Friday, July 19, 2024

It is a great irony that the T lies within a stone’s throw of a half-dozen schools of engineering, including one of the best engineering schools in the world. It is irony piled upon irony when we remember that the T lies within a stone’s throw of a half-dozen business schools, including one of the best business schools in the world.

Yet that may be part of the problem, over the past 40 years in business schools, financial engineering has become the most important and popular part of the curriculum. The best students aspire to raise money for their firms and for their clients using very esoteric financial instruments.

Yet in the mundane real world, mechanical engineering and civil engineering matters.

In the real world, manufacturing matters.

In the real world, operations matter.

In the real world, especially for the T, quality control matters.

The T contracted with one company to do the construction and with another company to undertake quality control. It might make some sense to have a different firm to evaluate the outputs from the constructors, but only in the world of financial engineering would an organization structure the quality control of inputs to be outsourced to a different company because it was the cheapest option.

Only in the world of financial engineering would an organization choose to forgo the tight control and integration of quality control for inputs with the core functions of construction and operations in favor of an arm’s-length relationship with a contractor.

This failed. The T has been accepting rail cars that malfunctioned and more recently accepting thousands of pre-assembled railway ties whose brackets – the metal plates to hold the rails – were set at the wrong gauge. This will mean an immense amount of rework.

Where was quality control at the contractors?

Where was quality control at the T?

The situation at the T is complicated by the fact that although the top executive just learned about the narrow tracks, the maintenance-of-way staff knew of the problem in April 2021 and piecemeal fixes to the problems were started then.

We know that it is incredibly difficult to get accurate information up organizational hierarchies. There are two problems: uncertainty absorption and the self-interest of subordinates.

Uncertainty absorption 

Most work in organizations is structured hierarchically so communication flows up and down the organization. There are, however, times when communication must flow between different functions at the same level.

The problem is that distinct levels in the organization have different perspectives, and diverse groups at the same level have different interests. Folk at the bottom are concerned with operational nitty-gritty issues; those in the middle worry about administrative issues. Top managers should be worrying about strategic issues. Thus, information selected at the bottom for its operational relevance may be useless from a strategic perspective – especially after the middle managers have put their “administrative” spin on it. Furthermore, information that is relevant from a strategic perspective may never be noticed because it is irrelevant for operational purposes.

In organizations, different departments have different frames of reference. For example, R&D people are concerned with technical issues; marketing people were more balanced having almost equal concern with business issues, customer needs, selling and technical issues; managers in manufacturing are concerned with production issues and, to a lesser extent, technical issues. These different foci make it difficult to share insights. When people with different frames of reference communicate, the receiver will distort the incoming information to fit her/his frame of reference.

 Self-serving subordinates

In organizations, information is power. By holding back information, an individual makes others dependent on them in decision-making. In other situations, where there is a major difference in the technical competence between a manager and a subordinate (so the boss is unaware that the wool is being pulled over his eyes), the subordinate can manipulate the flow of information so as to make sure the boss makes decisions that are consistent with the subordinate’s best interests even though they may be sub-optimal for the organization. How can managers prevent being manipulated in this way? The shield against this kind of manipulation is by being as technically well informed as the subordinate. This enables the manager to undertake his own evaluation of the adequacy of the information.

A second form of misinformation that comes from subordinates is the suppression of unwelcome news or the inflation of good news.

The best way for managers to overcome both kinds of distortion is for the boss to reach down the hierarchy to gain information directly from the subordinate’s own subordinates rather than having it filtered through the bottleneck of the subordinate’s filtering mechanisms.

This, the T’s top managers must do. Now.

Martin G. Evans is a writer in Cambridge whose contributions on managerial and political issues have appeared in The Boston Globe, Cambridge Chronicle, MetroWest Daily News, Providence Journal, Toronto Star, Globe and Mail of Toronto, National Post of Toronto and the former Toronto Financial Post. He has taught at the Rotman School of Management at the University of Toronto, London Business School, George Mason University, Rutgers University and the Harvard School of Public Health.