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¨      Resources - money, time, people, etc - whatever is required to effect a transformation.

¨      Requirements - the resources associated with satisfying the requirement of the work.

¨      Guidance - the Resources associated with satisfying the things that guide and influence how we satisfy the Requirements. Things like Principles, Policies, Standards, etc, but also things like conforming to the structures and methods imposed on us.

¨      Required Resources - the Resources that are required to satisfy the Requirements and conform to the Guidance.

¨      Assigned Resources - the resources that are actually provided - which are always less than those that are required!

Don’t forget that Governance & Lobbying happens at each level of the Transformation cascade and therefore each level has to conform to (or lobby against) the guidance (Structural and Transformational) from the level above.

The Perfect World

In the perfect world, the Assigned Resources (what we are given) would always equal the Required Resources (what we need). But that never happens...

The Real World

In the real world, the Assigned Resources very rarely equal the Required Resources.

From the point of view of requirements, this is usually managed as any requirements that will not be met are usually identified and either resource is brought to bear to satisfy them, or they are “de-scoped”.

This is not where most of the problems that derail Transformation efforts lie.

The problem comes from the Guidance or rather from the fact that appropriate resources are not available to satisfy the Guidance. Even more correctly one can say that the problems arising from this Non-Compliance is largely hidden and therefore ignored. In fact many Enterprises take a very dim view of exposing these problems. There may very well be valid business reasons for this, but a lot of the time this restriction can be pretty arbitrary.

 “There is never time to do it right, but always time to do it over.”

“A short-cut is the longest distance between two points.”

I have personally worked on countless projects that had drop dead go live dates that, if missed, would mean the world would end - but in reality it never did. I have also worked on countless projects where the money required was not made available - again for some pretty arbitrary reasons - but in reality those restrictions meant the project ended up spending far more. I am sure you have too.

Restriction of resources tends to be the very simplistic (and ultimately severely damaging) control mechanism that management uses in relation to Enterprise Transformation, as well as the simplistic management style of always asking for more for less. This leads people to produce inflated estimates (assuming that they will be cut) and management not believing them (assuming they will be inflated).

For most Enterprises that’s where it stops. People have to muddle through somehow - put their nose to the grindstone - work as team - forge ahead - think positive thoughts - don’t be negative, etc. Perhaps some lip service is paid to this gap - some entry in a risk register that is never used for anything - but that’s about it. There will be implications, but those implications are not known and will only be discovered later when nothing can be done about them and those that could have done something about them have moved on to far more important things.

But, let us be clear.

Not providing what is asked for is not the problem.

Ignoring the implications is.

The Pragmatic World

In the Pragmatic world, things start off the same as in the real world i.e. the Assigned Resources very rarely equal the Required Resources. However, in the Pragmatic world we accept this inconvenient truth and do something about it. We recognise that there are three things to expose and consider.

¨      Cost of Compliance - What is preventing the Enterprise from complying with the guidance and what is required to allow the Enterprise to comply?

And, assuming what is required is not provided…

¨      Cost of Non-Compliance - What issues and risks going forward will this non-compliance create for the Enterprise? (Transformation Debt™)

¨      Cost of Remediation - What will it cost the Enterprise to become compliant in the future.

This Transformation Debt™, is what it will cost to service the debt and what it would cost to bring the work being done up to the same standard as would have been produced if the Assigned Resources had been provided. Notice that the Cost of Remediation is bigger than the difference between the Required Resources, and the Assigned Resources. This is because it will always cost more to do something one way and then change it to another than it would have cost to just do it right the first time.

A Business Decision is then made to either provide what is required to comply (Cost of Compliance) or to accept the implications of not doing so (Cost of Non-Compliance + Cost of Remediation). If the Business decision is made to not provide what is required to comply, this Transformation Debt™ adds to overall Enterprise Debt™.

Enterprise Debt™ is a measure of the resources that would be required to pay off the debt. But Enterprise Debt™, like financial debt, also has to be serviced in the form of interest payments, for example increased support costs. Like interest payments on a loan, this is a recurring cost and will continue for as long as the Enterprise Debt™ it is servicing exists.

In addition, if the thing that was transformed now needs to be transformed again, there will also be an increased cost to effect that change. This change also requires resources and if the Assigned Resources for this change does not equal the Required Resources for this change we are introducing even more Enterprise Debt™ into the Enterprise - a double whammy! This is akin to taking out another loan to pay the interest on a current loan!

However, it’s not all doom and gloom. If it is recognised that we need to do some remedial work, (or more likely, things just get so bad the Enterprise has no choice but to do some remedial work) this reduces Enterprise Debt™ and is therefore akin to paying off (some) of the debt.

Recognising and managing Enterprise Debt™ provides a simple and extremely effective control mechanism for management to get back in control of their Transformation initiatives and for those working in them to produce quality work (and to be able to sleep at night!)

Enterprise Debt™ is not an exercise in making sure that the Assigned Resources always equals the Required Resources.

Enterprise Debt™ makes sure that when the Assigned Resources does not equal the Required Resources (most of the time) that the implications are exposed so that management can make informed business decisions in the light of that information.


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