Let’s get some definitions out of the way:
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
Assigned Resources - the
resources that are actually provided - which are always less than those that
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
Now, lets consider these three worlds…
The Perfect World
In the perfect world, the Assigned
Resources (what we are given) would always equal the Required Resources (what we need) and there are
therefore no problems. But that never happens...
The Real World
In the real world, the Assigned Resources
very rarely (aka never) equal the Required Resources…
From the point of view of satisfying the Requirements, this
discrepancy is usually managed as part of Requirements Management. Any
requirements that cannot 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.
From the point of view of satisfying the Guidance, this
discrepancy is usually not managed, or if it is, not managed well. Often the
discrepancy is ignored, or an entry placed in a risk register that is never
acted upon. 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 is pretty arbitrary.
For example, I have personally worked on countless projects
that had drop dead go live dates that, if missed, would mean the world would
end - but, 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 they will be cut) and management to not believing them
(assuming they will be inflated). Two well-known phrases come to mind:
“There is never time to do it right, but always time
to do it over.”
“A short-cut is the longest distance between two
For most Enterprises that’s where it stops. People just have
to knucjle down and muddle through somehow - put their nose to the grindstone -
work as team - forge ahead - think positive thoughts - don’t be negative - just-do-it
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 fully 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 required 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 we need 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
Cost of Remediation - What will
it cost the Enterprise to become compliant in the future?
Transformation Debt™, is what it will cost to service the
debt going forward, 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. Note 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.
It should also be noted that while Transformation Debt™ can
be incurred when doing Transformation, it can also be incurred when not doing
Transformation, by just the passage of time. For example, by not keeping
operating systems up to date or by not maintaining a building or people
properly. In many ways, this type of Transformation Debt™ is more insidious as
it can creep up on you unawares.
Having exposed these three key pieces of information, a
Business decision can 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 the overall Enterprise Debt™.
Enterprise Debt is a measure of
the overall debt an Enterprise has incurred and is literally a list of the
debts the Enterprise has on its books. It is a well understood accounting term
meaning short and long term loans, accrued wages and utilities, income taxes
payable, and other liabilities. Pragmatic
believes that Transformation Debt™ should also be listed as a liability of an
Enterprise and accounted for in the proper way.
Transformation Debt™ (like any 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 Transformation 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 Transformation 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 Transformation
Debt™ and is therefore akin to paying off (some) of the overall Enterprise Debt.
Recognising and managing Transformation 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!)
Managing Transformation Debt™ is not an exercise in making
sure that the Assigned Resources always equals
the Required Resources.
Managing Transformation 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.