Michael Schrage on the Downside of Auditing Applications

A recent mainstream business publication had a nifty piece about how cost-conscious companies now aggressively use computerized travel booking services to make sure their road warriors fly coach and don’t surreptitiously upgrade their budget hotel rooms from double beds to suites. One proud CIO boasts that his travel and expense auditing software saves his professional services company bundles. Hurrah.

This bean counter’s bonanza ties in quite neatly with yet another powerful IT trend in the “surveillance economy” that CIOs now oversee: the use of expert systems and scoring algorithms to scan expense reports for all those hidden vicuna coats, covert bottles of Veuve Clicquot champagne and Vegas-based blackjack bets. With more and more corporate transactions going network, a company’s ability to cheaply and thoroughly audit itself leaps by orders of magnitude. As team players, CIOs are ready, willing and able to work with internal auditors to craft “exceptions spotting” software and collaborate with those department heads looking for easy ways to flag inappropriate or wasteful financial behavior. The sheer lethargic lousiness of the economy makes CIOs compelling partners for any and all executives who declare themselves cost conscious.

Nothing wrong with that. Organizations are absolutely entitled to manage their expenses as they see fit. They’re even free to assume their employees are all thieves until proven otherwise. If verification is more cost-effective than trust, then go where you get the most bang for your buck. That’s the American way, no?

Those bottom-line behaviors aren’t irrational. I’m even comfortable with the assertion that real-time cash management surveillance is essential to running a business well. But what’s so appalling about this proliferation of auditing apps is that they’re all about sticks. Sure, we can craft networks that can catch embezzlers, moochers and travel policy violators but what about apps that are as much designed to reward as to punish? Where are the carrots?

This is not a plea for corporate compassion. Rather, it is a request for CIOs and their colleagues to recognize reality instead of treating it like a marginal nuisance. There’s an undeniable logic in the idea that we should turn intranets into dragnets. And yes, we are fools to ignore the value of networks as tools to enhance and ensure compliance in the corporation.

However, we are both fools and knaves if we invest the bulk of our ingenuity figuring out better ways to pound nails into our sticks at the cost of figuring out creative ways to plant carrots. We betray our understanding and respect for human nature by not coming up with as many ways to reward our people for clever use of the networks as we do ways to trap them. I think CIOs are guilty of taking the path of least resistance here. They leap to pluck the low-hanging fruit while ignoring equally inexpensive opportunities to make employees feel empowered and productive.

That’s awful. I personally know one midsize company phasing in an audits package for its salespeople even as it has deferred development of its “benefits notification” website and e-mail service. What kind of message do you think that sends? The company’s CIO tells me that he’s merely reflecting the CEO’s priorities. That’s hardly a profile in courage. I think it’s a betrayal of trust. Where’s the balance? It would be one thing if a benefits site cost a fortune to implement and maintain. It doesn’t. Even the appearance of balance is sacrificed. That’s a false economy.

One Fortune 500 organization uses its network to deliberately make it more time-consuming for its employees to fill out the e-forms necessary to get reimbursed. What once took 15 or 20 minutes online now takes a minimum of a half hour plus a manager’s digital signature. Here’s the kicker: Reimbursements over a certain amount now take 30 days instead of 14. If a department’s expenses exceed an undisclosed limit, accounting has been instructed to postpone a portion of the payables to the next cycle. All those changes have been designed and implemented in concert with IT. The CIO is being a team player. He can prove his IT people are boosting the company’s cash flow. Hurrah.

Yes, the company’s employees are sullen. But, hey, at least they’ve got jobs. Then again, their desire to collaborate with IT on various projects has declined. The CIO is seen more as the CFO’s enforcer rather than someone who invests in improving workplace productivity. That’s not good.

If CIOs truly care about the ongoing challenges of implementing positive change in their organizations—as opposed to merely empowering the legion of cost-cutters—they had better be seen as doing far more than implementing technical tattletales. Portfolio management means striking a balance between using networks to tighten financial control and using them to expand productive employee opportunities.

So just where are those CIOs who publicly reward the best and fastest response to an enterprisewide e-mail cry for IT help and customer support? Which companies pay a bonus to the employee whose PowerPoint presentation is downloaded and used the most? Which intrapreneurs get rewarded for citing the works of others online? Which organizations are creating internal economies where knowledge sharing and personal introductions via e-mail get compensated in cold hard computational cash or credit? Are CIOs challenging their CEOs and CFOs to be a smidgen more creative about the value of their intranets?

Those aren’t rhetorical questions. They reflect a corporate sensibility that is being sacrificed by too many executives in their rush to bring Orwell’s 1984 into 2004. They want value-added sticks. Shame on them. They’re mismanaging their IT portfolios. They’re undermining the alliances that will make future implementations go more smoothly rather than face resistance.

Our intranets—our ERPs and supply chains—are way overinvested in surveillance and punishment, and woefully underinvested in incentives and rewards. That asymmetry will ultimately cost more money than it can ever save if we don’t respect the reality that human beings need networks that provide both. Organizations that don’t consciously seek to build a better balance are managed by “leaders” who will richly deserve the contempt they inspire. Don’t be one of them. Don’t let your CEO or CFO become one of them either.