Tag: revenue

When you overhear someone talking about federalism versus states’ rights, you are bound to think they’re talking about national politics. In the meeting rooms of corporate America, however, it’s often a very different discussion going on.

For product engineering teams in a medium to large corporate context, many topics and discussions boil down to federalism versus states’ rights wherein federalism relates to the interests of the corporate parent and the states in question are the business units or individual product teams. The representatives from each of these bodies often have distinct agendas and priorities which sometimes compete with each other and all too often leave employees and executives alike flummoxed and resigned to pain.

The Federalist Perspective

The people who are charged with driving unification and standardization may indeed use their process and policies as sword and shield, but this doesn’t mean they don’t have a well-reasoned position that drives them. Almost every employee is familiar with the drive to create revenue. Not nearly as many are familiar with the charge of “driving the spread.”

A business could be viewed as healthy when revenue grows at a rate that exceeds the cost of capital (i.e., “investment in the business beats investment in the market”). Better yet, a business can be viewed as sustainably healthy when revenue grows at a rate that exceeds the cost of capital AND operational expense grows at a smaller rate. This is what is known as increasing “the spread.”

When the spread grows year over year, it means the business is succeeding at increasing both effectiveness and efficiency at the same time (i.e., “doing the right things right”). In most cases that don’t have explosive market growth, driving the separation between revenue growth trend lines and operational expense growth trend lines is one of, if not the best, metrics for the sustainable health of an enterprise, because the increasing spread acts as a lever to fend off disruption and competition by raising barriers to entry or funding acquisition of potential disruptors.

If your job within the company is to increase the spread for the entire enterprise, the best tools at your disposal are to drive standardization and consolidation in all things by default. In this context, “all things” really does mean “all things.” It includes—but is not limited to—tech stacks, support levels and processes, operating procedures, job descriptions, programming languages and frameworks, employee policies, employee tools, business process systems and core capabilities.

This drive for rationalization often will come into conflict at the business unit because individuals at all levels within the business unit will many times be asked to drive change that could sacrifice the performance metrics and commitments that are measured at the business unit level.

In the eyes of the federalist, sacrificing pennies for the sake of dollars is almost—if not—always the right thing to do for the enterprise.

The States’ Rights Perspective

The people who are charged with driving business unit performance may indeed voice their displeasure at corporate direction with an attitude that displays a lack of professionalism and respect, but this doesn’t mean they aren’t fighting for a just cause. Supporting the whole at the expense of piece is something that most people can understand. Not everybody, however, can see the cost that comes when unification erodes peoples’ sense of self-determination.

Individuals and individual business units alike are extrinsically driven and rewarded by achievement of individualistic goals and commitments. Many of these same individuals are intrinsically driven by a sense of autonomy, mastery and purpose. Autonomy at its basic level is well-understood.

When new directives for unification or standardization are rolled out, this introduces both direct and indirect cost at the business unit level. These costs aren’t always funded to the extent necessary to drive the required rationalization. Even in the case of reasonable funding, relief from existing commitments isn’t usually factored into corporate directives.

Funding and wholistic concerns aside, what can be the hardest dynamic to work through is directed idleness while fully aligned decisions are being generated. From the practitioner perspective, this dynamic can be perceived as contemptuous because it simultaneously says, “Your concerns are not sufficient to warrant our attention,” and “Don’t take any action to address your concerns because that will warrant our attention.” In the most extreme cases, this is coupled with an unyielding expectation to meet or exceed performance goals.

This approach breeds a combination of labor attrition, forced helplessness and a jaded attitude within teams that can take years to unwind and change.

The Balanced Perspective

Splitting the middle can be difficult in emotionally laden high-stakes areas. Add distrust and a high degree of power separation, and the degree of difficulty gets intense for this effort. Let’s start from the top because the onus is on leaders to go first when an impasse arises:

Where federalists can give in efforts to support self determination:

• Even the most ardent federalists agree that autonomy is the only path to achieve scale in a modern corporation. Central bodies of authority can go out of their way to demonstrate their commitment to this by endorsing explicit role-specific areas where experimentation and innovation is needed (i.e., a message of, “Don’t advance here just yet,” goes down easier if it’s coupled with a list of topic areas that have few or no guard rails).
• Assuming current commitments are not in jeopardy, acknowledge that work done in excess of current commitments is a contribution and not a distraction, even if it has the localized possibility of deviating from to-be-set standards (i.e., a message of, “Don’t spend time on improving area x,” goes down a lot easier if it’s coupled with an acknowledgment that, “If a person is willing to dedicate their own personal time, that does not come at the expense of the company. We value that level of commitment”).
• Find ways to recognize and reward individuals and teams for avoiding local optimization at the expense of the whole to compensate for locally defined goals and compensation systems.

Where states’ rights activists can give in an effort to support a broader set of goals:

• Even the most ardent localists acknowledge the pricicipal within a hierarchy of goals (enterprise goals > unit goals > team goals > personal goals). Local leaders and practitioners can go out of their way to demonstrate their faith in leadership by going the extra mile to find and generate goal alignment that drives benefits to more than one organizational unit (i.e., a stance of, “We’ve prioritized local remediation in this one area because it helps our business unit meet some secondary objectives,” invites less opposition if it’s demonstrably linked to the broader set of enterprise goals.
• Assuming room for innovation and continuous improvement is met with tolerance, local leaders and practitioners can make themselves beyond reproach by ensuring goal priorities have been kept in mind and also focusing improvements that have limited to no impact outside of their local responsibility (i.e., a local development push to a microservice architecture can have deep impacts to a centralized operations unit without a diligent effort to manufacture a mature operational capability).
• Find ways to drive local improvement communications up to broader system owners in an effort to facilitate collaboration and longer-term planning (i.e., a message of, “Business unit x has developed a new solution for y,” raises a lot less concern when it’s paired with a statement of, “… and the teams acted responsibly by collaborating with the enterprise team responsible for keeping our long-term efforts here aligned with a consensus road map.”

When deference and forbearance meet, graceful and elegant solutions emerge and ultimately harmony is preserved. If only more people understood that the adversarial noise in between us is more harmful than either minor deviance, or momentary ambiguity.

— Stephen Fishman