. It's a three-way collaboration with MIT and Tufts."
So I spent a year studying dispute resolution and mediation there. Needless to say, I got religion.
Q: How could the work there help the software industry?
Well, a recent study by Cutter Consortium showed that conflict is epidemic in the software and IT field. Everyone's racing at Internet speed. It's estimated that the average software organization has about 50 disputes in litigation. Some are in the tens or hundreds of millions of dollars.
The father of modern negotiation, Roger Fisher, is professor emeritus at Harvard Law School. As a young man, his exposure to conflict was during World War II serving in the U.S. Army Air Force, and in Paris with the Marshall Plan. When he returned from service, he found - like many other young veterans - that many of his boyhood friends and classmates were killed in battle. Since then he's dedicated his life to solving conflict.
Years of research by Professor Fisher and others at the Harvard Conflict Management Group (CMG) and at PON brought forth new methods - most of which are being applied at the international level - on the world's toughest conflicts. There's even an initiative entitled "The Project on Preventing War". These methods are now making their way into the corporate world for the rest of us. It's a trickle down effect. I feel this research also holds the answer to the conflict that's afflicting the IT industry.
Q: That's the big picture. But what about for a manager in an IT organization? How does this work apply to them?
The typical IT manager is in a vise. She's given all these Internet-speed deadlines, forced into a constrained budget (especially in recent years), with ever-increasing demands for more functionality by client organizations. It's the "perfect storm" for conflict.
At the same time, IT managers were never trained in conflict and negotiation. Some of us were drawn to technology for the pure science and research aspects. Many engineers and scientists chose their fields because it wasn't people intensive. There used to be lots of jokes about engineers' people skills in the companies I worked in.
And yet, today's world demands that we interact with more people than you can imagine. Constant negotiations and difficult conversations among IT executives, development teams, clients, VPs, and CIOs. Commercial and deadline pressures sometimes demand outsourcing. So now you've got potential disputes between companies, on top of the tension inside a company. And some of these companies are offshore. Voila, now you've got international relationships. Who knows how to handle those well?
In my experience, unresolved conflict can rip apart an organization and its relationships from the inside-out, and render it ineffective, mired in the energy-sapping distraction of infighting. We can't afford that in today's commercial marketplace. Everyone loses. We need to win.
Q: Why is software and IT so important to today's organizations?
One common thread I've found is that software and information technology is highly strategic in every company I've worked with. We have to get it right if we're going to be successful. In my opinion, some of the cuts during the recent recession were overdone, and more than a few companies are now paying the price.
Fred Smith, the CEO of FedEx, once said that planes and trucks were commodities. They became a sensation by using back-office IT that made overnight delivery possible, which was the new product built out of the commodities. They blew everyone away.
Then others caught up and overnight delivery became a commodity. Smith now says that it's not overnight delivery that's the product - the product is now the information about the delivery! So now front office IT is leading the way, and FedEx is still winning because of their IT. Lotta smart people in Memphis.
Jeff Bezos from Amazon recently said, "By building new technology ourselves, we get to offer a better customer experience. Does that give us an advantage? Absolutely. Now, if we just rest on our laurels, we're not going to enjoy that advantage. You have to continue to innovate."
A lot of IT people are amazing: So many have the most tenacious work ethic, a "never say die" willingness to solve problems. That's part of the problem -- we over-promise. I struggle with it sometimes too; just ask my wife. But never giving up and quitting are the same qualities that brought the Apollo 13 astronauts home against incredible odds, in my opinion.
Q: What are some of the innovations in software management science?
Today there are new capabilities and software management technologies that we've never seen before. We can measure and predict software projects "in-flight" -- to better than 90% accuracy, very early on. It's a lot easier to benchmark historical performance against industry trends today -- we've pruned out practices that didn't work as well.
It's easier to manage the implementation of software packages, selecting software vendors on competitive bids and manage outsourced relationships. The list goes on.
But there's one thing to note: Tom DeMarco was right when he said, "IT is change. It consists of so much more than writing and testing code. The real and always difficult challenge of IT is to transform the organization. A new program or system is merely a vehicle for this. The hard part is not getting the software to work but rather getting agreement on it before the fact and effecting the necessary changes to the company and its procedures afterward."
That's where modern negotiation science fits in.
Q: What's the upside? What's your vision for how it could be?
Imagine having accurate and reliable information on your most challenging IT projects. Knowing with good certainty what is likely to happen with the schedule on your next project. Having dependable historical knowledge on how projects behaved in the recent past, to better predict future outcomes. Knowing the accurate "location" of current projects that are "in-flight".
Now imagine having at your disposal all the tools and skills you'd need to solve interpersonal conflict on both the individual and organizational levels. A rich resource of negotiation and mediation skills. The ability to overcome and navigate through the unfair use of leverage being wielded by tough adversaries. Being able to manage difficult business conversations and uncomfortable relationships with better ease.
Blending software measurement and estimation science with modern conflict management techniques presents untold potential for today's modern organization. This is but one possible future that I envision from my time in this field over the last two decades. I like to imagine a future that holds remarkable potential using the far-reaching advances in technology - made possible by efficiencies from skillful use of modern negotiation and relationship management. We could create the best of all possible outcomes in whatever work we choose to do in this lifetime. That's what the agile executive can do.
A Competitive Advantage
An Interview with Michael Mah, Senior Consultant, Cutter Consortium
Do you feel the potential for an economic slowdown will have an affect on outsourcing?
I believe that if we have an economic slowdown, it will drive more companies to explore cutting costs through the use of outsourcing. This means more companies will experience a power shift and the "split" between two interest structures. The client has a set of interests for outsourcing, and the vendor has a set of interests for being the supplier. Now you have what's essentially a marriage of two different corporate cultures.
The result of a slowdown is likely to be more creations of these types of relationships. They can have a greater chance of prospering when both client and supplier implement good metrics, relationship management, and contract governance frameworks.
What should companies do to try to create a lasting corporate relationship?
First, don't rush things. It's important to set aside the pressures to outsource and consider the long-term impact of the relationship. You need to "date" a little bit. Just as you wouldn't rush into a wedding without getting to know someone, you must begin a relationship with a supplier on a level that enables you to understand each other's cultural issues and working styles. That might mean doing a pilot development project with them or breaking a large project up into phases.
If you're in a downsizing scenario (transferring a function and personnel to an outsourcer), it's more difficult to do things in phases. That's where metrics come in. You need to have a baseline of your own productivity and some substantive numbers on their performance. After all, you're hiring them on the premise that they're going to be more efficient than your current organization. If you have no metrics evidence of that, you may end up hiring a supplier that doesn't achieve your goals. Or you may have an excellent supplier, but no metrics that reflect the positive results that are being achieved. You want a supplier whose reach, resources, and technical skills allow them to perform at a high level, and measures that can verify performance and help optimize how the companies work together.
What about outsourcing application development projects?
What organizations need to understand about application development is that these projects are really R&D projects, and the contracts need to be created with that in mind. Most companies, regardless of the project, structure their contract as though they were a manufacturer contracting with a factory -- that's a major flaw. You start the relationship on the wrong foot because the performance levels and the balance scorecards don't reflect R&D dynamics.
For example, you don't want the contract performance figures to be based only on rates of output per unit cost. While cost is indeed important, you also want to balance measures for quality issues like reliability and defects, as well as time to market. You need to strike a balance between all of those. After all, IT solutions that are low cost, but with late delivery and poor quality are not very useful.
The fact is, shotgun weddings with bad metrics frameworks can create unnecessary tension and conflict. If, as Tom DeMarco described in his recent Cutter Consortium interview ["IT Personnel Shortages, Litigation, and Busy-ness"], litigation is escalating at a dramatic rate, and some companies are spending more on lawyers than on programmers, that tells us that a lot of companies are setting the stage for this. Everyone's expectations are awry because they're using a contract that was designed for outsourcing functions that are repetitive and routine to create a relationship for an R&D function like software. The contractual elements that people are familiar with are the wrong elements to use in R&D-type projects. Those projects are, in essence, creating something that doesn't exist today.
A typical example is using cost-per-function-point as the sole metric, without regard to speed and reliability as I described earlier. There may also be disagreement about what size metrics apply to the spectrum of projects being designed. The factory-oriented view -- just deliver a low per-unit cost (analogous to "cost per light bulb") -- has the potential to create problems that are otherwise avoidable, and set the stage for disagreement.
What's the right way to set up a contract for an application development project?
The R&D portion of an application development project could be on a time-and-materials basis. The subsequent design and build could be on a fixed-price basis if that's what the parties want. There should also be a balanced scorecard that includes all of the dimensions for service levels individually and with the proper proportions -- time to market, cost, reliability in the first 90 days of deployment, and the business benefit.
You also need to focus on relationship management issues. You can have the best metrics framework in the world, but without good relationship management, you may still end up in conflict. We have to teach people the difference between hardball negotiation before the deal is signed and a completely different kind of negotiation after the companies are "married." The negotiation tactics that most companies use to get to a signed deal can create bad side effects in the relationship after the deal is signed, especially if one party is left feeling exploited.
Are you talking about specific training?
Yes, after the contract is signed, there should be joint sourcing-team training on how to negotiate without damaging the relationship. Adversarial, win-lose negotiations are no longer appropriate. You need a negotiation framework that's designed to preserve the relationship, and you need personnel who are trained in how to have difficult conversations. Even if you have a decent metrics framework, that doesn't mean you'll agree. In fact, accurate measures might highlight areas of dispute that need attention. So you have to address how you talk about performance and other critical numbers.
You need to bring in people who understand outsourcing and are informed about organizational dynamics and relationship management, so that you have both subject-matter expertise (in IT) and knowledge about managing disputes in a productive way. One way to do this is to bring in a team that includes both IT/sourcing experts and negotiation consultants.
What happens after the training?
There's no silver bullet in the relationship management arena. It's more of a continuous process, especially since you'll have turnover to deal with. You should have an ongoing program designed to maintain the principles of negotiation -- negotiation on the merits. Here you're learning what's known as interest-based bargaining to create a win-win, versus win-lose. It might take the form of a periodic training program -- for example, a series of onsite workshops for both the sourcing teams and the executives on both sides to aim for good outcomes where they jointly create value together, versus claiming value by one side over the other.
This will help you on two levels. First, on the project level, where these negotiations happen weekly, if not daily -- on an eight-month project to develop a product the company needs to enter a market, communications are going to be daily, and those people are often in conflict. Second, at the executive level, where they are making contractual commitments between the large entities.
What you're dealing with in this type of partnering is a fundamental shift in power that requires specific attention. If you do it well, both sides win; if you do it poorly, both sides can be damaged unnecessarily. And the financial cost of two damaged parties in a large-scale outsourcing relationship can be staggering. Not only in dollars, but in lost opportunity and bad publicity.
Think about it -- two partners who manage this well are going to be at a tremendous market advantage over two partners whose energy is being sapped by internal conflict. In the former scenario, both companies are focused on common problems in the marketplace, working as a team to focus on respective core competencies, bringing their gifts to the table, and aligning their skills and talents in ways that are mutually reinforcing. In the second scenario, you have people losing sight of solving problems and directing their energies at each other with tension and outright hostility, while the marketplace blows by them. The combination of relationship management, metrics, and good dispute resolution is really a competitive weapon.
Up Close with Michael Mah
"So here's the tricky part: traditional projects have long suffered from cost overruns, schedule slippages, and cuts in scope, so tell me again why it's good news that ERP projects behave similarly?..."
Michael Mah: Cutter Latin America Summit October 2009
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