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Harriet Wasserman writes:

We just came back from Stockholm where we visited the Vasa ship exhibit. In 1600 something, the king modified plans for his giant ship, to make it bigger and with more guns. His shipwrights (comparable to our engineers) told him he couldn’t add enough ballast and would have problems. He insisted, and they constructed the giant ship, covered with gorgeous carvings and carrying about a zillion guns. It got out into Stockholm harbor, tipped because of too little ballast, all the guns rolled to one side, and it sank. It was retrieved in 1963. The design story is all too familiar.

Core Principle #1 of the KJR Manifesto states that in order to optimize the whole you must sub-optimize the parts. It isn’t original (although I’ve been unable to track down its author). And it raised an objection in the correspondence I received in response to last week’s column that introduced the KJR Manifesto‘s core principles.

The objection was entirely reasonable. Paraphrasing, it’s that optimization never makes sense except in the concept of the larger whole, but that a naive manager, reading this catch-phrase, could use it as an excuse for poor operating discipline.

It’s a fair criticism. It can be applied to nearly any succinct statement of principle. That’s why each core principle is accompanied by explanatory text. It also raises a larger subject that’s well worth exploring: That in organizational design, when it comes to parts and wholes, “whole” is purely a matter of choice.

Consider General Electric. It’s pretty much run as a holding company. The point of optimization for GE isn’t the whole corporation — it’s the individual business units. They aren’t evaluated according to their functional contribution to the larger entity. Each must be one, two or out all by itself. That stands in contrast to Costco or Nucor, whose parts optimize Costco and Nucor, respectively.

Or take the pre-SBC-acquisition AT&T. Its point of optimization was the shareholder, and optimization was defined in terms of the price of a share of stock. It certainly wasn’t the company itself or any of its business units. The word that comes to mind when describing those is “pathetic.”

CEOs are responsible for clearly defining what gets optimized — the enterprise, individual business units, product lines, or what-have-you. Call that the Optimization Unit. Whoever is responsible for each Optimization Unit defines optimization priorities (perhaps cost, then speed, then quality), and aligns systems and structures with them.

Those who manage the divisions that make up an Optimization Unit deal with more complexity than the Optimization Unit manager, because any change … any improvement they might want to make in their own division … could have an impact on one or more of the other divisions in the Optimization Unit, as was the case with the Vasa and its improved armaments. And unlike physical engineering, organizational engineering is an imprecise discipline under the best of circumstances.

This analysis leads to the potential for conflicted IT. Imagine an enterprise that adopts a holding company structure, like GE. Now imagine a central IT organization that tries to support the enterprise. One IT organization that has to support multiple, autonomous Optimization Units won’t be able to sub-optimize its own operations in a consistent rational way.

Which is why, I think, CIOs in this position usually choose to either establish IT as an internal outsourcer, or to structure IT as an “organizational mirror” with separate departments, each aligned to a business unit.

Most managers, up to and including the Board of Directors (and, it appears, some Swedish kings) don’t understand this principle at all, figuring global optimization is nothing more than the sum of local optimizations. So they set up systems that assess the performance of sales, procurement, manufacturing, and distribution in isolation. I know this from personal experience, having been responsible for the manufacturing budget once upon a time. We were to develop our budget in isolation from sales forecasts. Predictably, the CEO pushed Sales to increase their forecast, and simultaneously pushed Manufacturing to reduce its budget. You can guess what happened next.

With all of the above in play, I don’t mind “sub-optimize the parts to optimize the whole” at all. It is catchy. More important, the phrasing requires executives and managers to figure out what constitutes the “whole” and their relationship to it, and to recognize that they can’t make choices in isolation.

A longer essay doesn’t do the job, because they’ll never read it … unless the catchy phrase first grabs their attention.

I have just one question about Microsoft CEO Satya Nadella’s comments regarding women’s compensation: Did he deserve all the outrage?

Let’s start with his actual words:

Maria Klawe: What do you advise women who are interested in advancing their careers but they’re not comfortable with putting themselves up for promotions or advanced opportunities?

Satya Nadella: The thing that perhaps most  influenced me in terms of how you look at the journey or a career…There was this guy whose name is Mike Naples who was President of Microsoft when I joined, and he has this saying that all HR systems are long-term efficient, short-term inefficient.

And I thought that phrase just captured it. Which is…it’s not really about asking for the raise but knowing and having faith that the system will actually give you the right raises as you go long.

And that I think might be one of the additional “superpowers,” that quite frankly, women who don’t ask for a raise have. Because that’s good karma. It will come back. Somebody’s going to know that’s the kind of person I want to trust. That’s the kind of person that I want to give more responsibility to.

And in the long-term efficiency, things catch up. And I wonder whether taking the long-term approach helps solve for “Am I getting paid right?” Am I getting rewarded right?” The reality is the best work is not followed with your best rewards. Your best work then has impact, people recognize it, and then you get the rewards. And you somehow have to think that through.”

Opinion: The problem here isn’t that Nadella is insensitive to women’s realities. It’s that he’s insensitive to how things happen here on the planet I like to call “earth.”

The problem, that is, is that this isn’t how things actually work.

When an employee, male or female, does great work and that great work has impact, that doesn’t mean anyone in management will even know which employee deserves the credit.

Credit-stealing is routine in American business. Worse, or perhaps better, great work and impact are usually produced by a team. Balancing the importance of valuing team effort with the varying contributions of different team members is quite a difficult feat.

Also, Nadella seems to be implying that promotions and raises come from doing something that has a strong positive impact. I sure hope not. That’s what bonuses are for. Employers should give employees raises when they’re worth more in the employment marketplace, and promotions when they’re capable of a more responsible and valuable job.

What happens instead: When companies underpay employees the result is a short-term increase in profitability. And as accounting systems don’t have any way to represent the loss of talented employees on financial statements, the whole system is tilted in this direction.

The result: In the vast majority of corporations, employees don’t get what they deserve, they get what they negotiate, just like the ad in the in-flight magazines tells you.

Nardella’s response was, in many respects, thoughtful. The problem was that he failed to include something critical, namely, useful advice for the world as it actually is. A far better response would have been:

The situation for women at Microsoft … and at any other company, but I only have influence over Microsoft … should be exactly like the situation for male employees. What we’re striving for is that no employee should ever have to ask for a raise or promotion. We want every employee to be in a position they can succeed in, and that provides them with opportunities to achieve and grow. And we want to pay every employee what he or she is truly worth.

If we’re failing to do that for any employee, that employee should make her … or his … case and we should listen and make an objective judgment. We should give that employee a raise or promotion if one is warranted, and an honest response either way.

As a general rule, in U.S. businesses at least, men are better at negotiating these things than women. Worse, it’s considered okay for men to negotiate such things, much more so than for women who do the exact same thing.

And as the big three when it comes to compensation de-motivators are arrogance, disrespect and unfairness, it’s unsurprising that women, more than men, are likely to find their compensation de-motivating.

Were Mr. Nardella’s words disrespectful to women? I don’t think so. They were worse than that.

They were terrible advice.