“We can’t let politicians make decisions, they are so irresponsible!” This was the reaction by a group of academics to the suggestion that politicians should be free to allocate their own weights to various criteria (cf last post on multiple criteria decision making)

I was first introduced to multiple criteria analysis when a UK researcher presented his work on the third Heathrow runway to a university staff seminar. The presentation was enlightening – and so was the reaction of those present.  The senior public servants, who needed to get elected members focussed on the issues, were enthusiastic about the potential to present clear information not artificially constrained by dollar equivalents. But the academics  were truly horrified when the presenter argued that elected members should allocate their own weights. As the people’s representatives – it was their objectives that were key.

In the last post, I asked who should be deciding on the weights.   This is not a trick question but it is a difficult one.  It bedevils serious public servants everywhere, staffers who desire to produce good quality ‘finished staff work’, to be able to anticipate all the problems, all the issues, all the questions, that decision makers could ask, and ensure that they have been addressed.

But this can then slip into believing that, having done all the analysis,  the staffer now knows best what option should be selected and so we get the three card trick –  presenting the decision makers with only three options, two of which are obviously out of consideration for cost or other reasons, so that effectively the decision makers are forced to choose what the staffer has determined.

Multiple criteria analysis, presented honestly without weights, allows decision makers to seriously and knowledgeably to consider the issue. The final decision may not be so predictable but it is likely to have their greater long term support.

On 9 September I wrote a post “Are Politician the real decision makers?” which attracted more comment than most other posts and the commentary was good.  Have a look.

Also see Kim Geedrick’s comment   on the last post

QUESTION TODAY IS GENERAL – YOUR THOUGHTS?

In our post on May 29 we introduced the problem of finding the best solution to the problem of a high number of road accidents on a certain stretch of road in the Adelaide Hills. The Government had decided to address the problem but what was most important to them – reducing the number of accidents, maintaining speed of traffic without congestion, aesthetics (or the ‘general look’ of the solution), minimising social disruption, or containing the cost?

Multiple Criteria Analysis

In this case a multiple criteria solution was adopted.  Each option was analysed by specialists in the particular criteria who estimated the expected outcomes for their criteria, e.g. likely number of accidents reduced, or likely impact on aesthetics, so that each option ended up with five scores, one for each of the criteria examined. No option clearly dominated all others on the five criteria.

To weight or not to weight

At this stage there was a staff debate.  Some thought that each criteria should be allocated a weight which would enable them to reduce each solution option to just one score and thus they would be able to rank the options, as is often recommended in the textbooks on the subject.

Others thought that they, the staff, were not the right group to assign weights but rather that this was the right and responsibility of the decision makers themselves (i.e. the government decision group).  They pointed out that in previous circumstances where staff had assigned their own weights and ranked the options accordingly, the decision makers frequently ignored their ranking recommendations.  Moreover they argued, since the decision makers were unable to see the analysis that had been done on each criteria, it was not taken into consideration and so was wasted.  This group argued that the decision makers should be presented with the results and allowed to decide what weights to assign.

Question for today.  

Which group has the right of it, and why?

The last post observed that every objective has multiple dimensions or elements. Before moving (as promised) to consider how we could deal with this, it is worth considering that while the main element or ‘what’ is likely to remain constant (although not always, see example below) the other elements, the ‘what else’ can change as a result of external events and other projects being carried out or planned.  In addition to the problem of ‘staying on track’,  we also face the challenge that some aspects of importance to decisionmakers may be deliberately hidden from us.

Consider the following

Staying on track

A section of road in the council was subject to major flooding with heavy rainfall and repairing the damage threw the road budget into the red.  It was suggested that creating a wetlands would enable the water to be drained away removing the repair problems and would also provide an attractive tourist feature and provide a number of other benefits.  The council got more and more enthusiatic. However, in the process of considering all the ‘extra’ benefits, they completely lost sight of the original purpose of reducing the costly damage that the regular flooding of the road presented.  They decided they would go ahead with the wetlands – but not in the originally suggested location where it would ameliorate the flooding damage, but somewhere else!

Discovering what is really important. 

The Police department insisted that they needed to own their own regional housing.  There was a ready supply of rental housing in all areas so it was hard to understand why this was important to them.   They argued that with their own housing. it could serve as a de-facto second police station.  Why was this important?  They didn’t want to say. It turned out that police officers are difficult to manage and the ability to send an unruly officer out to a remote regional location at a minute’s notice was a valuable and key deterrent to bad behaviour – but not something that the department was keen to admit to.

Question:

What other elements of understanding objectives have you had experience with?

First, let us get back to basics.  We know that

You are being effective, if your activities achieve the objective or desired outcome. You are efficient when you achieve that objective or desired outcome at minimal cost or effort.

So both effectiveness and efficiency require us to be clear on our objective or‘desired outcome’.  And that is where our first problem arises, for an objective never has just one desired outcome.

Consider the following example:

A particularly tricky stretch of road in the Adelaide hills was causing serious safety concerns.  The government decided to tackle it.  But what was the objective?  Reducing the number of accidents was obviously a front-runner because it had been what initiated the action, but it wasn’t the only concern.  Traffic speed was also important because a growing number of city workers had been moving to attractive locations in the hills so that anything that slowed down traffic could result in major morning and evening traffic congestion.  It tended to be the richer and more influential who could afford a hills location and decision makers were quick to realise that inconveniencing them could  provoke an undesirable reaction.

The hills were a major catchment area, which presented environmental considerations.  They were also a key tourist destination as well as a main entry point for interstate visitors from the east, which meant that aesthetics, or the general look of the solution, was of concern.  Of social consideration was the number of businesses along the route that could become nonviable if the solution required extensive deviations or lengthy road closures.  Finally, there was cost.

This is true of any objective.  It is a composite of features – things we wish to have (in this case safety, traffic speed) and things we wish to avoid (detrimental effects on the environment, on aesthetics, and on the livelihood of businesses along the route)  And all must be accomplished within an available budget.

All members of the government’s decision making group agreed that it was important to reduce accidents, but they had different priorities when it came to the other features.

If you have ever proposed what you considered to be the ‘optimal’ solution only to have it turned down by the board or council, this may well have been the cause – your bundle of features and the importance you gave to each was different from theirs.

How do we deal with this problem?

Do ‘efficiency’ and ‘effectiveness’ conflict? Eli Goldblatt, author of the 1983 book ‘The Goal’, which led to the theory of constraints, believes that they do. Goldblatt was a physicist who applied his scientific thinking to manufacturing. (Incidentally, Deming was also a physicist.)  In ‘Beyond the Goal’ Goldblatt argues that  the objective of every manager is to manage well, but what does it mean to manage well?

“To manage well”, he says, “we have to satisfy two different and necessary conditions. One is we must control costs. If we don’t control costs, costs will go too high and we are bankrupt. This is true for a ‘for profit’ organisation and for a ‘not for profit’ organisation. On the other hand, we must protect sales. Sales are the things (products/services) that we promise to the external world. In business, it is the service or product, if you are in the army, then it is what you promise – defence.  Do one without the other, you have done nothing.

To control costs where do you start?  Where the costs are drained. In every department!  So in order to control costs you must judge according to the local impact. But now look at sales, your impact on the wider world.  This is not done by one person, because if it was, you wouldn’t need an organisation. If you look at a for profit organisation, for example, you have people who are designing the product, those who are producing, those who are shipping, those who are billing and receiving the money, those who are marketing and getting the customers.  If any one of these links drops the ball, sales fall. Sales are achieved through the synchronised effort of all links.

That means that if you want to protect sales, that is, what you are promising to the external world, you can no longer just look at the local impact, because what may be good for one department may be disastrous for another.  So to manage well, I must control costs and to control costs I must look to local impacts, but I must also protect my sales and to protect sales there is no way I can just look at local impacts”.  –  hence conflict.

Now ‘controlling costs’ is what we mean by efficiency, and ‘protecting sales’ is what we understand by effectiveness.  So, in business – and in government – we have a conflict.

TWO QUESTIONS TODAY:

Does a similar conflict arise in infrastructure decision making?

If so, how can it be resolved?

Efficiency is accomplishing something with the least waste of time or effort, or at minimum cost.  Effectiveness does not refer to costs but measures instead the extent to which objectives are achieved or problems solved.  We are all no doubt familiar with the statement that ‘efficiency is doing the thing right and effectiveness is doing the right thing’.   I had an opportunity to observe this in practice over 50 years ago.

When I started in economics I was impressed, as were many others at the time, with the notion of Time and Motion study. a business efficiency technique combining the Time Study work of Frederick Winslow Taylor with the Motion Study work of Frank and Lillian Gilbreth. The Gilbreths were famous for their 1950 film Cheaper by the Dozen and I was very excited to be introduced to Mrs Gilbreth, an elegant lady, then well over 80, when she visited our department.  Naturally, this encouraged me to further consider time and motion study as a career. And I might well have continued in this direction had I not gone to India the following year.

My host in Bombay (now Mumbei) was very rich by the standards of the time.  He owned numerous large apartment houses in the city and several paper mills in Poona.  One day he had work to do in his paper mill and asked me if I would like to come along and see it.  While he worked in his office I trailed around the factory and was apalled at what I considered to be waste.  I put my time and motion study interest to work and mentally catalogued all the many efficiency improvements he could make.  I figured he needed less than half of the employees he had.  Well, after he finished his work my host introduced me to the staff – and they were all members of his extended family. He considered it his responsibility to take care of them and he was proud that he could provide an income and a good work life for so many. They loved and appreciated him and he was clearly a happy man so I kept my business efficiency improvement ideas to myself!  The business may not have been efficient, but if the goal was to maintain his lifestyle whilst caring for others, you might argue it was effective.

TODAY’S QUESTIONS:

How do you interpret efficiency and effectiveness?

Was the Indian Mill Owner effective in your book?

Could he have been both efficient and effective?

Is there a conflict between efficiency and effectiveness in your own business?

Remains of Island Lagoon Tracking Station

In the early 1960s, I worked at the Island Lagoon Satellite Tracking Station at the Woomera Rocket Range, a large Australian Defence Force aerospace set up as a series of individual satellite stations, each of which was located more than the blast distance of the then known bombs from each other, so that any attack could only take out one at a time. This was an understandable and sensible security precaution at the time but for staff it lent itself to hours of travel over empty and dusty red gibber plains if you wanted to move between stations.  No doubt it would have been more ‘efficient’ to aggregate the stations, that is it would have been cheaper in both capital and labour costs, but from the perspective of security, this was the more ‘effective’ solution.

Hamburgers and Blackouts (April 24), considered how, in the past, we strove to enlarge and integrate our electricity  infrastructure and infrastructure networks in the name of efficiency, but how this has placed us at risk.  New technology now provides more options. Which brings us to microgrids.

A Microgrid is a localized group of electricity sources and loads that may operate connected to and synchronous with either the traditional centralised electrical grid or with other microgrids but may equally function autonomously as physical, security or economic conditions dictate.   Microgrids enable a focus on both physical and cyber security for military facilities and assure reliable power without relying on the macrogrid but they also have commercial applications. There are many manufacturing processes in which an interruption of the power supply may cause high revenue losses and long start-up time and last year a NSW farmer was reported to have withdrawn from the grid and now uses only solar power with backup to support his electric cattle fences because the macrogrid failed to provide him the continuity he needed. In South Australia the Fluid Solar House at Elizabeth is a 4 storey building with office and research facilities that is completely off-grid using a water-based heating and cooling system incorporated in the building’s ceilings and floors at less than half the cost of a commercial air-conditioning plant. Low cost housing is now being built using the same technology.

With new options comes the necessity to re-think old solutions – but also old objectives. Efficiency might have once been our touchstone.  Should it be so now?

There is an economic principle called ‘diminishing returns’. This says, in effect, that your first hamburger is great, the second OK, but by the time you are on to your third and fourth, the returns in terms of enjoyment and allaying hunger are greatly diminished. Continue and the returns will eventually become negative. Of course, long before you become physically ill, the benefit:cost ratio will itself have become negative.  This does not only apply to hamburgers. It applies to everything, including our policy settings.   For a while the benefit of the new policy outweighs the disadvantages – until it doesn’t.  We often fail  to see the change because we are always looking backwards – justifying our current actions by the gains we have already made, and asssuming that these gains will continue.

Consider that over the last several decades we have made great efficiency gains in infrastructure services such as electricity production and distribution by increasing the size of our production units and integrating our networks.  There was a period (up to about the late 1980s) when it was always more efficient to build a new plant rather than renew an ageing one because technological improvements were increasing boiler size resulting in vastly reduced capital costs and considerable savings in labour.

Eventually two things happened. The technological gains slowed down. And risks increased.  For one thing, if you can satisfy demand with 6 units of a given size, should one fail you have lost 1/6th of your total output. But when the size of units increases to the stage where total demand can be satisfied by just 3 units, then failure of just one unit reduces your capacity to serve by 33%. Gains slow down, risk costs rise.  We can see a similar pattern in the integration of networks. Initially the gains are great, and obvious.  We do more integration and we get further gains.  But the more individual networks that are connected the greater the risk that an accident in, or mismanagement of, any link in the chain will have flow on effects to the others.

And so we get events such as the 2003  major blackout of the NorthEast of America which extended into Canada and, closer to home, the 2016 widespread power outage in South Australia that occurred as a result of storm damage to electricity transmission infrastructure. The cascading failure of the electricity transmission network resulted in almost the entire state losing its electricity supply.  To add to our worries are recent accounts of Russian hacking into US nuclear power plants.

So big is not necessarily beautiful.   But what’s the alternative?

Today’s post is by Jeff Roorda, Technology One, and Deputy Chair of Talking Infrastructure.

Is using condition to determine life a fundamental error in asset registers?

Part 1

How long does an asset last? The answer determines life cycle cost, depreciation and infrastructure planning.

Asset registers estimate useful life for every asset but which life do we use? The physical life or the economic life? Yes these are different, and often materially different. I recently was working in Queenstown NZ with Queenstown-Lakes District Council. After work, I boarded the steamer TSS Earnslaw that had been carrying passengers on lake Wakatipu since 1912, and its steam engine is still powered by coal. The Earnslaw and many steam powered transport assets around the world still have many years of remaining physical life after over 100 years of operation.

So why did we stop using steam for transportation ? Was it because the assets reached their physical life?

In hindsight we all know the answer. Because steam power is dirty and technology made steam power obsolete. OK then, so the economic life was determined by function and capacity, not by physical condition. Even though steam powered assets had many years of physical life remaining, they became obsolete relatively quickly, far more quickly than most people managing the assets predicted. How much of the infrastructure we are building right now will be obsolete well before physical life is reached?   So why do we focus on the measurement of physical life using condition instead of function and capacity? The pace of change could be faster now than in the 1940’s and 1950’s when transport shifted from steam to the internal combustion engine which created the infrastructure networks we now manage.

Think about what we are building now and drivers for change.

Infrastructure based on continuing the past where everyone has to travel to the office at the same time creating peak transport loads using internal combustion engines with one person per car does not seem to be a likely future with changes in communications and energy technologies.

Part 2 coming shortly.

Just over a year ago (Jan 6 2017), I wrote about ‘Pop Up’ Prisons, more accurately called ‘rapid build’.  Rapid build is used in war zones where there is a sudden and urgent need. It is extremely expensive.  Overcrowding of our prisons had led to this now being considered an urgent need, but why had we not foreseen it?   One answer had, in fact, been earlier suggested by Mark Neasbey in his post “Infrastructure decisions we make when we don’t think we are making any”(Aug 12 2016) where Mark had brilliantly, and entertainingly, explained how the ‘costless’ decision to put more police on the streets to combat crime had cost consequences which were not only extensive, but, unfortunately, invisible in the eyes of decision makers.

Now, today, comes news from America where incarceration rates have increased 500% over the last few decades. Philadelphia in Pennsylvania is even more extreme, their incarceration rates have increased 700% in the same time. But that is already changing with the appointment a few months ago of a civil rights lawyer, Larry Kranser, as the new District Attorney who is taking extreme action to reduce the cost and human damage involved.  The whole encouraging story can be found on the Slate website here but I would like to draw your attention to one move which could effectively be used more widely.

“In a move that may have less impact on the lives of defendants, but is very on-brand for Kranser, prosecutors must now calculate the amount of money a sentence would cost before recommending it to a judge, and argue why the cost is justified. He estimates that it costs $115 a day, or $42,000 a year, to incarcerate one person. So, if a prosecutor seeks a three-year sentence, she must state, on the record, that it would cost taxpayers $126,000 and explain why she thinks this cost is justified. Krasner reminds his attorneys that the cost of one year of unnecessary incarceration “is in the range of the cost of one year’s salary for a beginning teacher, police officer, fire fighter, social worker, Assistant District Attorney, or addiction counselor.”

The same reasoning could be applied to just about any new rule or regulation introduced by government.

Comment?