Corrections Needs Correcting

Failed Controls Result in Oakland Tragedy

An Oakland police honor guard stands next to the flag-draped caskets of the slain Oakland police officers at the Oracle Arena in Oakland. (Michael Macor / The Chronicle). Picture Source

The mood was somber on March 27, 2009, as more than 20,000 gathered into the Oracle Arena to mourn and honor the four police officers that were gunned to death a week earlier. Law officials from all around the country attended the event, as well as prominent members of the Bay Area community including San Francisco Mayor Gavin Newsome and Los Angeles Mayor Antonio Villaraigosa.

Two days earlier, a group of about 60 people marched and rallied in Oakland against its law enforcement, charging the Oakland Police Department with genocide. The protesters, organized by the Uhuru Movement, proclaimed that they’re tired of police terrorism, and would like to see just a little respect for the residents that live in the area.

People are angry, frustrated and above all scared—not a pleasant way to go through life. This sudden and terrific cry of emotion stems from what parolee Lovelle Mixon did on March 21st, and what law enforcement didn’t do that led up to it. Mixon now takes credit for the deadliest day in Oakland’s history.

On Saturday afternoon at around 1:00 pm, Sgt. Mark Dunakin and Officer John Hege pulled 26-year old Lovelle Mixon over for a routine traffic stop. It’s unsure at this point whether or not they knew what they were dealing with when they pulled him over, but chances are they did not based on how they proceeded to engage Mixon. Mixon, “taking advantage” of their relaxed protocol drew a handgun and opened fire, taking both police officers out of commission.

Within moments over 200 law enforcement officials including SWAT teams were deployed to comb the city in search of Mixon. After about 2 hrs, on an anonymous tip, SWAT team members Sgt. Daniel Sakai and Sgt. Ervin Romans entered the apartment complex where Mixon was hiding out. As they charged down the hallway, Mixon opened up his AK-47 assault rifle from within the closet where he was hiding. Sakai and Romans didn’t have a chance, and were instantly killed. Within moments, another SWAT officer finished the job by taking Mixon out.

What’s particularly interesting about Mixon, is that he was fugitive from the law when officers pulled him over on March 21st, due to missed parole visits. Although he was only 26, he already had quite a history with law enforcement and corrections. Mixon was paroled in October 2007 after serving a six-year term for carjacking someone in 2002 with a firearm. His parole was then suspended in January 2008 after he was caught with a stolen laptop computer, which put him back in prison for another 9 months. He was then released in November, and given another chance of parole. Mixon’s parole was going well initially, but after three missed home visits in February 2009, officials issued a warrant for his arrest. Less than a month later, Mixon gunned down four police officers.

Mixon’s family members claim that he was upset with his parole officers because they had missed appointments however authorities have dismissed those claims as baseless. After reviewing the process, the inspector general for the state Department of Corrections and Rehabilitation claims they did everything correctly.

I can’t disagree more. Something is obviously wrong here. We have four dead police officers, and one dead citizen of Oakland. You may not like what Mixon did, or how he lead his life, but the outcome is tragic and you cannot put all the blame on him. This is yet another example of failed controls. People are trying to make themselves feel better because they “followed the process.” The process doesn’t matter when it produces outcomes like this.

I send my heartfelt condolences to the friends and families affected by this tragic event. The officers involved are truly heroes; their bravery and dedication makes me grateful to have good people like them protecting me and my family. I’m also very sorry that the friends and family of Lovelle Mixon have to suffer through their loss. His death was unfortunate, and unnecessary. Let’s hope this signal is strong enough to affect a much needed change in the law enforcement and corrections system. This is where the buck should stop, and they’re not doing a good enough job. Results don’t lie—people are dead.

The New Capitol’s Venture

Geithner Targets Venture Capitalists in New Regulation

Copyright 2009 AP. U.S. Treasury Secretary Timothy Geithner is proposing changes that could affect venture capitalists. Picture Source

On March 26th, Geithner testified before the House Financial Services Committee, explaining what he feels are the root causes of the current economic crisis, and his views on how to better regulate the financial system. The Wall Street Journal captured the text of his testimony. According to Geithner:

“Market discipline failed to constrain dangerous levels of risk-taking throughout the financial system. New financial products were created to meet demand from investors, and the complexity outmatched the risk-management capabilities of even the most sophisticated financial institutions. Financial activity migrated outside the banking system, relying on the assumption that liquidity would always be available.”

This is an interesting statement that I barely agree with. Implying that investors demanded financial instruments that were so complex nobody could understand them is a somewhat indigestible idea for me. Nonetheless, I agree that complexity invites disaster, which is why I always advise to keep things as simple as possible (without oversimplifying). Part of Geithner’s solution involves consolidating the function of financial oversight:

“We must end the practice of allowing banks and other financial companies to choose their regulator simply by changing their charters; regulators must choose who to regulate. Moreover, our regulatory system must be comprehensive and eliminate gaps in coverage. Our regulatory structure must assign clear regulatory authority, resources, and accountability for each of the key regulatory functions. We must not let turf wars or concerns about the shape of organizational charts prevent us from establishing a substantive system of regulation that meets the needs of the American people.”

Once again, on the surface this may sound like a good idea, but consolidated entities like this run the risk of turning into ineffective bottlenecks. I don’t disagree with the mass inefficiencies caused by multiple regulatory bodies, but solving this with one super-oversight agency to take care of all twist and turns of the financial landscape is a big mistake. The better way to handle this situation is with a federated system of oversight that communicates well with each other. Financial institutions function very differently from each other, and trying to create a “one-size-fits-all” regulatory body is a mistake.

Regardless of the validity of the approach, it looks like venture capitalists are in the line of fire:

“… in the wake of the Madoff episode it is clear that, in order to protect investors, we must close gaps and weaknesses in regulation of investment advisors and the funds they manage.

Accordingly, we recommend that all advisers to hedge funds (and other private pools of capital, including private equity funds and venture capital funds) with assets under management over a certain threshold be required to register with the SEC. All such funds advised by an SEC-registered investment adviser should be subject to investor and counterparty disclosure requirements and regulatory reporting requirements…”

Although the proposal is very high level at this point and void of details, I would urge venture capitalists to start taking action right away. Geithner is not messing around, and whatever comes out of this must be treated with extreme seriousness. Here’s what I recommend venture capitalists do to prepare for the upcoming regulation:

Immediate Action #1: Organize your Compliance Team

You need to quickly identify the resources that will support your compliance efforts. Keep in mind that you will need both content experts (i.e. lawyers and accountants that understand the regulations), and process experts (i.e. Six Sigma black belts, and others that understand process efficiency and program management). Use a combination of consultants and in-house personnel to make sure you’re getting accurate guidance without total dependence on outside resources.

Immediate Action #2: Get Your Financial Reporting Under Control

Most likely, the new regulations will look a lot like Sarbanes-Oxley (SOX). There will be disclosures and attestations, however at the end of the day the government will want to know that you have your own financial operations under control. Leverage the lessons learned from SOX to avoid bloated compliance efforts which abuse precious resources. As mentioned before, if you don’t have the expertise in-house, leverage consultants.

Immediate Action #3: Get the Financial Reporting of your Investments Under Control

Unlike most other companies, you are not only responsible for your own operations, but you’re also responsible for all the companies you control as a result of your investments. Leverage the investment in your own financial control, to make sure the companies you invest in are exercising prudent fiscal control. This not only takes the heat off of you, but it also gives you increased confidence in your investments.

Although venture capitalists had very little to do with the current economic mess that we’re in, they seem to be included in the institutional line-up targeted by the new administration for regulatory overhaul. Taking immediate action is paramount. A team of experts should be identified and a compliance team formed to get things under control as quickly as possible. Remember to keep things as simple as possible, and avoid monolithic entities that try to control too much. There’s no doubt about it, the regulatory wave is coming. Will you be prepared when it hits?

A Little Chaos Goes a Long Way

How to Speed Up Your Process Using Chaos

This advice may sound odd coming from a Six Sigma Black Belt, however chaos just might be the cure to your long cycle times and struggling productivity. I’d like to share with you what Agilists like ScrumMasters and Extreme Programming coaches have known for some time now—chaos is a necessary ingredient in any efficient process.

This truism was recently illuminated by my recent involvement with PayPal, the transaction processing arm of Silicon Valley giant eBay. When I first started working with PayPal a couple of weeks ago, two things quickly became apparent; things are very chaotic, and things get done very quickly. Contrast this to a place like Sun Microsystems who has spent an inordinate amount of time and energy trying to organize processes and procedures, only to end up with an environment where things get done very slowly, if they get done at all.

This is a quite interesting and unintuitive phenomenon that’s worth exploring a bit. Although quality zealots still cling to the notion that all chaos is evil, the elimination of chaos in favor of process may backfire on you.

Somewhat by accident, people at PayPal have stumbled upon a fortunate byproduct of being somewhat unstructured and chaotic. Their lack of process and control provides a certain weightlessness and agility, empowering their talent (they have very talented people) to fly effortlessly to their goals in an unobstructed way.

This is the freedom that chaos provides. Ironically the same process that’s usually introduced to improve things can actually end up slowing things down. The organization somehow feels better because there’s a process in place which is repeatable and transferrable; however, they’ve sacrificed productivity which is never a good thing. They then try to compensate by adding more process, which further slows things down. When taken to an extreme, the organization completely eliminates chaos, and concomitantly becomes completely dysfunctional.

Obviously, total chaos without any process is not the answer either. Chaos is a lot like fire. Under the right control it can be very useful; however, if it gets out of control it can be very dangerous. When chaos gets out of control confusion takes over and instead if things getting done quickly, things don’t get done at all; the same result as the over-engineered process.

So here’s my four step process for introducing chaos into an over-engineered process, without getting into trouble:

Chaos Injection, Step #1: Get Clear on Your Process Objective

If your process is bloated, most likely at some point in its life the steps became more important than the outcome. This needs to be immediately undone. It’s primarily a mental shift but there are some tactics involved. You must know exactly what your process is intended to achieve, who it’s intended to benefit (the end user) and the ideal cycle time from the end user’s point of view. You must be able to objectively measure whether or not your process produced a successful result, and whether or not it accomplished it in an acceptable amount of time.

Chaos Injection, Step #2: Identify Value Stream Buckets

There is a Lean technique called value stream mapping, which should be employed at this point. Categorize the steps of your process into three buckets: 1) value-added, 2) value-enabled, 3) non-value-added. Value-added steps are any steps the end user would be willing to pay for. Value-enabled steps are any steps that are required for contractual or regulatory compliance. Everything else is non-value-added.

Chaos Injection, Step #3: Keep Value-Enabling Steps, Throw Everything Else Away

That’s right! Get rid of all your process steps except for your value-enabled steps. The reason is this. You don’t build a process just to see it run; you build a process to get a result. The only thing that matters is the result, as long as you haven’t violated any regulatory concerns.

Chaos Injection, Step #4: Find Intelligent People, and Turn Them Loose on the Objective

The objective is to get the result within the ideal cycle time, while still following all the compliance rules. These are the rules, the whole rules, and nothing but the rules. Let the team come up with any means they can to accomplish the task. Give them a hard and fast deadline to get things done. The important caveat is that you use intelligent people who are willing to play along. This will not work with people who don’t want to be creative and problem-solve.

Intelligent teams will tend to self-organize and rise to the occasion as long as the objective and the parameters for completion (i.e. value-enabled steps) are very clear. If left to their own devices, humans have an uncanny ability to solve problems, especially when teamwork is involved. Things will seem very disorganized at first—this is chaos at work. But there’s method to the madness, and eventually you should see an outcome emerge.

Process bloat is a common disease found in companies, and the antidote is sometimes somewhat unintuitive—chaos. However, introducing chaos without proper care could lead you from the frying pan into the fire, so take care to introduce it cautiously. By clearly understanding your objective, and identifying any other legitimate process constraints (i.e. value-enabled steps), you can confidently turn an intelligent team loose to get the result without any other strings attached. Give it a try; you may be pleasantly surprised at the result.

Doing Time for Lobbing Loafers

Bush’s Shoe Assailant Goes to Prison

President Bush dodge's an angry journalists shoe assault. Picture Source

“ A court convicted an Iraqi journalist of assault Thursday for hurling his shoes at George W. Bush and sentenced him to three years in prison…”

I, along with several very upset Iraqis, are having a real hard time with this one.

Three years in prison for throwing a couple of shoes at Bush? Really? You’d think for three years in prison he could have at least felt the satisfaction of connecting with one of his shoes.

It gets even more bizarre. Apparently this was the minimum sentence—he could have received 15 years!

As odd as it sounds, it’s real. His lawyers will try to appeal the decision, but for now it looks like our over-zealous shoe sharpshooter will be retiring his loafers for quite a while.

Understanding what your compliance violations will cost you is vitally important. For instance, if you’re a government contractor, and you are found guilty of violating the False Claims Act, did you know that you could be liable for $10,000 per government invoice issued? As odd as it sounds it’s real.

Take some time to understand what your exposure is. I’d hate see you get time for simply throwing shoes.

How to Call the Police When You're Old

When at First You Don't Succeed, Get Creative

A colleague recently sent me this story which is allegedly true. True or not, it's a funny story that illustrates a good point.

"George Phillips age 82 of Meridian, Mississippi was going up to bed, when his wife told him that he'd left the light on in the garden shed, which she could see from the bedroom window. George opened the back door to go turn off the light, but saw that there were people in the shed stealing things.

He phoned the police, who asked 'Is someone in your house?' He said 'No.'

Then they said 'All patrols were busy. You should lock your doors and an officer will be along when one is available.' George said, 'Okay'. He hung up the phone and counted to 30.

Then he phoned the police again.

'Hello, I just called you a few seconds ago because there were people stealing things from my shed. Well, you don't have to worry about them now because I just shot them.' and hung up.

Within five minutes, six Police Cars, a SWAT Team, a Helicopter, two Fire Trucks, a Paramedic, and an Ambulance showed up at the Phillips' residence, and caught the burglars red-handed.

One of the Policemen said to George, 'I thought you said that you shot them!'

George said, 'I thought you said there was nobody available!' "

First of all, don't mess with old people! And second, creativity is a vital yet often overlooked asset when trying to get an outcome. Use it more often, and you'll get more results.