Calculus

Old joke: the reason I went to law school is they promised there’d be no math on the final exam.  They misspoke.

“Bottom Line Drove Security Clearances,” Wall Street Journal, October 25, 2013 A1 http://on.wsj.com/H7yvz0

Recently privatized operation to provide background checks for security clearance; contract provides for 90% of fees upon submission of draft, and remainder on approval/closure by government.  Seems to make sense, right?

Well, I learned early on that legal and other services were subject to the following calculus: Cost = f Time + Quality.  Cost is a function of time plus quality – pick any two.

So putting a premium on quick delivery (and therefore early $) of 90% of fees means you picked time and cost; quality sorts itself.  Result: Edward Snowden and Aaron Alexis (Navy Yard shooter) get their security clearances approved and USIS gets paid.

Do you have reward regimes in your company that are driving (or in retrospect appear to have driven) poor outcomes? Is one of the corners cut gathering all the right data?

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Filed under Controls, Data quality, Risk, Third parties, Value

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