Are we stuck in a never-ending cycle of inefficiency—or can we break free? In this thought-provoking talk from Prodacity 2025, Paul Gaffney, transformation leader and former CTO of Home Depot, unpacks the power struggle between hierarchy and collaboration—and how financial management plays a critical role in shaping the future of organizations.

Using insights from philosophy, history, and real-world transformation efforts, Gaffney challenges traditional financial models, bureaucratic decision-making, and the annual "project pageant" that stifles innovation. If you’re ready to rethink how organizations allocate resources, empower teams, and drive real outcomes, this talk is for you.

🔹 Key Topics Covered:

• Why traditional financial management reinforces hierarchy & inefficiency
• How stupid people (by definition) slow down progress
• Why the "annual project pageant" leads to wasted resources & bad investments
• The importance of durable product funding over temporary project teams
• How to shift from focusing on budget spending to actual business outcomes
• Why leaders must resist bureaucracy and fight for collaboration

🕒 Key Highlights & Timestamps:
[00:03] - Introduction: The tension between hierarchy & collaboration
[02:55] - The four types of people (and why stupid people reinforce bad systems)
[05:00] - Why we feel like we're losing the fight for better ways of working
[08:28] - The "annual project pageant"—a competition for budget, not results
[10:57] - How financial policies shape organizational behavior
[13:30] - How fragmented investments lead to inefficiency & duplicated efforts
[15:58] - Fixing the system: Durable product funding & long-term investment in teams
[18:44] - How to measure success based on real business outcomes, not project completion
[22:42] - Final thoughts: Why real transformation requires courage, persistence & better financial models

🔗 Stay Connected:
Learn more about Prodacity: https://www.rise8.us/prodacity
Follow us on X: https://x.com/Rise8_Inc
Connect with us on LinkedIn: https://www.linkedin.com/company/rise8/

📖 Recommended Reading:
Paul Gaffney references key philosophical works that challenge hierarchy & promote better systems:

• The Basic Laws of Human Stupidity – Carlo Cipolla
• The Republic – Plato
• The Social Contract – Jean-Jacques Rousseau
• Lean Enterprise – Jez Humble, Joanne Molesky, and Barry O'Reilly

👍 Like, Subscribe, and Share:
If you’re tackling financial transformation, digital modernization, or breaking down bureaucratic inefficiencies, give this video a thumbs up, subscribe to our channel, and share it with your network. The future belongs to those who challenge outdated systems and fight for better ways of working.

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Paul Gaffney (00:03):

How are you all doing? I'm excited to be here. I've been here for a couple days and I came here with my 25 minute talk and I've accumulated two others along the way, so I'm going to squeeze three 25 minute talks into this 25 minute segment, and I want to thank you in advance for giving me your attention. I mean, you may not know this, but that's the most expensive gift that a human can give to another. We are wired biologically to conserve our attention for the threat that has not yet emerged, and then we've been conditioned over the past decade by these devices that we clinging to actually distract us even more. So thank you in advance for 25 minutes of attention. The assignment that Bryon gave me is talking about transforming financial management right after lunch on the third day, and I already knew coming in I had the prevent the food coma for the next round of speakers, so I'm taking on that assignment, but I also learned over the last couple of days, first of all, I got to rehab Aristotle, so I'm going to try to do that today.

(01:07):

I've got to reposition. Sisyphus is actually something more inspiring, so I'm going to bring Plato in to help us do that. I've got to introduce Rousseau because he's very critically important to rehabilitating Aristotle, and I'm going to talk about transforming financial management. So you all up for that? This is going to be an interesting tour. Okay, and then before I do that, I got to deal with two elephants in the room. One we've glanced at. We glanced at one of the elephants in the room this morning when Bryon's opening, and that elephant is the elephant that has turned into Sisyphus, but I'm going to rehabilitate that as a quest for enlightenment. That elephant is the, Hey, we've all been talking about the same things for a long time and it feels like we're losing. Is that in fact true? It's not true, but I know why it feels that way and hopefully I'll give you some new tools to deal with that.

(02:00):

That's the first elephant in the room. The second elephant we haven't glanced at yet, but I think you'll understand it and am not going to seek your permission. But I'm going to give you the warning that I have to talk about stupid people and I want to talk about stupid people in a very precise way. There's a book, it's a short book, it's like 60 pages. It was written in the late 1970s by an Italian philosopher named Carlo Cipolla only recently translated into English. I don't know why it has eluded translation. It's called The Basic Laws of Human Stupidity. Has anyone read it? Okay, you all got to read it. Take all of Bryon's recommendations, push them down on the stack. One put at the top basic laws of human stupidity when I talk about stupid people. So when talk about stupid people throughout the duration of these 25 minutes, I'm talking very precisely in Carlo's language.

(02:55):

Carlo defines that there are four kinds of people and the first kind that he defines are stupid people. And stupid people by definition do two things. They cause harm or loss to others while getting nothing for themselves. They cause harm or loss to others while doing nothing for themselves. And we pervasively underestimate the presence of those stupid people in our midst. The other three types of people are bandits. Bandits create good income, other things for themselves while taking from others the helpless, the helpless, create good for others while harming themselves. Those are often people who get stuck in really bad roles. And then the intelligent and the intelligent create good for themselves and for others and societies and companies that thrive the intelligent figure out how to keep the stupid at bay.

(03:59):

Unfortunately in this battle, why are we all feeling like this might be a loss? We're feeling like this might be a losing cause because we are caught up in forces that Aristotle actually wrote about over 2000 years ago. Now, these are the forces of hierarchy, the forces of essentially subjugating the helpless at the bottom of a pyramid that often the folks at the top, if the intelligent aren't doing their jobs right? The folks at the top end up being Bandits and Aristotle. He was a professional observer and he observed that that's just the way things are. There are people at the bottom of the pyramid and they're just destined to be there. And there are people at the top and they're just destined to be there. But along comes Rousseau right around the time that the United States is being born and says Aristotle had an accurate observation, but he mistook cause for effect.

(05:00):

And Rousseau's famous line is people everywhere are born free, yet they're in chains. And that this subjugation to hierarchy is in fact self-inflicted and simply requires courage to overcome it. Both of these things I just talked about are 25 minute talks in and of themselves. So I'm only planting those seeds. I'll come back at the end and bring Plato in and bring some hope. But against that context, and the reason that understanding stupid people is important is in the battle between these forces of hierarchy and these forces of freedom, which we often talk about in terms of collaboration, we are trying to empower more people to participate in creating good outcomes because we all have the experience and the belief and that belief is reinforced by experience that when we allow more people to participate in creating good outcomes, you actually get better outcomes When people are mostly subjugated to the decisions of others, it's kind of a random walk.

(06:05):

If that person at the top of the hierarchy happens to be in Cipolla's view, an intelligent person, you might get good outcomes from time to time, but you durably get better outcomes when you resist hierarchy and foster collaboration. And that's what we're all trying to do. And there is a force that the stupid people, they prefer hierarchy because it's actually more comfortable to say, well, yeah, there were bad results, but it's not my fault. I'm at the bottom of this hierarchy. I don't have any agency in this. I'm largely helpless. Just pay me at the end of the day and let me go home. And so in this battle where we might think that the forces could be like equivalently distributed between bandits, intelligent people and the helpless, it turns out the stupid like to gravitate toward hierarchy. So how do we fight that? Well, we encounter that in financial management. Financial management has been talked about a couple times today, leads to certain behaviors if it's conducted certain ways. And most of us have been subject to the old ways.

(07:20):

The old ways is sort of the inherited wisdom. Aristotle would come here and observe. The way these finance organizations behave is exactly what I observed in 400 BC. There are people who are naturally suited to be leaders of resources and others who are naturally suited to be disposed of by others. And the way the old ways show up is the annual operating plan. The annual operating plan is an exercise in implementing hierarchy driven as Parker described, as others have described. Not by merit in general, but by merit in salesmanship, the annual operating plan is usually the final stage of the project pageant. If you all participated in a project pageant, this usually starts getting going. They dust off the floats, they dust off last year's floats in June or July, they start gearing up for the early competition of what slaughter are you going to get in the parade in August, September?

(08:28):

And then you run the full-blown pageant at the end of the year trying to get to an annual operating plan which floats won the most money. And then people are become professionals at participating in the project pageant. Just like in beauty pageants, there are consultants, there's wardrobe research, it's all theater, and it results in establishment of the hierarchy for the next year. And the winners of the pageant love certain elements of the old ways. They love this competition to potentially get a single yes that then turns into a fixed bid for implementing the promise of their float, a temporary team that might be assigned to that. And then we're off to the races, release the hounds, don't pay any more attention to what I was supposed to accomplish, just pay attention to did I spend all the money and did something come out that we can have a launch party for.

(09:30):

But because organizations are skeptical of that, they also release the police. And the police are often the finance organization. The finance organization then gloms itself on to each of these things to ensure, first of all that nobody's coloring outside the lines that the pageant awardee is doing only what they were awarded to do and that there's regular scrutiny of is the money being spent at the right pace and is this all going to kind of track to a nice Gantt chart? Is this everyone's experience of the old ways may in fact still be the current ways that leads to a collection of problems that I think we've all experienced. You run the annual project pageant cycle reinforced by financial practices that are geared up to this annual cycle award budget equipped to that budget, execute that budget, rinse and repeat. But what that leads to is you run that cycle for 5, 6 years, let alone 10, 20, which is the situation many of us find ourselves in. You run that cycle over and over again and you get what Angie Brown and I discussed yesterday. You get a massive amount of fragmentation because every pageant winner that comes along and needs to get their thing done, they build all of their own supporting cast.

(10:57):

They believe they don't have time to talk to anybody else who might be working on the same thing. They think all of those other people aren't going to do a good job, so they need to create all their own stuff. So if you're in an organization that does maybe 10 things, you run the project pageant 10 or 15 times and you get those 10 things re-implemented 10, 20 times. And so you get this systems infrastructure. We had someone up here earlier from the state of Pennsylvania. How many times do you think the state of Pennsylvania has implemented citizen identity? As many departments as they have have their own concept of citizen identity, the way the awards worked, that's the way the project pageant worked. No one wants their float to be evaluated in the context of the whole parade. They want their float to be evaluated all by itself.

(11:51):

It leads to ignored opportunities the police are around and when the police are around and your award was to do a very specific thing, it's inevitable that you're going to stumble across an adjacent problem. It's inevitable you're going to be in a part of the code base that says, this has always been a problem and we're in here right now and we should probably fix it. And someone comes along and says, no, no, no, no, no, you're not funded to fix that. So people put blinders on the temporary team that was assembled to implement the vision of the float moves on. And there is this fixation not on return, not on outcome, not on getting results, but a fixation on completing the project. A fixation on in fact, spending the investment, right? I got the money, I should spend it because that burnishes my star in next year's pageant. I'm already a big winner that helps me become a bigger winner. And at least among many of us, the reaction has to be the Festivus reaction.

(13:05):

Is there anyone here celebrate Festivus? We just exited holiday season. There are like 52 or three holidays celebrated between sort of the end of November and the beginning of January. Festivus is the newest one introduced in a famous Seinfeld episode by George Costanza's father Frank Costanza because he found himself experiencing his own version of this incomprehension of the old ways when he was in the toy store and he and another dad were competing for the last unit on the shelf of a toy that they both wanted and they ended up at fisticuffs. And Frank famously says, and as I was reigning blows down on this other father, I realized there has to be a better way.

(13:52):

And I think that's the result that most intelligent people come to in their own head after they've seen the results of the old ways of financial management and much as was described in Lean Enterprise. That leads to I think a very straightforward recipe for, well, what is the goal of transforming financial management that would focus on better outcomes and would solve a bunch of the problems? It doesn't involve a poll, it doesn't involve feats of strength, it doesn't involve a little bit of airing of grievances. Those are the fundamental elements of the Festivus celebration for anyone who's not following along. So the first of those is durable product funding. Angie and I succeeded at making that happen at Home Depot. I've seen mixed results in other places. This is a general good, even if you don't transform the entire financial management, if you start making headway to say, wait a minute, every float is built on a trailer that has, we are not going to build 27 versions of trailers and wheels.

(14:58):

We're going to have a trailers and wheels department. They're not going to worry about is their funding going to evaporate at the end of any calendar year? They know they're always going to be in business, and that means the trailers and wheels infrastructure is actually going to get a little bit better every year. We're going to start approaching the beginning of Steve Spear's magic of half in and twice out because we start consolidating investment into teams that are no longer temporary. They have some permanent attachment to this thing actually getting better. And the same thing happens as you move up the stack, right? We're going to invest in at Home Depot. We did this on sort of the fundamental building blocks of a retailer, and this is what Angie talked about, about the common architecture. We're going to have one engine for looking up and passing back the price at which we should sell this item at this moment in time instead of having 29 of them.

(15:58):

The other pivot in financial management is to get the finance organization because at the end of the day, the finance organization, they also actually want results. They do not relish their police role. They relish being able to tell a good return on investment story. The only way they've been allowed to do that is by attempting to police folks to have their actuals look something like the pro forma that won them the budget award in the first place. But they know that doesn't happen. And the thing that drives that often is a fixation among project sponsors on, if you just build me these capabilities, I promise you I'll go get better results. They rarely describe the mechanism by which those capabilities turn into results. And then the old ways drive a continued fixation on have you built the widgets that this sponsor asked for? Don't worry about when they might be held accountable for those widgets actually producing results.

(17:03):

Build the widgets. And you find yourself, if you manage to wander around a typical enterprise technology organization and you ask folks the Christopher Ren question, is everyone familiar with the Christopher Ren question? Christopher Ren was the architect of the rebuild of St. Paul's Cathedral. And he would often wander among the workers asking them, what are you doing? And when he got very low level questions like, I'm a brick mason and I'm making bricks, he's like, well, okay. And when he finally got to the person, I'm building a cathedral to be the most beautiful cathedral in all of England, he knew that he'd gotten through to some. And the Christopher Ren question for all of you is you're wandering around the folks doing the actual work and say, Hey, what are you helping us accomplish? And when get the, I'm building an enhanced DPM for the marketing department, that's the equivalent of I'm making bricks.

(17:57):

Well, what are they going to do with the DPM? I don't know. I was just told to build this enhanced DPM because someone convinced everyone that we had to get that capability in order to deliver results. The other pivot that enables more modern financial management is to front load the discussion. Was it, what are the results you're going after? How are you actually going to change the income statement for the better? Just don't talk about the how the money. Show me your equation, your financial transformation equation. And when you're ready to commit to that outcome, you can then ask me for some money to enable you to accomplish that outcome. And then we can talk about the capabilities that you need because I'm trying to instill in you, you probably don't know, and if you act like you know you're going to go build a bunch of capabilities, but my experience is those capabilities are not going to turn into results.

(18:58):

So I want to front load the conversation about results. The promise of this transformation is actually pretty magical. You can get both effectiveness working on the right things, getting actual results moving from one in one out or one in one, half out to half in to X out that Steve described. And Steve and Gene Kim write a lot about extensively in Wiring the Winning Organization. And it turns out it's all about the stuff we're talking about now. It's all about rewiring the way people talk to each other. You get collateral enhancement, you get teams that are in that code and they're like, I know we set out to do this, but I'm right next to this thing that's actively on fire. And I no longer have a policeman telling me, no, I'm not funded to put that fire out. I actually put that fire out. You start getting people enlisted in building the cathedral instead of executing tasks because they're more affiliated with results than widgets.

(20:01):

So part of the half in 2X out is good. People do more than is expected of them because they see other problems that can be solved in the normal course of their work. And the enterprise that you're working for starts getting actual returns on investments. And in general, those investments are smaller. When each participant in the pageant builds their own trailer and axles and does their own maintenance, it's often 20 or 30 times more expensive than one dedicated team doing that. And so you change this cycle for just two or three cycles from projects to product transforming the way that you think about finance and you start to see a meaningful fraction of that input gets to decrease and output starts to increase. But this is challenging. This is challenging on a metaphysical level, and I'm going to come back to that. That's why I'm trying to rehab Aristotle.

(21:09):

That's why I introduced Rousseau. That's why we're going to close by talking about Plato. But you drop from the metaphysical level to just what goes on day to day at work. Well, nobody starts with a clean sheet. The first class of challenge is the Cold Start challenge. The first time you do this, everybody's got their own trailer and own wheels. The first time you do this, you've got 29 pricing systems. The first time you do this, you've got 16 ways to identify a citizen of the Commonwealth of Pennsylvania. So what do you do? You persuade the persuadable at the top that you actually have to have a launch budget. You actually have to apply additional resources to equip the initial round of product teams. When we first did this in 2015 in Home Depot, we took an additional 25% of the core new systems budget and set it aside as dedicated funding to make progress on common architecture.

(22:12):

And I'm pretty sure they still do that. That was the right judo move to say we're not going to disenfranchise all of the winners of the project pageant. And Parker mentioned earlier today, one of the reasons people don't want to do this is they think they lose. So we made it not a lose. They didn't get anything taken away to fund the new construction of the trailer and axle program, get top level sponsorship, which is actually easier than you might imagine because the folks at the top increasingly understand they keep spending more and more on technology and their company's ROI keeps going down. And those two things are very directly related. They want to fix that. This helps them fix that. And then finally, as we've talked about a lot, and I think this is even more crucially important now show results. Find ways to very early and very often show that the inputs are going down and the outputs are going up.

(23:07):

That's the cold start problem. The second problem is eventually you'll start to get to the point where, hey, the trailer can't really get any better. That dedicated team, that's the trailer team, I don't know, should we keep funding them? And you start to get that kind of questioning everywhere, especially when a new bandit at the top shows up and says, Hey, we should really be skeptical about this stuff that's been going on for several years because I've got this new idea. And if we invest in this and take stuff away from, you'll enjoy the float parade next year even more. The way to deal with steady state is to make sure we don't hide all the stuff that happens all the time, right? Maybe we can't make the trailers any better, but we're using them a lot more. So they need a lot more maintenance.

(24:04):

There are pressures from people, the new people who show up and these questions of, is the product still worth it? So how mechanically do you do this? What are the things that you all do to help the finance organization be your allies in this transformation? Well give common updates. And Siobhán Mc Feeney at Kohl's has done this in a masterful way. The project world they love, these are the dominant hierarchical people. And one of the strategies of folks in a dominant hierarchy is to divide and conquer. And one of the best ways to divide and conquer among technology folks is to say, I want to talk about my needs in isolation. I know you've got other people who have needs of you, but I don't want to go to those meetings. I want to give you my priority list. And you may get seven other priority lists, but it's your job to harmonize those.

(25:04):

Some have experienced this. This is a fabulous bandit technique, right? Fabulous bandit technique is the problems that are going to cause you harm are your problems. The way to fix that is don't allow private updates. So force every user of the float trailer department to come to the same monthly update. And in pricing, for example, everyone always has needs of the pricing system force one monthly pricing update and have the bandits battle with each other, not with the intermediary. This requires a little bit of backbone and we'll get to courage in just a minute. We'll close with courage, but it requires that you're willing to actually live comfortably with silent tension when it becomes obvious in a monthly update that the marketing department wants something that's fundamentally at odds with the sales department and they're trying to not have to resolve that themselves. They're trying to make that a technology problem.

(26:09):

It's not a technology problem, it's a marketing and sales haven't figured out how to subordinate their own needs to the realities of the company that the mechanic for dealing with that is get rid of the spaces where they can make it your problem and make spaces where they need to fight with each other. Live with your actual end users. The truth is always in the actual use of the software. And when you start living with your end users, you not only start developing a better affinity for them mechanically, they start seeing you more as an agent of collaboration than of hierarchy. You will find that all of your end users also feel like they've just had stuff inflicted on them for years and years and years. They very rarely participated in assembling the float at the project pageant. They received the results of the project some years, hence, and they largely hated it.

(27:08):

In most large organizations, you find at the real end user level, they're basically finding ways to work around the systems that have been inflicted on them. You can then very easily become the people that they actually want to talk to. When that happens, you can enlist them in helping force meaningful measurement and meaningful measurement is okay, sales won the battle with marketing, and so we're going to build their thing, but we're still kind of skeptical that they actually have any idea how this is going to work. So we're going to measure it. We're going to measure does anybody actually use it? When they use it, does it have any follow through effect to fundamental financials? And we're not going to allow the sponsor of the feature to self evaluate to what they'll claim is, yes, I got my feature. Give me an A. It's like, okay, well no.

(27:59):

Did it actually do anything? And in reality, I recognize that while these mechanics sound straightforward, they're hard and they're hard because zooming back up to the metaphysical, we are caught in this several millennia long tension between dominance and hierarchy and collaboration and freedom. And so far today we've characterized the task of taking this tension on and advocating for the freedom side of the ledger for the collaboration side of the lever. We've characterized that as a Sisyphean task. And the Sisyphus, for those of you who don't know, was cursed by a God to continually roll a boulder uphill only to have it rolled down. And that's his permanent condition. I forget who he ****** off, but in Greek mythology, you **** off a God. There's very rarely redemption. There's permanent punishment in its own way. The myths of old are hierarchy reinforcers, not advocates for better outcomes.

(29:14):

So I want to replace this as a Sisyphean task with a much more noble task. And it's the task that Plato describes in Book seven of the Republic, essentially a contemporary of Aristotle. Plato tried to give us advice on how to structure a society. And a society can be your company. A society can of course be the overall society. And Plato recognized, and by book seven, we're pretty deep into his idealized view of might we live together better? And how might we conduct ourselves to actually be living the kinds of lives that would result in more of us being fulfilled? And Plato uses an allegory of a cave. This is another, this is a two hour talk that I'm now going to condense into one minute. So go read it if you haven't already read it or read the Wikipedia part of it. But Plato very accurately describes what happens in any group of people, in any mini society where the folks are kind of caught up in the old ways.

(30:15):

They're actually very deeply attached to the old ways. They have become expert in talking about the old ways they have become masters of the existing system. And inevitably, someone will become a little bit aware that there's something outside of the current context that feels a little bit more true, that feels a little bit more inspirational. So I think almost all of you have had a version of this experience where you were stuck in hierarchy and then maybe you did a project to Pivotal Labs, or maybe you met someone who knew how to conduct business in a more iterative way. And you realized like Frank Castanza realized when he launched Festivus, that there is a better way. You have, in Plato's words actually Socrates words, because Socrates is the character that Plato uses to get this message across. You have become a little bit more enlightened.

(31:07):

You've become a little bit closer to the sun and in the allegory of the cave, Plato describes this not as a Sisyphean task, but he recognizes the reality that when you become a little bit more enlightened, but you have to go back to the people who have no enlightenment, and you have to try to explain to them that there is a better way. They will do all of the things that Plato describes. They'll call you an idiot. They will cast you out of the old society because you can no longer compete in using the language of the old society because you've adopted this crazy new thing. But Plato actually insists that we have to take as leaders, we have to take people who have more enlightened knowledge. We have to force them to go back into those who are unshackled by the chains of the old ways and force them to help bring others out of that subjugation.

(32:02):

Thomas Jefferson, who I like to think about now because I wish he were around, he read all these cats in the Library of Congress, is Thomas Jefferson's personal copy of Aristotle's Ethics in Greek. His marginal notes in Thomas Jefferson's own hand are in Greek. He was reading this contemporaneous with writing the Declaration of Independence. Rousseau was a contemporary Rousseau's famous line is, man is born free, but everywhere is in chains. And that Plato's aerosol's observation of this destructive hierarchy is actually product of our own creation, not a product of nature. So while it might feel Sisyphean, it's actually much more enlightening, though still painful to become better at your craft and by becoming better at your craft, learn better ways that are not the old ways, but they're the new ways. And go back to try and bring a couple more people out of the subjugation of the old ways and into the new ways.

(33:07):

And I know from my discussions with now more than hundreds, thousands of people who've actually had the experience of really shifting from the old ways to the new ways that it has in fact changed their lives in a more positive way. And even when they find themselves temporarily subjugated because a new boss showed up or they ended up in a new company or the forces around us just kind of elevated the dominant hierarchical folks temporarily, they still have that kernel of, but I know what better looks like and I'm going to suck it up and I'm going to fight for it. And I hope you all can reposition the task that's in front of all of us as leaders. We're not destined for the stone to continue to roll down the hill. If you want to just come to grips with that and you feel good about, okay, but I get to pick the hill, do that. Whatever works for you. But I think there's actually even more inspiration than being able to choose your own hill. You can choose your own hill and you can get more people to help you in getting the rock to get to a better permanent place. Thank you for your attention. It is the greatest gift you can give to anyone. I hope you'll all go explore some Aristotle, some Rousseau, some Plato. And while doing that, talk to your finance people about changing from the old ways to the new ways. Thanks.

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