The Soft Side of Hard Data

IoT! Industry 4.0!! Digital World!!! The champions of these technologies promise that hence forth you will always have access to right data. Your decision making will improve as you will have at your discretion – right data at the right time. Armed with right data sets, you will march towards prosperity. If only access to data was the secret recipe to good decision making, machines would have taken control of management long ago!! However, as long as there are humans in the delivery chain, effective management would require not only objective and rational goal setting but also an empathetic and cultural sensitive decision making. As the famous organization theorist Harold Koontz once said, “Management is the art of getting things done through and with people in formally organised groups.”

In a recent MBA class at an elite institute, I asked a student if he is considering investment banking as a potential career. He was inclined to pursue investment banking because of its high remuneration but he was not confident of his modelling and mathematical skills. He was of the view that these skills were essential to be an investment banker. I wonder if the student knew Peter Lynch’s – philosophy; where common sense and not data alone is the basis for stock picking. This is an old topic in research, where in 1960s it was found that managers used “satisficing” approach to decision making. The researchers argued that managers do not focus to secure perfection in decision making through elaborate planning, negotiations and rational thinking but aim towards securing a working solution. More data processing may lead to more brain hours for the manager, but not necessarily better decisions.

I concede that there are inefficiencies which can be removed through better data analysis. Better data analysis would help in resource optimization. It is assumed that optimal allocation of resources is as a precursor to good firm performance. However, there is evidence in management research that suggests that slack i.e. buffer/extra resources can sometimes improve firm performance. In short having optimal and well defined systems may not always be good for the organization. Managing systems and processes is not a mathematical problem alone that is solved by a machine. It entails an element of art as well.

The importance of managers identifying and addressing the right problems is more critical than ever in the new data driven environment. In the present times the discourse on IoT or Industry 4.0 is limited to technology solutions. More than the technology adaptability of organization, it is the human resource systems which need to evolve and adapt to the new digital world. In the race towards adopting industry 4.0 and IoT solutions, HR managers need to stand as gatekeepers for their firm’s long term wellbeing. The heart of IoT lies in logging, documenting and monitoring events and activities for better decision making. People and not machines tend to have greater variation in performance. IoT systems may unknowingly reflect upon individual performance and practice. If used as a tool to highlight shortcomings in existing people practices and processes, there is a risk of disturbing the fine balance. Consider the response of a maintenance manager when offered with a simple alarm system for the critical batch process in factory –

“Ï do not wish this solution. Now even when I am off duty I will be expected to respond and revert immediately to any problem.”

“The top management never trusts us. Now if I start using this I will be monitored for my deliverables. No one will notice that I was involved in company activity, but everyone will notice if I did not respond or got late for an activity.”

These voices are emerging from the field and not glass chambers of the corporate office. In principle, one cannot argue about the benefits of IoT. However, identifying its implementation and its interaction with human resources in an organization remains a sticky subject. In 1920s, Frederick Taylor’s scientific management revolutionized factory operations by simply using a timer to control and monitor worker efficiency. According to Taylor, “The natural laziness of men is serious…but by far the greatest evil from which both workmen and employers are suffering is the systematic soldiering which is almost universal.” As factory workers performed repetitive jobs in a timely manner, much like a semi-robot, the organization gained operational efficiency while losing its human side. No wonder there were strife in industrial labour relations as the organizations struggled to maintain a healthy relation with its employees. In fact it is worth revisiting the work of Mayo and human relation research which emerged as a response to scientific management practice in early 1900s. As Mayo and other researchers found, that organizations can enjoy better outcomes by cultivating a good and friendly environment for employees rather than attempting to build an efficient machine as espoused under scientific management principle.

Even when the organization has not explicitly shared or announced use of monitoring results for employees assessment, they have shown a detrimental effect on psychological health of the employee as found in an early study of Smith in 1992, when monitoring technologies were still primitive compared to today. The results from the study by Smith et al. (1992) indicated that “employees who had their performance electronically monitored perceived their working conditions as more stressful, and reported higher levels of job boredom, psychological tension, anxiety, depression, anger, health complaints and fatigue.” Another much recent research on large scale surveillance also found a negative impact on people even when the intent was intelligence gathering and not performance or monitoring on a job task. It was reported in another article in Guardian, that researchers studying national surveillance system suggest that “indiscriminate intelligence-gathering presents a grave risk to our mental health, productivity, social cohesion, and ultimately our future.”

As technology becomes more pervasive in organization life, HR managers entrusted with maintaining a harmonious working environment for employees and employer alike, need to filter and manage use of technology in coordinating human activities. IoT or Industry 4.0 promises more efficient systems essentially by unlocking and unravelling realities which at times can be hard. HR systems need to be tuned to buffer adoption of Industry 4.0 in organizations. Few simple guidelines discussed here can facilitate adoption of IoT practices in organization.

1. Identify Processes and Systems

Consider this automation meeting in a leading factory where largely the decision makers include business head and plant manager for feedback on financial prudence and operational effectiveness. The HR manager was not a part of the discussions as this was not perceived to be a people issue. Later the HR manager was invited only to discuss on possible manpower rationalization. When the solution was implemented the factory workers and union leaders felt uncomfortable leading to covert resistance.

This experience has been reported by many business leaders in the industry. HR managers can provide rich insight in building transition maps for processes which define the order and priority of adoption of Industry 4.0 practices. In addition to financial and operational concerns in transition, HR manager needs to understand the target efficiency which is being aimed at by implementation the new IOT based system. As discussed, 100% efficient processing need not be the desirable solution for the firm.

2. Structure and Process Reorganization:

“Last quarter we realized the importance of XYZ process and we introduced a new BI (business intelligence) report to monitor. Now you are adding another set of reports. How much can one track…you also need to plan and act on corrective actions.”

The feeling expressed above is similar for most middle managers who feel burdened from reporting and tracking processes. In many cases new reports keep getting created for managerial action along with existing old reports and processes. Also as corrective actions are planned in organization it may require cross functional implementation and expertise, thus re-defining the job description of the existing employee. This is not necessarily a bad outcome as organizations need to be flexible in organizing their processes. However, these improvisations necessarily challenge the existing organization structure and processes. This can build up as stresses among sections of the employees,

3. Communicate – Choice of capturing data – to what end

The need to capture data should be widely discussed and communicated to all. When an organization does not discuss widely it signals lack of belief and trust in people. The first step is by on boarding some of the organization members in the implementation process and building a communication channel with the team where IoT is to be implemented. It is also important to share the action report with everyone to ensure that team builds confidence in the system as more of a facilitating and improvement tool and not a monitoring device. Sharing reports of performance and seeking suggestions on improvements from team is another way of building team confidence that the data will not be misused. To dispel the fear of individuals getting singled out for poor performance, HR managers can be creative in identifying success and shortcoming in teams or groups. Alternatively, one can also consider sharing proposals of senior management with teams and invite selection and voting on different proposals to build greater buy in from employees who are eventually going to be part of the solution.

Industry 4.0 is definitely leading industry towards building a more transparent operational system through democratization of data. It promises to help organizations in improving their operational efficiencies and output. However, operational efficiency in not the only elusive goal of the organization where managing people is perhaps even a more critical task. One of the first steps in industry 4.0 includes monitoring and tracking activities of processes inside the organization. Industrial history teaches us that one can expect a strong covert resistance to such changes. HR managers will therefore have to play a larger role in defining a smooth transition of the organization towards Industry 4.0. HR managers need to ensure that pursuit of greater operational efficiencies does not adversely impact employee relations. Industry 4.0 has a potential risk of making the darker side of the organization more strong by alienating employees, if the critical task of managing people is not judiciously taken up in organizations.

Authored Dr Shantam Shukla, Lead Innovation Officer, Forbes Marshall. Views are personal.