Failing Slower?

by on January 29, 2016 at 7:25 am in Economics, Law | Permalink

Fortune: Hiring a new employee, for instance, now takes 63 days, up from 42 in 2010, according to a 2015 study we did with 400 corporate recruiters. Meanwhile the average time to deliver an office IT project increased by more than a month from 2010 to 2015, and now stands at over 10 months from start to delivery—this particular nugget coming from a study we conducted with 2,000 project managers at more than 60 global organizations.

And when companies need to mesh processes, things get even slower. Multiple surveys we did with several thousand stakeholders in the realm of business-to-business sales revealed some striking evidence of institutional delay. The time required for one company to sell something to another, for example, has risen 22% in the past five years, as gaining consensus from one or two buyers has turned into five or more.

More here.

It certainly feels like more people are required to sign off on something than ever before and that fact is slowing things down. The time-series is short, however, and lots of other things are going on. Maybe firms take longer to hire when the growth rate is low. File under speculative.

1 jb January 29, 2016 at 7:55 am

Working in the IT industry for the last 22 years, my guess is regulatory requirements, HR and PR concerns.

“Do we want to hire this guy? Let’s make sure we have all our legal and HR preparation done”

“Are there any federal regulations that affect this project? Let’s spend a week or two investigating those”

“What are the regulatory requirements for buying this? Also, does the seller have any negative PR issues that would be problematic for us?”

etc, etc, etc

2 cheesetrader January 29, 2016 at 8:51 am

Working in NON IT, this would mesh with my experience – far more people involved in the hiring process (Hi, HR department) with many more hoops to jump thru and forms to fill out. HR departments need to justify their existence somehow.

3 Mike January 29, 2016 at 9:48 am

My experience is basically the opposite of this. I work in one of the most heavily regulated fields, but compliance policies have little to say about whom we hire. Also, HR are extremely helpful as they collect the resumes, schedule the interviews, extend offers, discuss logistics (start date, relocation, etc.)

4 TMC January 29, 2016 at 1:04 pm

“HR are extremely helpful ” Now I know you’re lying 🙂

5 JWatts January 29, 2016 at 10:32 pm

I’m thinking he works in HR.

6 Jonfraz January 29, 2016 at 1:35 pm

My sense of this is that there are too many HR people and they have to justify their jobs.

7 rayward January 29, 2016 at 8:01 am

IT projects take longer because many companies have outsourced IT; and those outsourced IT providers, in turn, outsource many of the IT services (to places like India). Those who work in IT know first-hand the perils of outsourcing: the outsourced IT providers rarely retain the former in-house IT personnel. And companies which choose to outsource IT know first-hand the error of their ways: not only delays in IT projects, but lower quality.

8 aws January 29, 2016 at 9:44 am

Came here to say this. My company outsourced, and afterwards I complained with evidence that IT project productivity had dropped ~45%. The IT VP told me that they had projected a decline of 50%, but outsourcing still made financial sense with a 70% decline in productivity. Shut me up pretty quick.

9 rayward January 29, 2016 at 10:04 am

Of course, outsourcing IT makes economic sense if the reduction in cost isn’t more than offset by the reduction in quality. That’s a difficulty with IT: how to measure quality. I suppose the quality of IT is a lot like pornography: you know it when you see it.

10 derek January 29, 2016 at 1:37 pm

Good IT defines the operation, bad IT does as well. As you mentioned, the costs are hard to quantify; having all your best people leave because of the frustrating trash they have to deal with to get anything done rarely gets billed to IT or to whoever hires the consultants.

11 Jonfraz January 29, 2016 at 1:38 pm

It’s pretty unusual to outsource everyone. Mostly it’s the lower echelon of jobs that gets outsourced. Which however creates a problem when there are few people to hire for more advanced jobs with 10-15 years experience at lower levels. And on a day-to-day basis working with people on the other side of the planet who speak a different language and have different cultural meshes creates friction that slows work down.

12 Dan Weber January 29, 2016 at 8:48 pm

I make a pretty good living cleaning up the messes left by outsourced IT. Keep it up!

13 Jeremiah January 29, 2016 at 8:05 am

Mergers may play a role here. It takes a while to sort out how many people in the new entity are needed to make a successful decision. Eventually the new group becomes more efficient, but there’s a cost.

14 XVO January 29, 2016 at 8:26 am

On the hiring, supply vs demand of good, experienced IT workers and firms are hesitant to raise wages or hire less qualified or junior people to fill roles.

15 yo January 29, 2016 at 10:53 am

Don’t these firms then hire a consultant who employs the same clueless junior people anyway? The disadvantage in this “temp work boom” is that it’s more expensive at the start but better to train and identify potential hires.

16 XVO January 29, 2016 at 1:24 pm

Yup they do, at 3x the price (at least), the pitch is that they are guided by senior developers. Consultants don’t have the same incentives as internal employees and I’ve personally seen the bad side of that.

17 chuck martel January 29, 2016 at 8:52 am

It’s different in the unionized construction industry. Employer calls the hall, the BA calls the next guy on the list and he shows up the same day. The new worker does the paperwork, gets a safety orientation, maybe a urine test, and starts building America. Just in time inventory of personnel.

18 Urstoff January 29, 2016 at 9:08 am

It takes awhile to troll through the prospective employee’s Facebook and Twitter accounts for anything that might be remotely incriminating.

19 anonymous January 29, 2016 at 9:12 am

We are going to see some plausible endogenous explanations in the comments.

Does it change things if we consider technology to be an inherently deflationary sector?

20 Derek January 29, 2016 at 9:15 am

There are enough stories about failed IT systems either bankrupting, or rendering unworkable the revenue generating processes that hurrying carries a risk.

I’ve been on the recieving end of two major rollouts over the last two years. One worked reasonably well, once we trained the local managers on what they needed to do so we could get paid. The other one increased costs across the board, and has essentially been ditched for some cockamamie scheme that will end up closing stores.

HR delays I think have the same characteristic. You hand over the existence of your business to the new guy, with no history, no apprenticeship or mentoring. Best to delay.

How would the world work if it was as designed? Or a company where everything was done strictly according to the laid out process. This is now possible. First, your good people leave, then you end up with smart people who know how to circumvent the complex systems, but with no connection to what you are doing to generate revenue. No one knows what is really going on because the data and what you see with your eyes doesn’t match.

So you sit on your hands. The best survival technique in a sclerotic bureaucracy is to do nothing. We are all government bureaucrats now. I collect far more money for them than I get, so it is apt.

21 Bob January 29, 2016 at 9:30 am

It’s an open secret in the industry that large IT deployments, where big integrators have any part of the project, are extremely expensive and don’t deliver what is promised: Those firms are like used car salesmen, doing their best to gouge unsophisticated customers. There aren’t enough consequences for bad delivery: By the time a company gets savvy, they just hire their own developers. Healthcare.gov was not a big example of government incompetence: It was an example of what happens in corporate America every day, when they choose to deal with the usual suspects.

Sclerotic bureaucracies are designed to minimize responsibility, and they are wonderful at that. So are the reorgs every 6 months. But when nobody is responsible, nothing works. People say government works like this, and they are right. But they forget to mention that most large companies work in exactly the same way: We get a principal-agent problem, and companies just bleed money.

22 mbutu o malley January 29, 2016 at 11:23 am

I’ve made a career out of cleaning up or shutting down these deployments. Reality is there is some value in a successful deployment that deliver on what was promised if it’s legit, however some over promise and under deliver, some just work around existing processes so fail to realize any sort of improvement, some add substantially to headcount and G&A without delivering business value. I’ve been laying down a bunch of systems recently that were deployed because they delivered really cool functionality and real-time information without delivering any operational improvement (there was perceived improvement but it was more than offset by increased costs to support the system).

23 Bob January 29, 2016 at 9:15 am

Software is a two speed business: There are companies that get a lot of stuff done, quickly, and then there are others where getting anything done takes a million years. Both kinds exist in every major city. The biggest difference? Who manages IT. The companies that are slow have very top heavy systems, and the top is FULL of people with business degrees, so they understand, at best, manufacturing. Often, they just understand financials. That makes about as much sense as having the owner of a sports team also play coach and general manager. And the more time you let that kind of hierarchy to settle down, the slower things will actually move. Companies where management understands the engineering get far better outcomes, but good luck getting that in places that aren’t very small, or just software giants.

As far as HR goes, in tech there is a lot of talking about how we don’t even have an idea of how to hire, even at the top companies in the world. What we know is that traditional HR departments are very badly equipped to handle tech talent. For instance, I know of a very large company in middle America where HR has decided that a principal engineer should cap out at $120K, by using industry surveys about the same town. But now those same engineers are leaving, because Silicon Valley companies are happy to pay better than that for remote workers. So they just lost many of their top people, to offers ranging from $190K to a whooping $330K. Almost triple! Then they wonder why they have problems hiring, and why 95% of the candidates they get appear to be incapable of solving simple problems (hint, they come from similar large companies that don’t do layoffs, and where management isn’t technical)

24 Ray Lopez January 29, 2016 at 9:57 am

@Bob- but the cost of living in Silicon Valley (where I lived for many years) is much greater than in Wichita, KS. So you’re 300k will be eaten up and you’ll be left with about the same as in the Midwest. Also temptations are greater on the coast so you waste more money. However, it’s a ‘quality of life’ issue and some people like the look and feel of the coast towns.

PS–the last paragraph of AlexT’s post read like TC wrote it–maybe they are becoming one person?

25 static January 29, 2016 at 10:49 am

Lopez, Maybe you missed the word “remote”.

26 JWatts January 29, 2016 at 10:42 pm

“So you’re 300k will be eaten up and you’ll be left with about the same as in the Midwest. ”

Well first, he said “remote”, but even if he didn’t $330K is still a lot more money even after paying Silicon Valley prices than $120K is in middle America. According to the sources I saw, it’s about 50% more expensive than the national average and about 60% more expensive than Wichita, KS.

27 Dan Weber January 29, 2016 at 8:51 pm

As a worker, or a small provider, you should compete on quality. There are always people willing to pay a premium for the job being done right.

28 Joseph Sands January 29, 2016 at 10:03 am

As a lawyer, I can say that clients take much longer today than 20 years ago to settle a case. People are just much more risk adverse than before and will not make a decision until they have to.

29 (Not That) Bill O'Reilly January 29, 2016 at 10:10 am

It’s infuriating. We have a client who has already burned almost 2 full days of a 5-day clock to file something making up their mind about whether to proceed.

30 KS January 29, 2016 at 10:26 am

As a recent job seeker, I think big companies create a lot of problems for themselves. If you haven’t looked at the job listings for a company like KPMG or Deloitte, it’s quite eye-opening. 3/4 of each posting is just boilerplate jargon that was poorly scraped from the About page of their site, and the rest is a job description that very often looks like it was written by a person that doesn’t actually know what the position requires. Some companies have hundreds or thousands of these postings and some of them have been up for so long they can’t possibly still be open.

To me it looks like they’ve tried to automate too much, and the people who have to work with the new hires have managed to almost completely insulate themselves from the hiring process. I’m sure they have good reasons for this, but it strikes me as completely oblivious to complain about how long hiring takes when they seem to value their own distance from the process far more than the process itself.

31 static January 29, 2016 at 10:49 am

With IT, security to deal with increasingly sophisticated attackers has been increasing project times. This is also becoming increasingly bureaucratic.

32 mavery January 29, 2016 at 11:21 am

This is what I would point to. Cybercrime has become an increasingly important issue for companies large and small over the time frame discussed in the OP, and most folks were very far behind the curve at the start.

33 TMC January 29, 2016 at 1:18 pm

As someone involved with this 1) Security does add more time than it used to, and 2) Development teams involving Security at the time of implementation instead of early on hoping to get around security REALLY adds time.

34 TomHynes January 29, 2016 at 11:15 am

Does the increased availability of temporary workers decrease the need to quickly hire people quickly? A lot of IT people start out as temps and then transition to employees, removing the sense of urgency.

Does the availability of Tinder reduce the pressure to get married?

35 prairie economist January 29, 2016 at 12:04 pm

A post a few weeks ago pondered whether the ever-growing size of firms is worsening the income gap. (My vote was YES.)

That’s at work here too, in my experience.

I betcha analysis will show big centralized firms take longer to hire folks, and longer to decide on any form of partnership—IT or not. And when they do, they select the bigger names. The cycle snowballs.

You just try getting a contract to cut the grass—a simple thing, right?—at my local workplace. Now that the national office is into everything, it will take much longer than 15 years ago. And unless you’re a big player in lawn care with a capable contract lawyer, the fact is: you’re pretty unlikely to get the deal.

In my grumpy old age, I’m becoming convinced that tax breaks for small business are insufficient to offset these forces. Some manifestation of active anti-trust is the only hope.

36 Alvin January 29, 2016 at 1:08 pm

How much of the delay involves more widespread use of background checks, drug tests, reference checks, and, for more and more jobs, security clearances?

But I agree more people are involved in the hiring process, including multiple rounds of interviews.

37 chuck martel January 29, 2016 at 1:59 pm

The background check is an even bigger deal than people realize: http://nailheadtom.blogspot.com/2014/12/the-problem-with-background-checks.html

38 Alvin January 29, 2016 at 3:55 pm

Even if you want to volunteer as a YMCA basketball coach or AYSO soccer referee or coaching position, a background check is required nowadays. I don’t get that. Everything is out in the open, with parents and others watching, what do they think the volunteer soccer coach is going to do? Its absolutely ridiculous, and is why, I think, these organizations are having trouble finding volunteers. Who wants to give out their SS# and other personal information for a non-paying volunteer job? It’s not worth it to me.

39 Ethan Bernard January 29, 2016 at 3:54 pm

In my work (hardware engineering) decisions being made more slowly because information technology has made it easier for more people to review each decision. But this also catches more mistakes, so the decisions tend to be better, and in the long haul time and money are saved. A related effect is that information technology allows more complex and heavily interconnected problems to be attempted.

40 GeoffBr January 29, 2016 at 6:59 pm

I find it hard to believe that 5 years have dramatically increased the regulatory burden on employers or IT departments. I’d be inclined to look for other explanations (one recruiting example – many of the companies I work with have been gingerly feeling out the economy until relatively recently and hiring managers have been slow to pull the trigger because of the perceived risk).

41 Madeleine January 30, 2016 at 5:08 pm

The unemployment rate in 2010 was around 10%. Now it’s around 5%. This seems like a sufficient explanation for why it takes longer to hire someone now.

42 Steve Korn February 15, 2016 at 2:14 pm

I’m in the outsourcing and offshoring business

Few observations:
* Decision times have gotten lengthened. Careers are at stake with these decisions
* While savings is a big factor, lack of skills is a bigger reason today. Clients’ staff are older and often lack today’s Digital Skills.
* Internal IT is not the middle class jobs of 20 years ago…fueling demand for outsourcing

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