Douglas K Smith

June 19, 2007

Better Deeds

Over the past several years, America's best run non-profit housing organizations have dramatically outperformed the subprime lenders in serving financially-strapped folks seeking to buy or refinance a home. Many of these stellar performers, though, struggle from year to year to ensure they have the financial wherewithal to continue their efforts -- and few, if any, have been rewarded with the capital to expand. There's no real reason -- other than the always potent cocktail of ignorance and greed -- that capital markets cannot work with nonprofit housing organizations. The fact that otherwise sophisticated folks do a double take at this suggestion merely confirms the extraordinary level of self-interest and distorted language that now pervade our culture. Remember this: mortgages are forms of debt. Not equity. Non-profit lenders can produce debt instruments just like for profit lenders. What happens to those debt instruments down the road -- that is, how they get converted into equity like forms -- is not limited or constrained by the tax status of the initial lender. As I explain further in Slate, however, the quality of the mortgage evidently is affected by the tax status of the lender. America's nonprofits produce much better deeds than the the subprime lenders. Much better. Delinquency rates for the nonprofits run between 1 in 20 to 1 in 50. For the subprimes? 1 in 5 and rising.

Posted by Doug Smith at 02:07 PM | Permalink

March 19, 2007

Memo To Journalists: Move From Reporting Ideology to Reporting On Problem Solving

There are many explanations for the flight over the past decade or so of journalists toward reporting about ideology. Among them, of course, is the chicken-and-egg spiral whereby political discourse shifts to 'either/or', 'on/off', 'my way or the highway' presentation and appeal that, in turn, influences journalists to report about the horse race of 'which ideology is winning' that, then, encourages and reinforces the thread bare 'either/or-ism' of the political discourse. In addition, though, are many, many other factors too numerous to list in this post. But, just to illustrate; there's also the incredible, geometric expansion of subject matter, the traumatic shifts in the economic and other realities of journalism and news businesses in this new information/web age of ours, and the rapid drift toward celebrity as a means of competition both for journalists' own careers and for the businesses that employ them. In response to all of these are some clear patterns of how journalists now practice their craft. One, for example, is what I call 'press release' journalism: simply printing the press releases of others and calling it reporting. (My far too subtle intended irony here has to do with the interpretation where journalists 'press the release button --that is, release themselves from their best values and aspirations to actually inform us -- which would take some work -- instead of merely being parrots.)

It's been years now since we've all learned to expect and experience the 'he said, she said' form of what passes for jounalistic balance in this new world of press release journalism. No matter how outrageous any ideological position, the minimal obligation of journalists seems to be met by merely including any comment from anyone who opposes that position. Among the many ways this hollows out journalism, much like termites eat away at a house, is that it eliminates any threshold of accuracy. So long as someone can be quoted, it matters not that the quoted statement is devoid of any fact. We've seen this time and again with regard to Valerie Plame's job status as a covert agent. We see it time and again with regard to creationism, the WMD lies that led to the Iraq disaster, the either/or journalism about No Child Left Behind and more.

Put differently, in a world and culture that spins out of control toward politicizing everything into a black-and-white loyalty test regarding ideology and identity, there becomes no room left for actual problem solving -- for actually trying to do anything about anything. Karl Rove triumphs. All journalists are branded as right v left or, more likely, supporters of Bush and the Republicans versus supporters of the 'left', the 'Democrats, of 'Satan' and of our 'enemies'.

Note again, please, how easy this makes the job of a journalist. The articles basically write themselves. And, the obligation to actually think for one self and to learn about the issues disappears.

None of which is to say that this description matches the best aspirations, the real concerns, the private lives or the truly professional best efforts of most journalists. From my experience, most journalists I know would prefer a better, more constructive way of moving forward into the 21st century. And, I'm guessing, most journalists I don't know would too.

We're dealing with issues of profound change. And, among them, are the challenges of shifting course within the context of jobs and organizations. That's very hard. At a minimum it entails taking risks to do things differently -- risks that affect job security, friendships within the organization, and sense of self. In most organizations, the 'either/or' aspects of our culture can rapidly become 'either/or' loyalty tests or career risks -- perhaps because they really are; or, more likely, perhaps because there is a perception that the "CEO" will come down hard on any risk takers. (Such perceptions, by the way, are as often mistaken as they are correct.)

Changing 'the way we do things around here' within any organization is very difficult. It is one explanation for why new entrants often take market share away from existing players -- at least until the existing players get the message and begin to recast themselves accordingly.

This is now happening in journalism. New players -- blogs, crowdsourcing journalism, citizen journalism, user generated content and more -- are moving quickly and independently toward taking advantage of a core new reality: the essential 'many-to-many' nature of our webbified world.

News organizations that, over the decades stretching from the 1970s to early 2000s, adjusted and grew based on a 'one-to-many' world, today have decades of skills, instincts, processes and economics that don't fit a 'many-to-many' world. This was shocking news to most of these organizations -- and, for the most part, even a year or so ago, most were in denial. Now, across this country, news businesses are rapidly moving from denial to doing something about it.

As they do, I've got a recommendation. Put a stop to 'press release' journalism. Put a stop to reporting about the horse race between a well defined ideology (Rovian Republicanism) and the assumed ideology in opposition (which, by the way, as every single one of us knows is and has also been defined by Rove).

Put a stop to this. And, instead, start to explore and learn journalism oriented to reporting about 'problem solving' -- that is, journalism that seeks to report on and inform people about options worth considering for how to move forward against the many challenges we face as a people.

In this 'problem solving' journalism, there will be no 'totally right answers'. Rather, there will be approaches that 'work sometimes'. And the job of journalists will be to help us figure out when various solutions work and when they don't. (And, yes, also what those promoting any solution have to gain personally -- that is, sources of self-interest that might or might not reach beyond objectivity.)

To take just one example, consider charter schools. Charter schools really do work sometimes. And, at other times they do not work. And, yet still in other situations, charter schools can exacerbate and make worse various ills. In a world where journalists report on education, they'll help us distinguish among the three cases -- unlike today where far too many articles one reads basically present a 'balance' between those who claim, "Charter schools are right!' and "Charter schools are wrong!"

Posted by Doug Smith at 01:41 PM | Permalink

March 17, 2007

What Does The Republican Party Brand Really Stand For?

What can we tell from how we experience the actual behavior of the Republican Party about the values Republicans really stand for? We are aware of a series of beliefs that the Republican Party wishes to include in the brand it markets and sells to Americans (and the world). And, let's be clear, political parties -- like companies -- need to have clear brands in our new world of markets, networks, organizations, friends and families. The issue we're putting on the table is about how actual behavior matches those branded beliefs.

In this regard, let's review how the best organizations think about and use brand. There are three phases:

Brand Promise: Using a set of clear beliefs, the best organizations promise behavior that matches those beliefs

Brand Delivery: How the best organizations go forward with products, services, information, distribution, customer service, technology, and more to deliver against the promises made.

Brand Experience: How the customers, investors and others experience what gets delivered -- that is, whether the promise, the delivery and the actual experience match up and reinforce one another.

Recently, for example, Howard Schultz, the brand mastermind who runs Starbucks, sent a memo to his senior executives asking aloud about whether Starbucks efforts to streamline stores (and increase revenues and profits) had damaged certain key aspects of the brand promise: 'romance' and 'theater'.

By stocking prepackaged coffee and using automated machines, Schultz worried that the brand delivery shifted from the promise of 'romance' and 'theater' to the experience of -- my words -- your basic retail grocery store-like assembly line.

"Romance" and 'theater' may be difficult to deliver on in ways that create the intended customer experiences. But, if Starbucks chooses those beliefs and promises to be core to their brand promise, then, as Schultz alerts the executives, it's incumbent on Starbucks employees up and down the company and all across the world to take steps that do the best job possible of delivering against those promises.

The Republican Party has a set of core beliefs with which it has branded what it promises America. These include small government, efficient government, fiscal responsibility, family values, defending America, prosperity through individual opportunity, low taxes and so on.

But, all Americans of all political stripes -- and especially Americans who belong to the Republican Party - need to ask whether the brand delivery and brand experience match up with these brand promises.

What happens to companies can also happen to political parties -- indeed, any organization in this new world of ours. At some point, if the brand delivery and brand experience radically contradict the brand promise, then the customers (in this case, voters), the investors (in this case, contributors) and even the employees (in this case those who work and volunteer for the Republican Party) will actually look at the delivery and the experience to define the brand of the Party and not to the promises themselves.

If, for example, Starbucks fulfills Howard Schultz's worst fears and focuses so much on efficiency and profits that it's coffee -- and the experience of being in one of it's stores -- has zero to do with romance and zero to do with theater, then Starbucks will be branded by customers, investors and, again, even employees as 'just another coffee company'.

This is the reality of managing brands in a world of markets, networks, organizations, friends and families.

And this reality applies to the Repubican Party.

Many news organizations, pollsters, political professionals and other insiders can (and will) continue to monitor the Republican Party's brand solely at the level of promise. In this sense, they can report on and talk about promises, promises, promises -- as if those were -- as in the now ancient days of marketing the only thing that mattered.

But, while they are essentially just talking to themselves about tautologies ("The Republican Party stands for family values because The Republican Party stands for family values!"), an ever increasing number of voters, contributors, volunteers and employees who live in the rest of this new 'real world of markets, networks, organizations, friends and famliies' will persistently -- that is daily and weekly -- bump up against the actual delivery and experience that -- if they radically contradict the promises-- reach a tipping point that then brands the Repubican Party in ways that will be extraordinarily difficult to reverse because -- well, because promises of reversing them will sound like 'promises, promises'.

All of which is to say: Take a moment and reflect on the brand promises of the Republican Party and then ask, what do you observe about how the Party delivers on those promises as well as how you and people you know experience what the Republican Party really stands for.

Do this and, if you can put aside partisanship of any kind (pro or con) -- if you are capable of that -- then try to objectively observe: What's the current real brand of the Republican Party?

Posted by Doug Smith at 12:39 PM | Permalink

February 01, 2007

Take Advantage of Market Failure In Energy!

Okay folks. Here's your opportunity to make some money and contribute to the sustainability of the planet for future generations -- all by taking advantage of a market failure in today's energy industry.

Here's the situation, which you can read more about in one of the best new blogs on finance, markets and capitalism (www.nakedcapitalism.com): Deregulated electricity markets shift pricing out of the hands of regulators and into the lap of the industry's marginal cost supplier.

That's a mouthful. Why? Because folks like you and me and Aunt Sally do not factor price into whether we flip the switch when we get home at night. Our demand for electricity is impervious to price (the technical word: inelastic).

Price, then, will reflect the profit requirements of that supplier whose energy sits out the outer limit of total demand (i.e. the marginal cost of the 'last' supplier). Of course, other, lower cost suppliers could charge less in theory. But, absent regulation, why would they?

So, how is the price set by this 'last supplier'? Based on the supplier's profit appetites that sit on top of that supplier's costs. And what would be that supplier's costs? The amortized cost of the investment to build the plant plus the operating costs to run it.

Well, it turns out that it's easier to gain financial backing (i.e. capital investment) to build plants that have lower up front investment costs and higher operating costs. That means investors and capitalists make a nice profit by getting a return on lower investment tied to higher ongoing prices for consumers.

Consumers, folks. As in you and me and Aunt Sally.

Of course, it's also possible that you or your Aunty Sally may have the kind of megabucks to get in on the investment side of this game - and the contacts and relationships to be invited into the game. In which case, you'd have to check to see if your energy costs to run your home (or, more likely, your many homes since you're very rich) are adequately offset by the return on investment you get.

Now, what to do about it?

Well, it is in the planet's interest -- in the interest of protecting our precious earth for our children and their children and so on -- to replace the irrationality of this market failure with a market success. Instead of subsidizing capital through government action (note well: deregulation is an act of government!) which, in turn, causes higher energy prices (reread the above) -- and, if you go to the link -- also causes geopolitical instability as well as environmental degradation -- it would be great to find a market mechanism to correct for all this.

How? Well by finding a way to invest in something that has lower operating costs.

What would that be?

Renewable energy sources.

But, they have higher up front investment requirements.

Yes. And, that's where the opportunity comes in.

Listen up Goldman Sachs and pals. Here's what you do. You create an investment security for the broad public that combines up front capital with ongoing price reduction. In exchange for the capital that will go to build higher cost renewable-type plants, the investor gets a claim on the lower ongoing prices promised from that source of electricity. And, Goldman Sachs, if you're really clever and have any good government connections, you throw in some kind of investment credit to the total package.

Come on, now, all you financiers and capitalists. Let's get going.

(PS: Are there a variety of obstacles and details to work out? Yes. And that's why folks at Goldman and elsewhere get paid the big bucks.)

Posted by Doug Smith at 12:45 PM | Permalink

November 25, 2006

Day Of Reckoning

The United States remains one of the rare -- and certainly the largest -- pharmacuetical markets where government has refused to step in to curb pricing and other practices. Defenders of these practices point to the ideological instruction of shareholder value extremism: we must have free markets in which companies use profits and capital to innovate through research and development that, in turn, bring us ever new and more effective pharmaceuticals. The problem, of course, is when any single answer -- in this case profits and shareholder value -- is repeatedly used like a catechism without reference to it's actual, fact based effects, even the constructive aspects become emptied of all reason, all possibility.

Should we construct our affairs so that pharmaceutical companies make profits and offer an attractive return to those who provide them capital?

Yes.

Yes.

Yes.

Should we construct our affairs so that pharmaceutical companies drive profitability through kick-back like rewards to doctors who promote their high priced drugs, research and development trials conducted without oversight by independent agencies with sufficient resources to maintain objectivity, campaign funding provided to politicians (who declare themselves anti-science) in exchange for extending legalized monopolies needed to support high prices, product development processes that favor marginal advances on existing drugs over fundamentally new drugs (including life-style drugs instead of life-saving drugs), marketing and advertising campaigns that draw attention toward life-style and away from real need, and, finally, legislation that sets up complexly regulated distribution of drugs to older folks who neither themselves (nor their adult children) can even ever hope to understand -- and all because each and every one of these practices and more help pharmaceutical companies do in the United States what they cannot do elsewhere: make unsustainable profits?

Should we continue to allow all of these usurious and unethical practices?

No.

The free market crowd of zealots have become so detached from the facts on the ground about how markets actually operate that it comes as no surprise that Big Pharma is gearing up to fight against allowing for the free market importation of lower priced drugs from Canada.

Here's the problem. If you're an executive in a Big Pharma company, you know that the United States market is your last, best hope for sustaining unethcially high prices and shareholder value. Why? Because other markets are now 'off limits' to such practices because the governments in those marekts have chosen to blend their concern for Big Pharma profitability with their concern for the health and well being of all of their citizens (not just the top 10%).

For the red meat eating ideologues out there, please re-read: these governments blend their concern for profits and people. Blend. They do not prevent or advocate or wish that Big Pharma become indigent groups operating at unsustainable losses.

No. They wish for and hope and listen to reason to help Big Pharma and all private sector companies make profits -- reasonable and sustainable profits. Because that's how markets work.

But, these other governments -- unlike the government of the United States -- have said "No" to single answer, shareholder value extremisim. They know that this form of extortion is no more sustainable than continual, persistent losses.

So, if you're a Big Pharma exec and you look at the markets around the world and you see that, for the most part, your profits will be hemmed in except for one -- the US -- then what do you do?

You put the peddle to the metal in the US and do whatever it takes to drive as much profitablity as possible out of this last 'frontier'. Do the math! If you have 10 markets and 9 of them -- at best -- would produce, say, 10% return on investment while your financial markets are 'demanding' you maintain 25% in total -- then you better get a heckuva lot higher profitability out of that 10th market if you hope to make the total performance meet these expectations.

So, when a mid-term election shifts Congress from R to D, and the D group knows there's not much reality left to what we used to refer to as 'middle class' -- quick fact: the top 1% in this nation have 40% of the assets and they can definitely afford the high prices of Big Pharma's US market drugs while the lowest 60% of families have 1% of the assets and cannot -- and this D group identifies the free market idea of importing lower priced drugs -- well then the 'free market' Rs and their Big Pharma paymasters are going to go to work quickly to ensure that free market thinking like the D's offer do not imperil the 'free market' profits of the status quo.

Posted by Doug Smith at 12:19 PM | Permalink

November 19, 2006

Invest Today In A Free Press

How would you like to invest in the growth of an independent press? Well, go to the Media Development Loan Fund today and you can do just that by putting your money in a safe, low yield bond.

Over the past decade, MDLF has provided low-cost financing and technical assistance (learning related to financing, distribution, business planning, etc) to more than 50 independent media companies -- radio, TV, newspaper, internet and more -- in nearly a score of nations in Asia, Latin America, Africa, Central Europe, Russia and elsewhere that are transitioning toward the possibilities of democracy.

MDLF provide both low cost loans as well as takes equity stakes. They, in turn, use innovative instruments to gather the capital needed for their important work. In particular, with the participation of major financial institutions, MDLF offer investors low interest returns (e.g. up to 3%) in safe bonds -- what they call 'social bonds'. In effect, you can invest in press freedom around the world.

Posted by Doug Smith at 01:33 PM | Permalink

November 14, 2006

Market Magic

See my article in Slate about how we can use the idea of "dynamic deductibility" to create a new kind of security around the right to trade the timing and size of a charitable deduction -- and, thereby, foster a real capital market for non-profits.

Posted by Doug Smith at 01:40 PM | Permalink

November 12, 2006

Six Sigma Upside Down

Six Sigma programs have been a common aspect of the quality movement that swept industry over that past twenty years. Among the key principles of these programs are (1) all work can be described in terms of step-by-step processes; (2) there are always 'customers' of these processes (that is, people, whether inside a company or, more traditionally, beyond it like real customers) who receive the benefits of the work at hand; (3) defects or errors matter to these customers; (4) data can be kept about such defects; (5) a variety of problem solving and improvement efforts can be made to continuously root out the causes and eliminate such defects; and, (6) those involved will do better if continuously challenged to reduce the number of defects.

Six Sigma itself is a statistical notion conveying that there will be less than 3.4 errors or defects for every milllion opportunities. This is a steep mountain to climb. Still, as an aspiration, it has vastly improved the quality of work over many years now -- especially when combined or driven through an expectation of continuing reducing the number or incidence of errors at some rate (e.g. every year cut defects by 70% or 90% or some other goal).

The six sigma statistic crossed my mind while reading about the track record of the federal and state Road Home program designed to help Katrina victims with the money needed to repair or replace damaged homes. Whether organizations are governmental or private sector, one doesn't expect six sigma performance in an effort only 14 months old. 3.4 four errors out of a million opportunities would be too high a bar.

Still, it came as a bit of surprise that, in a process essentially aimed at providing money to needy homeowners, the pace at getting it wrong would be so wildly at odds with six sigma. Indeed, the numbers turn six sigma on its head. Instead of getting it wrong 3.4 times out of million, this program has gotten it right only 22 times out of 79,000.

Only 22 home owners have actually received cash -- out of nearly 79,000 who have applied.

In six sigma upside down terms, this translates as "of every million opportunities to get it right, those doing the work in the Road Home program succeeded 278 times."

So, here's a suggestion to the Road Home program:

Invite all who have applied to the program to a football stadium. Ask them to use their application as their ticket to get in. Take the $7.5 billion allocated to the program, divide it up by the projected number of those in attendance, put that amount in a cashier's check on the stadium seats, provide some entertainment and call it a day.

Will there be defects?

Will there, for example, be folks who spend the money on something other than home repair or rebuilding? Will there be folks who shouldn't get the money? Will people get the wrong amount of money?

Yes.

But, here's my guess: The number of defects will be far lower than the current rate of getting it wrong at a pace of 999,732 times out of a million.

Posted by Doug Smith at 12:26 PM | Permalink

November 11, 2006

Note To Joe Nocera: Almost There

Joe Nocera of the The NY Times visited the annual Corporate Social Responsibility conference this past week and came away dazzled by the paradoxes. The contradictions would have been hard to miss. For example, what must Joe have wondered as he spoke to Exxon Mobil's and Chevron's corporate social responsibility representative the week following the Stern Report catalogue of the catastrophic risks of continuing to treat environmental damage as an externality. Ditto for Pfizer's 'do-gooder' who, as a person undoubtedly seeks to better human kind and cannot be held individually accountable for his company's maniacal focus on bottom line practices such as kick-back like rewards for doctors who push Pfizer products, research and development trials conducted without objective oversight, campaign funding to politicians who support extending legalized monopoly, product development efforts aimed at minor improvements over fundamental innovation, and marketing campaigns that draw attention away from health risks while misleading consumers about the actual costs of new drugs.

Ditto for Ford Motor Company -- whose advertising mantras for years and years (e.g. "No Boundaries") use the imagery of pristine environmental experiences to push gas guzzling SUVs. Or, how about General Electric? Having fouled the Hudson River for decades, GE poured tens millions of dollars into delaying court-ordered cleanup and miselading the public about it's actions because, from a shareholder point of view, the costs incurred in delay outweighed the costs of the clean up. McDonalds? The same week it's representative chatted about the company's sense of social responsibilty at the NY City confab, McDonalds was also funding the effort to fight a NY City ordinance banning transfats.

The list could go on. Joe could not avoid the paradoxes. When, for example, the McDonald's rep claimed corporate social responsibility is "core to the way we do business", Joe noted: "You could wonder about that."

Nocera picked up this theme again in his conclusion. Having ceaselessly breathed in paradox and contradiction, Joe opined that for companies to become substantively responsible -- as opposed to PR-oriented "responsible" -- would demand all responsible values become core to those companies' business models.

Hurrah for Joe! He is dead on correct. Now, Joe, go back, re-read and re-think this declarative statement you make earlier in the article:

"Do shareholders come first -- above other stakeholders (another favorite buzzword at the conference... encompassing customers, employees, activists and so on)? Of course."

Joe, Joe, Joe. There can never -- never -- be fundamental change to the core business models if shareholders come first and their concerns are the trump card of any discussion. Never.

But, Joe, listen up carefully. This last comment does not reflect today's either/or orthodoxy. The orthodoxy embedded in your all-too-facile "of course". The orthodoxy that insists that either the shareholder comes first. Or the shareholder comes last.

No. The shareholder cannot come last. We saw a long run of the poor consequences from the 1950s through the 1980s of what happens when the shareholder came last. We must pursue shareholder value. We must celebrate shareholder value.

But we must not make shareholder value the trump card of all human affairs conducted by business -- especially if we, as I think we should, choose capitalism as an essential philosophy for the well being of the planet.

Joe, if you are to help us change the core business models then you've got to erase your robocall "Of course" about the primacy of shareholder value. You've got to think again and somehow, some way discover the more profound declaration that the shareholder, like other core constituencies, must abide in equivalency of importance. The shareholder does not come first. Nor does the customer come first. Nor does the employee come first.

The shareholder does not come last. Nor does the customer come last. Nor does the employee come last.

Sustainable and ethical corporations must shift their core business models to this formulation: "Shareholders provide opportunities to the people of the enterprise and their partners to deliver both value and values to customers who generate returns to shareholders who provide opportunities to the people of the enterprise and their partners to deliver both value and values to customers who generate returns to shareholders who..... and on and on."

That is an ethical and sustainable scorecard. And it reflects this unprecedented and undeniable fact of the 21st century human condition: we live in a world of markets, networks, organizations, friends and families in which our organizations are the new communities that determine the fate of our planet. Our primary ethical challenge can only be met when organizations reintegrate our legitimate concern for value with our equally legitimate concern for other values. Failing this, our most dominant organizations -- for-profit enterprises -- will continue putting value first and, thereby, continue propelling our global society toward social, environmental, political and economic disasters.

Joe, consider only this illogical aspect of your all-too-easy-and-orthodox "of course": Who are these shareholders who come first? I'm imagining you are a shareholder. But, let me ask this, are you a customer? Are you an employee?

Put differently, does Joe Nocera the human being come first? Or, do your concerns only matter to the extent that you happen to own stock in one more enterprises?

Should we put one of our dominant shared roles (investor) above the other dominant shared roles of our new age of human kind (employee, customer, family member, friend)? And where does that leave the extraordinary number of folks on this planet who are not investors?

Joe, if we wish to take your constructive insight about changing core business models as an essential condition to the fate of this planet, then we must move beyond either/or-ism to both/and. We must not elevate any role to trump card status while also avoiding subordinating any role as a last concern.

We must learn to practice the new golden rule: "As employees do unto others as customers, investors, family members and friends what we would have them do as employees to us as customers, investors, family members and friends."

When the employees and executives of Chevron, Exxon Mobil, Pfizer, Ford, General Electric and McDonalds begin practicing this golden rule in earnest, we'll all witness social responsibility (as well as environmental, medical, legal, political, technical, family, spiritual and economic responsibility) blended into the daily lives of those who make, sell, distribute and service the many good things we depend on for leading our lives.

We will experience and have good things to have that are truly 'good'.

Posted by Doug Smith at 12:44 PM | Permalink

October 22, 2006

Weakness

In any human situation -- a relationship, a family, a team, an organization, a market, a war -- the blend of arrogance and incompetence is one of a handful of formulas for weakness. Why? Well, of course for myriad reasons. Just one, though, suffices as illustration: Arrogance in the form of "I/We are never mistaken and, therefore, never need to invite other viewpoints into our choices" guarantees that incompetence remains incompetence forever. As I say, a prescription for weakness. And, therefore, a prescription for certain failure.

All of us must make our own choices (e.g. in voting as well as the exercise of speech) about paths forward. As you approach such choices - for example, this coming Nov. 7th -- think about whether, in light of the troubles and difficulties from terror to Iraq to disaster recovery to social security to education and on and on -- you choose to pull the lever in favor of a Republican Party deeply and permanently committed to being weak.

Put differently, you have a choice: Support a Republican Party whose blend of arrogance and incompetence ensures perpetual weakness; or, choose another possibility that, whatever your anxieties or hopes, is not yet permanently condemned to failure.

Posted by Doug Smith at 11:56 AM | Permalink

October 01, 2006

Value versus Values

From Der Spiegel in Germany:

"In its report on Afghanistan, CorpWatch - a U.S.-based corporate watchdog - concluded that the companies were more interested in making money than helping the people. Thousands of foreign experts have been dispatched to Afghanistan.

The consulting firms in Kabul have been given multi-million-dollar budgets from their governments to establish a central bank and three ministries: Finance, Justice and Commerce. They have also been tasked with slowing poppy cultivation and finding alternative sources of income for the farmers. Their remit further extends to building schools, roads and hospitals.

{snip}

American taxpayers would be stunned to hear where their tax dollars were actually going, the CorpWatch report says: beyond being wasted on failed projects, it helped pay for "contractors' prostitutes and imported cheeses." The CorpWatch investigators spent months monitoring the flow of international funds and concluded that business-savvy representatives of donor nations rather than Afghans were the real beneficiaries.

The U.S. government lavished $150 million on the private security firm DynCorp. Its mission: to close down Afghanistan's poppy fields. Ninety Americans and 550 Afghans set about the task. The result: thousands of extremely irate farmers who - despite having their crops destroyed - were denied realistic compensation.

The Rendon Group from Washington, D.C. was charged with winning public support for the United States and its military in Afghanistan. According to CorpWatch, the PR firm - which reportedly has close ties to the Bush administration - has received contracts worth more than $56 million since September 11, 2001. It has failed miserably in Afghanistan: never before have the Americans and their allies been as unpopular as they are today.

The euphoria that greeted Americans in Kabul on Nov. 13, 2001 has long been replaced by suspicion. Today many Afghans regard the erstwhile liberators as occupiers."

All of which begs these questions:

What do the people who work at these companies really stand for?
What do the people who work in the government organizations that hire these companies really stand for?

Posted by Doug Smith at 11:34 AM | Permalink

September 02, 2006

The Size Of The Pie And The Share Of The Pie

For those who have the courage and wisdom to pay attention, among the most important contributions of the now decades-old quality movement in the contemporary business world is it's demonstration of 'both/and' thinking and acting. When people adopt and pursue shared purposes built on 'both/and' principles, they identify and articulate two or more objectives that are in constant tension with one another. For example, within the broader field of quality, an organization might pursue both fewer errors or defects and faster speed of delivery. These two objectives struggle with one another. A group pursuing only speed has an easier, less constrained set of solutions than the group pursuing both speed and fewer defects because the former can simply speed things up and accept more errors.

The benefits of both/and approaches, though, go far deeper than the stated objectives themselves because they support and promote effort that is more fully human -- more challenging and, therefore, more creative and more fulfilling. While elitists might disdain the deeper meaning within the work of a team of folks at the front lines of a company pursuing both speed and fewer defects, the people on the team itself will and do report that with success comes the experience of both deeper affiliation and deeper meaning. No, such folks do not equate either the affiliation or meaning with the poet's truth or beauty -- but they do know and sense the importance of collaborating with other human beings on something that matters. As Marlow in The Heart of Darkness admiringly, respectfully says of the man who helps him guide the boat up the river, these folks do work, they do something.

And they do it together, fully challenged by both/and realities of human existence.

Our planet is beset by powerful men and women who ignore the way of both/and humanity in favor of single goals and single answers. In this, they pursue self-interest over shared interest and personal power and wealth over shared purpose and the rule of law. In contemporary geopolitics, we see this abhorrent, destructive self-interestedness in the form of powerful governmental, corporate and media officials who claim truth stripped of reason as a shield to their own pitiful failure to embrace the opportunity for a more fully human experience given to them at birth. They love single answers because they are the easy road to self-enrichment. They eschew both/and because, down that road, lies shared struggle and shared responsibility.

In economics and business, we see this single answer extremism primarily in the form of our age's deep and widespread acceptance of shareholder value as the trump card for business performance. The primacy of shareholder value is today as widely shared as the belief in motherhood. And, yet, unlike motherhood, the beliefs and behaviors of shareholder value extremism march us toward and over the cliff of despair and destruction every single day. Whether it is exploding mortgages, layoffs, deteriorating benefits, moves to privatize social security, ongoing environmental destruction, decades-old erosion of real wages, poverty that is hidden by false statistics, rising obesity and eating disorders, failure to equate energy policy with national security -- etc, etc, etc -- the either/or thinking and action of single answers have now endangered our planet and put the futures of our children and their children at grave risk.

The Philistine plutocrats admonish us to either accept the primacy of shareholder value or destroy our markets, our business prospects, our jobs and our country. That is the 'either/or' proposition that has an iron grip on our society today.

And, it is the either/or proposition that has propped up the irresponsible, self-interested officials in government, corporations and media who have spent the last three decades promoting the false notion that the 'size of the pie' -- the size and growth of GDP -- somehow exists in isolation from the 'share of the pie' -- the distribution of income and wealth. Both matter.

Both matter to the aspiration embedded in our national heritage known as 'liberty and justice for all'.

Not for some. For all.

Not just for the top 1% who now control more than 40% of our wealth.

For all.

Not just for the top 20% who control more than 80% of wealth.

For all.

"For all" includes the bottom 40% who actually have less than 2% of our society's wealth.

For all.

Just like the quality team who challenge themselves to be more fully human by tackling both speed and fewer errors, all of us -- every day we wake up -- have the choice to demand of ourselves and those who would claim to lead us that we commit our resources, our capabilities, our hearts, our minds and our guts to building a society that aspires to both a larger pie and a just distribution of that pie.

We cannot and will not find our way to this 'both/and' pursuit of happiness, though, until we once again adopt belief and behavior that demonstrably care about people beyond ourselves. Nor until we -- and especially the 'we's' of organizations -- explicitly evict shareholder value extremism from our midst. We must not condemn shareholder value itself -- only the tenets by which it is made a golden idol, a trump card of either/or-ism whose shininess blinds us to the corrosive reality with which it destroys our common humanity -- including, importantly, the humanity of those who practice and espouse it.

Let us now -- right this moment -- turn our eyes toward both the size of the pie and the share of the pie. And let us do that work together.

Because the clock is ticking. And our children our crying out for us -- their elders -- to take shared responsibility for creating a safer, saner and more sustainable future.

For all.

Posted by Doug Smith at 01:30 PM | Permalink

August 19, 2006

Planning For The 20th Century

Evidently, officials at Ford -- the company that yesterday announced drastic cuts in auto production -- have been working hard over the past several years planning for success in the 20th century through betting on cheap interest rates and low gasoline prices to support a product line featuring SUVs. We are, of course, smack in the middle of 2006. But, on Friday, Ford officials contended that "no one in the industry could have anticipated that gasoline prices would remain so high".

No one.

In the industry.

Or, did they mean, "No one at Ford"?

Actually, no one ought to be surprised by the Ford production cuts. They are a natural consequence of me too, inside the boxplanning aimed squarely at solving strategic problems defined through the rear view mirror.

The auto industry has been aware of the core dimensions of the shifting strategic landscape for well over a decade -- arguably two decades. These shifts are profound. They inevitably call for a fundamentally different business model -- one that demands innovation and deep, behavior and skill change. Those, in turn, have always -- always -- meant that the solutions would require trading off today's profits, shareholder value, jobs, benefits and salaries (both union and executives) for tomorrow's sustainability.

Those at Ford, GM and elsewhere have confronted the question, "Are we willing to take real risks -- risks that might upset the financial markets, the unions and our executives?"

"Or, can we somehow find a way toward a viable future through luck and incremental, deck-chair (I mean, parking spot) rearranging?"

These are not easy questions. The executives, unions and other decision makers deserve our sympathy for the difficulty they find themselves in. But in choosing the incrementalist approach, those involved have wreaked real world damage on tens of thousands of families and, in part, they have done so out of obeisance to shareholder value fundamentalism.

They have picked short term value over a blended values approach that includes, but does not worship as false idol, value itself.

Posted by Doug Smith at 12:59 PM | Permalink

August 17, 2006

Exploding Mortgages V

From Billmon writing about the housing bubble:

"But what makes things different -- and potentially more exciting -- this time around are the gaudy new financing gimmicks Kevin mentions: no money down loans, interest-only mortgages, ARMs that reset to truly usurious rates, etc. If and when these loans blow up, and they will, it could leave many home "owners" with no alternative but to sell and sell quickly -- or simply mail the keys back to the bank."

Who is responsible for this situation?

In our popular culture, the responsibility will get placed largely on the customer - on individuals who signed up for exploding mortgages.

Caveat emptor -- buyer beware -- has a long and important history and some of the responsibility always should lie with the customer.

But in a world where place still fostered shared values, individuals were much more likely to be bouyed in their choices by the shared wisdom of extended yet present family and neighbors who lived nearby and participated meaningfully in their shared lives. Folks would not let folks sign up for exploding mortgages.

Most of us no longer live in a world of places. We live in a world of markets, networks, organizations, friends and family. In this new world, an extraordinary amount of responsibility for the safety, sanity and sustainability of our society rests with organizations -- because organizations are where we come together for an experience of community -- of thick we's -- that allow us to ask and answer: What difference do we wish to make -- together -- to the world we live in?

Our long history of markets in a world of places does not always serve us best in answering this. The singularity of the profit motive arose in a world of places because place itself fostered shared values that moderated the effects of businesses operating out of self-interest. Today, our most prevalent shared values - that is, predictable patterns of belief and behavior -- happen because of markets, networks and organizations -- not places. Of these, organizations are the most important: they set the tone of what matters, of what we really stand for.

While undertandable from a standpoint of history, what most private sector organizations really stand for is profit. But, that is neither sustainable nor sufficient in our new world. It has led, for example, to widespread and entrenched shareholder value fundamentalism every bit as virulent as religious fundamentalism. That, in turn, leads to financial institutions, realtors, mortgage brokers, speculators and others who -- as thick we's -- make it their shared purpose to build profits and shareholder value at any cost without regard for other values.

That, in turn, leads to exploding mortgages.

Responsibiity? Customers? Yes, somewhat.

The core responsibility lies however with the folks who show up to work every day in companies that create and sell exploding mortgages. And until a critical mass of employees and executives of those companies figure out they are responsible for the horrendous things happening to their 'customers' -- and their customers' families and children -- we will continue to move blindly and recklessly through a world we refuse to take responsibility for.

Posted by Doug Smith at 11:25 AM | Permalink

July 15, 2006

Exploding Mortgages, IV

According to this NY Times' article, the share of interest-only mortgages jumped from ten percent of new mortgages in 2003 to over 25% in 2005. In addition, a different variant of exploding mortgage -- called payment option adjustable -- represented nearly 16% of new mortgages in 2005. In total, 42% of new mortgages in 2005 had explosive potential -- that is, could blow up if the borrowers found themselves in any of the following situations: (1) rising interest rates that triggered significant increases in monthly carrying costs beyond the income capacity of the borrower (and this goes for the mortgage as well as credit card debt); (2) falling home prices that trigger similar problems or make refinancing out of the question; (3) increases in other costs such as gasoline, health insurance or home heating which force the borrower to make tough choices; (4) loss of job which, if the borrower is actually a couple who premised affordability on two incomes could mean unaffordability if either spouse loses a job; or, (5) illness that either puts the borrower out of work for too long or means a spike in uninsured or underinsured medical costs (which might arise if either the borrower or any other family member gets sick).

These are just some of the risks facing 42% of the borrowers who got exploding mortgages in 2005.

Executives in the mortgage industry who are quoted in the article, however, are not concerned. "It offers an opportunity," said Brad Brunts of CitiMortage, a Citigroup unit. According to Freddie Mac -- the giant mortgage packager that has been under a cloud for years for unethical practices -- the exploding mortgages offer a bonanza opportunity for Mr. Brunts and his professional colleagues to refinance existing mortgages -- to, in effect, wring yet more profits out of financial arrangements already unaffordable to borrowers.

Exploding mortgages were predatory by luring people into unaffordable situations. Now millions of families may lose their homes -- or be forced to drop critical expenditures such as medical or dental help or heating during winter. Millions of families. But it's not likely that many of them sit in the top 20% of society. Instead, the top 20% hold the paper - they are, directly or indirectly, the ones providing the capital and, because the top 20% hold more than 80% of the assets, we know that the capital markets in the US have huge capacity to ride out the difficulties through refinancing and streching out payments before declaring bad debt not to mention capacity to profitably write-off a lot of debt.

The current way markets work, then, favors the holders of capital at the expense of millions who cannot afford the exploding mortgates threatening their futures. One might, in theory, consider turning to courts for redress. But, such efforts to rectify predatory practices have fallen very short. Ameriquest, for example, suffered a mere few hundred bucks per bad mortgage in a settlement aimed at its unethical practices. Road kill.

So, if you're like Mr. Brunts, you look at the more than $1 trillion of likely business that will get re-financed over the next two years and see bonuses and commisions, not misery. In his lack of concern, Mr. Brunts is joined by the head of the National Association of Realtors - you know, the folks bringing you the recent wave of commercials about how comforting it is to have a broker you can trust.

As the Times article notes, "Mr. Brunts says only a minority of mortgage holders will face real problems."

Statistically, of course, 'minority' can mean any percentage less than 50. Linguistically - and culturally -- however, when a person says, "only a minorty....', the rest of us are supposed to hear: 'very minor problem that won't affect you."

In other words, 'tsk tsk... let's just move on'.

Posted by Doug Smith at 02:59 PM | Permalink

June 28, 2006

The Courage To Act As Employees

In the 21st century, the most powerful venue for principled action -- for voice and dissent -- has shifted from the places we reside to the organizations in which we meaningfully participate and especially the organizations where we work. Most of us no longer live out our lives in places. Instead, our most meaningful interactions with other people happen in markets, networks, and organizations; and, among family and friends. Of these five contexts, organizations are the main one where meaningful aspects of our fates -- jobs, status, daily affiliation, opportunities to pursue meaning -- depend on other people who are not necessarily friends or family yet we know by name and interact with daily. Beyond friends and family, these are our 'thick we's' and, therefore, if any of us wishes to act on and perpetuate the democratic heritage of our nation, we had best learn to do so in these new thick we's in our lives.

Among the most claimed aspects of that heritage are voice and dissent. From the late 18th to late 20th centuries, our traditions for voice and dissent happened in places where we lived with other people -- towns, neighborhoods and so forth. The prime context for this may have always been elections. Today, however, elections are market phenomena -- they are far more subject to the markets, networks, and organizations of electioneering -- including the distribution channel popularly called 'mainstream media' -- than the daily, persistent and intensive action of citizens in local places. As noted in Bowling Alone, such place-based citizen action - complete with reasonable percentages of participation -- still happen in very small towns as well as some places where the traditions are extremely strong. New Hampshire and Vermont fit both criteria and, as you'll see from a careful reading of Bowling Alone, these towns continue the traditions of a world of places as opposed to markets and so forth. Robert Putnam's 'warning signs' of the deterioration in civil society do not apply to these places -- they are the exceptions.

This is confirmed by other observations. For example, analysis of get out the vote efforts in the 2004 election indicated a much easier challenge in Vermont and New Hampshire than, say, New Mexico where that lack the two centuries old traditions or California where the world of markets, networks, and organizations is more firmly rooted.

Practicing voice and dissent within thick we's is essential to democracy. But, in our new world, that means doing so in our organizations. A 19th century American risked much in his or her town by having the courage to dissent from a popular view. For tens of millions of us, this is not the case in the 21st century. We can, of course, attend town meetings and raise our concerns. And, we should. But, the personal risk and exposure in doing so bears no relationship to taking the same action in our organizations. In our towns, most of us most of the time -- if we act or speak at all -- do so in the role of 'customer' and are treated accordingly. In our organizations, by contrast, if we have the courage to act and speak out and dissent, we do so as employees and we risk making a lasting impression -- especially if our voice extends beyond the water cooler.

Go ahead, Try this out. Even if only as a thought experiment. Imagine going to a town council meeting and voicing your concern about some current topic in a manner opposed to popular opinion. Say, for example, you would like to encourage the town council to raise property taxes or give teachers more benefits -- or, the reverse if that's counter to prevailing winds. Or, to test this more precisely in an emotional context, speak in favor or against teaching evolution or intelligent design. If you live in a town or city of greater than 10,000 people (let alone ten times that), the absolute worst reaction you might imagine is getting shouted at that evening and, perhaps, attracting the attention of some press person who hopes to get some attention by writing about you. If you have friends and family who seriously disagree with you, they probably already know about, and have formed their responses, to your position. Again, worst, worst case, you might risk some 'nut job' from the other side screaming at you in the blogosphere or a letter to the editor.

In contrast, imagine for a moment that you choose to voice dissent -- real, challenging dissent -- about matters of real importance to the organization where you work. Ah. What a difference! In this case you must consider beforehand the risks to your job, to your friendships and acquaintances, to your relationship with your boss, to your career prospects and more. Unlike the town context, here you are far more likely to risk some persistent and enduring response. Some memory -- near as well as medium and even long term -- of your action.

Acting as an employee takes far more courage than acting as a citizen. In saying this, I do not mean to trivialize in any way the efforts of citizens who actively participate in local, regional and national affairs. Clearly, the more who participate -- and vote -- the better. But I do mean to point out that courage itself is best tested in the actual thick we's of our lives.

Consider, then, this comment:

Stand Up

As treason charges against the New York Times (but not, oddly, the Wall Street Journal) are getting thrown around on various "respectable" news outlets by people working in "journalism" I think it's probably time for the serious reporters at those outlets to inform management that their resignations will be forthcoming if it doesn't stop.

Silly people like me have been trying to warn you for years - you created, cultivated, nourished, and promoted these people. They're one of you. Take a stand, because pretty soon it's going to be too late.

The mainstream media are a crucial distribution channel that determine the nature, content and opinion bias upon which folks in our new world of markets, networks, organizations, friends and family depend. If you or anyone wishes to dissent from how the mainstream media handle their responsibility, you can do so as a consumer (purchase or not purchase; provide feedback positive or negative), as a competitor (offer a different or the same product), as a litigant (sue them), as a family member and friend (speak up at the dinner table) -- or as an employee of mainstream media corporations.

Of these, there is simply no question that the most courageous -- and the most pragmatic, near term and impactful -- choice belongs to employees who ask and answer the question, "What do we, the people of this enterprise, really stand for?

If you want to 'make a difference' -- if you want to pass along to your children and their children -- a world that is safer, saner and more sustainable, then you must act as an employee in the thick we of your organization because organizations are the driving crucible for the markets and networks that determine the fate of the planet.

Posted by Doug Smith at 12:31 PM | Permalink

June 05, 2006

Value Madness

The fixed and seemingly inviolate obsession with shareholder value might -- might -- now deny government agencies the information needed to prepare for hurricanes. Again, I say might. According to this article, a supercomputer's forecasting methodology created by government funded scientists at Florida State University (I repeat: State university - as in a government entity) has been licensed by that State university to a private company, Weather Predict. According to the licensing agreement, Florida State scientists are not permitted -- yet -- to provide forecasts to any agency without permission from Weather Predict.

The article points out that the supercomputer has among the best track records in accurately forecasting hurricanes.

The article also mentions that Weather Predict's CEO assures one and all that, of course, nothing will get in the way of helping out government agencies during the hurricane season; and, that his company is currently working on making sure such arrangements are in place.

So, let's recount:

Government money funds employees of a government institution (Florida State) to create a supercomputer that accurately forecasts hurricanes.
The institution sells this know how to a private sector company.
The private sector company now sits between the use of the computer and the well being of folks who live in the United States of America.
Those folks are citizens and taxpayers -- whose money funded the invention.
Weather Predict's CEO promises 'to work it all out".

One can imagine a State University licensing technology to the private sector - both to take advantage of it's own advancements as well as to encourage market-based uses of weather prediction. No problem.

But, it's absurd that the licensing agreement fails to limit the license itself to a range of uses that are free and clear of any need of the forecasts for the public good.

And, having failed at incorporating such language in the contract, it is absurd that the issue of protecting the public use of forecasts made by a supercomputer created out of public money is still up for negotiation.

Weather Predict is now endangering millions of lives as it tinkers with how best to make a profit.

This all might work out. Let us hope so. But it is absurd -- it is immoral -- that the situation even exists.

Posted by Doug Smith at 12:30 PM | Permalink

June 04, 2006

Not One Ounce Of Prevention

Today's LA Times has a well written article about the shortage of doctors in the US, including succinct explanations of why the shortage has happened, some of the consequences we can expect and what it will take to remedy.

As I say, it is a well written and concise article. And, because of that, it illustrates a profound problem: The incredible difficulty folks have in thinking comprehensively and out-of-the-box.

Read the article and you will come away with this conclusion: Medical difficulties stemming from too few doctors are best and (only) cured through more doctors.

Quickly now: We need more doctors (and nurses and other health care providers).

But, the arithmetic in this is stultifying. It's all about solving problems of quantity with quantity. Not one word about 'thinking differently" about how to approach health care.

Not one word, for example, about what medical schools teach doctors about the challenges of health care in a world of markets, networks and organizations. For example: What about epidemiology, public health and prevention?

How can doctors, nurses and other health care providers change the ratio of inputs and resources from 'too heavily weighted toward curing those who are sick" to a better blend of 'prevention and cure'?

In a world of markets, productivity is critical to sustainability. Input/output relationships matter a lot. But if our public discourse is limited to arithmetic relationships -- that is, to increase outputs, limit your solutions to increasing the same amount of inputs -- we are left only with the same rate of productivity. Want more cures? Get more doctors!!

If we are to shift the ratio of productivity, we must find better uses and approaches to the inputs. And that means we should be focusing tremendous effort and creativity on what medical schools and others teach and think about prevention, early detection, low-tech interventions and an incredible variety of other means toward building a healthier society.

Posted by Doug Smith at 12:09 PM | Permalink

May 28, 2006

Government Secrecy Gone Wild: The SEC

Among the most cherished and powerful market principles is the direct relationship between the free flow of information and market efficiency. In our networked economy, of course, this is even more pertinent. The more information that flows, the more powerfully and quickly the markets can adjust. If one or more organizations gain control over information flow, trouble follows (e.g. see today's earlier post of about the flow of information around the widely shared but false idea of 'authenticity' in our political markets).

Those who favor openness and free flow of information also believe the same is the best possible policy for countering the ill effects of dis-information. That is, when one 'let's it all flow" the odds improve that markets will more quickly and effectively adjust to bad or false information.

But, of course, those who currently rule instead of govern our nation have a strong, predictable set of beliefs and behaviours -- strong shared values -- that opt for secrecy over openness, and controlled/trumped up misinformation over the free flow of information.

It now looks like their diseased values have spread to the SEC.

Earlier this week, a jury returned guilty verdicts against two of the architects of the Enron scandals. In a subsequent letter, Chris Cox, the current head of the SEC congratulated the agency for their hard work and persistence in helping with the prosecution. Too bad that Cox's new secrecy policy at the SEC -- the policy of nondisclosure by that federal agency most iconically associated with the idea of disclosure -- is but one more brick in a growing wall separating our government from competence and sanity.

Have Chris Cox and his lawyers lost their minds? The basic point of disclosure laws and practices is to help the markets react and adjust as quickly and as efficiently as possible to 'news' -- especially news of possible wrongdoing. Had Cox's wrong-end-of-the-telescope policy been in place in late 2001, the SEC would have blocked -- not disclosed -- information about the Enron investigations Cox now so proudly celebrates -- and, in doing so, would have left tens of thousands of investors in the dark about what was emerging as a major scandal.

Yes. That's right. The financial markets would not have been given the earliest possible moment to begin adjusting for the Enron malfeasance -- and those same tens of thousands of investors would have held on longer -- only to have been burned worse before the word came out.

Your job Chris is to help faciliate large, effective, and efficient capital markets. That's job No. 1.

Your job is not primarily to 'get scalps', build your resume of successful prosecutions, and along the way harm investors.

Start doing your job.

Posted by Doug Smith at 04:25 PM | Permalink

May 23, 2006

War on Manners

The Wall Street Journal has responded to a college student's candid criticism of Journal-supported policy by declaring a strong preference for actual failure over any acknowledgement that might be perceived as failure. In their image-dominated world, any whiff of even the possibility of failure is, well, bad manners. Instead, the Journal stands four-square behind sycophantish applause and back slapping. They are a "heckuva job" outfit -- at least when it comes to jingoism in support of a John Wayne kind of image. (One seriously doubts, for example, that the same yawning gap between image and substance would be tolerated in their company or in their investments.)

After scolding the young woman -- or more accurately her family - for ill manners, the editors go on to equate calls for changing our current disastrous path with 'precipitous surrender" in the war on terror. In doing so, the Journal casts it's values with those who prefer image to substance.

For against the yardstick of actual substance -- actual performance -- how else can we describe the current state of affairs with anything other than the word 'failure'? Were the nation a corporation, it would be bankrupt (far more debts than assets -- literally), have virtually no market share (see polls both inside and beyond the US), suffer from spent and aging infrastructure (see state of US military and lack of preparedness for natural or human disasters), and entirely bereft of core competencies -- or, better put, it's executive ranks are the very picture of core incompetencies.

But, hey, the editors at the Wall St. Journal are still promoting the 'buy' side. Or, would it be more accurate to say they cannot bring themselves to acknowledge the 'sell' side's arguments and wisdom. It's all hat, no cattle at the Journal. A war on manners instead of a war on incompetence and bankruptcy.

Their screed appears as an editorial. But, it's actually an advertisement for the Journal's disloyal, anti-American attack on democracy. More than five years of staged Bush speeches in front of folks who either work in the military or sign loyalty oaths, of rules against showing the coffins coming home, of Gestapo-like tactics to tamper with voting, of the utter incompetence that always flows from the absence of open and real problem-solving, have left the Journal editors bereft of ideas or suggestions.

No wonder they use what little imagination they have to rage against manners instead of acknowledging responsibility for the disaster their own Constitution-hating, preemptive war-starting, and drown-the-government-in-a-bathtub fantasizing has fostered. The Journal applauds Rovian character assassination of folks who actually risked their own lives for their country -- but gets sniffy about a young woman's respectful disagreement with a man whose personal war record stands out as an isolated exception among the cabal of draft-and-duty dodging men who had 'something better to do' when their country called.

A friend has a wonderful expression: gradual suddenness. It applies to the precipitous defeat we experience every day under the atrocious, morally bankrupt and incompetent officials whose manners are so loved by the editors of the Wall St. Journal.

Gradual suddenness. That is what the 'larger electorate' is now experiencing. The gradual suddenness of precipitous failure and defeat.

Mirror, mirror on the wall, who's the bravest of them all? In the mahogany, tax-cut lined executive suites at the Wall St. Journal, the mirrors continue to lie on command. And, sadly, the editors themselves remain blind to the ugliness in their souls and, consequently, bereft of any chance to move beyond their adolescence to full adult maturity -- the kind that demands acknowledgement of error in one's self and sincere, heart felt apology and repentence for the harm done to others, to the nation, and to the planet.

Posted by Doug Smith at 11:53 AM | Permalink

May 19, 2006

Exploding Mortgages, III

Recently, the National Association of Realtors has run a series of TV ads promoting their brokers' ethics. The ads portray a series of sociodemographically diverse folks giving heart felt testimonials describing how lucky and fortunate and, well, down right life saving was the help and assistance they received from their real estate brokers whose -- well, golly, -- whose ethics saved the homeowners from any number of traps, illusions and pitfalls.

The brand promise here, of course, bears only a random relationship to the brand delivery, at least as experienced by millions of folks who now have exploding mortgages and homes they cannot and never could afford. Are there ethical real estate brokers to be found in the United States? Of course there are. But, have this nation's housing markets experienced the depradations of 'make a buck for me' real estate brokers, mortgage borkers, housing developers, predatory lenders and -- even so-called non-profit financial counselors?

Yes. For example, see this, this and this. And, for the latest update see this.

Beyond the contexts of friends and family, we live our lives in markets, networks and organizations. The organizations in those markets -- like the National Association of Realtors, the local realtor down the block, the bank, the mortgage company, the credit card company, the US Congress (see Bankruptcy Act), Fannie Mae, Freddie Mac, Citigroup, Ameriquest and on and on and on and on -- choose how to position what they really stand for in terms of brand promise as well as the extent to which the products and services they deliver match those promises.

That our life experiences with the gap between brand promise and brand delivery have taught us to be skeptical is not a surprise. Some exaggeration is a built-in corollary of the constraints posed by 30 second ads, billboards and banners. Of course there is exaggeration because companies must choose what to emphasize.

But, exaggeration need not be immoral, unethical and damaging to others. Exaggeration -- even the need to competitively exaggerate in markets -- need not be a mandated corollary of societal suicide.

The horse of unethical, sharp practices has long since left the barn of the last half decade in the housing markets. Tens of millions of folks -- of families with children, of the elderly, of young individuals and couples struggling to live what used to pass in reality not just commercials as the American Dream -- confront serious housing affordability problems -- and far too many realtors who are members of the National Association of Realtors responded to the real, human needs of these people by pushing them into higher priced homes with exploding mortgages so that the realtors could make more and higher commisions. Me. Not both me and we.

It's a sickness. A sickness infecting souls that have lost the capacity to blend concern for money and profits with concern for other values -- and to do so in real time, not hindsight; in today's real estate transaction, not on TV in some commercial.

Hey, the pursuit of profits in markets has showered humanity with untold benefits. Let us rightly celebrate the power of markets to make lives better. But, let's stop killing the life enhancing, life giving power of markets by deluding ourselves that self-interest starts and stops with profits. It does not. Adam Smith's famous butcher, baker and candlesttick maker were also interested in -- and guided by -- the values they shared with other folks with whom they were fated to live their lives. Were there butchers who sold rotten meat? Yes. But, did a majority, even a plurality, of butchers as a matter of policy and routine harm their customers -- their neighbors -- by selling hurtful products at unaffordable prices? No. And there's nothing in The Wealth of Nations -- or any economic theory or practice since then -- that suggests this is a desirable characteristic if it dominates and dictates the course and conduct of commerce. This sort of unethical conduct is meant to be a regrettable, if predictable, by product. An exception. Not the rule.

Over the past five to ten years, sharp practices in the over heated housing markets, though, have become more than exceptions. And, no amount of after-the-fact horse pucky from the National Association of Realtors waxing on about the wonderfulness of their members can hide the consequences of financial rape perpetrated by realtors who, in turn, have been abetted by other 'thick we's' known as financial service institutions, law firms, Congress, housing devleopers and so on.

The widespread habit of showing up to work from 9-to-5 and allowing our legitimate concern for value to trump our equally legitmate concern for other values (e.g. shared prosperity, family, liberty and justice for all) has infected not only the body economic -- but also the body politic. It must stop. Not by turning our backs on profits, money, wealth building and winning. But, rather, by each and every one of our thick we's -- especially the thick we's of organizations where we work -- asking and answering how the organization's particular vision, strategy and common good contributes to the greater good of our society and our planet. And, then translating the answers into performance -- into a blended, ethical scorecard that converts promise into results.

Yes, we must turn away from those, like Grover Norquist, Karl Rove and their cabal, who -- in their own maniacal pursuit of winning and value -- have fostered a popular culture that hates government and, thereby puts folks in charge of governmental organizations -- governmental thick we's -- who, it logically follows, cause those thick we's to be self-hating.

We must restore a proper and legitimate role for governmental thick we's. And that means we must learn all over again that there are situations and contexts in which government regulation -- yes regulation -- is proper and needed.

But, in a world of markets, networks, organizations, friends and families, law and regulation are necessary but not sufficient. We cannot foster a safe, sane and sustainable planet for our children and their children if we don't take shared responsibility for doing so. And, yes, that means acting individually as friends, family members, customers and investors in ways that account for more than 'me'. But, again, such is necessary, not sufficient.

The critical crucible in our new world in which we can and must take shared responsibility is the organization. Unless and until we act there to ensure a sustainable blend of value and values -- unless and until we act to ensure that our brand promise as well as our brand delivery -- honor all that is right and just including but not limited to profits, we will continue to march in darkness toward the precipice.

And, our shame will mount and we will occasionally be so shocked when we look back over our shoulders at the wreckage of human lives in our wake that, in mock preservation of our souls, we'll hire writers, directors, camera folks and actors to create the image of what can only be best described as nostalgia for our better selves.

The time has arrived for before-the-fact vision, strategies, products and services that blend all values.

And those who must -- indeed, the only ones who can -- make this happen are ourselves in our shared roles as employees and executives in the thick we's we call companies, agencies, firms and organizations that have the whip hand of the planet.

If you think for one second that what you and your colleagues at work do is "just business", then you are continuing to sleep walk toward the destruction of the planet by missing the opportunity every single day of your working lives to make a difference with others by creating and implementing businesses that are just.

And, you can start today.

Posted by Doug Smith at 12:02 PM | Permalink

May 16, 2006

Incompetence Of The Hands

Incompetence can take on as many forms and flavors as competence. Still, surely one of the hallmark characteristics of utter incompetence occurs when, as the saying goes, 'the right hand doesn't know what the left hand is doing." This metaphor conveys a basic failure of coordination -- whether in vision or policy/strategy or, especially, implementation. The lack of coordination between the two hands of the same body result in those hands pointing toward only one thing: confusion.

Last night, we learned from the incompetent, uncoordinated and confused elected officials of our nation about plans to deploy up to 6,000 members of an already overstretched national gaurd along the border to assist the border patrol whose numbers the same administration cut significantly a year ago because of budget pressures resulting from the Iraq adventure being waged, in major part, by a national gaurd who were unprepared and underfunded for the duration of that conflict but whose stretched numbers were needed because the same administration couldn't find in the regular armed forces the number of soldiers required because they believe actually in cutting the number of on the ground armed personnnel in favor of quick strike technology and strategy to win conflicts that they define in terms of battles won instead of enduring peace achieved so that the full cost of the initiative is never actually accounted for, thereby yielding unsupportable budget deficits that can only be met by cutting things like the border patrol so that those other needed services fail to deliver when needed and create squeeky wheels that can then be greased by temporary measures such as moving in the national gaurd to do back office and other clerical/admiinstrative support work during the two weeks each year the guard are supposed to be training in things like, say, armed conflict that they might be called on to deliver if ever deployed in a war situation -- but only for so long as it takes for the administration to build up the border partrol to the numbers that were rejected a year ago.

So many right hands. So many left hands. So little knowledge or awareness by the ones of what the others are up to.

Incompetence.

Posted by Doug Smith at 12:07 PM | Permalink

May 13, 2006

Letter To Billmon About Leviathan

Dear Billmon,

Thank you for Leviathan. The picture painted of an already-happening police state is a dark one -- yet one I fear millions of us might sleep walk to and through unless we wake up to the new realities and responsibilities of living in the world of markets, networks, organizations, friends and families described in On Value and Values: Thinking Differently About We In An Age Of Me.

We can save our nation and the world from the nightmare of Leviathan. But, first, we need to identify who 'we' are -- or, rather, when we are a 'thick we' versus a 'thin we'. The fate of our nation lies with choices made by 'thick we's' as well as 'thin we's". But right now, the choices discussed in popular culture's democracy topic lie mainly with the 'thin we's' -- the we's such as NASCAR dads et al shaped by common interests expressed in markets as opposed to thick we's shaped by actual shared fates and shared purposes for which those in the 'thick we' must hold themselves mutually accountable for implementation. "Thin we's" elect folks (e.g. Bush v. Kerry); 'thin we's' consume things (e.g. hybrids v. Hummers); 'thin we's' -- in roles as consumers and voters and investors -- are courted by thick we's competing in markets and networks.

'Thin we's' matter -- a lot. We cannot shift and evolve without shifts and evolution in thin we's. But, thin we's are not in some sense real we's. Unlike organizations, friends and families, thin we's are more like collectivities of me's. Thin we's never hold themselves accountable as we's for choices. Rather, and this is key, thin we's look to thick we's -- to organizations -- to implement the choices for them and to deal with the consequences of those choices. Thin we's elect officials; thin we's buy cars or computers or cereal; thin we's invest in companies. But it's thick we's who must implement the full range of implications of those choices.

Today, our most powerful thick we's are organizations, not towns or neighborhoods. That is different from the time of Hobbes, from the time of Jefferson.... indeed, from the time of Eisenhower when he warned of the military-industrial complex -- when he foreshadowed a powerful and scary upshot of the transition from a world of place-based thick we's (towns, neighborhoods) to organization-based thick we's in a world of markets, networks, organizations, friends and families.

Even Ike could not have had more than a foreshadowing about what happens when networks are thrown into the mix with markets and organizations -- when the strategies of organizations seeking to grow/thrive in the context of markets (including, what Schumpeter described as our political markets) get wired up in networks. Perhaps, the picture you paint in Leviathan would not have surprised Ike -- but he would not have conceived that the reality might have happened in quite this way or with what a friend describes as quite this 'gradual suddenness'.

Today, the most powerful and dangerous thick we's in our nation -- those private sector corporations led by shareholder value fundamentalists, government organizations led by Bush Administration power fundamentalists, and those fundamentalist Christian churches being led by satanists instead of Christians -- are indeed making choices that can lead to the Leviathan nightmare. But, note that such choices are being made far more hierarchically then democratically within the thick we's themselves. The choices jeopardizing our society are coming from the top of such thick we's and they are being made in secret.

That, however, is neither fated nor required by how organizations should or must work. All organizations -- just like all societies -- even Hobbesian ones -- blend hierarchy and democracy. Always. Hobbes' blend was 99.9 parts hierarchy and .1 democracy. But, let's remember that even the fearful Hobbes permitted people to undo the government through revolt.

If you look at choices that matter where you work -- where ever that may be -- the blend is not 99.9 hieararchy to .1 democracy. It may, in your view balance more toward hierarchy. However, having advised/consulted to hundreds of organizations in close to fifty different industries over more than a quarter of century, I observe that the blend has shifted toward more democracy. The challenges of competition demand it. Indeed, the challenges of implementation and performance demand it.

One of the great failures of the Bush Administration comes from the shared beliefs and behaviors of Bush, Rumsfeld, Cheney and others who simply and stunningly have not had executive experience in this new world where organizations cannot succeed with 99H/1D approaches. While I personally believe far too many critical choices in organizations are still made far too hierarchically and secretly, I cannot from personal experience or observation point to a single top management group of a successful company on the planet who continue to use 1970s H/D mixes to meet the needs of 21st century performance. Not one. Instead, what I read/observe daily about the Bush administration and, consequently, what we all read daily about the trail of failure and incompetence that follows in the wake of their outdated 99H/1D bet on hierarchy. (Indeed, I believe we can bet that the only effective part of the Bush Administration -- the part run by Rove for the past many years -- uses a different blend of H and D. Why? Because that Rovian part is focused on actually solving real problems against which they have to hold themselves accountable for actual -- not made-up -- performance.)

The shift in corporations, non-profits and the hinterlands of government enterprises not yet infected with the Bush approach has not gone to .1 H/99.9D. I'm not saying that. Nor do I believe such an extreme imbalance in the direction of democracy is more promising than Hobbes. Not even the Athenians had 99.9D/.1H. But, the shift is on -- especially with regard to issues such as quality, customer orientation, front-line problem solving and so forth. What has not happened, however, is a shift toward a more blended approach on issues that cut to the heart of what a corporation stands for and how the vision/mission/strategy of the corporation -- the common good of that particular thick we - contributes to the greater good of the planet. There we continue to see hierarchy and secrecy -- we see after the fact attempts at 'buy in' instead of before the fact inclusiveness and shared problem solving. One can be dead certain, for example, that the phone companies did not widely discuss and debate within their respective thick we's the choice about whether to hand over the phone records to NSA. (And, no surprise, we may now see that those executives have condemned their employees, their investors and their customers in ways that a more open, better blended democratic and hierarchical process would have avoided.)

You rightly worry in Leviathan about the profound effects of habits formed in organizations where, in our roles as executives and employees, we make assumptions about the values and purposes associated with nanny networks, security cameras, political speech and so forth. OnVVS points out that our most predictable beliefs and behaviors (which I equate with our actual values as opposed to just abstract ones) derive from a blend of relationships, roles and ideas. All these sources of shared values most powerfully reinforce each other when we are part of a thick we who share meaningful parts of fates and purposes together -- friends and family to be sure -- but, in our 21st century, the context beyond friend and family most present in our lives is that of organization.

Organizations -- again, not limited to work organizations and not limited to private sector either -- are where we interact persistently with other folks beyond friends and family. The habits of belief and behavior we form in organizations are reinforced by relationships there, roles there (e.g. boss/subordinate; marketing v. engineering; team problem solving vs boss/subordinate problem solving) and ideas there (vision, mission, strategy, brand... things like 'shareholder value' and 'the customer is always right' .... indeed, the entire concept of 'corporate values'). What you note as your greatest worry -- point five in Leviathan at the bottom of the section 'Mining Disaster' about the replication of behavior and values found in corporate America -- is one of the core pivot points and generative experience bases in our lives in markets, networks, organizations, friends and families. DeTocqueville reported on the power and potential of replication of behavior and values found in small towns. OnVVs argues that, for tens upon tens of millions of us, small towns are not our thick we's. Organizations are. And, only when we learn to take responsibility together for the choices of our organizations and how those choices contribute to the greater good, will we move and evolve forward. Only then will we revitalize how best to use the inheritance and legacy of the Founders in our dramatically differently structured lives and world. Only then will we migrate and revitalize our democracy where we actually live together with other folks (organizations) instead of only where we make consumption choices (markets).

Yes, we might stumble forward. We might continue our deep seated beliefs and behaviors that have us act as if what happens at work is 'only business' and that somehow we can offset the consequences we cause in pursuit of profits and shareholder value as the obsessive, singular trump card concern by somehow acting righteously as consumers or investors .... that we can somehow in our individual roles oppose our actions as 'me's' and thin we's in ways that effectively counter the unbelievably stronger array of resources and power of our thick we's.

But, we cannot leave a safe, sane and sustainable planet for our kids and their kids if we continue to travel down this path and confuse the pursuit of happiness with the pursuit of value over values. We cannot solve the problems of, say, rampant obesity, unaffordable housing, predatory lending, gasoline/oil addictions, environmental depredation, the attack on science -- or government spying -- unless we take a stand inside the organizations where we work that have something to say and do on these matters.

Nor can we sustainably respond to these challenges if we abandon value. Value matters. But, until our brands, strategies, missions, products and services bake equivalent concern for all values, including value, into the common good of our thick we's, we will continue to walk the dark path forward. If we fail to take responsibility for the thick we's in our lives and mindlessly perpetuate allowing secretive, overly hierarchical approaches to reinforce a path we seemingly are on today, then surely the Leviathan follows.

But there's nothing written by Hobbes or anyone else for that matter that says or mandates, "This must be so."

We can act differently. We must. As Gandhi said, 'We must be the change we wish to bring about." In part, that means let's do what we can as "me's" and "thin we's" to elect a president -- and a Senator and a Congressperson and a Governor and a state, county or local legislator -- who have the vision and courage to see this new world we live in and lead us to a more promising future for our children and grandchildren. But, as per Gandhi, we cannot hope to find that path through merely replacing Bush and friends with different and competent leaders who, while benevolent, continue to bet on unsustainable blends of hierarchy and democracy -- or on a concern for value that remains dis-integrated from a concern for values. I can imagine a president who is the leader needed. When I do, I also imagine that she or he reminds us that we are responsible for the future of this planet -- and that our responsibility exists both in choices we make as consumers, voters, investors and other "me or I" roles -- but, especially in and as part of our thick we's. For it's in those we's that the resources, knowledge, information and motivation is most powerful. A president or any leader can show us this path forward. But, we -- as thick we's -- must walk it -- must make and implement and take full responsibility for choices together. It is in our real, every day thick we's -- the thick we's of where we work, learn, play and pray - that we face the choices that will determine the fate of the planet.

And, it's there we can turn things around. The thick we's of auto companies can drop Hummers in favor of hybrids -- if they have the courage to blend concern for value with concern for values. The thick we's of food companies can reverse how their products and advertising and marketing contribute to obesity and other eating disorders. The thick we's of Homeland Security, the FBI, the IRS and others can stand up and say, "Our job is to govern, not to rule with the iron grip demanded to reelect Bush and the ideologues of Bush forever more."

All this is possible -- if thick we's learn and even demand healthier blends of hierarchy and democracy in how they govern themselves.

But, that is most likely to happen when we learn first to 'think differently about we' and about our responsibility to blend our legitimate concern for value with our equally legitimate concern for values.

Posted by Doug Smith at 04:36 PM | Permalink

April 27, 2006

The Price Of Oil? Homeland Security

From the Seattle Times:

"America's unchecked appetite for oil is seriously jeopardizing U.S. security, despite the billions of dollars the U.S. spends to safeguard steady access to cheap oil. Americans spend $1 billion every weekday on imported oil. Many of those dollars are used to frustrate critical U.S. diplomatic goals, underwrite terrorist organizations and finance jihadist movements in the Middle East and southern Asia."

From Harvard Magazine:

“The consequent global warming is already linked to a pattern of record floods, droughts, heat, and other extreme weather events around the globe, and is expected to lead to extinctions of some plants and animals. But such news from the natural world has done little to galvanize political will. Even forecasts of disastrous effects for the human sphere—severe drought in parts of Africa and Europe in the next century, and rising sea levels worldwide that will someday drown major cities—have thus far failed to mobilize public action in the United States. The time to act is running short.It’s a grand problem,” says professor of earth and planetary sciences Daniel Schrag. “One that most people haven’t even thought about.” Even within universities, he says, “research on energy has basically decayed away to almost nothing over the last 30 years. Around the country, there just isn’t that much intellectual capital, and the reason for that is really quite simple: the cost of oil has been low for a very long time.”

Posted by Doug Smith at 04:13 PM | Permalink

Family Values

Advice given to lawyers from a general counsel at a recent panel discussion:

"If there's a family crisis or something with the kids or other clients, we don't care about it -- get the job done," Linda Louie, general counsel for the National Hot Rod Association, told an audience of about 100 women Wednesday. "You are a commodity to us -- show me how you can solve a problem."

That is, show me how you can solve a problem I have because in the world of markets, networks, and organizations, it's all about me instead of we and the only thing that matters is whether you are adding value to my problem because, face it, you're just a commodity, a cog in the wheel. Family crisis? That's your problem not my problem. Kids? Ditto. Face it. Value is the trump card -- every thing else is just road kill.

That's Linda's view. What's yours?

Posted by Doug Smith at 03:43 PM | Permalink

April 24, 2006

Nature Abhors A Vacuum

The Bush Administration has emptied itself of all that has been key to governing the American democratic experience: openness, accuracy, candor, debate, competence, values, charity, hope, forgiveness, ethics, the rule of law, inclusiveness, dissent, consent, shared accountability, the common good, and the greater good. They have sucked all the air out of our government and, whether this November or some future November, our nation will start to pay yet one more price for their sins. Instead of the Bush-style ignorance of all the many difficulties and real problems that face us, we will instead see a Congress so bent on investigating that it will risk yet more years of neglecting the many challenges that beset us. Such investigations will be necessary to healing the grave wounds done to our body politic. But, while necessary, investigations will not be sufficient to moving that body politic forward into the demanding 21st century. And, in a choice between just re-working the past versus both that and taking responsibility for the future, most politicians will find the former has great reward at little risk while the latter is loaded with risk. The surest thing going once Bush lacks a Republican Congress will be the public -- and even the corporate media -- embracing those who remind us just how bad this president and his administration have been. Responsible leaders must do this -- and, yet, we must pray that they will also do more than just that.

Posted by Doug Smith at 12:14 PM | Permalink

April 23, 2006

The Decency Line

By mid-2005, according to the Economic Policy Institue, 28% of families living in the US did not have the incomes to afford the items in EPI's basic family budget for secure, safe and decent lives. There are 108 million households in this nation. So, 30 million familes cannot make ends meet and fall more and more in debt with every passing month.

That was almost a year ago. Since then, we've seen interest rates rise, consumer debt continue unabated and the price of energy (home heating oil; gasoline) skyrocket. The Bush Administration's sabre rattling toward Iran has had the predictable effect on the price of oil, now well over $70 a barrel and rapidly driving up producer prices that, in turn, will drive up consumer prices for more than just gassing up the car.

With nearly 30% of families already living below the 'decency line', the outlook for economic sustainability and sanity in the US is grim. There are many differences in affordability of life depending on where one lives (e.g. rural vs. urban), size of family, and local price patterns (among other things). Still, a very gross picture emerges from comparing the median income to the median family budget required for decent living. According to the latest figures I could find:

In 2005, the median family budget required $40,000 of income.
In 2004, the median family income was $43,200. (So, make it $44,000 for 2005)

The median is the point at which half the households are above; half below.

At 108 million households, this means 54 million operate, at best, within $4,000 of not being able to make ends meet (30 million of whom already cannot).

These are pre-tax incomes, by the way. So, the margin for (t)error is even less than the $335 per month indicated.

Everyone sees what's happened at the gas pump this last month. And, the Washington Monthly online has an interesting statistic: the typical household uses just over 90 gallons of gas a month. In the past year, of course, the price of gas has gone up more than 50 cents per gallon -- meaning this one item alone has eaten up $45 a month -- or, more than 13% of the margin of (t)error.

If you live well above the 'decency' line, these movements in gasoline (as well as interest rates and other) prices are annoying. And, it's not even noticeable if you are someone like Lee Raymond who just retired with an from ExxonMobil -- a company that, under Raymond's immoral leadership denied it had any power over gasoline prices. But, we are rapidly approaching a point where half the households in this nation will not be able to afford a decent, basic life.

Posted by Doug Smith at 02:04 PM | Permalink

April 18, 2006

Competence Is Not A Red/Blue Question

Carl Bernstein of Watergate fame in Vanity Fair: "We have never had a presidency in which the single unifying thread that flows through its major decision-making was incompetence....."

Posted by Doug Smith at 07:46 PM | Permalink

Health Care and Ideology

Part of our cultural orthodoxy hates government and loves the market. It typifies the all-or-nothing, either/or-ism of our times. For the Republican Right Wing, this means: Thumbs up to markets; thumbs down to government. (It only means that in their advertising. In real life, the Republican Government of Bush and pals have piled up the largest government spending and deficits ever. And, they happily savage the rule of law in favor of a government that knows no bounds.)

But, in the orthodoxy, the talking points and the assumptions always begin with market idolatry and government-bashing. We will not find a path out of this darkness without adopting a both/and view -- without seeing when and why markets work best and when and why governments work best and, most importantly, how markets and governments can collaborate to achieve optimal and sustainable solutions.

Health care provides a prime exhibit for our 'head in the sands, either/or' approach. Today, health care . Like so much else in contemporary life, health care is increasingly a haves vs. have nots affair. Those who can afford insurance and those who qualify for government help versus those who fall out of both buckets.

Chaos reigns. But, instead of sincerely tackling this grave and complex challenge, those who claim to be leaders instead demagogue about markets vs. government. Unfortunately for the orthodoxy, however, the private markets idolators are increasingly pushing a fiction. Consider only this: Overhead and other costs not spent on direct care account for 13% of the expenses of private sector insurers and only 2% for Medicare. Government is over 600% more efficient and effective than markets!

Why? Well, one reason has to do with the ideology of shareholder value fundamentalism. Instead of seeking sustainable returns that benefit shareholders, customers and employees in some reasonably blended fashion, the shareholder value radicals pursue profits and only profits in order to satisfy expectations of financial markets that, not coincidentally, they themselves shape. It's a self-fulfilling prophecy of doom: we must have more profits because the financial markets -- that is, ourselves, say we must have more profits.

So, how does a private insurer insure steady and growing profits in health insurance? Well, by combining steady increases in premiums with steady increases in costs used to screen out unhealthy people as well as fight off claims from all people. Why do private sector health insurers spend 13% of their budgets on things that don't make us healthier? Because private health insurers are more in the business of making profits than the business of insuring people.

Medicare doesn't have this motivation. And, under the assault of the 'we hate goverment' crowd, Medicare has had decades of pressure to reduce any costs that cannot be linked to direct benefits. Which -- in the both/and spirit -- is both a good thing -- and also a bad thing in that such pressures have probably also led to reducing coverage that might be needed.

In any event, the orthodoxy celebrates markets for their efficiency -- yet also fuels the capital markets ideology of shareholder value fundamentalism that, in turn, drives up administrative costs of private insurers more bent on financial results than insurance results.

But, there's more. Our capital markets also support the market for corporate control. One way of gaining more leverage over the bottom line is through market consolidation. Healthy market competition disappears when markets are so concentrated that either monopoly or oligopoly power sits in the hands of too few. Which, of course, is just what has happened among .

And so how are you feeling right now? Have you been reading along and thinking to yourself, 'this is a severe criticism of markets and celebration of government?" I hope not. I'm not contending that either markets or governments are the single answer. Instead, I'm suggesting that our nation faces a health care crisis of great complexity. We can solve it. But, to do so, we must understand and deploy markets when they work best and government solutions when they work best. None of which will happen so long as the conversation remains one of our typical screaming matches.

Posted by Doug Smith at 03:44 PM | Permalink

April 16, 2006

The New Golden Rule

Over the past 36 years, the prevalence of obesity among 12 to 19 year old Americans has doubled -- among children 6 to 11 it has tripled. Today, the percentage of kids who are either obese or overweight ranges from a low of 21% in Utah to 40% in Washington DC -- and the average across the US is 31%. Meanwhile, government officials report that poor diet and exercise will help push obesity-related diseases past tobacco as the #1 killer in the US.

This epidemic in eating disorders presents a classic case for how our culture of individualism conspires to darken the prospects ahead. The policy battle will rage between those who hold parents and kids individually accountable versus those who look to government regulation for answers. Meanwhile, the food companies who produce, distribute, market and advertise the diets and foods that are killing Americans in growing numbers will sit on their hands, happily making profits while claiming to be 'socially responsible." In reality, as this recent BBC item notes, the food companies don't 'care a jot'.

In the real world, though, the food companies -- and the employees and executives who work in them -- are the best positioned to do something about this crisis. They have the resources, the know how, the data, and the motivation -- if only they would replace shareholder value fundamentalism with blended values strategies for growth and prosperity. If only they would act to make capitalism sustainable instead of suicidal. Our culture of individualism will rant and rave about consumer and investor boycotts. Fine ideas. But, the real power to do something without waiting for governments to force action lies with the food companies and the thick we's who work there.

It's classic. The executives and employees of the food companies spend their working hours sitting on their hands - then spend their nonworking hours in the midst of kids who, because of food company products and marketing, are seriously overweight or obese.

Eventually, we'll find we have a 'red vs. blue' kind of split with regard to food companies -- one that already exists with tobacco companies. When this happens, those who work in food companies will be vilified. Why are they waiting? Why not act now -- and do so according to the new golden rule in our age of markets, networks, organizations, friends and families:

"As employees, do unto others who are consumers what you would have them as employees do unto you as a consumer."

Posted by Doug Smith at 02:02 PM | Permalink

April 14, 2006

When Decisions Are Not Enough

A number of retired military officers are calling for the resignation of Donald Rumsfeld. Meanwhile, the White House continues to support Rumsfeld with the same 'doing a great job' comments we've heard many times before, perhaps most famously applied to FEMA head Mike Brown in the wake of Katrina. Rumsfeld has certainly failed the test of performance. Take any of his assigned challenges -- whether Iraq, Afghanistan, the war on terror, or his own vision of a reengineered 21st century military. Simply ask yourselves what 'success would like like' against any of those challenges. Try your best to answer in terms of real outcomes instead of endless activities. Then weigh actual performance against the outcomes and, inevitably, Rumsfeld comes up short. Drastically short.

Even reasonable folks on the Republican side of the aisle acknowledge Rumsfeld's failure. This particular caught my eye, though, because the writer holds Rumsfeld's previous accomplishments in such high esteem. And, in doing so, the writer betrays a characteristic failure that has bedeviled all of us since 9/11: the utter lack of appreciation on the part of our elected officials, our media, and ourselves to acknowledge that profound change demands more than decisions.

There are two kinds of change faced by organizations. In one, decisions are enough. In the other, decisions are necessary but insufficient because a critical mass of already employed people must learn new skills, behaviors and ways of working with one another in order to succeed at both change and performance.

Consider, for example, three challenges that confronted Rumsfeld:

Achieving military victory in Iraq.
Nation building in Iraq following military victory.
Reengineering the military for the 21st century.

Delivering performance results against the first of these three was/is profoundly different from the second and third. The military had been thoroughly rebuilt during the Clinton years (in significant part because of true bipartisan support for the reforms). The 'already employed' folks in the military and defense and related organizations already had the skills, behaviors, and working relationships to go into Iraq and achieve military victory. Put aside the decision to take that step. Once the choice was made, that decision was enough.

Not so with the second and third challenges. Nation building in Iraq as well as reengineering the military for the 21st century cannot succeed without profound changes in skills, behaviors and working relationships among people who are already employed -- that is, human beings like you and me and everyone else who must deal with all the anxieties, uncertainties and questions about the risks that real change presents with respect to job security, career aspirations, friendships at work, and, even, our search for meaning and fulfillment.

This is why 'behavior-driven' change is so much more difficult than 'decision-driven' change. The track record for success in behavior-driven change is much worse than decision-driven change. It probably always will be harder. But, the odds of success in behavior-driven change rise dramatically when leaders understand that decisions are not enough.

Rumsfeld -- as well as Cheney, Bush, Rice and others -- do not get this. They come from the "CEO as decision maker" school of leadership. Which, again political preferences aside, is good enough when decisions will be sufficient. These folks are not alone. For example, the 9/11 Commission and its staff also failed to appreciate this difference. They worked their tails off. They did a really wonderful job under very difficult circumstances. And, the recommended decisions they shaped truly make sense.

Still, a read through of their report shows they -- and, I guess, those like Robert Mueller and Porter Goss -- who must figure out whether and why to implement such recommendations went into the challenge without recognizing when and when not decisions would be sufficient.

My guess, though, is that Mueller, a good guy who is so dedicated to doing what's right as opposed to what's only right for him and his vision (compare Rumsfeld), has learned a lot about the difference between decision versus behavior-based change. Let us hope so.

If he has, though, he separates himself from Rumsfeld.

Rumsfeld has failed. He has not delivered performance. He should resign or be fired. I share the view that such is unlikely. But, whether he goes or doesn't go, let's hope that our discourse over the many failures of this incompetent administration will begin to include insights and lessons about decision-based versus behavior-based change -- because guess what? Most of the challenges we face and will continue to face are of the second kind and most of the leaders we elect and the media who claim to inform us about them have yet to master anything but the first.

Posted by Doug Smith at 12:46 PM | Permalink

April 13, 2006

The Dangerous Union

Today's most dangerous union has no meeting or hiring hall, no dues, no plans for strikes and no formal organization or name. There are no workers in this union. There are folks who work. But neither their self image nor the image of them held by others would translate through the word 'workers'.

Today's most dangerous union is small relative to population as a whole. Only one in ten families have full-fledged membership -- although another ten to fifteen percent of families hope that one day they'll gain admission.

Today's most dangerous union embraces all faiths, ethnic groups, genders and sexual orientations. It welcomes those who detest as well as love their fellow human beings, those who are hard headed and hard hearted as well as softies.

Today's most dangerous union dominates every industry and sector. They rule and control markets and governments. They need not issue threats or decrees or five year plans. Their shared ideas and shared values are as predictable as night following day. They are the orthodoxy of our times.

Today's most dangerous union includes folks from all walks of life, all kind of jobs and titles, all manner of hobbies and skills and predilections.

Today's most dangerous union has all manner of diversity and, at the same time, one unyielding answer to all of life's most pressing questions: Shareholder value fundamentalism.

The single answer now destroying our nation and our planet -- not to mention sustainable shareholder value itself.

Posted by Doug Smith at 04:27 PM | Permalink

April 12, 2006

The WMD Doctrine

By now, all but the ideological zealots know that the Bush Administration 'fixed the intelligence to fit the war'. Laying deeply flawed claims to being a "CEO presidency", they also famously commented that they would roll out the war much like a product. And, so we might call this the WMD Doctrine: Words of Mass Deception -- spin and exaggerate in order to build market share for your product (including your 'ideas' as products).

It seems to have spread. For example, having raked in unprecedented profits, big oil companies run ads that present themselves as nearly impoverished while, of course, prices at the pump get ready to rise with summer temperatures. The US military admits it's hyped Zarqawi for the benefit of "the home audience in the US." A few years ago, Royal Dutch Shell falsified oir reserve information to run a number on investors. But, then that's a form of accounting subtrefuge that exploded well before the appearance of the WMD Docrine. Ameriquest celebrates the American Dream in its TV ads while bilking folks in its boiler rooms by providing exploding mortgages. On a small scale, NBC news tries to provoke the creation of news by asking folks to dress as Muslims and attend NASCAR races.

And, now we read that major pharmaceutical companies hype diseases in order to sell drugs that folks actually do not need.

Posted by Doug Smith at 02:14 PM | Permalink

April 09, 2006

The Shared Idea Of Transparency

All values, including financial and economic value, reflect patterns of belief and behavior. Think, for example, about pricing. Yes, pricing derives from some balancing of costs incurred, competition and some sense of what the item in question is worth to those who might buy it. All three, though: cost, competition, worth to the customer --- mirror belief and behavior, both rational and irrational.

So, what makes for predictable patterns of belief and behavior? Some of this is found in our DNA. In addition, though, we learn or pattern our belief and behavior through how each of us individually respond to what happens in our relationships with others, the roles we play in our lives (e.g. employee or parent), and in the ideas we absorb and act on. My guess, for example, is that the other day when audience members booed a man who told President Bush he was ashamed of Bush and Bush's policies, those audience members responded through some mix of shared ideas having to do with respect for the office of president -- as well as the ideas that undoubtedly helped select them for audience participation -- that is, the ideas the Bush Administration has used for more than five years to ensure that the president only speaks to supporters so that the television images portray unified enthusiasm.

The shared idea of Truth -- with a capital T -- has done much damage the American body politic ever since the Republican Party embraced Truth Seekers in it's big tent. Like most aspects of contemporary Republicanism, this has gone from bad to worse during the Bush years. Bush himself is said to have the 'black vs. white' world view of many recovering alcoholics -- the predictable belief and behavior to cast all issues and questions and policy choices in stark contrasts. That, of course, fits the shared idea of Truth strongly held by Truth Seekers. And, it means that Truth Seekers will vote disproportionately for a Truth Seeking Republican Party.

It also means that folks angered or dispirited by the the dangerous and already incurred consequences of a government of Truth Seekers (e.g. preemptive wars, the Unitary Executive, Terry Schiavo.... the Rule of Truth instead of the Rule of Law) pattern their belief and behavior around being anti-Truth Seekers. The stark contrasts becomes us v. them. And so, our nation's culture wars slip into a Cold Civil War.

Finding our way out from this suicidal pattern will rest on many things, including luck. But one sure part of any sane path forward will be to drop the shared idea of Truth in favor of shared ideas of accuracy and transparency. Enough with whether every single thing said or done is the Truth. How about putting serious resources behind making sure folks know whether X or Y or Z is accurately described and are transparent.

Consider, say, the federal budget. Is it transparent? No. The full cost of the Bush wars are not included in the budget. Tens of billions are provided under additional appropriations. How about the number of troops and other personnel in Iraq? Not transparent. Tens of thousands of defense contractors have folks in Iraq. They are not counted. Neither of these are about the Truth. As Joe Friday said on Dragnet: "Just the facts, maam."

How about executive compensation? Is it transparent? No. How about net pension liabilities? No. How about unemployment figures? No. How about poverty? No. How about the information we need to judge the future of Social Security? No. Do we get to see and read legislation in any kind of remotely reasonable time frame before it is voted on by legislative bodies? No.

Do our elected representatives even get to see such legislation? No. It is now standard practice for the ruling party to schedule votes past midnight while actually making the legislation -- often hundreds, even thousand of pages -- available for perusal only hours before the vote. This, for example, was what happened with the disastrous prescription drug law.

Speaking of which. Were the projected costs of that law accurate or transparent? No. And the Bush official who hoped to fix that got fired.

Why? Why the lack of dedication to accuracy and transparency?

Because our popular culture has a much stronger, more predictable set of beliefs and behaviors dedicated to the shared idea of Truth and Truth Seeking.

And, it is destroying us.

Posted by Doug Smith at 12:33 PM | Permalink

April 04, 2006

Blended Values Strategies in Food

Shareholder value fundamentalists maintain that a maniacal focus on profits is and should be the central focus of all private sector enterprise. Their credo trumps all questions of family, social, political, environmental, technological, medical, legal and other issues of values with the single question: will it promote or detract from financial/economic value?

Theirs is a fundamentalism every bit as destructive of the planet as any religious or other form of 'single answer' ideology.

Not only does this extremisim hollow out and threaten the sustainability of humane society, it also inevitably undercuts shareholder value itself. Only blended values strategies can save shareholder value from these extremists -- whose ideology, unfortunately, pervades executive suites and boardrooms across the globe.

The absurdity of shareholder value fundamentalism is well captured in this item from the BBC. Here's the sub-headline: "Many of the world's 25 biggest food firms only pay lip service to their duty to help fight the global diet crisis, a report on the issue says."

Obesity and other eating disorders are at crisis proportions in many areas and among many groups. Ought food companies care about the health of customers? All of us -- and them -- would quickly agree that food companies ought not put poison in their product. But in our shareholder value fundamentalist culture, the only thing food companies ought not do is 'break a law' (and, it's fair to report that even then, the too often ruling ethic is 'don't get caught breaking a law'). Anything goes so long as it adds to the bottom line.

All private sector enterprises must have a positive bottom line. All private sector enterprises MUST generate returns for those who provide capital. Shareholder value is essential. But shareholder value fundamentalism is a sociopathic ideology that ought not be confused with the necessary idea that return on capital provided is critical.

Laws prohibit poison in food. But only ethics embraced by executives and employees of food companies -- that are strong, predictable shared values about 'how we do things around here' -- can ever turn around this situation where major food companies endanger the health of us and our children through 'poison by other means'.

If you work at a food company -- or if you know anyone who does -- ask yourself or them, "Is this what you stand for? Selling food that is unhealthy? Are those the predictable beliefs and behaviors -- shared values -- that you want your children to remember you stood for?"

Posted by Doug Smith at 02:15 PM | Permalink

April 02, 2006

Business Credulity

Chauncey Gardiner, better known as Chance, in Jerzi Kosinski's contemporary classic Being There, is a man whose entire experience prior to the events of the book exist within a strange, late 20th century American Eden: gardening on the estate of his adoptive father and watching TV. Chance has not tasted the fruits of knowledge, forbidden or otherwise. Yet, when those from beyond the estate discover Chance, they come to see his simple adages as the essence of wisdom and brilliance. The book, among other things, is a study in credulity: of the readiness to believe in what Chance says notwithstanding a total absence of evidence or logic.

My favorite piece of Chance's wisdom is: First comes Fall. Then Winter. Then comes the Spring. Then Summer.

I was reminded of this truism yesterday when I chanced upon the latest wisdom from Ram Charan in Strategy + Business, a magazine produced by Booz Allen Hamilton, Inc. Here's the teaser from the table of contents:

Sharpening Your Business Acumen By Ram Charan
How do executives at leading companies like Thomson Corporation, GE, Apple, and Verizon anticipate external trends and craft their strategies accordingly? They follow a six-step thinking process...

Allow Chauncey Gardiner to increase your business acumen in only three steps:

1. Seasons change.
2. Plants must change.
3. Gardeners must change too.

Translation: The world changes a lot. So must our businesses as well as our competitors. Thus, those who run businesses must see these changes and act on them if they are to have business acumen.

Business acumen?

Or, credulity of business people?

Posted by Doug Smith at 01:15 PM | Permalink

March 30, 2006

Flunking Quality Education

The New York Times reports that, for the first time, the No Child Left Behind law has been used by a state board of education (in Maryland) to take over failing schools (in Baltimore). Journalism being what it is today, the story focuses first and foremost on Republican vs. Democratic political squabbles in the state and city -- and whether this action will be a harbinger for similar squabbles in other states.

Thus, a startling fact is presented in a context of politics: 27% of schools in the United States of America are failing the standards set by the law.

27%. More than 1 in 4. Failing.

Ever since the No Child Left Behind law was passed, many educators and others have worried that a maniacal focus on test results would cause schools to confuse test performance for real, quality education. No one argues against tests and standards. Rather, that once we make any metric the 'single answer' to all issues, much that is required to help kids learn how to think, read, evaluate and mature into folks who prosper and contribute to themselves, their families, their organizations and society gets lost.

Too much.

Consequently, my guess is that the 27% failure rate understates the crisis created by this single dimensioned law.

We need a . We need to establish that right and then demand that all involved in delivering against that right work together -- including asking kids themselves to get more involved in local education policy and affairs. In this regard, the Times article is typical: Not a single student is quoted.

Posted by Doug Smith at 03:50 PM | Permalink

March 29, 2006

Incompetence Through The Lens Of Incompetence

Let's just spend a moment on reporting versus editorializing. The basic idea is that the first -- reporting -- provides a description of what has happened. This week, for example, the Bush White House swapped out Andy Card as Chief of Staff for Josh Bolten. That happened.

The second-- editorializing -- provides a perspective on why something happened or whether the thing that happened is positive or negative or any number of other expressions of opinion. Editorialization is a form of opinion. Reporting is meant to be fact telling.

So, what are we to make of this sentence in USA Today's article about the change in Chief of Staff at the White House: "The Bush White House already is known for its discipline and managerial skill."

Is that reporting? Is it editorialization?

Actually, it makes no difference. It is incompetence. It is an incompetent description of an Administration that, in turn, is incompetent.

The Bush White House is among the most incompetent collection of managers and leaders that can be found in one place in America today. Every policy and direction these managers attempt to implement goes sour. Their incompetence precludes any reasonable test of the merits of their ideas. Decent folks can debate issues such as deregulation, homeland security, tax and fiscal policy, environmental and energy challenges and approaches, educational reform, the conduct of war -- and on and on. But, the Bush White House puts such debates beyond the pale of actual proof about whether any particular set of ideas and approaches work because, as the track record now brutally shows, nothing the Bush White House touches -- regardless of who is Chief of Staff -- ever works. Except of course: getting elected.

Perhaps USA Today meant to say that. Perhaps the writers and editors of this article intended to communicate that "The Bush White House already is known for its discipline and managerial skill at getting elected."

But the last part -- the part that could have qualifed as accurate reporting and a reasonable, competent opinion -- was left on the cutting room floor.

Or, perhaps USA Today meant to qualify the sentence by reference to some limited group-- Washington 'insiders', a press corps hungry for an audience, the 30% of Americans who seem wedded to the Bush ideology of infallibility, or maybe others.

But, for anyone who has ever witnessed actual discipline and managerial skill, this comment by USA Today is itself an indication of incompetence.

The sad thing, of course, is that it perpetuates a lie by reinforcing a piece of advertising -- a shared idea circulating in our world of markets and influencing folks who are trying to go about their daily lives. The fact that this particular idea is filled with helium does not prevent if from staying afloat -- especially when it is 'reported' as fact.

Posted by Doug Smith at 03:54 PM | Permalink | TrackBacks (1)

March 27, 2006

Secretary Snow's Star System

As noted last week, Secretary of the Treasury John Snow is out on the circuit hawking his boss's wares. Just ask him and he'll pull open one side of his tailored overcoat and show just how great the economy is doing as a direct result of tax cuts, unprecedented spending and deficits, and federal subsidies-and-rule-making for oil and energy companies, pharmaceutical companies, defense contractors, financial service companies, communications and media companies -- pretty much any private sector company..... and, of course, nonprofit organizations that promote Christianity of the 'complete faith, no works' kind. You know, the kind with a litmus test of being reborn in biblical literalism while staying as far as possible from Christ's message of acts of forgiveness, tolerance and charity.

One of the latest steps taken by the Rebulican right wing employing Snow is to throw gasoline onto the already raging fire known as the pension fund crisis. Several decades ago, millions of workers in the U.S. depended on pensions that were funded by the companies for whom they worked. It was part of the 'deal'. In the bubble years, many companies' pensions soared because of the stock market -- and, a number of questionable practices sprung up like putting all of the pension assets in the company's own stock (violation of Rule #1 -- diversification -- that every single one of those pension managers would advise their parents and children to follow). With the growth-on-paper of pension assets, companies also got lazy about actually funding future pension liabilities with cash and other hard assets.

Then, the bubble burst. And, the Bush Administration came into office. By the middle of Bush's first term, nearly all private sector pensions were underfunded. That means, they did not have the assets to meet liabilities. The federal agency responsible for monitoring and serving as insurer -- the Pension Benefit Guaranty Corporation -- was also underfunded, especially after it got hit by the airline bankruptcies.

A competent group of federal officials from the executive, legislative and agency parts of the government would have looked at the balance sheets and taken steps to restore -- well -- balance. But the Bush Administration -- and their handmaidens and sponsors that rule the Republican Party -- have instead chosen the novel approach of inviting companies to decrease -- not increase -- how and if they fund pensions.

This is very good news for shareholders. At least in the short term. Of course, like all policies of shareholder value fundamentalism -- the ideology that makes "what does this do for next quarter's earnings?" the single test for every question, large and small -- this latest piece of incompetence will, soon enough, destroy shareholder value along with, of course, the security of tens of millions of workers who thought they could depend on funded pensions to see them through the years ahead.

It is a travesty of incompetence. Put ideals to one side. My father was a Republican. I learned from him the ideals -- the values -- of fiscal responsibility and of the responsibilities in a free market economy that must be exercised by owners. Those are values. Those are ideals. And, those are evidently now viewed by these Republican rulers -- well, to paraphrase what the Attorney General once said about the Geneva Conventions -- they are evidently 'quaint'.

It's not that Snow will be without a pitch. The ideology, we know and hear daily, is all about individualism and individual risk taking in free and open markets. Bracing stuff. Every single one of us is out there on our own to make or break it -- that's freedom. Stop the "Nanny State". Stop the "Nanny corporation." It's all about an ideological view of "me" and "I". The value of living in completely free and competitive markets and having the opportunity to make it on your own. That's what America is. Of course, we should permit corporations to stop funding pensions. If millions of individualists out there cut a deal with their employers that, in part, were based on pension expectations, then, well, then let's correct for those individuals' misunderstanding of what individualism and true freedom are all about. Let's set them free from the freedom-killing possibility that they might have income disconnected from any current labor. True freedom is the right to go out there, compete, and make money based on the labor you put in each day. Pensions? Sure, make that an investment choice for yourself. But, grow up and get free. Don't expect any free lunch from others who are working hard just to make it on their own. Really, a company should not even be allowed to promise future income streams for past work. It ought to be against the law if we want to have a competely free marketplance!

Unless, of course, the company is dealing with senior executives. Then the idea of providing future money -- in rather large amounts -- for past as opposed to current effort is an effective form of executive compensation in John Snow's star system.

The blend of arrogance and incompetence in folks like the affable John Snow leads, of course, to stories like this -- only one of zillions of similar stories that are part of our economy's -- of our society's -- overall narrative by and in which folks who do not do their jobs get million dollar send offs while folks who have and/or continue to do their jobs get stripped of financial security -- all in the name of 'shareholder value fundamentalism'.

In the slick Snow sales pitch, the stars in the star system take no individual risk on actually being paid for real performance yet get plenty of individual reward while the 'non-stars' risking their financial security every single day on performance receive little actual reward for their effort. No wonder 80% of the workforce still makes basically the same pay they did when Bush took office. And, job insecurity being what it has been, it's also no surprise that the average family income is less now than in January 2001. Meanwhile, with dramatic increases in consumer debt (both credit card and home equity related), American families face precarious financial futures. To all of which, we can now add increasingly value-less pension promises under the individual-risk-loving-for-all-individuals-except-CEOs policies, practices and, again, sheer incompetence of the Bush Administration.

Posted by Doug Smith at 01:00 PM | Permalink

March 24, 2006

Brand Is As Brand Does

Throughout history, human beings have deployed pattern recognition skills to 'read' situations and make choices. Our most distant ancestors read the signs in things ranging from scat to stars. We use brands. Unlike them, we live in markets, not wildernesses. We do not hunt. We shop. Like them, though, we must rely on the evidence before our eyes to make choices -- and core to many of these choices are brands.

Brands go far beyond mere logos. Brand communicates what a company promises -- what it stands for across a spectrum of values only one of which has to do with 'value for money'. Quality, speed, reliability, integrity, feature, function, customer orientation, how employees are treated, whether shareholders come first -- these are the more straight forward promises made by brands. In addition, though, are many subtler values: concern for family, political and ideological orientation, environmental, technological, legal, medical and other beliefs and behaviors are there to be read in brands, if we only ask ourselves to take a moment to ask.

Brands increasingly explain much of competitive success. In the overheated equity markets -- markets that routinely have earnings per share far exceeding historical averages -- some argue that brand accounts for more than half the value. Brand, like 'human capital', intellectual property, core competences and other key factors for success in our new world of markets, networks, organizations, friends and family is an intangible asset. It does not trace it's value to land or machinery or other hard assets one can touch, see, smell or taste.

Instead, brand is the upshot of three related human actions: promising, delivering and experiencing. Employees (a category that includes executives) promise and deliver. Customers (and investors who are not actively involved in companies) experience. Most of us have yet to catch up with the latter two of these activities: delivery and experience. Because we are bombarded with logos and symbols and promises, we tend too rarely to look beyond the promising to the delivery and experience.

That is, until the experience is entirely out of line with the promise. Then we connect the dots. If it's a negative experience (e.g. a salesperson whose pitch is complete hooey), our reaction could be just a shake of the head -- but it's a shake of the head that spells 'never again' for the company and it's employees. Or, we could go into a kind of rage and take steps to make that "never again" apply to as many of our friends as we can reach.

If the deviation is positive, the reverse is also true. Marketing gurus love this phenomenon. It's why 'delight the customer' is a widespread shared idea within marketing circles. Under promise and over deliver. Do that and your customers will be delighted in their experience of your brand. In turn, they will become loyal customers (the most profitable of all) and are also likely to 'spread the word'.

The middle verb in all this is: brand delivery. Organizations should be careful about what they choose to promise. But, promises, especially promises in our cluttered world of logos, advertising, PR, sales pitches, word of mouth and more -- while actually a complicated choice -- are the lesser of the two verbs within the direct control of employees and executives. Delivery against those promises is far more complicated because it demands the effort of an entire organization be seen and acted upon in a way that causes many people -- including, increasingly, people in organizations like distributors or retailer or others who are not part of the same organization -- to actually act in ways that are consistent with the promises. This demands careful and self-conscious coordination. It is one big reason, for example, that I strongly believe the 'division of labor' mantra about organizations is a fundamental misconception in our new world. Yes, organizations divide labor. But, the primary function of organizations is to integrate labor, not divide it.

Brand delivery is brutally difficult to get right. Among the many routine failures most of us experience often is the 'apology' from one part of an organization for the screw ups of another part. We get the wrong items in the mail, call customer service and are told, "I'm sorry" in a way that connotes "But I am not taking any responsibilty for their mistake." The 'their' refers to another employee or division or part of the same company. This admission immediately tells us the person on the phone fails to grasp this about his or her organization: it's a community he or she is a member of. It's a "we' of whom he or she is a part. It is not an "I" and a "they".

Recently, many media organizations have struggled with what their brands stand for in terms of promise and delivery of news. One that hasn't struggled is Fox News. The irony of their promise -- 'fair and balanced' -- is, of course, that all of us know the real promise is "actively promote the right wing dominance of the United States". And, they deliver consistently against that promise. We know their brand. And our experience rarely disappoints. We are not surprised to learn, for example, that Dick Cheney instructs his employees to make sure all TVs are tuned to Fox News whereever he stays. We are not surprised that when he chose to go on TV to explain how he came to shoot a friend in the face, he chose to do so on Fox.

Some folks, like Cheney, are loyal customers of Fox because of this consistency across brand promise, delivery and experience. Others detest Fox for the same set of reasons. Regardless of camp, though, it's important to understand that Fox does have a mission and strategy and brand that is clear -- and that, as an organization, they deliver an experience consistent with all that. Shared beliefs and behaviors at Fox -- shared values -- are highly predictable (regardless of whether any of us might also deem them good, bad or in between.)

By comparison, to take just one example, The Washington Post struggles. It is difficult for us to quickly and accurately describe the brand promise of the Post. And that makes it difficult for folks who work at the Post to clearly understand how they need to work together to deliver. Naturally, this leaves readers and others guessing about how their 'experiences' of the Post's brand match up with the intended brand promises.

Unlike with Fox, customers are confused. Among many implications, is this: individual customers are likely to 'impute' promises to the Post brand. For example, people who believe in a 'liberal media' look for any delivery of news by the Post to reinforce this belief -- reinforce how these customers define their experience of the Post's offerings. For such folks, the brouhaha over Daniel Froomkin's blog was a tautology: The Post is part of the liberal media. Froomkin is a liberal. The Post is biased toward liberals.

Others who lament a bygone day when the Post seemed to be an organization grounded in journalistic values dedicated to facts, openness, challenging those in power and so on, now look with equally juandiced eyes at any peccadillo by the Post that reinforces the company's fall from grace. The writings of Post employees are scrutinized for lack of perspective, lack of facts, lack of challenging power -- any indicia that point to a right wing drift and a loss of the journalistic soul.

These are the ends of the spectrum. But what of more moderate customers? How might they respond when, for example, the Post -- in the name of 'balance' -- hires a Bush political operative without any common journalistic credentials and a history of plagiarism to join the blogging at the Post's website?

What is the moderate customer's experience about the Post's brand in this action by the Post? Frustration, of course. It feels like being pushed to an either/or choice to align with one of the extreme groups. Red state. Blue state. Liberal media. Corporate media. Choices that are less about journalism than about propaganda.

Such are implications about our experience of the Post brand at the level of abstract ideals and ideas. Let's look for a moment, though, at more routine matters in our experience. A friend, upset by the Post's hiring of this political operative, wrote an email to the Post's ombudsperson, Deborah Howell.

Here is the response:

"Deborah Howell, ombudsman for The Washington Post asked me to pass this on
to you. The website, washingtonpost.com, hired blogger Ben Domenech. The Washington
Post did not hire him. The newspaper and the website are under different
management. If you wish to complain to the website, write to its editor, Jim Brady."

My friend, using the email given for Brady, sent the same letter of concern to Brady.

Here's the response:

"Deborah Howell, ombudsman for The Washington Post asked me to pass this on
to you. The website, washingtonpost.com, hired blogger Ben Domenech. The Washington
Post did not hire him. The newspaper and the website are under different
management. If you wish to complain to the website, write to its editor, Jim Brady."

(Yes. The exact same, automatic reply.)

What do you draw from this about the customer experience of the Post brand? About the clarity of the Post's brand promises? About the sense of "we" at the Post regarding what the company stands for? About the effectiveness with which employees in different parts of the company coordinate in ways that are consistent with their brand promises? About the values - the beliefs and behaviors -- regarding respect and concern for customers that guide the Post's brand promises and brand delivery?

Does this anecdote give you confidence that the Washington Post is on an effective path toward figuring out what the promises it wishes to make, how best to deliver them and what it wishes customers to experience when they choose the Post brand?

Posted by Doug Smith at 12:37 PM | Permalink | TrackBacks (1)

March 22, 2006

Snow Job

Earlier this week, the Wall Street Journal reported that Treasury Secretary John Snow maintains the widening gap between high-paid and low-paid Americans reflects a labor market efficiently rewarding more-productive people. For example, Snow said, "In an aggregate sense, it reflects the marginal productivity of CEOs. Do I trust the market for CEOs to work efficiently? Yes. Until we can find a better way to compensate CEOs, I'm going to trust the marketplace."

Recall for a moment that after Paul O'Neill resigned at the end of 2002, we learned that O'Neill had a habit irritating to the Bush Cabinet: he didn't always agree with the Party. Among other things, he was not a favorite on Wall Street because O'Neill worried that the reckless fiscal policies of the Bush Administration were, well, reckless. Tax cuts were favored on Wall Street. O'Neill wasn't.

Much was said at the time that the primary reason for selecting Snow as O'Neill's replacement reflected a strong belief that Snow could and would do a better job selling the Bush tax cuts.

O'Neill must have seen his job as that of a Secretary of the Treasury of The United States of America -- a job traditionally associated with leading the effort to tackle problems of significant economic consequence. Snow, we must surmise, sees his job as a salesperson.

Skilled sales folks understand that their job is to sell. The best among them focus on communicating effectively with those whom they are trying to sell and, in doing so, sticking to pitches that are grounded in something resembling the reality -- the actual feature, function and performance-- of what they are selling. Slick sales people succeed in selling us what we come to regret because the pitch is not grounded in any kind of reality. It turns out to be hooey.

(For the moment, please note that effective sales people whose pitches are linked to reality still might exaggerate and flatter and do all kind of things that help with their effectiveness. But what they sell us is not hooey.)

So, re-read Snow's sales pitch about CEO's and efficient markets and productivity in light of these additional perspectives:

Exhibit 1: The Growth of Executive Pay by Bebchuk and Grinstein: " This paper examines both empirically and theoretically the growth of U.S. executive pay during the period 1993-2003. During this period, pay has grown much beyond the increase that could be explained by changes in firm size, performance and industry classification. Had the relationship of compensation to size, performance and industry classification remained the same in 2003 as it was in 1993, mean compensation in 2003 would have been only about half of its actual size."

Exhibit 2: Stock Options: The Backdating Games: "Following a yearlong investigation, it appears the Securities and Exchange Commission is finally beginning to crack down on companies with questionable policies governing stock-option grants.... The commission apparently became interested in the topic when academic research showed that the share price of scores of companies dropped just prior to the granting of options. The research also indicated that — surprise, surprise — share prices often rose immediately after the pricing of options."

Exhibit 3: Privileged Class: " Part of the problem, experts say, is the way executive compensation packages are determined. At public companies, the board has a compensation committee, which often is composed of peer executives from other corporations. Those committees hire compensation consultants who study what similar companies pay their executives. The committee members and the consultant have an incentive to see compensation increase, experts say. "What goes around comes around and somebody in turn is going to take care of them," said David Theobald, chief executive of Netshare, a Novato, Calif.-based Web site for people who earn more than $100,000 a year. "It's a vicious circle. ... The consultant is always going to put his best foot forward and more often than not, he's going to make it seem like it's justified. It's absolutely absurd."

Exhibit 4: Berkshire Hathaway Chairman Warren Buffett Letter to Shareholders in current Annual Report: "Too often, executive compensation in the U.S. is ridiculously out of line with performance."

Does the market for CEO pay work efficiently? As Snow says, 'yes' -- if by efficiency we mean, from the perspective of CEOs, a very predictable annual pay raise that is quite handsome.

Does the CEO pay market work effectively? That is, does it reflect 'fair pay for fair performance'?

No. And anyone trying to sell you that is selling you hooey.

Posted by Doug Smith at 08:21 PM | Permalink | TrackBacks (6)

March 20, 2006

No Good Deed Goes Unpunished

Today's Slate asks, "Is Whole Foods Wholesome?" and follows up with this subtitle: "The Dark Secrets Of The Organic-Food Movement."

Here's what the article tells us about Whole Foods:

Pluses:

"There's plenty that's praiseworthy."
The chairman of the company is dedicated to proving business can be ethical, socially responsible and profitable. One way the company achieves this objective is through marketing organic food to better off folks and charging premium prices.
Whole Foods is dedicated to environmental sustainability.
Whole Foods pays employees living wages, provides good benefits and has a rule that the top executive cannot make more than 14 times the wages of front line workers (Note: The vast majority of companies pay top executives more than 300-to-1 -- and, thereby, reinforce and widen the already Grand Canyon gap separating the bottom 60 percent of households from the top 1%).
Whole Foods is purchasing wind energy.
Whole Foods provides information to customers inside the store with regard to energy cost savings of farming organically.
Whole Foods provides information to customers inside the store that says purchasing organic foods is supportive of small, family farms.
Through the growth of it's business (and related steps), Whole Foods and others have caused a growth in the number of large agribusinesses who now grow organic food. (Note: And, thereby, the share of organic versus non-organic food in the total market.)

Negatives:

During the summer season when locally grown tomatoes are availabe in New York, the Manhattan based Whole Food Stores sells organically grown tomatoes from Chile. The total energy costs of the Chile tomatoes during that season would be greater than the total energy costs from the New York area.
Whole Foods deals mostly with large agribusinesses that grow organic food. Whole Foods does not give the majority -- or even a large minority -- of it's business to small, family farms. Nonetheless, Whole Foods misleadingly places pictures of small, family farmers next to produce grown by larger, organic agribusinesses.
Whole Foods premium pricing puts organic food out of reach for many customers from lower economic brackets.

Following this last point, Slate points out that now Wal-Mart is considering getting into organic food -- a step that would increase the benefits of organic farming to many more people and the planet as a whole. That would be terrific. An innovation started at the 'high end' of the market makes it's way down and, thereby, increases the total 'share of market' for organic farming.

Now, if Wal-Mart would also mimic Whole Foods' policies on living wages, benefits and the ratio of top exectuive pay to front line worker pay, the vision of Whole Foods' chairman would have made an even bigger and positive difference to the world. What a great thing that would be!

And, not coincidentlly, Whole Foods should also revisit it's commitment to small, family farms and stop misleading consumers about the source of its produce. That, too, would be great!

Of course, the odds that the Slate article will induce either Wal-Mart or Whole Foods to take such steps is made smaller by the article itself. "Dark Secrets"? Not Wholesome? It's the kind of overheated, immature journalism that fails to enlighten while only retarding lofty aspirations more than advancing them. (Indeed, a friend who read the Slate piece emailed me that he was now quite worried about the integrity of Whole Foods -- probably just the kind of reaction that Slate hoped for. Namely, one that bred anxiety toward Whole Foods rather than anything remotely constructive in continuing the 'organic food movement.")

It also betrays some ignorance. Should Whole Foods take steps to work with local organic farmers in New York? Yes!! But, the author of the article seems wholly ignorant of the minimum demands of commercial relationships as well as 'apples to apples' accounting. To induce large (or small) farmers to switch to organic, Whole Foods must promise to purchase in volume. It cannot 'just show up' on various days in various parts of the year and say, "Hey if you have organic, I'd like to buy it from you!" Both buyer and seller must focus on the entire economic package -- and the larger the package -- the more comprehensive and continuous it is - the more likely each will commit to the necessary shifts required to move toward organic.

Cherry-picking a part of the year, as the author does in making the energy cost comparison of summer tomatoes from New Jersey versus summer tomatoes from Chile is, as the author likes to write, 'technically correct". Fine. But, perhaps it would have been more enlightening for the author to also share the 'full year' energy audit. That is, the energy costs for Chile tomatoes versus local only. A problem of course is that local New Jersey tomatoes are only availabe in summer -- unless grown in greenhouses -- and then, if greenhouse grown, the full energy audit would be higher.

Should Whole Foods find ways to support New Jersey small farmers and also tap into local, in season tomatoes? Yes! By all means. But the current facts as presented in this overheated piece from Slate are, well, overheated.

Dark secrets?

Hardly.

A more accurate title for the article might have been this: "Whole Foods Is Not Perfect."

And, the subtitle might have been: "One Store In Manhattan Has Misleading Posters."

Of course, the 'dark secret' of this kind of journalism is that such headlines don't attract many readers. Much better to have misleading headlines.

Posted by Doug Smith at 01:23 PM | Permalink

March 09, 2006

Knight-Ridder And Sustainable Strategy

Knight-Ridder and it's chain of newspaper and media businesses is up for sale. Here are three stories about the finalists in the bidding -- one story from Editor & Publisher, one from the NY Times, and one from the Minneapolis Star Tribune.

I recommend reading all three. Before you do, however, let's review some basics of business strategy and performance.

First, among the various strategic choices that businesses must make are those that determine what blend of cost versus customer value will sit beneath the strategy. Put in it's extreme, will the strategy be cost based? Or, grounded in the value delivered to customers? All businesses must deliver both of course: cost and value. But, often the blend tips in favor of one or the other. So, read about the three bidders for KR and reach your own conclusion about the degree to which the strategy of each will ground itself in cost versus value.

Second, it is commonly accepted that busineses have multiple stakeholders -- most particularly, customers, shareholders and employees. The best, most sustainable businesses balance and blend concern for each in the strategies pursued. Still, many businesses run on the extremist creed of shareholder value fundamentalism -- a creed that goes beyond a healthy concern for delivering shareholder value to an obsession about shareholders that crowds out concern for customers and employees.

Read the three articles. And reflect for yourself on the relative concern each bidder has for shareholders , employees and customers.

Posted by Doug Smith at 03:13 PM | Permalink

March 05, 2006

Did You Say Non-Profit Capitalists?

Yes.

And you can meet Pacific Community Ventures by visiting not only their website, but also the websites of dozens of businesses benefiting from PCV's investment, advice and other resources. PCV focuses on businesses that offer good wages and benefits plus skill and asset building to folks who live in low and moderate income parts of California. They sometimes invest -- and they always provide resources, including advisory help from seasoned business professionals seeking to make a difference. Perhaps most critically, PCV sets, evaluates and achieves impressive goals regarding both the financial and non-financial aspects of how their portfolio businesses -- including the employees of those businesses -- are doing.

PCV offers a wonderful example of using performance to drive change. And, as indicated by the title to this post, PCV demonstrates that, while profits -- or put more specifically, positive cash flow -- is essential to the life blood of any business, there is no requirement that all businesses be 'for profit'.

None. Hundreds of years of culture -- reinforced by our transition into a world of markets, networks, organizations, friends and families -- have embedded this orthodoxy: 'business = for profit'.

It is inaccurate. Business = sustainable cash flow? Yes.

But the choice about the form of any business -- for profit or not for profit -- is a separate matter. The businesses PCV invests in are for profit. For them, cash flow must cover the costs associated with each respective business's goals of delivering great products and services to customers and providing attractive wages, benefits, skills and opportunities to employees as well as generating profits for owners. For the entity PCV, on the other hand, there is no profit component to be covered by cash. This is the key distinction. PCV is non-profit. The businesses it supports are for profit. Both need sustainable cash flow. But, unlike the businesses it promotes for the good of low and moderate income areas, PCV does not require cash to fund profits for itself.

Most of us are familiar with non profit businesses that provide goods and services. Pacific Community Ventures is a business that connects the capital markets to the goods and services markets. PCV invests in for profit businesses that benefit folks in low and moderate income areas. It does so by providing for profit enterprises both money capital and human capital. PCV is impressively successful. And, by all indications, sustainable.

And it is a not for profit. It chooses to invest in for profit businesses. But PCV itself is a not for profit captialist.

Posted by Doug Smith at 12:58 PM | Permalink

March 03, 2006

Viral Bankruptcy Update

Dana Corp, the huge auto and truck part maker, has filed for Chapter 11 in the latest spread of the viral bankruptcy begun by Delphi last autumn.

Posted by Doug Smith at 04:57 PM | Permalink

What Gets Measured

What gets measured, gets done.

It's one of the core precepts of good management and good leadership. It is not always the easiest thing to do -- especially if the challenge at hand is best measured -- or evaluated - in qualitative ways. Reducing stress in your life, for example, is a more difficult measurement challenge than, say, quitting smoking.

Still, without attending to measurement and evaluation, it is not possible to use performance to drive change.

As with all precepts, though, there is the subtle opposite equally worth attention. That is, if you wish something your organization is doing to cease, then it makes sense to stop measuring and evaluating it.

What does not get measured, does not get done.

These choices, too, tell us much about the quality and character and vision of leaders.

Posted by Doug Smith at 12:14 PM | Permalink | Comments (1)

March 02, 2006

Carnival Puts Profits First In Katrina Response

comes today that Jeb Bush helped Carnival Cruise Lines grab a lucrative contract to send three of its ships to New Orleans in the wake of Katrina. Carnival executive Ric Cooper has given tens of thousands of dollars to Jeb Bush's Florida Republicans and George W. Bush's GOP too. Jeb, of course, has high level access. He can, and did, email directly to Mike Brown of FEMA to seal the deal.

Corruption? Or, a corporation reaching out to help those in need in a crisis and a 'can do' Governor and FEMA director cutting through read tape?

Those are the red vs. blue political questions. Let's focus, though, on the first part of the second question: a corporation reaching out to help those in need.

Here's what a Carnival spokeswoman says about Carnival's civic spirit in a time of crisis: "The ships have played an effective and critical role in housing and feeding thousands of people who desparately needed help and we are extremely gratified to have been there for them."

My hunch is that this description is not far from accurate. People did need help. Those who work for Carnival must feel good about having provided it.

So, is this a case of a corporation putting the needs of the nation above profits -- of reaching out in a time of crisis to do the 'right thing'?

Well, the article goes on to mention "Carnival officials have defended the deal, saying the company will not make extra profit because the $236 million price covers the revenue it would normally receive for up to 120,000 passengers it could book."

Let's look at the fine print and the facts. A catastrophe of Category 5 proportions hits the Gulf Coast and cripples it. How many passengers who had already booked cruises canceled? How many of the 'up to 120,000' who would normally book postponed such plans? Put differently, what would Carnival's actual cruise revenues have been had they not sent the ships to New Orleans?

Next, note the phrase "will not make extra profit". As just suggested, actually Carnival probably did make extra profit when the comparison is between the actual revenues if they had kept the ships for cruise use versus the actual revenues gained by sending them to the Gulf.

Morever, there is a qualitative issue raised by 'will not make extra profit'. A devastating hurricane strikes and hundreds of thousands of people's lives are put at risk. Tens of thousands of other Americans reach into their pockets to provide money and other assistance. That is charity. Stories also circulated about businesses providing support without compensation. That is charity.

A business that provides support at it's normal profit margin is not charity. It's an exercise in putting profits first.

Let's replay the tape. Katrina hits. Jeb Bush contacts Carnival or the reverse. Carnival immediately volunteers three cruise ships -- at cost. Red tape is cut. The ships get there and people are helped.

Okay, let's replay it this way. Ditto on the contact. But this time Carnival says, "We'll send the ships and cut our normal profit margin by X%."

Either way, Carnival does 'the right thing'.

What Carnival did, though, was to extract maximum value from a revenue generating opportunity. Values in the sense of reaching out and doing the right thing were merely a by-product. They played no determinative role in this decision. Carnival probably reaped extra profit because they would not have had 120,000 normal passengers. They charged the Government full price. And, the bonus was, they were able to make 'we were there to help" claims for their brand.

Any way you look at it, Carnival did not do the fully right thing.

And, among other things, here's why it matters -- profoundly. An effective and efficient government should have competitive bidding. Indeed, effective and efficient private sector companies have competitive bidding. It just makes sense. However, in a time of crisis, bidding processes that make routine sense might impede responsiveness. Moving quick counts. Any effort consistent with speed that captures the spirit of competitive bidding is great. But, with Katrina-like disasters, all of us would hope that speed of response rises in importance -- and we would expect people who care enough to send help would move quickly and do the right thing in abiding by the spirit of effective and efficient decision making.

Put differently, we must rely on the good judgement and the values of those in a position to act.

When such players abuse that trust -- when they line their pockets and take full financial advantage -- the reaction will likely include this: further government restrictions on such decisions, even in a time of crisis.

And that means when the next crisis hits, our collective response will be worse, not better because players like Carnival and their executive Ric Cooper who undoubtedly have spent decades decrying government red tape and bureaucracy got a golden opportunity to demonstrate the power of the spirit of the rules instead of the letter of the rules and saw and seized the 'gold' by putting their self interest above interest in others.

Posted by Doug Smith at 12:39 PM | Permalink

March 01, 2006

Leadership 101

Among the principles of Leadership 101 are two critical aspects of effective communication. First, effective communicators tell the truth and listen. Second, in their communications, effective leaders are grounded (listeners have a sense the leader is on solid footing; that his or her messages are deeply rooted in strong beliefs) and clear (listeners can easily make sense of what the leader says -- the messages hang together).

These two pairs of Leadership 101 intertwine. Effective leadership means that, in his or her communications, the leader is grounded and clear about the truth -- and that the same is on display in how well the leader listens. It is not enough to get these two pairs half right. A leader who is grounded and clear about untruths and doesn't listen, for example, is a leader likely to take an organization over a cliff.

As described in Taking Charge of Change, leaders who face the daunting challenge of leading organizations through a period of profound change must lay out a clear vision for what the change is, why it is important and necessary and how it will be brought about (including the goals by which success is indicated).

Through telling the truth and listenting - and through being grounded and clear in doing both -- leaders achieve the understanding and support needed. Those following the leader can articulate the what's, why's and how's of change. They understand and can easily articulate the vision, the strategy and the earmarks or goals that indicate success and drive the enterprise forward.

None of which means there is an absence of disagreement. Quite the contrary. Through being grounded and clear in how well they listen, leaders invite disagreement so they and others can learn from it and adjust. Effective leaders seek commitment to the vision, strategy and goals by all who will hold themselves mutually accountable for delivering the vision, strategy and goals. But, because the world is dynamic and changing, effective leaders do not confuse such commitment with agreement in every particular. Again, quite the reverse.

One way of evaluating the effectiveness of leadership in an organization involves assessing the quality of understanding and commitment of those who are following. Because people are wonderfully differentiated, it's a mistake to expect 100% uniformity when asking those who work in an organization about their understanding and commitment to the vision, strategy and goals of the organization. Still, effective leadership inevitably generates such shared understanding and commitment in at least 70% to 80% of any organization.

So, what should we interpret about the quality of leadership in the following organization facing profound change:

- 42% of the employees are foggy about the mission and strategy
- 58% are clear about the mission -- but 85% of them attribute the mission to an untruth
- 72% of employees support terminating the change effort even if the goals have not been achieved
- 51% (out of these 72%) believe in the rapid termination regardless of goal achievement
- 37% of employees believe that customers who seek such rapid termination without goal achievement consider those customers as bad people

These 37% were not asked about their moral assessment of the more than half of their fellow employees who agree with those customers.

What can we learn from this survey of employees about the effectiveness of their leaders?

Have their leaders told the truth and listened? Have their leaders been grounded and clear?

Would you invest in this company?

Posted by Doug Smith at 02:10 PM | Permalink

February 28, 2006

Blended Values Strategies

Blended values strategies are choices about all the usual aspects of strategy -- but with a twist: neither the pursuit of value (money, profits, winning, wealth) nor the pursuit of other values (social, family, political, technological, environmental, spiritual, creative, legal or medical) is the trump card for all critical (or even non critical) decisions. In blended values strategies, the organization -- the business -- constructs a narrative of successful performance by and through which all key stakeholders both gain from and contribute to the success and happiness of the other stakeholders.

Blended values strategies do not put the interests of any constituency first. Businesses that identify and pursue blended values strategies do not allow 'shareholder value' to trump all other concerns. Nor do such strategies make 'the customer king', or operate to the exclusive benefit of executives and employees.

Rather, the narrative of sustainable success is an interative one that stretches out into the foreseeable future -- telling a story by which shareholders provide opportunities to the people of the enterprise and their partners to provide value and values to customers who generate returns to shareholders who provide opportunities to the people of the enterprise and their partners.... and on and on and on.

Each link in this story is ornamented with SMART outcome-based goals by which those involved know the answer to this key question: "How would we or anyone know we had succeeded with this blended values strategy?"

For shareholders, yes, those SMART outcomes will include share price, profits, market share, brand equity and more. For customers or beneficiaries, those SMART outcomes would speak to quality, speed, loyalty, share, innovation and more. And, for the people of the enterprise and their partners, the SMART outcomes would reflect success at skills, opportunities, and values as well as dollars -- whether direct or in terms of benefits.

Blended values strategies are intentionally win/win for all stakeholders. They are not 'put up' jobs that talk the talk about how 'employees are our most important assets' and 'the customer comes first', but, in the end, only walk the walk of 'shareholder value and executive compensation'.

Posted by Doug Smith at 08:39 PM | Permalink | TrackBacks (2)

February 24, 2006

Thresholds Of Decency

In our complex 21st century, tens of millions of us experience what has traditionally been meant by the word community in the organizations where we work. It is in that context that we depend on other people we know for critical aspects of our lives: security, affiliation, meaning, and more. Each day we go to work, there are co-workers who will do much to influence our health, well being and future. And, these co-workers are not limited to close friends or family. They have little relationship to us other than the purposes we share with them that are related to the purposes of the organization where we work with them.

In too many organizations, the shared purposes reflect a bias toward value (profits, money, winning) over other values (family, social, environmental, spiritual, political and so forth). Value is the trump card. If a decision will increase profits and shareholder wealth, the odds are that decision will get made. Indeed, this is a profoundly powerful description of the shared beliefs and behaviors in our organizations -- of the 'way we do things around here'.

Consequently, news that employees calling themselves scientists doctored information about health risks in order to gain profit making opportunities for their companies come as no surprise. In our world of value trumping values, this is 'dog bites man' -- not the reverse. It's common place. It's not really news in the sense of surprise. It's predictable.

Tomorrow, though, when you go to work, ask yourself: In this community you know as your organization, is there any threshold of decency below which you -- the thick we of your organization who share fates -- will not allow value to trump values? For example, if sickness and death of some of your co-workers are a potential consequence of profit making choices, does that sit above or below the threshold of decency?

Posted by Doug Smith at 01:02 PM | Permalink

February 22, 2006

Buy Clean Energy for $29.95

TerraPass is a wonderful idea. You can go to the website and, after calculating the emissions from your car or truck, purchase clean energy offsets for as little as $29.95. And, yes, nothing prevents you from purchasing clean energy well in excess of your car's emissions.

According to the website, TerraPass customers have helped reduce over 50 million pounds of carbon dioxide pollution through funding clean energy projects. I couldn't find the associated dollar amount on the site. But, through reasonable estimating, it looks like TerraPass customers have ponied up nearly a quarter million dollars. Pretty impressive for a website that -- one guesses -- has but microscopic brand recognition.

Which means, of course, you can help in at least three ways. First, buy some clean energy offsets. Second, email and otherwise create the word of mouth needed to make TerraPass a household name. Third, and perhaps most critical, set a goal and achieve it.

In Make Success Measurable, I write about performance being the primary objective of change, not change. Setting outcome-based goals is central to performance-driven change. For example, you might set this goal: "Within one month, purchase TerraPass clean energy and get at least five others to do so as well."

Easy to measure results. And, if you did this -- and encouraged those you know to do so as well -- TerraPass would soon enough have much more than a quarter million dollars on hand to invest and support clean energy.

Posted by Doug Smith at 01:25 PM | Permalink

February 20, 2006

Performance Madness At Ford

Here's an astonishing factoid from Laurence Haughton:

"In 2005 Ford executives spent over 4.4 million management days tracking and assessing their company’s performance. That’s just short of 100 days per manager on average, over 19 work weeks looking at how everyone in every department was doing and creating new plans to hit budget. And if you add it up over the last 5 years Ford has invested some $6 billion dollars and some 21 million person days in the same activity – reviewing performance and generating new plans."

I do not know the source of Mr. Haughton's numbers. But, let's accept them for a moment and explore the implications. For example, don't just think about the managers. Think too about the time, attention, effort and cost put into preparing for meetings with managers about performance at Ford. If we imagine for every managerial hour there are, say, four non-managerial preparation and attendance person-hours, then a total of 21 million person days were spent at Ford tracking and assessing performance in 2005.

Assume that, with holidays, sick days and vacation, an average person at Ford works 240 days per year. That means Ford deploys 87,000 full time equivalent folks each year tracking and assessing performance and generating new plans for performance.

According to a recent article, Ford has about 300,000 employees worldwide.

So, if Laurence Haughton -- and the assumption about non-manager prep time and effort -- are correct, 29% of the company's work force spends their time focused on reporting about and planning for performance -- instead of, say, performing.

Ford badly needs to change. And, a focus on performance is the surest path to successful change. But constant, overweening attention to metrics and plans do not necessarily equate with a focus on performance.

Say, for example, you wish to lose weight. You set a goal and you'll do well to review your progress against that goal regularly.

But, let's ask this: Would it make sense for you to spend 29% of your weight reduction effort reviewing how're you doing and only 71% actually exercising, eating less and eating more wisely?

Folks often seek to lose weight to reduce the stress in their lives. My hunch is spending 29% of the time worrying over weight loss results would add more stress and reduce less weight than the reverse.

Sure, Ford must set goals and monitor performance.

But 29% of resources stressing out over measuring, reviewing and planning for performance?

29%?

That is not performance -- it's performance madness.

Posted by Doug Smith at 05:58 PM | Permalink

February 19, 2006

Rearranging Parking Spots At Ford

A few weeks back, on the heels of announcing the loss of tens of thousands of jobs, Ford Motor Company sought to build enthusiasm for it's future by announcing that only Ford-driving employees would be permitted to park near the plants where they work. Hey, you might not have much job security. But, if you buy our products, we'll give you preferential parking.

Now we learn that employees making the Ford choice will also need to trade off the great parking benefit with the potential that, should they become paraplegiacs in a rollover accident, they will be barred from suing Ford by a new federal regulation prohibiting such lawsuits -- an anti-consumer regulation their employer supports.

Earlier posts have pointed out that American auto executives seem transfixed by cost-obsessed strategies for success. Problem is that customers respond to both costs and value. It's no surprise that Ford and GM are smiling at the new regulation. It promises more cost reductions. It may leave customers in wheelchairs; but, it seems, when given a choice between cost and value, the automakers pick cost regardless of the ethical, legal, and -- get this: competitive - concerns that all demand opposition to this atrocious regulation, not support for it.

There is an alternative. A strategy grounded in attending to both cost and value. A strategy that works. Just ask Toyota. For it to work, though, the necessary practices -- including the values demanded -- must characterize all the employees of an auto company as well as their suppliers and dealers. The focus on an integrated concern for both cost and value must permeate the executives -- not just the employees in selected departments -- regardless of where they are allowed to park.

Posted by Doug Smith at 02:11 PM | Permalink

February 17, 2006

Back Story to Next Year's 24

This week's New Yorker has a wonderful review of TV's long running show 24 and it's protagonist Jack Bauer. As fans know, each season, Bauer, with others, defeats terrorists bent on havoc and do so over the course of a single day divided into 24 TV shows, one for each hour (actually, as the NYer points out, closer to 44 minutes to allow for commercials).

Here is a potential blockbuster story for 24's producers to consider for next year's show:

Once some terror alert surfaces for Jack's consideration, we see his colleagues Chloe and/or Edgar quickly use Google video to find footage of David Sanborn, a powerful Treasury executive nodding approval to a staffer who works for the Committee on Foreign Investments, indicating Sanborn's support for what turns out to be a unanimous vote by the Committee in favor of turning over the safety and security operations of several major East Coast U.S. ports to DPW, a company owned by the United Arab Emirates.

Quick cut to a Democratic Senator expressing concern that these ports, already among the major facilities most vulnerable to terrorist attack, might further be endangered by this sale.

Quick flashback to Sanborn as head of operations at DPW, the job he held before taking the job at Treasury.

Quick cut to the current head of port operations for DPW as he (or she) briefs a new employee about the key tasks of integrating the management of the new East Coast ports into DPW's worldwide efforts. (Note to producers, writers and directors: This new employee will turn out to be a key character in next season's show -- someone Jack Bauer will be very concerned about.)

Quick cut to a dinner attended by Sanborn and his current boss, Jack Snow, the Secretary of the Treasury. At the dinner, Snow asks Sanborn about an earlier sale of several other ports to DPW by CSX, the company Snow ran before he became Secretary. Sanborn warmly smiles and tells Snow that the CSX sale was a win/win for the shareholders of all the companies concerned; and, he assures Snow the current deal will work out just as well.

Back to Bauer.

What do you think? Good TV? Would the verisimilitude of seeing real people like Sanborn and Snow help with the believability of the plot? How about if the two deals -- the sale of port operations by CSX as well as the one involving east coast ports -- were real? What if the Committee really did give unanimous consent to the deal?

Who knows? Maybe it could all really happen.

Posted by Doug Smith at 07:50 PM | Permalink | TrackBacks (2)

Science Update

Earlier posts have pointed to the corrosive effects of ideological claims of Truth (with a capital T) on the empirical and democratic (free speech) requirements of science. Whether it's a fascistic young man without any science education dictating science policy or market researchers turning their fact-based findings of their own science on unwanted facts from other sciences, the medium and long term effects remain terrible for our children and their children.

"Though all the winds of doctrine let loose to play upon the earth," wrote John Milton in opposition to censorship by government, "So truth be in the field ... let her and falsehood grapple (because) who ever knew truth put to the worse in a free and open encounter?"

Censorship. For too long we've considered it as a concept limited to adult entertainment. But now it operates within a Bush Administration bent on secrecy in all matters -- a Bush administration, to name just one example, whose market research indicates they will win elections by denying global warming and, so, seek to prevent scientists in the employ of the federal government -- that would be in the employ of us as in 'we, the people' -- from putting their concerns about global warming into the open.

Reasonable people deeply hope that the resignation of the young man for lying about his resume will be the harbinger of an end to such censorious behavior.

About which I am reminded of Mr. Darcy's comments (in Pride and Prejudice) when informed by Mr. Wickham that the latter sought three thousand pounds to pursue the law: "I hoped rather than believed it to be the case."

Posted by Doug Smith at 05:32 PM | Permalink

Education and America's Future

Jefferson, like many of the Founders, pinned the fate of American democracy on an educated public. Here is one of his lesser known comments, taken from a letter to John Adams: "I have great hope that some patriotic spirit will... call it up and make education the keystone of the arch of our government."

This week, just such patriotic spirits have launched an to fulfill Jefferson's wish by amending the Constitution to guarantee the right to a high quality education to all American students. Other nations have such a right -- but, more than two centuries after Jefferson, America does not.

I'm glad to be working with the folks at who seek to give voice to students across America in matters that affect their -- and our nation's -- future.

And, I encourage readers to go to their -- both to sign the petition if young enough and support the effort if you are older.

Posted by Doug Smith at 03:38 PM | Permalink

February 16, 2006

Headline: Some Shareholders Motivated By Self-Interest

The passion for uniformity sometimes induces otherwise sane folks to utter astonishing words. Or so it seems with these comments captured in an article at Institutional Investor about shareholder friendly corporations.

First, the author of the article:

"The presence of some unsatisfied owners at companies otherwise deemed the most friendly to shareholders highlights a growing concern among some institutional investors about the new wave of shareholder activists. There is no one-size-fits-all approach to governance that will ensure that a company is seen as shareholder-friendly, they caution. Although activists may be serving the greater good by drawing attention to corporate performance and governance, they may also prove to be more concerned about their own interests than with broader reforms."

Then an investment officer at Oppenheimer:

"There is a risk that some investors can become self-serving when they talk about governance. I don't think it's particularly shareholder-friendly if, for instance, a company does something at the insistence of the bondholders that disadvantages stockholders or that sacrifices long-term growth for short-term returns."

Then a law school professor:

"These folks are not interested in do-good reforms. Their goal is to make money."

So, let's recap. There's a growing concern among institutional investors about other investors who pursue their self-interest above the greater good. These might include bond holders whose self-interest differs from stockholders. Perhaps most troubling are those sharehoders who have a goal of making money.

From which, we learn that, evidently, money making forms no part of the goal of institutional investors, unless of course those institutional investors hold bonds instead of stocks -- or, perhaps those institutional investors represent or join in with other investors who are pursuing self-interest.

Sound confusing? Well, then, imagine the difficulties in trying to gain a ranking in Institutional Investor's survey of 'shareholder friendly' corporations. All of which recalls Rodney King's famous words put in this different context: "Come on, shareholders. Can't we all just get along?"

Posted by Doug Smith at 03:11 PM | Permalink

February 15, 2006

The Stan Test

Whether you work at a for profit, non-profit or governmental organization, you might want to gather a group of colleagues and take the "Stan Test":

Do you have customers -- whether consumers or businesses -- who have done business with you over the long term?

Would your customers be so shocked and disappointed if you went out of business that they would write you love letters, notes imploring you to get back into business, and, even, offer to finance/buy your business if it would help?

Would your customers' loyalty testify to the quality of your products and the affection, sincerity and personalness of your customer service?

Would you care so much about the work you do and the customers you serve that, after losing a spouse, turning normal retirement age and undergoing heart surgery, you'd decide to go back to 15 hour work days that start at 3 a.m.?

That's the "Stan Test". And at least one business owner, Stan Pascal of Stan's Produce in Los Angeles got an A+ when he took the "Stan Test" in real life.

Posted by Doug Smith at 02:50 PM | Permalink | TrackBacks (1)

February 11, 2006

Competence Is As Competence Does

Any sincere politics directed at governing our complex world of markets, networks, organizations, friends and families would find its way to some minimum threshold of competence as a prerequisite to office. Minimum competence has no partisan home. A person either qualifies by exceeding the minimum threshold or does not.

Minimum competence is also a prerequisite to performance. No matter how much I might like to be an opera singer, I cannot because I lack the minimum competence to perform. Notwithstanding whatever might have been the case with desire or will (or the lack thereof), Mike Brown lacked the minimum competence to lead the Federal Emergency Management Agency. Had it been a private or non-profit organization governed by folks who cared deeply about performance and purpose, Brown simply would never have been hired. Nor, had he participated in mangagement at any level, would his performance be rated at 100% (see earlier post: Yes, this happened.)

All of which raises a variety of questions about the comments made yesterday by Ken Mehlman, the head of the Republican Party, about competence. In a speech to conservative activists, he exclaimed, "We do not and we never should question these Democrat leaders' patriotism, but we do question their judgment and we do question their ability to keep the American people safe," he said. "These are people we know love their country, the question is: Can they protect it?"

Judgment and ability are two critical aspects of competence. According to the head of the Republican Party, every single Democratic leader lacks these two characteristics. Every single one. Somehow this man has evaluated every single Democaratic leader in the United States of America and enthusiastically admonishes conservatives and Republicans -- indeed anyone reading or seeing his quotes -- to distrust the minimum competence of any human being who has the label "Democrat".

So, let's put this in other terms that make the broad generalization understandable. Imagine a person in a powerful position saying, "I don't question the patriotism of women. But I do question their judgment and ability." Or, "I don't question the patriotism of Catholics. But I do question their judgment and ability." Or, "I don't question the patriotism of every employee at Fox News. But I do question their judgment and ability." Or, "I don't question the patriotism of men and women who have served in Iraq. But I do question their judgment and ability." These parallels have nothing to do with the worst aspects of 'political correctness'. They have everything to do with this reality: Human beings have traits. They have gender, race, religion, height..... and they have jobs and affiliations.

Among the other attributes of minimum competence to govern and lead in our complex world of markets, networks, organizations, friends and families is an orientation and capacity for problem solving. Neither you nor anyone you know would hire or happily work with any manager or leader who was utterly lacking in this capacity. Again, we're discussing a minimum threshold. You might currently work with others whose problem solving orientation and capacities fall short in your opinion. But, falling short in general differs from falling below some minimum threshold.

A part of that minimum threshold is this: Problem solving demands inviting and respecting (even if not adhering to) as many points of view as possible. Two heads are better than one. Again, every single one of you have experienced problems that were better solved through multiple view points instead of a single view point.

When Ken Mehlman seeks to involve himself in solving problems of getting Republican candidates elected to office, we can be sure he seeks out many viewpoints. At least with respect to electoral politics, we can be confident he rises above the minimum threshold of competence.

But what about governing itself? What about the minimum competence to deal with the vast array of problems facing government, problems such as providing affordable health care, dealing with hurricanes, rebuilding nations destroyed in wars, educating children, countering terrorists, assuring fiscal responsibility, accounting for money spent, finding and keeping the line between lobbying and corruption, protecting the enviroment and assuring America's respect and standing in the world?

Those are difficult problems demanding the very best in problem solving and, therefore, demading officials who rise above a minimum threshold of competence. They demand openness to many points of view. Ken Mehlman declares himself opposed to this kind of problem solving when it comes to the job of governing America instead of the job of gaining and keeping the power to rule America.

By his own words, he -- and any in his audience who take his words as their leader seriously to heart -- fall below the minimum threshold of competence upon which all of us rely to keep the planet safe, sane and sustainable. Not because Ken Mehlman is a Republican or a man. Rather, because his own beliefs and words evidence his lack of minimum competence. Ken Mehlman declares himself and all who would follow him opposed to any point of view regarding the problems we face if that point of view is linked to a human being who bears the label "Democrat". Based on recent national elections, Ken Mehlman and all who would follow him declare themselves opposed to problem solving that invites and encourages the participation of tens of millions of people.

Based on the track record of the past several years, Mehlman may not be alone in this regard. There was Brown at FEMA. There was Katrina. And, we have also seen poor problem solving on display in a prescription drug program that does not work, a rebuilding effort in Iraq that has basic security and infrastructure woefully broken, an education policy in tatters, a counterterrorism effort more characterized by questionable legality than results or efficiency, an utter lack of fiscal responsibility starting with no accounting for money spent, an increasing line up -- literally of the police type -- of corrupt officials, broad attacks on science that undermine environmental efforts, and an all-time low in America's standing among people around the world.

Every aspect of this atrocious performance record would have benefited from the kind of minimum threhold of competence Mr. Mehlman lacks. These are world class problems we face. We need at least a minimum orientation toward problem solving in those who we elect to govern if we hope to do better than today's tragic track record of bad performance.

Mr. Mehlman, by his own admonishing words, lacks this competence. Or, he is just grandstanding. He is just putting his passion for winning and ruling above his concern for people, values, America and the planet.

Either way, he is dangerous. And, he is spreading his disease of incompetence to others.

Posted by Doug Smith at 12:29 PM | Permalink

February 10, 2006

Measurement, Performance and Credibility

In our new world of markets, networks, organizations, friends and families, the purposes and performance of organizations determine the fate of the planet. Organizations -- whether governmental, non-profit or for profit -- sit at the "mid-level" between massively large contexts such as markets and networks on one side and tiny contexts such as friends and families on the other. Organizations are the crucibles in which people -- in their roles as employees and volunteers -- shape and pursue shared purposes that simultaneously use amassed resources to contribute to the fate of the planet and determine much about the fates of those folks who are employees and volunteers in the organizations. Organizations are 'thick we's' who share fates with others beyond friends and family and whose shared purposes say much about how the common good of those employees contributes to the greater good of the planet.

For all of these reasons, the performance of organizations and how that performance is measured or evaluated is of paramount importance. For example, too many private sector companies evaluate performance strictly in terms of shareholder value -- a fundamentalist ideology every bit as dangerous to the planet as religious terrorism. Just as the best religious and spiritual values are tempered by humility, tolerance and concern for others, so the best financial and economic values are strengthened by equivalent concern for customers, employees, joint venture partners and -- as just stated -- by how the common good of a company contributes, sustainably, to the greater good of the planet.

How, then, is the performance of governmental organizations to be evaluated? Surely there should be some evaluation of the efficiency with which resources are deployed to produce results. In addition, there ought to be a narrative of results -- a narrative of effectiveness -- by which the resources provided by taxpayers and others are used to provide opportunities to the people who work in the government organization (and their joint venture or alliance partners) to provide critical governmental goods and services to folks who need them in ways that inspire confidence by taxpayers and others to continue to provide resources that support opportunities for employees... and on and on and on.

This is a reinforcing cycle of efficient and effective performance. It demands evaluation at each link of the cycle -- evaluation and measurement about the quality of opportuniites provided employees and strategic partners, the goods and services delivered, and the sense and belief by taxpayers and other resource providers that their support is making a difference.

Performance evaluation is hard work, particularly when the parameters are qualitative instead of quantitative. Still, there is a threshold of credibility for such efforts -- a lower limit of 'believability' above which difficult judgement calls must sit to be credible.

So, let's all applaud the possibilities for learning, improvement, transparency and effectiveness within a widespread effort called to evaluate the performance of governmental organizations. In this effort, hundreds of governmental organizations ('programs') are evaluated through a series of questions provided to those who work in the organization as well as outsiders.

The standards used to translate qualitative questionnaires into a quantitative yardstick are interesting. The best score possible is 100; the worst 0. A governmental program is considered as 'performing' as long as the score is above 50, or "adequate'.

Put differently, the 'performing' vs. 'not performing' distinction rests literally with the 'glass half full', 'glass half empty' line of demarcation.

Okay. Let's accept this as an intelligent starting point to build a culture of accountability and performance in governmental organizations. And I mean that. Decades of experience managing difficult change suggest this is a smart way to start.

Having said that, the low threshold for 'adequate' performance puts a very high premium on credibility of assessment and evaluation. If low grades are 'good enough', then we need to be confident there is no 'grade inflation'.

With this in mind, let's look at what the evaluations tell us. According to the website, 72% of the federal programs are performing and 28% are not.

Among the 72% of programs performing is FEMA -- it received an adequate ('glass half full') rating. In the assessment, FEMA rated a 100% -- a perfect score -- for . In the section about steps being taken to improve performance, we are told "Reassessing the program to determine strengths and weaknesses in its response to Hurrican Katrina."

It is painful to see this assessment. In our new world of markets, networks, organizations, friends and families we -- and our children and their children -- depend on the performance of organizations to ensure that the future of the planet is safe, sane and sustainable. We must all applaud any credible effort to evaluate the performance of governmental organizations. It's a critical element to the movement begun with the book t.

But, such efforts must be credible. And that means the questionnaires used, the responses given and weighed, the oversight of governmental officials and other methods must pass some minimum smell test of credibility.

FEMA's performance -- in the wake of Katrina -- cannot possibly or credibly be evaluated as "adequate".

That expectmore.gov judges FEMA a performing program casts doubt on the entire edifice of their evaluation efforts.

Go ahead. Use this 'FEMA" standard for your personal and household decisions. I mean it. When you're figuring out what investments to make for your retirement, or how to help your kids choose a college, or what doctors to go to when you are sick -- go ahead, find an evaluation effort that judges the performance of the choices you have and rely on a service that gives 'performing' to an investment choice, a college choice or a medical choice with FEMA's actual track record.

Here's my prediction: You wouldn't do that. You wouldn't put your future in the hands of either an investment, college or doctor as demonstrably incompetent as FEMA -- and you wouldn't rely on any evaluation service that rated such incompetence as performing.

So, how do you regard the money, person power and other resources being put into expectmore.gov?

Does it make you 'expect more'?

Posted by Doug Smith at 02:02 PM | Permalink | TrackBacks (1)

February 08, 2006

Freedom of the Press At The Tribune Company

In our new age of markets, networks, organizations, friends and families, the organizations in which we actively participate are the closest contexts to what we have traditionally meant by the words community and town -- to the experience of sharing meaningful aspects of our fates (political, economic, social and more) with people who are not necessarily friends or family. Organizations can be work-based or volunteer, for profit, not-for-profit, governmental, formal, informal, large, small or otherwise sized. Of these, though, organizations where we work stand out for their importance to our character, our values and our fates. We have much on the line in organizations where we work. And, we have it on the line with others upon whom we depend for our livelihoods, our well being and our actual and not just professed values.

If we wish to understand our actual beliefs and behaviors with regard to any particular value, we need to look at how and whether that value is practiced in the organizations where we work more than the towns and neighborhoods where we happen to reside. In our towns and neighborhoods we are mostly consumers and friends and neighbors. Yes, the shared idea of citizen is powerful and important. We should vote and otherwise participate in local affairs. But democratic practices designed for a world of places require retuning to fit our new 21st century of markets, networks and organizations.

Just do a time and motion study of your life. You do not have time to actively participate in the role of citizen in all the many aspects of local government. Instead, you do have time to be an informed voter -- an informed consumer of local government policy and services. Do that. Be an informaed voter, an informed consumer. But don't kid yourself that somehow you can stop 'bowling alone' if by 'bowling together', you mean governing together some place-based community of folks with whom you actively share fates.

Stop dreaming about places your ancestors used to live with other people. And start taking responsibility for the values of the organizations -- the 21st century 'towns' and 'communities' -- where you actually do share fates with others beyond freinds and family.

Of course, to be an informed voter and an informed consumer, you rely on organizations -- and the people who share fates because they work together in those organizations -- to provide the information you need. That is more likely to happen if there is free speech and free press within those organizations. For decades, for example, there was not free speech or free press within tobacco companies. And, as millions of uninformed consumers died as a result.

All values are hardest to live by when self-interest is vulnerable. For decades, undoubtedly executives and employees of tobacco companies must have worried that information about links between disease and tobacco would hurt their self-interest. So, instead of pay and jobs and wealth, they sacrificed free speech. And that's just a fact. That's just the way it was.

Beyond our own organizations, of all others where we -- as consumers, voters, shareholders, networkers, family members and friends -- ought most to pay attention to free speech and freedom of the press, news-based organizaitons should be high on the list. For example, if you'd like to understand the real values that folks stand for in media companies, look at the values they actually practice where they work. For the folks who work at the Tribune Company in Chicago, the actual and real shared beliefs and behaviors regarding free press and free speech says much more about their character and their values than does their participation as customers in local, state or federal governmental markets.

And so, it's interesting to note what one former Tribune reporter says about the fate of an article on executive pay in a newspaper owned by the Tribune Company -- it was edited to exclude the pay of the top executive at the Tribune Company:

"It started as an assignment to analyze some executive compensation data for the paper’s annual CEO pay section. As I crunched the numbers, it became apparent that FitzSimons’ pay would figure prominently in the article. It seemed like an article we needed to publish, even if it would reflect negatively on the Tribune’s top exec. So I wrote it. My editor signed off on it. The copy desk cleared it and slated it for publication last May. And then, 36 hours before the article was to appear, it was killed. Tribune editors ducked questions about why they hadn’t run the article, and declined to schedule it for publication. As a member of the Trib’s investigative reporting team, I’d often been in the position of demanding answers from public and corporate officials about their conduct. When it became apparent to me, after months of evasive corporate-speak on the FitzSimons article, that the Tribune wasn’t willing to subject itself to the same kind of scrutiny, I resigned."

So, let us ask, "What do the people who work at the Tribune Company really stand for when it comes to freedom of the press and freedom of speech?"

Posted by Doug Smith at 03:17 PM | Permalink

Removing The Deck Chairs From The Titanic

That's what is happening at General Motors. Having cast tens of thousands of families into financial jeopardy, eliminated tens of thousands of jobs, shuttered plants across the country, and reduced health and other benefits for current and prior employess, the weakened auto giant yesterday announced a cut in dividends for shareholders as well as reductions in pay for senior executives and board members. All of which keeps GM steadily on course for disaster. Yes, they've gone beyond rearranging the deck chairs. But, tossing chairs off the sinking ship won't save this ship from sinking.

GM sells cars to customers. That means the company must attend to both the price of those cars and their value. For any market segment -- young people, folks interested in saving the planet, muscle-boys who love power, and so forth -- the prospective auto buyers and leasers weigh feature and function and image against price. Low prices are critically important and lowered costs provide the chance to sustain them. But, value matters too.

Consider Toyota, rapidly overtaking GM as the number 1 auto maker in the world. Toyota moved aggressively several years ago to ensure they were not reliant on a product line up heavy with gas guzzling SUVs. GM didn't. Toyota invested in hybrids. GM didn't. Toyota created and put heft behind cars designed for young adults. GM didn't. Toyota also managed it's costs. Better than GM. But, the key here is that Toyota looked at both sides of the consumer value proposition. GM stayed strictly inside the box on value -- SUV, SUV, SUV, SUV -- and moved slowly on costs. Now, GM is betting strictly on costs.

It still doesn't 'get it' when it comes to the value side of it's products. As previously noted, GM invested heavily in product design and manufacturing flexibility -- that is, the capacity to move quicker to provide new products. It can now bring 15 new products to market quicker than ever before. And, what are the deck chair managers doing with this flexibility. 13 of the new products will be re-designs of full size SUVS.

13 out of 15 are bets on the past.

It's no surprise then that Toyota made billions in 2005 while GM lost billions. Or, that Toyota's market capitalization -- the value shareholders put on the future health and well being of a company -- is $188 billion or 14 times higher than GM's.

If you were a bright, enthusiastic car designer, which company would you want to work for? If you had the talent and energy to have a choice in life about jobs and loved automobiles, where would you want to work?

To be sustainable, any company's performance must deliver value to targeted customers who generate returns to shareholders who provide opportunities to the people of the enterprise who deilver value to cusotmers.... and on and on and on. This cycle of reinforcing performance can be positive (like Toyota's). Or negative. At GM, the board of directors and the executives think they can cost cut their way to prosperity. It won't work. They might be able to toss some chairs off the ship. But, this ship -- the ship they captain -- is sinking.

Posted by Doug Smith at 01:51 PM | Permalink | TrackBacks (1)

January 30, 2006

Winning Product Strategy: Taking Responsibility

In late 1982, we all learned the hard way about the profound reach of bad products in a world of markets, networks, organizations, friends and families with the discovery that someone had laced Tylenol with cyanide. We also got a classic lesson in social responsibility. From their instantaneous decision to cooperate with law enforcement and media to their famous full recall of Tylenol, Johnson & Johnson established themselves as the standard for how to put the health and well being of customers and society ahead of nearer-term concerns for the bottom line.

In J&J's case, the inherent danger was obvious: how best to respond to poisoned pills already in stores and homes. Putting the public first was both admirable and effective. And, I think, it offers companies an insight into winning strategies that are more forward and proactive. No need to wait for things to go wrong. Make 'taking full responsibility" sit at the heart of your product strategy and you'll win in a world so entirely dependent on products and services for life itself.

As described in On Value and Values, "Products, services and markets overlay all aspects of life. Every human activity can be enhanced or eliminated by good things to have provided through products and services..... This transforms the meaning of products and services beyond our inherited understanding. For example, the air we breathe swirls with winds stirred by markets, networks and organizations trading in pollution rights, or heating and cooling the great indoors. Water? It is bottled and branded, regulated and managed, and bought and sold in all three natural states. The same holds for earth and fire -- and other substances nominated over the centuries by philosphers and scientists as the primary materials of reality..... When everything is or might be a product or service, the idea of markets -- the meaning of what markets are -- encompasses life itself."

Today, all aspects of our lives are mediated and experienced through products and services. That is our new reality. Now, we must find a way to ensure our lives -- and the products and services that make our lives possible and worth living -- are fully good. This challenge cannot be met if our understanding of social responsibility begins only with the discovery of bad products. We must build in the good up front -- and that means as employees, we must act to ensure that our products, our services and our brands blend our concern for value with our concern for values. We must take this responsibility because our customers depend on us to do so.

Employees and executives that embrace such blended values strategies -- that ground their market strategy in taking responsibility for value and values -- will win in the 21st century. Why? Because while we are employees and executives in the organizations where we work, we are customers of all other organziations. When we learn to act as employees on blended values strategies, we take the lead in doing unto others -- as customers -- what we would want them as employees to do unto us when we are customers.

Posted by Doug Smith at 03:44 PM | Permalink

January 29, 2006

Beggar Is Better

The path to a growing, robust economy is through impoverishing workers, according to Eduardo Porter of the New York Times. You see, here's the skinny: Unions have been too successful. Private-sector union members, on average, make 23% more than non-union employees. This, in turn, means that unionized companies -- such as Ford and GM -- operate at a severe competitive disadvantage. Porter must believe this is the sole disadvantage explaining why these auto giants have announced layoffs of 60,000 workers in the past few months. Porter doesn't seem to think product strategy, distribution channels, shareholder value demands from the financial markets, executive compensation, or anything else is worth throwing into the mix of any explanation about the failures of these companies. Or, at least if he is thinking such things, his editors have deleted such musings.

You see it's that 23% advantage that's killing competitiveness. The path to business success, by this logic, lies in reducing the wages of workers (and, of course, it also lies in reducing health and other benefits). Beggar thy workers! That's the answer!

It's an answer and strategy that has characterized the US economy for decades. Real wages have steadily declined for more than thirty years. Meanwhile, folks at the top of the heap are doing better and better. Since we're looking at car companies, let's consider Michigan. In the past 20 years, families in the bottom 60% of the population have seen their incomes rise a total of, at most, 26% -- or at best just over 1% per year. Those in the top 5% in Michigan -- the auto executives and other well-to-do who guide the economy -- have seen their incomes double -- rise by a total of over 100%; or, straightlining for simplicity, by 5% per year. Put in dollar terms, the lowest sixty percent of families have gotten pay raises of between $165 and $2200 per year while the top folks have seen their incomes rise by over $4800 per year for 20 straight years.

The same pattern pertains in other states. And, according to a spokesperson for New York's Business Council, this is a great thing because the wealthy pay 'huge sums in taxes' enabling New York State to have generous social services for the poor.

So, here's the strategy: Beggar workers so that companies can be competitive so that the executives and shareholders of those companies can continue doubling their incomes every twenty years so that those folks can pay 'huge taxes' to support government social services needed to respond to poverty which, of course, will be rising rapidly as we make sure that workers continue to see their incomes remain flat to declining and any health and other benefits disappear.

To Eduardo Porter and the editors at The New York Times this is as good as a glory road to national health and prosperity. And, it's all down to the the success of the American Union movement.

Posted by Doug Smith at 01:55 PM | Permalink

January 27, 2006

Superficiality Is Spectacular

Not. But this kind of headline would surely please the chuckle-headed editors at the Los Angeles Times who use their musing on corporate participation at the Sundance film festival to proclaim, "Greed is good". Right away, let's not lose our balance over the participation itself -- the partying, free goodies, and financial support given to independent film makers and others. Sundance is a staging ground for potential commercial successes. Of course corporations want to be there to seek out opportunities to promote their brands and companies. There is nothing necessarily bad in that and much that might -- might -- be positive. We do live in a world of markets, networks, organizations, friends and families. We do live in a world that must find a way to integrate and blend our concern for value with our concern for values.

But, 'greed is not good'. Greed has never been and will never be good. Greed's more modest cousin -- self-interest -- has and can fuel markets to produce all kind of good. But self-interest and greed are not the same thing. Greed is what drives a sociopathological obsession with value that splits off and subordinates concern for other values. Greed is what causes the yuck-it-up editors to lament that their company ethics policy forbids them from accepting any of the free gifts. Hey, why not? Get on the greed bandwagon. Open yourselves up for all comers. Why not put Jack Abramoff on your editorial board while you're at it? Or Tom Delay? Or Ken Lay? Or Jeff Skilling? Or Bernie Ebbers? Or Martha Stewart? Or Richard Scrushy? Or Armstrong Williams? Or Duke Cunningham? All these folks believe and behave with full fidelity to the precept that 'greed is good". And, hey, look at the kind of country they've given us?

Oh, and while you're at, go home tonight and celebrate greed with your kids. Bring them into the party. Encourage them to go out there and be greedy. And to grow up believing and behaving that greed is good. Go ahead. You say you believe it.

Posted by Doug Smith at 01:02 PM | Permalink

January 26, 2006

The High Cost Of Bad Leadership

Regardless of the legal outcome of the Skilling and Lay trial beginning next week, the high cost of their bad leadership is well established. In exchange for the unsustainable run up in shareholder value -- the single answer to all challenges in the Enron regime of Skilling and Lay -- energy markets were turned into casinos, employees at both Enron and other organizations lost jobs, consumers went without power and other necessities, marriages were ruined, and people were endangered. Evidently, Skilling's defense will combine claims that he was unaware of the bad deeds going on and, to the extent he approved anything, all such approvals were legal according to the accountants and lawyers advising him.

I was reminded of all this when I received a notice in the mail about a product defect. Over the past several decades, we've all become quite familiar with the strong shared concept and idea named 'product recall'. For example, The Salt Lake Tribune runs a service for readers to be sure they are up to date on all such recalls. In our new world of markets, networks, organizations, friends and families, bad products can find there way into anyone's life anywhere. The human beings selling you a bad car, a bad toy or an exploding mortgage don't live down the block or around the corner. You don't see them at church or your kids' school. You don't know them in any meaningful way. You know their companies-- and their brands.

If single answer fundamentalism drives their company and brand to choose value over values -- to put your health, safety, security and well-being in jeopardy because of the dedication of the executives and other decision makers to the single, all determining goal of building shareholder value -- you cannot count on 'locality' to bail you out. Corporate cultures driven by shareholder fundamentalism are prone to reach into your life and shake it up -- with dangerous products...... and with bad leadership.

A century ago, the adverse effects of bad organizational leaders likely stayed within the ambit of the places those leaders lived with others. Plenty of harm could and did result. But, today, in our new world of markets, networks, organizations, friends and families, the high cost of bad leadership takes on entirely new and breathtaking scope. So far, though, we've not adjusted to this new reality.

It's great that we have product recalls. Now, however, we need to figure out as many and as effective means as possible to have 'leader recalls'. And waiting for a drawn out legal process triggered after most of the damage has been done is better suited to a mid-20th century world of places than our new 21st century world of markets, networks, and organizations. Meanwhile, for shareholder activism and democracy to work demands, among other things, rooting out and eliminating unsustainable shareholder value fundamentalism in favor of a blended values approach that honors and builds shareholder value and values in concert with employee value and values, customer value and values and societal value and values. We must find a way to save shareholder value from itself -- and from the bad leaders whose extreme self-interest now imperils the world to be inherited by our children.

Posted by Doug Smith at 12:45 PM | Permalink

January 24, 2006

Exploding Mortgages, II

Exploding mortgages are back in the news. Ameriquest, the huge finance company whose website comforts potential borrowers with promises of 'personal attention' needed to help with the 'lonely process' of getting a mortgage was evidently providing 'stalker-like' personal attention and has now agreed to roll back its aggressive practices -- practices that left many of its customers with exploding mortgages. Customers like 69-year old Carolyn Pittman, a widow with a heart problem who has difficulty reading and who, apparently, succumbed to Ameriquest's high pressure sales practices and took a mortgage that overvalued her home and was padded with illegal fees. Her Ameriquest mortgage exploded. She now faces foreclosure and the loss of her home and equity. Under the terms of this settlement, if she were to accept it, Ms. Pittman would get a few hundred bucks.

Showing some of that 'personal attention', an Ameriquest spokesperson said of Ms. Pittman, "Her story is unfortunate." The head of Ameriquest, in contrast, merely expressed 'regret' that thousands of customers got exploding mortgages because of the unethical sales practices that Ameriquest now promises to change. At a few hundred bucks per victim, it's a sweet deal for the company that has become a household brand name through it's TV and other advertising in support of the "American Dream". Through the predatory practices, fees and rates it has charged folks like Ms. Pittman, Ameriquest has made claims for values ("American Dream") while keeping its eye on value -- on profits, winning and generating wealth for it's executives and shareholders on the backs of 69-year old widows with heart problems and difficulties reading.

Indeed, one might ask all the employees of Ameriquest -- the thick we who share fates with one another and, thereby, whose character as human beings highly correlates with the character of Ameriquest's brand -- 'what do you stand for?" And, if you stand for helping all people achieve the American Dream, then why did you use predatory practices, fees and rates to provide folks with exploding mortgages? And, as the ill effects of these practices became more known to you, why did it take the efforts of 49 states to bring about the changes you've just announced with this settlement.

There's a word for the damage done in our new world of markets, networks and organizations by this kind of extreme, fundamental dedication to value without values (or, the reverse): terrorism.

Posted by Doug Smith at 08:56 PM | Permalink | TrackBacks (3)

January 23, 2006

The Twin Engines of Performance

When my good friend Saad Allawi of Performance Logic called me several weeks ago, he asked my view of software that helps leaders 'see and manage' a portfolio of projects in their organization. Like most software, these applications are only as effective as the purposes and performance focus for which they are used. If the projects have activities instead of outcomes as goals, if the outcomes obsess solely about financial metrics instead of blending both the financial and non-financial, if confusion reigns about the difference between the team and single leader disciplines or if the software fails to put the projects in the context of the overall organization's vision, strategy and operations, then the odds go up the software will add to cost and 'busy-ness' and subtract from value and values instead of the reverse.

None of which was news to Saad. What may have surprised him a bit, however, was my contention that such software -- even when well used for purposes and performance -- falls short of it's full potential because it too often is limited to projects only. As Saad and I describe in our white paper, work -- and therefore the engines of performance -- in today's 21st century organization (in all three sectors of the economy) essentially bifurcates into two categories: projects (or discontinous, ad hoc efforts) versus process (or continous, repeatable effort). All organizations can be seen this way. And, leaders who connect performance to these twin engines put themselves and their organizations in a fair way to win in today's dynamic business environment.

Fifty years ago, nearly all work was stable, continuous and repeatable -- and it pretty much tracked with the organization chart. Today, in contrast, three major things have changed. First, even the stable, continous work is best seen as process instead of task or function because otherwise organization's run 'silo' risks. Second, the percentage of work that is project-based has rocketed. And, third, those who run their organizations strictly for financial ends seriously risk failing because all substantial challenges have both financial and non-financial aspects -- must, in other words, be conducted with a view to performance that measures success in terms of both value and values.

Posted by Doug Smith at 04:31 PM | Permalink

January 21, 2006

ExxonMobil Explains Windfall Profits

Yesterday, a Vice President of ExxonMobil conducted a web-based news conference to preview both the company's windfall profits of over $30 billion in 2005 (from extraordinarily high energy prices) as well as ExxonMobil's proposed 'framing' for why the profits are no big deal. "Many people say that the energy industry is reaping unfair profits and that consumers are paying the price," Cohen said. "But one has to have a point of reference. The reason that energy industry earnings are so high is that our business is immense."

Hey, we're a big industry. So, we make big profits.

Only, according to Cohen, ExxonMobil is really not so big -- or, well, yes it is big, but it is a small player in the world of energy because it supplies only two percent of the world's energy.

So, if you're keeping score on the proposed 'point of reference' needed for framing and understanding the $30 billion in profits, ExxonMobil is very profitable because it is part of a big industry -- but it is not such a big part of that industry that it can really do much about the workings of the industry.

ExxonMobil might seem like a giant oil company to you. But, really, it is only a small player in a big industry -- and pretty much toothless to do anything about prices that threaten households of millions of people who, this winter, must make tradeoffs between gasoline to get to work and fuel oil to heat the home against food, medical and other necessities. Nor can or should this bit player in the big industry pay any more taxes that it already does because it needs the money to be able to afford the oil refineries and other activities required to supply 2 percent of the world's energy to -- well to whom?

For that answer, let's take a look at ExxonMobil's 2004 Corporate Citizenship Report, in the section entitled Economic Progress and Corporate Governance where the people of ExxonMobil commit themselves as follows: "ExxonMobil's primary benefit to society is providing affordable energy to people all over the world."

So, let's continue our search for the best 'point of reference' for understanding ExxonMobil's $30 plus billion in profits in 2005. The company makes big profits because it is in a big industry. But, it is a small player in a big industry and cannot do anything to affect price swings in that industry. However, it is committed to being a good corporate citizen, primarily by providing affordable energy.

It's just that, hey, we're a bit player and there's really not much we can do to make energy affordable because the industry is huge and, as explained yesterday by the Vice President of ExxonMobil, "Oil and gasoline are global commodities and are subject to price swings in the same way as agricultural products, minerals and steel, and it's a very competitive market."

So, how does ExxonMobil hold itself accountable for bringing affordable energy to the people of the world?

Well, according to the Corporate Citizenship Report section on Economic Progress and Corporate Governance, ExxonMobil does this by paying taxes and making community contributions. Yes, you've read this correctly. ExxonMobil doesn't actually do much about making energy affordable in what might seem the more obvious ways such as keeping prices as low as possible. Rather, it pays taxes and makes community contributions (although evidently not the kind of community contributions Citgo is making this winter -- the kind that bring energy to low income communities in danger of freezing.)

So, let's wrap up our search for the best point of reference to frame our understanding of ExxonMobil's $30 plus billion in profits from the high energy prices in 2005 that made energy unaffordable to tens of millions of people around the world:

- ExxonMobil has big profits because it's in a big industry
- However, ExxonMobil is a bit player in this big industry
- So, ExxonMobil cannot do much about prices that made energy unaffordable to tens of millions this winter
- As a result of it's bit player status, ExxonMobil chooses to fulfill it's commitment to providing affordable energy by paying taxes and making community contributions instead of attempting to work directly on affordability
- However, ExxonMobil's community contributions do not include Citgo-like programs that intervene in low income communities in some danger of freezing this winter because they cannot afford high fuel prices
- And, because ExxonMobil is a bit player that needs all the cash it can get to keep supplying affordable energy to the people of the world, ExxonMobil cannot pay any more taxes that it already does, which, by the way is a lot of taxes

Got that?

Posted by Doug Smith at 01:35 PM | Permalink | TrackBacks (1)

January 18, 2006

Exploding Mortgages

A survey just out from the National Association of Realtors tells us that 43% of first time-home buyers put no money down. None. Nada. Zilch. 43%. Not 23%. Not 10%. Not 5%. 43%. More than 4 out of ten.

How? Well, as housing prices have escalated during the real estate bubble, the real estate and financing industries have accomodated the unsustainable inflation through a creative range of mortgages that put all the pain 'down the road' -- in a distant future that first-time (indeed, many repeat) buyers -- dreaming of owing a home or making a killing in real estate investing -- easily overlook. Risks? Well, of course there are risks. "But if you... or if I.... don't get in on the action now, beware!"

The self-interest of mortgage brokers and real estate agents motivates them to 'help out' these first-time buyers. It's how these professionals make their money. That is not bad and it is not evil. It's human nature.

Still, the future of 43% of those purchasing homes for the first time is a precarious one. The dream can easily turn to nightmare if (1) rates rise in their adjustable mortgages; (2) home prices fall; (3) jobs are lost; (4) some one gets sick; (5) credit card debt pushes the home owner into bankruptcy; or, (6) any combination of the above.

A core principle of leadership in our new world of markets, networks, organizations, friends and families demands that concern for value be blended with concern for values such as family, social, political, sustainability and more. Leaders must see the whole of their lives. They must stop the dangerous practice of leading one way from 9-to-5 when they are at work 'making a living' and another way the rest of the day when they are at home or play or in church 'just living'.

The President of the National Association of Realtors is choosing to split his concern for value and values when he says he is not worried that 43% of first-time home buyers put no money down. "If the number was higher than that, I'd be concerned."

And how much higher would that be? 44%? 100%?

Posted by Doug Smith at 02:00 PM | Permalink | TrackBacks (3)

January 16, 2006

Martin Luther King Jr.

As we reflect on the birth, life and dream of Martin Luther King Jr., let's commit ourselves to having the courage to be the change we wish to bring about. Only adults can take responsibility for their own change. No one else can do it for us. If we wish to find leaders who care about building a better future for our children and the planet, then we must find a way to exert that leadership ourselves. If we wish to continue the great democratic project begun in 1776, then we must commit ourselves to democracy itself because it is simply not possible to build and support democracy with anti-democratic methods. If we wish to commit ourselves to the rule of law, then we must do so through respecting law above person because it is simply not possible to adhere to law without adhering to principles -- even when those principles require taking action against people whose self-interest and ideology seek to destroy the law instead of uphold it. If we wish to do well and do good at the same time, then we must act to heal the breach between our legitimate concern for value and our legitimate concern for values. We must cease forever our illusory notion that we can somehow make value (profits, wealth and winning) the trump card for all serious questions. We must stop the madness of shareholder value fundamentalism terrorizing our new world of markets, networks, organizations, friends and families. We must not repeat the errors of radical, anti-value revolutionaries. We must not succumb to the temptation to destroy the value that has and can bestow material well being. But we must move past our obsession with value and reintegrate value the singular as a healthy, sane and sustainable conern in the house of values the plural. We must save value from itself by humanizing it with the better part of our natures. And, we must do this as employees, customers, investors, networkers, family members and friends. We must do this. No one else will do it for us.

Posted by Doug Smith at 01:34 PM | Permalink

January 14, 2006

Wal-Mart For NeoLibs

NeoLibs (or, if you prefer NeoProgressives) such as Matt Yglesias, Jonathan Cohn and Ezra Klein are troubled about this week's news that the Maryland legistlature shot down a veto by their Governor and passed legislation requiring Wal-Mart to pony up more health benefits for Wal-Mart employees. The NeoLibs argue workers would be much better off if liberals, progressives and others sought an alliance with Wal-Mart allowing Wal-Mart to continue its current meager benefits practices in exchange for Wal-Mart helping to get federal action for things like universal health care. Look, these NeoLIbs say, we live in a Darwinian world where corporations spend "98 percent of their effort maximizing profits and share prices". Let's be real, let's be tough guys and let's cut a pragmatic deal with the Wal-Marts that let them continue to profit maximize while they help us get federal legislation to overcome the effects of their profit maximizing ways (in this case, the effects of having workers with low wages and little to no benefits).

All of which qualifies Klein and pals for a Wolfowitz award for Naive Pragmatism -- those proposals in which reality exists only as a subset of fantasy.

The world we actually live in -- as opposed to the Naive Pragmatic world of Washington parlor policy -- is one of markets, networks, organizations, friends and families. In this world, organizations are the most powerful crucible for experiencing community (thick we's) whose common good for all involved contributes to the greater good of society -- for finding non-governmental approaches to fairness, justice and equity among other things. If we can find approaches that work inside organizations, we ought to be looking for them. But that begins with this: Shareholder value fundamentalism is as dangerous to the stability and sustainability of our new world of markets, networks and organizations as is any religious fundamentalism.

The NeoLibs like to sound tough with their acknowledgement and agreement about profit maximization. But, like Wolfowitz, they evidently have little real world experience in such organizations. They have a single answer to all problems: let the corporations profit maximize and turn to government to fix the problems created. This logic is profoundly flawed.

Start, for example, with this proposition: when seeking solutions to problems, identify and address the root causes of those problems. Extreme profit maximization -- single answer fundamentalism -- is a root cause of the lack of health care for folks who work at Wal-Mart. Proposing to solve this by reinforcing the practice of extreme profit maximization -- the root cause of the problem in the first place -- makes no sense. It's like trying to fix all manufacturing quality problems by inspecting finished products as opposed to building in quality at each step along the way. (Another root cause, of course, is a government policy grounded in extreme individualism, in putting all risks and rewards on an individualistic basis instead of blending in policy promoting shared risks and shared rewards. In criticizing the NeoLib recommendation to align themselves with extreme profit maximizers, I'm not suggesting that complex challenges such as fair and just access to health care is entirely solvable without a government willing to re-balance "me" and "we". But, even then, any effective government policy would acknowledge that, in our new world, the most real 'we's' beyond friends and family are found in organizations -- not places we call towns and neighborhoods.)

Solving problems by addressing root causes of problems ought to be a straightforward enough concept. At a more conceptual level is this: No corporation -- indeed no organization of any kind, whether for profit, non-profit or governmental -- can sustain performance without having that performance benefit all those who matter to the enterprise: supporters/shareholders, employees/exectuives, and customers/beneficiaries. "Performance" is the measurable evidence of an organization's common good -- the mission, vision, strategy and so forth by which the organization seeks and achieves what's needed by the organization's supporters/shareholders, employees/executives, and customers/beneficiaries.

In the NeoLib fantasy, there is only one constituency: shareholders. Which, of course, begs this question: "Hey, why stop at benefits? Why not encourage Wal-Mart to lower wages, convert all jobs to no more than two years in length, and, while we're at it, lock employees in at night and turn off the time clock?"

If profit maximization is the single answer to all important questions, then there are no limits to what we -- as a matter of public policy -- permit profit seeking firms.

Sustainable organization performance demands balancing and blending the interests and benefits of shareholders, employees and customers. That's pretty much standard among folks in the private sector who spend far less time in Washington DC cocktail parties than the Neo folks, whether NeoCons, NeoLibs or NeoProgressives.

That crowd, however, is comfortable with policy recommendations, like this instance, that leave the real human beings who work at Wal-Mart struggling in poverty and ill-health while (1) Wal-Mart continues to generate unsustainable profits for executives and shareholders; and, (2) some theoretical set of forces are working their way toward federal legislation and the implementation of that legislation that supposedly will -- in a very distant future -- bring relief to these workers and their families.

At it's core, the NeoLib fantasy suffers from the same phenomena as the NeoCon fantasy: utter disregard for real people, real facts and real time.

Posted by Doug Smith at 12:56 PM | Permalink | TrackBacks (2)

January 12, 2006

What Do People Who Work at IRS Stand For (Part 2)?

In an earlier post, I asked what values were shared at IRS among the people who work there with regard to their commitment to fairness as opposed to politically-motivated intimidation. The executives and employees of IRS -- like executives and employees of any organization -- are a thick we, a 21st century community of people who share purposes and share fates in more important, meaningful ways than do most folks who happen to reside in what we think of as 'communities' (towns, cities, neighborhoods).

Other than friends and family, organization-based thick we's are the most critical crucible in which our values -- our beliefs and behaviors -- get shaped and where our values most influence other people in our new world of markets, networks and organizations. All of which makes the question, "What do the people at IRS stand for?" of prime importance for them and for all they affect and influence.

Yesterday, for example, we learned that the people of the IRS have a practice of freezing claimed tax refunds of thousands of low-to-moderate income taxpayers, people who depend on those refunds for food, housing, heat, transportation and other basic necessities. The stated shared purpose of the people at the IRS for this practice is focused on catching (and reducing the number of) tax cheats. That is an important purpose and objective. However, the practice itself is evidently poorly designed and implemented because as many as 80% of its targets ultimately get their refunds (although sometimes it takes 3 years!).

Ought the people at the IRS care about and seek to reduce cheating? Of course. But, when employees at IRS go home at night and tell their family about 'what their shared values stand for", do they seek to say, "we believe so strongly in catching cheaters that we accept and indeed defend the need to make poor, innocent and law abiding people even poorer."

And, with regard to their values regarding tax cheaters, we might also ask them to explain to their family and friends the answer to this: "What have you been doing/are doing now with respect to Jack Abramoff, Tom DeLay and others who, by all evidence, seem to have controlled tens of millions of dollars over the last several years? Have you audited them? And, if not, why not?"

Posted by Doug Smith at 12:19 PM | Permalink | TrackBacks (1)

January 10, 2006

The Shadow Of The Leader

In one of Aesop's fables, a political leader accuses his shadow of bad values only to be confronted by the shadow about the leader's own failings. In short, the shadow wants nothing to do with the leader. The shadow is ashamed of the leader.

Leaders -- whether political leaders or organizational leaders -- cast shadows. "The shadow of the leader" is evocative language used to describe how a leader's choices, actions, style and values dramatically influence those same things in the organization -- or the nation -- as a whole. As the Aesop fable implies, though, the word 'shadow' is not pejorative. Because leaders are human, their choices and values inevitably bring a mix of good, bad and inbetween. The key question about what kind of shadow is cast by the leader has to do with the overall effects the leader has on the political body or the organization.

Consider, for example, MIke Brown, the recently departed head of FEMA. What shadow did he cast on FEMA? Hurricane Katrina cast Brown's shadow in dramatic relief -- and the incompetence surfaced suggests that Brown's shadow was far more destructive than constructive.

Consider, as another example, Tom DeLay and the Republican majority in the House of Representatives? What kind of shadow did DeLay cast? Based on recent legal indictments (among other things), it would seem DeLay's values were very dark and negative -- just the kind of effect that the 'shadow' in Aesop's fable is running away from. DeLay's leadership evokes yet another phrase often used to convey the effects and influence of bad leaders on those they lead: the fish rots from the head.

Now, consider leaders in your organization. What kind of shadow do they cast? How do their choices, actions, beliefs, behaviors, and values add up? Would their shadows, if given the chance, cut and run? Or, would the shadows - on balance -- gladly continue walking together with the leader toward some best future for the organization being led?

Posted by Doug Smith at 03:02 PM | Permalink | TrackBacks (2)

January 04, 2006

Cross Cultural Teams

Teaming is one of the two disciplines for achieving performance in small groups. In addition to keeping groups small, the team discipline revolves around needed skills, shared sense of purpose, goals and how to get along and work together, and mutual accountability -- all of which make the findings from Grovewell must reading for folks in cross cultural teams.

We are all human -- we bring with us beliefs and behaviors that reflect 'how we do things around here'. Increasingly, more and more of us absorb and practice such values in organizations. Still, the forces of national and ethnic culture remain the starting point because of family, because we 'grow up' in contexts heavily influenced by those cultural dimensions. The shift from place to organization going on around the globe holds both promise and peril -- but surely one potential advantage comes from blending the best of various cultures into 'how we do things around here' in our organizations. Teams are powerful crucibles for making this happen because they are small thick we's with an orientation toward performance -- toward some objective purpose that brings us together meaningfully.

As the Grovewell research shows, achieving performance requires small cross-cultural groups using the team discipline to grapple with how to get the best from values that are seemingly at odds, such as:

1. Individualism versus group orientation
2. Hierarchical versus democratic distribution of power
3. Content-focused versus context-focused communication style
4. Formality versus informality
5. Punctuality versus flexible sense of time
6. Task and goal orientation versus relationship orientation
7. Deductive versus inductive reasoning
8. Holistic versus linear thinking
9. Confrontation versus diplomacy/face-saving
10. Short-term versus long-term viewpoint
11. Competition versus cooperation
12. Loyalty to particular people versus obedience to universal rules
13. Self-determination versus acceptance of fate/circumstance
14. Religious versus secular worldview
15. Permissiveness versus strict rules/regulations
16. Pragmatic flexibility versus adherence to detailed plans
17. Achieved versus ascribed status
18. Change as positive versus tradition as revered
19. Youth orientation versus age veneration
20. Male dominance versus gender equality
21. Rigid class structure versus social mobility
22. Action/doing versus contentment with being

Much turns on the attitudes with which these questions are approached, especially how best to respect differences while finding a shared path to performance that matters. Folks who jump straight to 'good versus bad' step into unpromising territory. In contrast, those who take the time and make the effort to understand nonjudgementally will build the initial respect and trust required for more difficult choices about the best path to performance.

The Grovewell piece speaks specifically to cross-cultural teams. Over thirty years of experience with small groups, however, suggests to me that several of the items listed apply just as much to folks coming from different organizational cultures (e.g. in a post-merger integration team) and different functional/expertise cultures (e.g. marketing versus engineering).

Posted by Doug Smith at 01:04 PM | Permalink

January 02, 2006

Blocking and Tackling Gone Sour

FedEx is currently running a series of TV commercials that take humorous aim at the overuse of football metaphors in business. So, let's quickly laugh at ourselves in commenting about blocking and tackling -- a descriptive phrase for what often separates entrepreneurial and/or innovative breakthroughs from disciplined organizations that can and do sustain success.

Any organization that has success eventually faces the transition from start-up, innovator and entrepreneur to disciplined enterprise. The key question is whether that transition will be successfully made, or will the organization fail as a 'flash in the pan'? Most commentary on the failure of making the transition focuses on founders (see this post as an example). But, organizations going through a transition from entreprenuerial to disciplined cultures also stumble at times because of a well known phenomenon at work in any organization of any size facing profound behavior-driven change: blocking and tacking each other instead of the problems and challenges at hand.

Change strikes fear and anxiety in most of us because it raises questions about our job security, our affiliations and even our sense of who we are and what we want to accomplish. These anxieties are very real. The question for all of us is how we can best respond to the anxiety (as opposed to how we might fool ourselves into thinking we can extinguish or ignore it). Put differently, the best question is how to respond to and channel anxiety into a constructive energy and effort aimed at getting the organization and ourselves through the transition at hand?

Too often, however, people -- and especially leaders -- choose to block and tackle the change at hand: to throw body blocks in the path of change. They claim all manner of 'principle'. But, their actions and words are transparent to nearly everyone as the work of people who do not want the change to happen. Indeed, much of the criticism of founders amounts to a subset of this larger pattern: people who prefer to stand in the way of change -- to prevent change. It's just that the person involved is a founder instead of some other executive or player.

When people inside organizations block and tackle change itself instead of blocking and tackling the challenges and obstacles needed to make change happen, the rest of the organization shudders and, eventually, loses heart. In addition to meaningful language, energy and effort are the scarcest resources needed to get through a period of profound change. And those who 'block and tackle change itself' are folks who destroy energy instead of create it. They are the change destroyers -- regardless of how high flung their stated reasons or explanations.

Blocking and tackling? Yes, it's a critical aspect of any organization's transition from entrepreneurial culture to the disciplined culture of sustainable growth and performance. But, make sure that it is the array of critical underlying challenges being blocked and tackled and not the overall change and those who are truly trying to lead it.

Posted by Doug Smith at 03:18 PM | Permalink

December 31, 2005

Recipe for Failure

Recently, I came across this evaluation of a post-acquisition effort to integrate managers of an acquired company into the culture of the buying company. The author has decades of experience in organizational development and training and, one imagines, has contributed to and participated in hundreds if not thousands of corporate culture and change exercises. This particular one caught his attention for being -- his word -- "sadistic".

Here's how the consultants spent the four days familiarizing the managers with 'the way we do things around here' in their new company:

- Provoking and pushing people to see how long it would take to break them, in front of their peers.
- Insulting and belittling people.
- Embarrassing people.
- Putting people on the spot repeatedly and uncomfortably.
- Telling people they did not have what it takes and would not make it in the new company.

In retrospect, the author believed the consultants had been sent in to "test us ... in such an aggressive manner that the weak would wash out and only the strong would survive."

If so, the consultants surely failed because an organizational culture that belittles, pushes, breaks, insults, embarrasses and destroys confidence is one in which only the weak survive. Strong people and strong leaders do not do these things. Bullies do. But not strong people.

Posted by Doug Smith at 05:46 PM | Permalink | Comments (1) | TrackBacks (1)

December 29, 2005

Annals of Incompetence

What do a South Dakota radio station, Virgin Islands perfume shop, a Utah dog boutique and scores of Dunkin Donuts and Subway shops around the nation have in common with nearly 17,000 other small businesses? Two things:

First, they received more than 85% of the billions of dollars Congress asked the Small Business Administration to distribute through lenders to small businesses in New York and Washington DC needing to recover from September 11th.

Second, they were in no way affected by the terrorist attacks.

Getting something -- anything -- wrong 85% of the time demands extreme "Brownie/FEMA" like incompetence -- incompetence on a scale that, seriously, shreds the use of the word 'administration'. Are you or anyone you know aware of any program or business or initiative that failed in its purpose and objectives 85% of the time?

Response of SBA Adminstrator Hector Barreto: "SBA implemented the program as Congress intended."

Posted by Doug Smith at 07:57 PM | Permalink | TrackBacks (4)

December 26, 2005

The Founder's Dilemma: Giving Life Twice

Whether a founder, an entrepreneur or even a later arriving star, men and women whose genius gives life to organizations regularly confront a profound choice: renewing that gift of life by letting go, or risking the death of the enterprise.

As challenging as it is to birth (or rebirth) an enterprise, the effort does have this reinforcing quality: both the founder/entrepreneur/renewer and the enterprise are at a beginning. The horizon is filled with unknowns giving energy and promise to each -- to the organization and to the founder. In creating the enterprise, the founder is also creating him or herself. This win/win phenomenon applies to for-profits and not-for-profits both. A dream pervades the scene to inspire all -- and especially the founder -- seeking to make that dream real.

None of which is to minimize the extraordinary array of difficulties, challenges and pitfalls. Indeed, that is why converting dreams into reality is the stuff of legend. It is why founders take on the mantle of the gods -- not literally -- but surely figuratively. Founders and entreprenuers are special in special ways.

This specialness, this legendary status is self-understood. Founders and entrepreneurs are aware of it -- they have to be because, in fact, they are not gods but human beings. They know what they have accomplished. And, it is not just pride that explains their faith in themselves. Founders and entrepreneurs sincerely and appropriately believe their guiding hand is a matter of special trust and mission.

Nor are they alone in any of this. Most who participate with them in the thick we -- employees, boards, advisors and others -- esteem and respect the specialness and honor of the founder and entrepreneur -- the life giver of the organization.

All of which makes the opportunity for the second gift of life the more extraordinary one. Founders are human. They age and tire. Or, circumstances and change outrun the founder's creative energy and fire. Or, both.

Consider, then, the Boys Choir of Harlem -- the magnificent dream brought to life by Walter Turnbull whose efforts were well described when he won the Heinz Award:

"Dr. Turnbull himself has traveled a long and difficult road. From the fields of the South where he chopped cotton as a child, to graduating with honors in classical music and vocal performance from Mississippi's Tougaloo College, Dr. Turnbull eventually settled in New York City where he hoped for a career as an opera tenor. But that professional ambition was sidetracked when he took a job teaching music in Harlem to support himself. There he discovered that despite the lure of the streets and unstable home lives, "music caused kids to focus." Thus, the idea for the Boys Choir of Harlem was born.

It began 30 years ago, when he gathered 20 youngsters in the basement of Ephesus Church.... Dr. Turnbull's infectious enthusiasm, his dedication, and his relentless enforcement of discipline paid handsome dividends.... By the end of 1979, both a touring choir and the Girls Choir of Harlem had been established.

The desire to prove that children from Harlem could succeed academically propelled Dr. Turnbull to create the Choir Academy of Harlem, opened in 1986 as an on-site school serving grades 4 through 8. The program was refined and expanded over the years, until today it is a co-educational, college preparatory school offering grades 4 through 12 to over 500 students. Similar choir academy programs are being established in Detroit, San Francisco, Milwaukee and Chicago, each with advisory support from New York.

Dr. Turnbull specializes in more than cultivating the love of music in children, he is equally dedicated to turning lives around. He and the Choir give at-risk youths a chance to succeed, an opportunity many of them might never have had without Dr. Turnbull's love and commitment. Most are from single-parent households receiving some type of government assistance. But the Choir teaches these youngsters to walk with pride and to hold their heads high, regardless of their circumstances. Dr. Turnbull has commented, "It's not just about the Choir. It's about discipline. It's about feeling good about yourself. That's hope."

Walter Turnbull received this honor in 1998 -- about the time, as the award describes, that the growth and future of the Boys Choir was filled with possibilities of expansion. That 'best future', though, was going to demand stepped up organizational and leadership skills ranging from development and fundraising to marketing, education, strategic alliances and finance.

All of which meant that even as Turnbull was being deservedly honored by Heinz, he confronted the second 'life-giving' moment. And, unlike the first, this moment for him -- like all founders and entreprenuers - was filled with contradictory instead of reinforcing energy. The "best future" for Boys Choir was not a future best led by Turnbull. This was not 'win/win' in that sense.

It was - and is for all founders and entrprenuers -- win/win in a very different sense. By letting go, by passing leadership onto others, the founder simultaneously gives second life to the organization and a very new and different kind of life to him or herself: the opportunity to seek new meaning and new possibilities unconnected and unconstrained by the organization. In giving second life to organizations by letting go, founders give second and new lives to themselves that are fresh and exciting because truly new.

Or, like Turnbull evidently chose, founders can turn their backs on new life for themselves and their organizations. Whether out fear of the unknown in their own life, or pride that will not let go, founders can condemn themselves and their organizations to the dead hand of grasping at a best past now gone by.

When this happens, things fall apart. None of which means the organization must die with the founder. But all of which means the founder's choice has cast the organization into a wilderness from which, quite often, only a new 'founder' with win/win energy, creativity and dreams might -- might -- save it.

Posted by Doug Smith at 12:52 PM | Permalink | TrackBacks (1)

December 24, 2005

The Santorum Brand: Update On Meaningless Politics

An earlier post discussed Pennsylvania poll results indicating that Senator Rick Santorum's personal brand, while well defined and understood by Pennsylvania voters, was nonetheless not doing a good job of appealing to a majority of them. Beginning with the Clinton impeachment, Santorum chose to brand himself in ways that gained him notice within the national Republican Party by making well publicized statements in support of extreme born-again fundamentalists, including his very open support for the scientific claims of intelligent design creationism.

Thus, in 2002, Santorum used an op-ed piece to speak clearly and loudly on behalf of what his brand meant on this issue; "Intelligent Design is a legitimate scientific theory that should be taught in science classes."

Among the many steps Santorum took to identify his brand with these ideas was his joining the advisory board of the Thomas More Law Center, an organization well funded by the extreme right wing interests and given to throwing its money and legal expertise to any effort seeking to have local governments establish religion through the inclusion of intelligent design creationism in science classes.

The First Amendment prohibits government from establishing religion. We read and hear much these days about another right wing nostrum: original intent -- the notion that the meaning of the Constitution is frozen by what the words meant to the Framers. It's a not-even-thinly-veiled effort to restrict government to operations within the ambit of late 18th century meanings and conditions. If you can't fit your proposed approach to 21st century realities within the original intent of 18th century writers, then fuhgeddabodit.

The Santorum brand includes original intent -- it's necessary to his efforts to gain and maintain voice and power in national Republican circles. Brands like Santorum's have never required any logical or principled consistency. That the plain meaning -- the original intent -- of the Founders prohibited establishing religion has never barred Santorum from actively supporting the Thomas More Law Center project to do just that. Really, in the Santorum approach to brand management, dealing with this seeming inconsistency merely requires definitional shifts. "Intelligent design creationism has nothing to do with establishing religion because it is science."

Naming things is the key to Santorum's brand strategy. Truth is entirely a matter of definition and the marketing and public relations needed to shape shared ideas in support of that definition. Thus, to Santorum, 'science' is a word like any other word and it's meaning is determined by what leaders like Santorum tells us it means.

Thus, the Santorum brand also includes this strain of definitional meaning. The kind of careful exploration of what science means that was on display in the Dover case courtroom is irrelevant and unnecessary to the Santorum brand. A corollary of the Santorum brand, of course, is this: words have no meaning. "Science"? "Truth"? "War"? "Clear Skies"? "Family Values"? "The Rule of Law"? "Mission Accomplished"? "Victory"?

The Santorum brand stands for the proposition that if you wish to understand how and when to use these words, pay attention to Santorum and he'll tell you.

Now, we learn that Santorum -- has re-tooled his definitions and brand a bit -- by dropping his affiliation with the More Center after the recent court decision castigating the then-majority of the Dover school system who forcibly installed intelligent design creationism in Dover school classes.

Key word: after.

One can almost hear Santorum and his brand advisors huddled together strategizing over how to play the result of the court's decision. "If the Judge rules in favor of the Board, we hold a press conference with the Board members and folks from the More Center to celebrate this victory for American values. If the judge goes against us, we drop the affiliation with the More Center, making sure to blame the More Center from its methods so we can appeal to Pennsylvanians who mistrust 'outsiders'."

The earlier post also noted that the Santorum brand was doing best among anxious, fearful, emotional and confused teenagers. And, so to Hamlet, Scene II when Polonius happens upon Hamlet who, unbeknownst to him, has overheard the plotting against him:

LORD POLUNIUS
O, give me leave:
How does my good Lord Hamlet?

HAMLET
Well, God-a-mercy.

LORD POLONIUS
Do you know me, my lord?

HAMLET
Excellent well; you are a fishmonger.

LORD POLONIUS
Not I, my lord.

HAMLET
Then I would you were so honest a man.

LORD POLONIUS
Honest, my lord!

HAMLET
Ay, sir; to be honest, as this world goes, is to be
one man picked out of ten thousand.

LORD POLONIUS
That's very true, my lord.

HAMLET
For if the sun breed maggots in a dead dog, being a
god kissing carrion,--Have you a daughter?

LORD POLONIUS
I have, my lord.

HAMLET
Let her not walk i' the sun: conception is a
blessing: but not as your daughter may conceive.
Friend, look to 't.

LORD POLONIUS
[Aside] How say you by that? Still harping on my
daughter: yet he knew me not at first; he said I
was a fishmonger: he is far gone, far gone: and
truly in my youth I suffered much extremity for
love; very near this. I'll speak to him again.
What do you read, my lord?

HAMLET
Words, words, words.

Posted by Doug Smith at 12:28 PM | Permalink

December 20, 2005

Kong Attacks Financial Markets!

Dateline Wall Street: King Kong has broken free from theaters nationwide to attack the transparency and integrity of financial markets!! Cleverly dressed in the guise of unfunded pension and other benefit liabilities, Kong has eviscerated the credibility of the balance sheets of hundreds of the nation's largest companies. The crisis seems to have unfolded with startling speed. What may have been minor adjustment errors when Kong was first brought to America now amount to nearly $450 billion!! Said one analyst, "This devastates the S&P 500." But while investors and others reel from Kong's rampage, those at the Financial Accounting Standards Board responsible for getting Kong back under control seem dazed, like deer in the headlights. "This is very political and complicated," said one spokesperson who sought even greater anonymity than is usually accorded accountants as their professional due. "We're going to need several years to work this out."

Several years? Haven't they seen the movie?

***********************************************************************************************************

More than half the households in America own equities. And way more than half have folks who are employed, with millions of these employees working for companies that have contracted with them to provide pension and other benefit coverage.

Our world of markets, networks, organizations, friends and families is so complicated that probably only a small fraction of people in investor households know that hundreds of publicly held companies now have pension liabilities that outstrip pension assets by just under $300 billion, or that other benefit obligations (e.g. health and prescription drugs) outstrip other benefit assets by nearly $150 billion.

$450 billion of obligations that are not funded. That's a lot of money. For example, it is the same amount just approved for the 2006 defence budget. And, according to Standard & Poor's, it equals a fifth of the tangible book value and 70% of the 2005 earnings of the S&P 500.

No wonder the Financial Accounting Standards Board (FASB) is hard at work trying to figure out how to handle this in a way that helps investors and others get the information needed to make judgments about the economic and financial well being of companies.

FASB will not, of course, require companies to make any radical adjustments. There won't be a new rule demanding an immediate write-off against earnings. Still, one wonders what 'transparency and integrity of financial markets' means when companies have had and will likely continue to have so many ways to miscast their degree of control over these King Kong liabilities. Just one example from S&P: "These evaluations derive from current estimates of what returns and interest rates will amount to over decades. Agreeing on the current Q4 2005 estimate poses quite a challenge -- estimating Q4 of 2035 would appear to be far less of a science."

30 years. Company accountants must consider all the factors that might happen over thirty years in determing the current value of liabilities. Really, now, let's get ourselves some perspective. Even those many, many, many accountants who do their professional and personal best are merely guessing. And, we know too well that plenty of accountants -- and chief executives and chief financial officers -- 'manage financial statements'. For them, "30 years" is an open invitation to "make it up!" (And, by the way, it's also an open invitation to prosecutors with personal agendas to go after even well intended chief exeuctives and chief financial officers under Sarbanes-Oxley).

So, stakeholders beware! Whether you are an investor or an employee with an interest in any of these companies, beware! And be prepared. The odds are that the obligations will be re-written and reduced, the generally accepted accounting approaches will be 'smoothed and managed' to minimize the financial reporting strain, and the real story underlying all of this -- the nation's broken system of sharing the risks and costs of health care and old age -- will continue to go untended or made worse through radically increasing the individualization instead of sharing of such risks.

Posted by Doug Smith at 02:38 PM | Permalink

December 19, 2005

The Science of Market Research Turns On Science

Market research is a social science as opposed to natural science. Market research, when done well, uses the scientific approaches of sociology, anthropology, psychology, political science, linguistics and more to identify, characterize, understand, respond to and, yes, shape human belief and behavior.

Like other social sciences, market research operates with less elegance than natural science. It is tougher work because subject to more doubt and uncertainty. Still, top executives in thousands of companies across the land authorize (cumulatively) billions of dollars and tens of thousands of person hours in market research -- all with a view to fulfilling visions of growth and performance.

It's been five decades or more since folks in corporations figured out that scientifically sound approaches to understanding markets could and would generate innovation as well as promotion that, in turn, could support growth. The science of market research is as much embedded in our market economy as the profit motive.

Given all that rides on the scientific soundness of their research, marketing and other functionaries must beware of coming into a meeting with the Chief Executive, Chief Marketing Officer and other C-suite denizens with shoddy work.

Yes, it's critical for the researchers to understand the vision, mission and strategy of the company and to do their research with a view to promoting performance and growth. But, it's the rare CEO who encourages and welcomes ideology completely bereft of facts and sound method. Executives whose interests suffer from market research findings will argue against those findings. But, debating such results is a far cry from an ideological drive to eliminate market research itself. Where would be the gain in that? Yes, you might -- in theory, but rarely in practice -- gain your point and advance to the top job. But once you had a board and financial markets demanding growth, what would you do? Reinstitute the science of market research that you so assiduously destroyed?

Again, yes, there are soft aspects to market research and yes, there are debates guided more by self-interest than fact or logic. But, still, look at the pattern of dependable and predictable belief and behavior in companies across the land: a huge investment and reliance on the science of market research.

Science.

Now, what does the science of market research tell those who seek to gain and hold governmental office?

According to , market research has guided those currently in control of the Republican Party to promote an attack on science as a means of generating votes and attaining, holding and using elective office.

With regard to climate change, biodiversity, contraception, drug abuse, air and water pollution, missile defense, evolution and other high profile matters, market research of likely voters has evidently indicated that elections can be won by throwing the entire edifice of science into doubt -- in effect, destroying science in order to gain power.

The recent results of this market research are impressive. Elections have been won. Authority over governmental policy has been gained. That authority has been used to further the erosion of the public's faith and trust in science (that's right: 'faith and trust').

The medium-to-longer term effects of this market research, however, are troubling. Again, in a corporation dependent upon scientifically sound market reserach for growth, innovation and sustainable performance, high level attacks on the foundational soundness of such research would, at best, generate short term gains -- and those gains would be measured only in terms of the internal political power of those leading the attacks. In the medium-to-long term, there could be only two results: either the destruction of further growth, innovation and performance because the attackers who gain power refuse to shift course -- or, a period of confusion, fear and anxiety as those with sound, scientific market research skills and expertise try to adjust to their former attackers now claiming to seek their help.

Among the many potentially tragic aspects of using scientifically sound market research to destroy scientific soundness is this: CEOs and others whose company performance depends on scientific market research disproportionately contribute money and other resources to those taking the lead in the desctruction of science.

These CEOs and others, of course, can change course. They have tremendous power to determine who controls the Republican Party and whether that Party's policy will continue to pursue the attacks on science that, ultimately, will destroy the soundness of the Party's own market research.

As they sit in discussions with those in power, let us hope the CEOs and others will think through the implications in a manner consistent with what they'd do in their own companies. Yes, there are undoubtedly many opportunities for short term gain in terms of tax and regulatory policy by supporting the attack on science. But, even with such gains, the medium-to-long term prospects in a 'science-less' economy and society for the performance of these CEOs' companies -- not to mention their children and grandchildren -- are dim.

Posted by Doug Smith at 01:58 PM | Permalink | TrackBacks (1)

December 17, 2005

The Five-Step Shuffle

According to a new study cited by Christian Sarkar, it is more important than ever for Chief Financial Officers to:

(1) focus on delivering against growth and earnings commitments expected by financial markets that punish missed commitments while also
(2) complying with the morass of rules and regulations imposed by an angry Congress seeking to get re-elected by 'doing something/anything' to protect the integrity of
(3) demanding and punishing financial markets who, it will be recalled, were
(4) reeling from illegal and unethical behavior of -- well,
(5) Chief Financial Officers and others obsessively focused on delivering against growth and earnings commitments demanded by financial markets that punished them for missing such commitments.

Got that?

No wonder Reuters reports "CFOs too bogged down to focus on strategy."

Posted by Doug Smith at 04:58 PM | Permalink

December 16, 2005

Be A Global Capitalist For $25

Absent the nightmarish destruction of the Internet (which, according to Legal Affairs is a concern to take seriously), globalization is as much a condition -- a force at work -- in our 21st century world of markets, networks, organizations, friends and family as gravity. Such forces drive the good, the bad and all in between depending on our shared purposes and shared values -- as seen in the wikipedia entry on globalization. It describes manipulation by mass media, controlling governments and multi-national corporations as well as growing possibilities for mutual understanding and friendship.

As with so much in our battle of value against values, globalization seems inclined toward the negative when it comes to matters of capital and profits, inclined toward the positive when it comes to matters of family, friendship, shared understanding and shared fates.

All of which makes Kiva -- a peer-to-peer microfinance organization launched by Matthew and Jessica Flannery -- worth noting. The Flannerys have blended a concern for value with a concern for values by integrating the economic as well as the personal possibilities in globalization. Through Kiva, you -- yes, you -- can be a global capitalist. You can lend money to entrepreneurs living continents away and, through the wonders of the Net, stay in contact as they use your loan to make life better for themselves, their families and their communities.

And you can do this for as little as $25.

The Flannerys have brought microfinance to your home computer. Microfinance is a worldwide industry built on an ancient notion: commercial lending to business. Only, as the name suggests, the loans are tiny. Experts estimate that as many as 30 million 'microentrepreneurs' have launched and grown businesses with the help of tiny loans. In world of 6 billion people -- the vast majority of whom are poor -- 30 million, while impressive, is just the tip of the iceberg.

Moreover, microfinance is profitable. Given the huge size of the market as well as the attractive economics, it is no surprise that the number and size of microfinance loan funds is growing rapidly -- and that giants like Citibank are now in the field.

Neither Citibank nor large non-profit players, however, are likely to give you the chance to be a global capitalist. So, go sign up at Kiva. And the next time the International Monetary Fund or World Bank comes to town, get a seat inside the room instead of throwing rocks in the streets.

Globalizaiton is a force. How do you want to shape it?

Posted by Doug Smith at 12:44 PM | Permalink

December 14, 2005

Board Governance: Too Many Cooks At Red Cross

With the resignation of Marsha Evans, the Board of Governors of the American Red Cross must once again search for someone to continue the much needed modernization of the giant charity. Perhaps the Board should change how they govern themselves before asking yet one more leader to take on that job for them.

While most of us link the Red Cross with disaster relief of the Katrina variety, the charity is in fact a highly complex, large organization. In 2004, Red Cross spent more than $3 billion on services including disaster relief and recovery, blood and biomedical, services for military members and families, health and safety, volunteers, young people and nursing.

This size and complexity would rank Red Cross in the Fortune 1000 -- a set of companies whose Boards of Directors, by the way, average 11 members.

In our work on teams, Jon Katzenbach and I repeatedly found the the effectiveness of small groups begins to deteriorate badly at about 10 to 12. There is no iron clad rule dictating Boards be 'small groups'. Still, if the 1000 largest companies in the world average 11, the small numbers probably amount to what the gurus like to call a 'best practice'.

All of which would be worth pondering by the 49 people listed as members of the American Red Cross Board of Governors.

Posted by Doug Smith at 04:19 PM | Permalink

December 12, 2005

Visibly Poor Performance

Harrisineractive has just published it's 2005 Survey of the "Reputation Quotient" for the sixty most visible companies in America. The top company, Johnson&Johnson, received a "B" grade (albeit just barely: J&J got a numerical score of 80%).

Of the rest of the top 60:

27 got a "C"
24 got a "D"
8 got an "F"

Overall, not much movement when compared with the 2004 results

A Zero
B Zero
C 31
D 19
F 10

In today's irrational financial markets, 'intangible assets' such as brand often account for significant parts of a company's overall market value. The vast majority of these 'most visible 60' have large market capitalizations. Leaving us to ask, "Does reputation have anything -- anything -- to do with brand?"

We know that extreme reputational damage -- Enron -- can link to brand and market capitalization. But, it must really be only at the extremes. Because when not a single one of the most visible companies merits an "A" grade and, in fact, nearly all get "C's" and "D's", what Harrisinteractive is measuring must not have much to do with how folks pick and choose stocks.

Put differently, folks out there are deeply worried about the mediocre to lousy reputations of these visible companies. But, when it comes to their IRAs or other stock holdings, they must just be 'holding their noses".

Suggestion: next time your at the dinner table with your kids, explain this to them (and to yourselves).

Posted by Doug Smith at 06:51 PM | Permalink

Performance, Problem Solving and Gender Stereotypes

Does the performance of your organization depend on excellent problem solving?

Does the performance of your organization depend on men and women solving problems?

What do you mean by 'problem solving'? What kind of problems does your organization need to solve?

What percentage of those problems are not really problems at all? That is, they are situations for which answers are readily available and simply in need of quick, crisp and efficient ways of 'taking charge'?

What percentage of those problems are actually problems -- that is, challenges for which no one in your organization has any current easy answer?

When you think about these real problems, how many of them are purely technical in nature? That is, how many are like jigsaw puzzles requiring that you figure out a set of technical, mechanical, or otherwise physical pieces and assemble them?

How many of your problems are purely social or are 'sociotechnical'? That is, how many are both about figuring out some objective set of pieces to a puzzle but then also figuring out how to get people within your organization (and possibly beyond -- alliances/customers/and so forth) to 'make it happen'? How much of getting folks to 'make it happen' demands figuring out how to take care of the interests, skills, readiness, reluctance and other human attributes that often spell the difference between a problem solved on paper and one solved in reality?

Think about these questions as you read the latest report from Catalyst about how organizations across the country continue to shoot themselves in the foot by using 'either/or' stereotypes about men and women who, truth and every day reality be told, are BOTH needed to move toward any organization's best future performance.

Or, perhaps you disagree. Perhaps you believe in your soul that your organization can best move forward to solve its most complicated and critical problems by relying disproportionately on male leaders or female leaders?

If so, go ahead and hang a sign on the door that says, "Here at XYZ Corporation, we know that our best future depends on male problem solvers." Or, if you answered with the other gender, "Here at ABC Corporation, we know that our best future depends on female problem solvers."

If, on the other hand, you believe your best future depends on men and women and women and men both leading and collaborating and collaborating and leading in finding and implementing the best solutions to your most critical problems, then perhaps you'd better start acting like you believe it.

Posted by Doug Smith at 02:39 PM | Permalink

December 11, 2005

Craig's Fist

Christian Sarkar alerts us to an urgent call for government action and political will by Craig Barrett, Chairman of Intel. who warned BusinessWeek the United States continues to fall behind other nations in producing the scientists and engineers demanded for sustainable national economic performance. The percentage of science and engineering degrees granted in the US have trailed competitor nations by double digit differences; and, when engineering is isolated, the US rate is one-sixth that of Japan, less than one-tenth that of China.

Barrett calls on government, particularly Governors, to exert the political determination needed to raise science and engineering education standards. And, he asks others in the business community to join Intel in supporting such efforts.

One commentator at the BusinessWeek online site writes in, "I agree with Mr. Barrett's comments. But why aren't any politicians taking note of this issue?"

Well, perhaps because people like Craig Barrett throw their political dollars in support politicians like Rick Santorum and George Bush whose political platforms weaken instead of strengthen science. Year upon year of high profile attacks on evolutionary, environmental, health and other sciences have popularized an anti-science cultural orientation that, in turn, has fueled instead of stemmed eroding education standards and career aspirations.

Craig Barrett's warning is spot on. Our nation -- our governments, our businesses, our schools and our young people -- will revitalize our best future with a sustained commitment to better science and engineering education and careers. Let us all stand up and applaud Craig Barrett.

And, let's hope that all of us, including Craig Barrett, will do more than shake our fists at the dangers of an irrational approach to science. Let us hope all of us will put our money where are mouths are so that warnings like Barrett's are more than lip service.

Posted by Doug Smith at 12:35 PM | Permalink | TrackBacks (1)

December 08, 2005

Ford to GM: Me Too!!

According to the Boston Globe, bad strategy and thinking inside the box catch up with Ford:

"Ford Motor Co. is reportedly considering the elimination of 30,000 salaried jobs and the closing of 10 North American factories. The news follows colossal job cuts and plant closings disclosed last month by General Motors Corp.

Both companies are hamstrung by costly health and pension benefits, excess production capability, increasing foreign competition, and reliance over the past decade on highly profitable SUV and pickup truck sales, which have been slumping because of rising gas prices."

Posted by Doug Smith at 12:20 PM | Permalink | TrackBacks (1)

December 07, 2005

Staffing Teams: Be Sure To Pick "Learners"

Thirty years and hundreds of team experiences have produced two seemingly paradoxical guideposts to staffing teams:

No team succeeds in the absence of people with the skills, behaviors and working relationships required for performance.
No team succeeds without folks on the team learning something new.

If read carefully, these two insights indicate it is simply not possible to predict in advance every dimension of skill, behavior and working relationship required for team performance. Can and should team leaders be careful and thoughtful about staffing teams? Of course. But, the second point would indicate that too many team leaders suffer from an illusion that somehow, someway there's a 'Dream Team" out there and if they only spend enough time, they'll be able to pick that team.

Indeed, if you think back to the last Olympics, you might recall that the US "Dream Team" did not win -- in major part because the players selected lacked a significant but necessary requirement: an orientation toward learning how to adjust their individual games to the requirements of international rules and styles.

In other words, even this 'Dream Team' needed to learn to succeed.

So, yes, by all means, be thoughtful in staffing teams. Pay attention to what you imagine will be the skills, behaviors and working relationships demanded by performance.

But, when it comes time to pick your team, please remember this: Pick 'learners'. Pick folks who have an orientation to taking risks, trying new things out, and not freaking out at the thought that things might not go as planned.

When it comes to successful teaming, picking learners is a 'best practice' in picking winners.

Posted by Doug Smith at 06:59 PM | Permalink

December 05, 2005

The Values Bubble In Real Estate

Today's Los Angeles Times reports that the incidence and variety of mortgage fraud is increasing as rapidly as insurgencies in Iraq. It's a good introduction to what happens when an 'anything goes' profit motive is given a field day by political forces who claim the 'only good regulation is no regulation'.

Mid-way through the article, Eric Von der Porten, a Silicon valley mortgage banker laments, "Is it suddenly okay to hoodwink national banks and government-sponsored mortgage companies?"

Memo to Eric: There's nothing sudden about this at all!

For more than thirty years, our nation has embarked upon an all-or-nothing adventure in hating government. Starting with the Reagan administration, the governing philosophy has assumed that regulation and government are bad. That trend began rationally -- for too many decades those in power operated as if Total Regulation was the single answer. Now our dominant single answer is, No Regulation.

There is a lot of possibility, of course, between No Regulation versus Total Regulation. Most markets work best when there are some agreed upon rules. Often, those rules are easiest and most practicable to install and enforce if done by some third party. Sometimes, those third parties can be private sector, non-institutional government organizations (for example, professional sports leagues that set and adjust rules). More often in the history of human beings, though, the third parties have been governments.

When done well, rules and regulations set predictable behaviors -- values about fairness and approach -- that provide all who participate some predictability they can rely upon. That kind of predictability in values also arise among small numbers of people who persistently interact -- say in families or teams. When the context rises to zillions upon zillions of folks interacting over markets and networks, however, a government that sets, enforces and updates rules and regulations can spell the difference between orderly markets and Hobbesian, anything goes markets. (And, again, let's be clear: a regime of Total Regulation provides order but kills all vitality and innovation while simulataneously increasing costs to unsustainable levels).

So, here we are: We live in a world of markets, networks, organizations, friends and families. We live in a world where the costs of 'either/or' approaches -- either No Regulation or Total Regulation - become increasingly unsustainable. And, we live in a world where our politics is currently dominated by a discourse of either/or-ism.

That we are experiencing a 'value' bubble in real estate is not new news. But, as this artlcle points out, we also are suffering through a 'values' bubble -- inflationary expectations that somehow, someway individuals and companies left entirely to their own devices will routinely do the 'right thing' because -- now listen carefully -- because it is in their self-interest. This is the governing orthodoxy. Markets are the only solution to every problem. Self-interest is what makes markets work. Therefore, sayeth Socrates, Self-interest is the only solution to every problem.

Evidently, unbridled self-interest is not a full solution to orderly real estate markets that produce the greater good.

Posted by Doug Smith at 01:32 PM | Permalink

December 02, 2005

When Bad Things Happen To Bad Strategies

Crafting (and especially implementing) good strategies in our chaotic, fast changing 21st century world of markets, networks and organizations is tough work. It's why the folks who head organizations get paid the big bucks. Still, even a Forest Gump could glimpse this about strategy: somehow you've got to make sure that you direct your company's resources and talent at providing customers what they need at a price that keeps your resources and talent in business. It's a 'both/and' challenge -- one of matching answers to internal questions (who are we and what do we need to be good at?) with responses to external questions (where's this market headed and what does that tell us?).

As noted in a previous post, GM recently confirmed it would be firing 30,000 employees and shuttering a dozen auto plants. That's 30,000 familes who will not see 2006 as a happy new year. I also noted that GM's own press releases indicated the giant auto maker was investing in the flexibility to be more responsive to customer needs by putting itself in a position to create 15 entirely new cars/trucks each year -- and then promptly announced they'd use this new found capability to produce 'more than a dozen' brand new versions of gas guzzling SUVs, large cars and large trucks.

Do the math. "More than a dozen" out of 15 leaves somewhere between zero to two alternative offerings to the marketplace.

30,000 employees and their families (and the local economies of where they live) have been put on the altar of GM's future for this strategy.

So, here's a couple of updates on GM's strategy:

GM's November sales were off nearly 8% from a year earlier -- helping to drag US automakers' total share of the US market down to historic lows. The Japanese, who have led in the production and sale of hybrids and other smaller vehicles, picked up most of the gain.

GM's response?

First, to announce a 'red tag' sale in which buyers of it's largest SUVs will get as much as $10,000 off the purchase price. Excuse me? Why is GM directing it's new found flexibility for entirely new and different vehicles at producing new versions of SUVs that it's got to put 'red tags' on in order to sell? Does that make sense to you?

Second, to shutter part of GM's most famous auto plant -- the Saturn plant in Spring Hill, Tennessee where, some decades ago, GM was going to re-invent the auto industry with a bet on small, quality cars made and sold differently.

As Gump says, "Stupid is as stupid does."

Performance in our crazy world is helped through learning from others. Suggestion: Take a look at how your organization's resources and talents line up against the evolving picture of customer needs. Then evaluate your efforts against a "NOT GM" scale. The better you do -- the more your strategy is unlike GM's -- the better your organization's future and performance is likely to be.

Posted by Doug Smith at 12:39 PM | Permalink | TrackBacks (2)

November 30, 2005

Two Traps That Hurt Teams

Two traps that hurt real team performance have to do with work assignments. Those who have mastered the team discipline know that mutual accountability for shared work and shared performance is a hallmark of real teams. Put differently, if a small group can achieve the overall performance objectives through a series of individual work assignments, then the group does not need the team discipline for success. The single leader discipline will work better.

However, if a small group faces a performance challenge that cannot be achieved through the sum of individual best contributions -- in other words, if success depends on one or more critical pieces of work being done by two or more people who collaborate in real time and hold themselves mutually accountable -- then the team discipline is required. The single leader discipline's dependence on individual contribution will fall short.

Consider, for example, a small group challenged to redesign a bank branch to improve customer experience and lower operating costs. One can imagine folks with customer service, operations, marketing, and communications skills in such a group. Well, my guess is that if every individual with functional expertise were assigned individual work products -- and that was the sum total of the work of the group -- the group would fall short.

Why? Because I'm guessing that both improving the customer's experience and reducing operating costs requires some collective work products mutually delivered by, say, the operations and customer service folks, or perhaps each of them plus a marketing person.

Now for the twin traps.

Trap No. 1: 'Virtual" collective work products that turn into indivudal work products. For groups whose members are not physically co-located and must use the team discipline virtually, there is a great temptation to assume a collective work product has been assigned when, in fact, because of time and distance, folks end up 'dividing up' the tasks into individual work products. One of the special challenges of teaming virtually is to use explicit, self-conscious steps to be sure your group is not falling into this trap.

Trap No. 2: Work products assigned to 'everyone on the team'. While not impossible, it is rare for any team to have very many particular work products requiring the real time collaboration of all the folks on the team. It is much more likely to need the work divided into a series of both individual and collective work products -- and that the those collective work products are best owned and done by more than one person, but less than 'everyone'. This last trap is especially prevalent among teams at the top where past habit and culture often lead to either a naive or cynical approach of 'we'll all do this together'.

Posted by Doug Smith at 07:53 PM | Permalink | TrackBacks (1)

November 29, 2005

Small Number and The Discipline of Team

You've all heard it. You gather in some auditorium to hear the Chief Executive, or you open your morning email for the latest memo from the top and hear or read, "Remember: We're all a team!" Nothing wrong with that. Leaders must encourage, shape and build a culture of shared purpose in order to have any sustainable performance and success. "We're all a team" is leadership in action that, cynicism aside, is constructive.

But, the discipline of delivering team performance is not about huge groups and whole companies. It's limited to a small number of people confronting challenges that best yield to the team approach as opposed to the single leader discipline. You are all very familiar with the single leader disicpline -- the management approach linked to a boss who has a small number of subordinates who together must deliver performance results.

Small number. It's a very pragmatic limiting factor in applying the team discipline. Indeed, management experts have written for years about 'span of control' -- a notion that applies to the single leader discipline. Once the number of direct reports gets beyond seven to ten folks, things start to 'break down' even for the single leader discipline. Bosses start having difficulty with effective communication, defining roles for subordinates and holding them accountable, and with establishing and implementing time efficient processes. Things start to fray at the edges when numbers get beyond 'small'.

None of which means that things go to hell in a hand basket. We're not talking a Category 5 disaster here. Just pressure. Just the kind of breakdowns that, with even larger numbers (say 20 or 30 or 40), almost inevitably lead to formalized subgroupings -- to recasting the span of control for the single leader discipline.

Well, what experience teaches for the single leader discipline also applies to the team discipline. When numbers get above seven to ten, 'things start to break down'. Only the 'things breaking down' are identifying and delivering on collective work products, defining and pursuing common purposes, common goals and commonly agreed upon working approaches; and, shaping a real sense of mutual accountability -- that is, the key aspects to the team discipline.

So what?

Well, this morning when you show up at work, ask yourself about the most critical challenges facing the groups you are a part of. List out two or three. Then examine just how many people are in each group charged with delivering performance against those challenges. If you and, say, a handful of others are responsible for any given challenge, then your group is small enough to make choices about when to use the team discipline versus the single leader discipline. If your group is bigger than, say, ten -- and especially if it is much, much bigger -- then you and the leaders of that group might want to revisit 'subgrouping' -- that is, breaking down the overall challenge into parts that lend themselves to 'small number' approaches.

Posted by Doug Smith at 01:29 PM | Permalink

November 23, 2005

Recommendation to Harris Poll: Use Grades Not Numbers

For several years, Harrisinteractive of the Harris polling company has done an annual survey of the 'reputation quotient' of what it calls the 60 'most visible' companies. The survey asks respondents to evaluate companies against 20 attributes ranging from social responsibility to financial performance to product quality. Each of the twenty can earn a top score of 7 and a low of 1.

To calculate the final scores, Harrisinteractive sums each company's average on the 20 attributes and divides by 140 -- then converts the score to a percentage.

It's like taking a test where your maximum possible score is 140 -- only the teacher chooses to grade you by a percentage.

Thus, Microsoft's average in 2004 was 109.2 out of 140 -- for a 78% score. The top ranked company in 2004, Johnson&Johnson, received a 79.81% score; the lowest, Enron, a 29.03%.

While Harrisinteractive provides a link to a pdf file explaining its methodology, it doesn't really say much about what the rankings or scores mean on the webpage presenting the results. Basically, Harrisinteractive says, "Here are the 60 most visible companies in America" -- and then provides a table with rank order on the left and a score on the right.

It would seem Harrisinteractive is losing an opportunity to clearly communicate. The company believes 'reputation management' is important. It offers polling and other services to help clients do a better job at reputation management (and, the survey must be a marketing tool for building business). It makes sense, then, that Harrisinteractive would want a visitor to its webpage to undertand what the scores mean.

Here's a suggestion. Explain that the scores are based on a percentage with 100% as the best possible. Then, show the scores and convert them to the well-understood letter grade all of us undertand from school.

Thus, the top ranked company, Johnson&Johnson, received a 79.81% or C+. The lowest, Enron, received a 29.03%, or F.

Viewed this way, we could quickly undertand that Americans rate the reputations of the sixty most visible companies as follows:

A: None of the companies.
B: None of the companies.
C: 31 of the companies.
D: 19 of the companies.
F: 10 of the companies.

That's a picture that should generate business for Harrisinteractive!

Posted by Doug Smith at 01:56 PM | Permalink | Comments (1) | TrackBacks (2)

November 22, 2005

Malicious Music From Sony

The Attorney General of Texas has sued Sony BMG for the aggressive use of 'rootkits' as an anti-piracy tool. The Electronic Frontier Foundation also has sued Sony in a separate matter. Wikipedia describes rootkits as software that "helps an intruder maintain access to a system without the user's knowledge". If that strikes a bad note, it's because rootkits are deployed by creators of viruses and worms in their war against computer users. Rootkits are malicious.

Now we need to ask, "Whose side of this war is Sony on?"

Just think about this for a second. Under what circumstances does it make any sense whatsoever for a maker and distributer of entertainment to be slipping software into your computer that is specifically designed to go undetected?

Rootkits, by the way, are extraordinarily difficult to eliminate once they get into your computer. Under the banner of its vaunted brand, Sony has now snuck a destructive piece of software into the computers of folks who assumed they could trust that "Sony" meant, at a minimum, that when you bought a music CD, you were buying music -- and just music.

Why has Sony, a company that recently won the Harris poll for most respected brand for the sixth year in a row, stooped to the use of rootkits to advance the company's view of copyright protection? Were the executives at Sony building shareholder value? Were they treating the 'customer like king'? Were they providing an exciting, promising environment of creativity and opportunity for their employees?

Sony is locked in a titantic battle over how to continue to make money in a music business utterly transformed by digital technology. But, 'by any means necessary' is not a good answer to any of the tough questions facing the music giant.

What do the folks at Sony music really stand for?

Posted by Doug Smith at 03:37 PM | Permalink

November 21, 2005

Thinking Inside The Box At GM

Today, General Motors it would eliminate 30,000 manufacturing jobs through a series of plant closings. That's 9% of the people who work at GM (325,000) and a much higher percentage of manufacturing jobs. This is a tragic development for thousands of families and communities. And, yes, we know that it is also a move aimed at making GM more competitve over the long haul. Both statements are true.

The job cuts come on top of the recently announced deal with the United Auto Workers that reduced GM's health expenses. Together, the two actions will lighten GM's costs by billions a year -- a key to reversing the $4 billion GM has lost in the first nine months of 2005 as well as positioning the auto giant to be more competitve going forward.

All businesses attend to both cost and value in efforts to succeed. With today's announcement, GM has taken a radical step in reducing costs. With this and the health care deal, the attention should now shift to the revenue side of the equation.

What is GM doing to design, build, sell and service great cars that meet the needs of today's customers?

A quick look at the November 21st press release describing GM's turnaround plan fails to build much confidence. (Click here and then choose "Four Point Turnaround Plan"). According to this news release, GM claims to be pursuing an 'aggressive product assault on all vehicle segments', in part by investing the capital required to permit GM to bring '15 all new vehicles' to the market every year.

Let's assume for the moment that 15 is a satisfactory number of all-new vehicles. What's GM planning to do with that capacity as it moves to meet the shifting realities and tastes of customers, especially customers who are beginning to sour on gas guzzling SUVs and other large vehicles?

Well, according to the same news release, GM will unveil 'more than a dozen all new versions of its full size SUVS." Yes, GM indicates that in 'late 2007", it plans to add a new hybrid to the market. (And, oh by the way, GM will also in 2007 roll out an entire new line up of full size pickups).

In response to the radical job cuts, the UAW commented, "Workers have no control over GM's capital investment, product development, design, marketing and advertising decisions. But, unfortunately, it is workers, their families and our communities that are being forced to suffer because of the failures of others."

Yes, the UAW took advantage of its sweet heart deal with GM for decades -- and thereby added to the cost burdens currently disadvantaging all the human beings -- executives and union members alike -- who are involved. Still, there is an important point to the UAW remark: GM's non-unionized employees have much more say over product selection than do the union workers.

Unfortunately, it would appear that those making product choices at GM are stuck 'inside the box'. There's advantage to be gained with cost reductions, capital investment and manufacturing flexibility. It will be a shame if GM throws it all away by merely using the new found capacity to continue building giant, gas guzzling cars and trucks that fail to meet the needs of early 21st century consumers.

Today, GM has indicated it is willing to make tough, radical choices. Well, how about this: Challenge yourselves to radically increase both the number and the speed with which you bring hybrids to market. And, while you're doing that, be as willing to scrap big, gas guzzling SUV, large models and pickups as you are willing to scrap manufacturing jobs.

Posted by Doug Smith at 07:46 PM | Permalink | TrackBacks (3)

November 20, 2005

Edelman's Opportunity At Wal-Mart

Wal-Mart has hired Richard Edelman's firm to lead the giant retailer's public relations response to the intensifying debate over Wal-Mart's values and practices. This is a wonderful opportunity for Edelman and those who work in his firm to put into practice Edelman's own values about the responsibilities of public relations professionals in our complex 21st century. According to an Edelman post in November 2004, , PR firms should avoid the 'anything goes' standard of lawyers of claiming that since all deserve representation, firms can take on any client regardless of that client's character and values. He believes PR firms should have a higher standard on who are represented and what is said on their behalf. In addition, he believes in full transparency of work methods. "It is more than what you say. It is how you say it that matters." Finally, Edelman writes of how important it is for PR firms to have a seat in the highest councils of companies in order to ensure that these high principles are adopted and applied.

His firm now has an extraordinay chance to live these values. As we know, Wal-Mart increasingly means controversy in a manner not unlike Iraq or tax cuts or Supreme Court nominees. What the Wal-Mart brand stands for -- every day low prices, low wages, employees with benefits, government subsidy of employees without sufficient benefits,local business erosion, keeping inflation low -- is subject to many claims.

Edelman must have decided that Wal-Mart was a worthy client deserving of the very best in PR help - that is, that Wal-Mart met his first principled test on 'whom to represent'. Now, on a daily basis, those who are working on the Wal-Mart account have the chance to apply the rule on what is said and how it is said.

One suggestion: In choosing how to counter various anti-Wal-Mart assertions, challenge Wal-Mart's highest executives to adopt a policy of acknowledging what is reasonable in those claims.

For example, avoid limiting yourself to writing only this on the Wal-Mart website:

"As of today, 620,000 associates have signed up for health insurance coverage in a Wal-Mart sponsored plan."

Why not present this information about the 620,000 associates while also explaining how many of them went beyond signing up for benefits to actually receiving them. Then note that hundreds of thousands of Wal-Mart associates do not have health insurance. Go on to explain Wal-Mart's position regarding associate health insurance as well as government subsidy. Provide readers of the website an understanding of Wal-Mart's objectives in this area and what the company is doing to pursue these objectives. For example, in choosing how to say what steps Wal-Mart is taking, include the Susan Chambers' memo that has recently been completed regarding an approach to benefits at Wal-Mart being recommended to Wal-Mart's Board of Directors.

It is important and undertandable that a PR firm hired by Wal-Mart should present Wal-Mart's side of the story. It is also important -- both for Wal-Mart and for Richard Edelman - to insure that the public debate and discussion of the challenges Wal-Mart faces are conducted with high standards that Edelman would have all in the PR field apply. Bending over backwards to insure that Wal-Mart's side of the story is presented in a manner that encourages real debate, real discussion and real problem-solving will be the highest, best testimony to Edelman and his firm.

Let's wish him and his firm well as they move to the higher ground.

Posted by Doug Smith at 05:10 PM | Permalink

November 13, 2005

The Incompleteness of Hierarchy

Peter Drucker, the preeminent management thinker of the 20th century, died this week. Let's honor him, ourselves and our posterity by picking up on one of his central teachings; namely, that, while powerful and useful, hierarchy is incomplete. It is but one thread in the fabric of management and leadership -- albeit the thread most prominently displayed.

When matched to a division of effort that fits any challenge at hand, clear lines of hierarchical authority work efficently - even elegantly -- to deliver effective solutions. The big word in this, though, is 'fit'. Let's say we work in a restaurant and the chef is overseeing a group of folks who need to deliver a set menu of, say, 15 meals every evening. Assume also that the number of diners varies within a well understood range, there are steady, reliable relationships with vendors providing ingredients and so forth, and that the staff has worked with the chef for many, many months. In this context, the challenge of providing the diners the 15 meals is well served by a clear division of effort and hierarchical lines of authority. Would those in the kitchen also benefit from respectful, cordial and constructive working relationships? Yes. But, such is the case with all hierarchical arrangements. Indeed, it's a comment on our culture's bizarre obsession with the good vs. evil of hierarchy that one even has to write this additional sentence.

Yet, even in this orderly, well understood and predictable example there is a need for non-hierarchical aspects of management. How, for example, will those reporting to the chef learn? Through hierarchy? Yes, in part. But, not strictly through a chef giving orders.

Still, let us all praise hierarchy as a part of what makes our world work well. But, let us stop this unrelenting bad practice of assuming that hierarchy is ever enough by itself. It is not.

And, as Peter Drucker saw over the greater part of his life, pure, unalloyed hierarchical approaches are very dangerous -- indeed, they inevitably fail and, in their failures, cause misery to all affected. Put most simply, there is this: The vast, vast majority of challenges we face today do not lend themselves to purely hierarchical approaches. The challenges are too fast moving, too dynamic, too unpredictable, too chaotic. These challenges do not 'fit' a managerial and leadership approach grounded in order, clear division of labor, formally granted authority, stable working relationships, or futures that predictably extend routine pasts.

Whether the challenges have to do with restaurants -- or nations -- the 21st century will not yield either effectively or peacefully to strictly hierarchical approaches. There are many ways we can honor Peter Drucker for the gifts he bestowed upon us. But one powerful tribute would surely be to, as quickly and richly as possible, get our conversations beyond the all or nothing assumptions about hierarchy -- to dedicate ourselves to using non-hierarchical approaches to discussing how we can respond to so many challenges that now lie between us and our best future together. There is a word for such approaches. Democracy.

But, to blend democractic and hierarchical approaches in a best path forward, we must overcome the illusion that either is complete in and of itself.

Posted by Doug Smith at 12:53 PM | Permalink

November 07, 2005

Focusing Energy At Chevron

Chevron has invited a handful of experts as well as the general public to join a discussion about the planet's energy future.

We should applaud this effort. Wherever the effort sits on the spectrum of 'toe in the water/public relations' to 'serious inquiry", it does allow for discussion -- perhaps most importantly among the employees and executives of Chevron (the 'thick we' so well positioned to do something about how Chevron's actual strategy creates a best future for the planet).

In saying, this, though we also need to pay attention to how Chevron sets up the dialogue because how a problem is defined contributes critically to the effectiveness of problem solving itself. As the old Yankee once said, "Well's begun is half done."

The current question is posed like this: Who should be primarily responsible for ensuring we conserve more energy -- governments, businesses or market forces?

Look, this is obviously an important question and can support a healthy debate. But it is also defective in a serious way because of the use of 'primarily'. That word -- indeed, even the question without that word -- sets up an 'either/or' debate. But, no one can solve the complicated energy challenges we face with either/or approaches. We need both/and thinking and problem solving.

The debate would be richer and more pragmatic if the question posed were this: "How can business, government and non-governemental organizations work together to ensure we conserve more energy? And, how would any of us know such efforts were successful?"

Posted by Doug Smith at 12:41 PM | Permalink

November 03, 2005

Horses, Barns and Buy-In

You're actively involved in some significant change -- for example, a new strategy, a major reengineering project, a shift in brand approach and so forth. There are a variety of folks -- from many perspectives -- whose buy-in will matter to the success of whatever choice is made. Buy-in itself is a subtle concept. Those making the choices typically interpret buy-in by others as one part intellectual understanding and one part emotional commitment. As actually approached and practiced, however, it more typically generates the first (intellectual understanding) than the second (emotional commitment).

It's a good idea to identify all consituencies and why/how they matter to the choice at hand as well as the success of the implementation of the choice. If any constituency's emotional commitment is critical, it's advisable to (1) find ways to engage in ways beyond "Q&A's"; and, (2) make sure the engagement happens before the 'horse is out of the barn" -- that is, while the choice is still in formation.

For those whose intellectual understanding of the choice is needed, "Q&A" approaches are just fine. Still, to be effective, you need to recognize and approach the communication differently depending on the horse and barn. If the horse is still in the barn -- the choice is in formation -- you can say as much. You can let those in the conversation with you know the general direction of the effort, the kind of issues and concerns in play, and you can seek input, critique, and other possibilities. But, if the horse has left the barn, you simply cannot take this approach because it violates credibility and truth.

Once the choice has been made, any communication with any constituency is part of the implementation of the choice -- not the formation of the choice. Seeking 'buy in' after the horse has left the barn is a different challenge than beforehand. And, you're well advised to put the context of your conversation squarely in some specific aspect of implementation. Put differently, you're now seeking buy-in to some critical aspect of moving forward with the choice -- not to the nature of the choice itself.

Posted by Doug Smith at 12:51 PM | Permalink

November 01, 2005

Big Pharma and Bird Flu: A proposed deal

Three weeks ago, executives from several major pharmaceutical companies sat down with President Bush to exchange ideas on how best to prepare for a possible bird flu pandemic.

As noted previously, much of the pandemic possibility lies in a race between mutation of the bird flu and finding and distributing effective antidotes. Big Pharma told Bush they are reticent to invest in antidote development in the absence of laws holding them harmless from liability lawsuits and damages from people who get shots and either die or get seriously ill nonetheless.

So, how about this deal? The Bush Administration and Congress agree to quickly pass such laws in return for Big Pharma agreeing to forego patent protection in the case of bird flu antidotes as well as proactively sharing all advances among themselves and with other companies and nations around the world.

This is a win/win for everyone. Congress and the Administration can act quickly to protect all of us -- thereby avoiding the nightmare of a Katrina re-run. Moreover, it would be the kind of real collaboration most folks long to see from Washington. And, Big Pharma can move quickly into action with all their talent, expertise and knowledge in a way that would also help them diminish claims that their sole interest lies in profits.

Posted by Doug Smith at 06:34 PM | Permalink

October 29, 2005

Brand Update: Red Cross

The Washington Post has an update on how the post-Katrina, post-Rita brand experience of the Red Cross matched the brand promise. As noted in an earlier post, the Red Cross crossed up its donor after 9/11 in failing to warn folks in advance that some of the funds would be stashed away for other purposes. The charity was so determined to avoid a repetition that they announced to the world post-Katrina they would be spending every single dollar received on Katrina. One concern, raised in the post, had to do with the effect of this overly literal reaction to the earlier difficulty on the full nature of Katrina's aftermath: namely, that the people of the Gulf coast need both immediate response/relief as well medium to longer term rebuilding help. The Red Cross -- the best branded charity in the field -- would have access to the most money. And it would have been wonderful if the Red Cross had annouced publicly its intention to raise funds that would, in turn, be provided to strategic partners better positioned to provide rebuliding assistance.

Instead, we got the 'we'll spend every dime on immediate relief' because, in what sounds almost like a petulant child, 'you slapped our hands the last time for trying to save for another rainy day'. The problems for the Red Cross's brand and mission here were two fold: poor communications and poor self-understanding of limitations.

Now, we learn that the Red Cross claims it is $340 million short in funds needed for Katrina and Rita. In addition, Congress is readying itself for a 'look see' at how the Red Cross responded. Other relief and rebuilding organizations are angry about imperious Red Cross attitudes. And, it's alleged that if you lived in the Gulf Coast and were African-American, the Red Cross wasn't quite as likely to respond as if you were Caucasian American.

So, here we go again. America's best branded, iconic relief organization is about to take another hit to its brand. Will the charity have some reasonable explanations. Yes! Let us not forget the extraordinary scale and propotion of Katrina. And, at the same time, will the Red Cross pass 'the test' on having delivered on its brand promise through open communications, good partnering and effective operations?

Well, based on the gathering storm reported in the WP, the answer there looks like it will speak from two camps: Those in the Red Cross will say, "Yes". Those beyond the Red Cross in the media, African-American citizens of the Gulf Coast, other non-profit organizations needing to respond and rebuild -- and certainly some governmental organization including Congress -- will say "No".

At the end of the article, an expert in non-profits calls from more openness. "What happens if you don't is that you live off your myth and you conceal your problems. They are an organization obsessed by its own myth."

Myth. Brand. Promise. Delivery.

At the Red Cross, these are critical words. And when it comes to disasters, the folks at the Red Cross must know deeply and wisely what these words mean. And why.

Otherwise, we will continue to see 'disasters' following disasters at the Red Cross.

Posted by Doug Smith at 03:04 PM | Permalink

October 26, 2005

Where To Pump Big Oil Profits?

The LA Times reports that Big Oil projects earnings of nearly $100 billion - both this year and next. Like any business, these companies must now choose what to do with the money. Here are the choices laid out in the article:

1. Invest in more production, refineries and distribution
2. Slap the industry with a windfall tax
3. Mandate the industry put money into alternative energy research
4. Reward shareholders with dividends and stock buy-backs
5. Diversify by going into non-energy related businesses
6. Consumer rebates

This is a reasonably full list. Note, however, the language, especially "slap" and "mandate". Each of these options get described in terms of Congress forcing the industry to take steps, as opposed to the industry taking such action itself. In addition, it's worth noting that the alternative energy suggestion is phrased in terms of research instead of results. It's a tentative exploration instead of a commitment to outcome-based goals.

It is doubtful Congress would take such action. Still, if they did -- or if the industry were to find some way to work together like the semiconductor industry did so successfully with Sematech -- each effort would have dramatically increased odds of success if they focused on results instead of activities. Performance is the primary objective of change, not change. Any effort to find a blended, more sustainable approach to energy would benefit tremendously by first setting a goal such as: "By 2010, at least 20% of energy uses come from alternative sources."

If Congress were to mandate (and follow through) on that, this industry -- filled with dedicated, talented and creative people -- would deliver. If Big Oil were to use a healthy chunk of their profits to create their own 'Sematech" with this kind of outcome-based goal, they'd succeed.

And, when they did, all of us -- and all of our children and grandchildren -- would be better off.

Posted by Doug Smith at 12:23 PM | Permalink

October 25, 2005

Hierarchy and Efficiency

McKinsey & Company's patron saint Marvin Bower once commented, "The thing about hierarchy is that it works." Bower was not celebrating hierarchy; rather, he was initiating a dialogue about it. He began by echoing the deep-seated claim about hiearchy's relationship to efficiency -- particularly decision-making efficiency. In hierarchies, decisions can be made quicker and with less cost, time and trouble. Hence, the claim of efficiency.

Consider the following situation. You are the pitching coach for a major league baseball team. You've seen and worked with your star pitcher for years. You know that when the pitcher tires, he drops his arm during his delivery -- leading to a loss of control. It's the seventh inning of a tight game. The pitcher has put in a lot of effort -- he's tired and he has begun to drop his arm. You call time out and visit the mound. Do you:

A) Engage the pitcher in an open-ended problem solving session aimed at gathering information, brainstorming and debating a variety of solutions and then reaching consensus on what to do next; or,
B) Tell him he's tiring and must get his arm up?

Most of us pick "B". We pick hierarchy because it is the faster, most cost-and-time effective decision-making process in this situation. It is efficient. And, it's effective --whether the pitcher can overcome his tiredness and get through the inning or not because, even in the latter case, it means a quick return trip to the mound and a call to the bullpen.

Note some nuance here. Both pitcher and pitching coach recognize the legitimacy of their hierarchical relationship within the context of the baseball team. The situation does not allow for long winded debate (baseball rules require that umpires resume play within well understood time limits). And, also note that the pitching coach provides information ("You're tiring") in addition to command ("Get your arm up!")

Marvin Bower was also commenting on habit. Folks who work in hierarchical organizations get used to hierarchy. Like the pitcher, there's a prevailing pattern of acceptance -- when a boss makes a choice, those who report to the boss listen. This was key to Bower's comment that 'Hierarchy works."

We also know from the evolutionary psychologists that human kind has thousands of years of behavioral experience with hierarchy imprinted into our DNA that reinforces leanings toward accepting the authority of hierarchical decision-making.

So, does all this mean 'hierarchy is efficient' is a truism?

Of course not.

Bower was actually getting at this -- only subtly and through dialogue: 'The thing about hiearchy is that people in organizations are habitually inclined to use it and that's fine if the situation fits the hiearchical approach. But not all situations do. So, we are left with the reality that hiearchy works -- sometimes.... but our instincts and experiences cause us to lean toward it most of the time."

Posted by Doug Smith at 01:47 PM | Permalink

October 24, 2005

Dynamic Deductibility

The Chronicle of Philanthropy is out with their 2004 rankings of the Philanthropy 400. No, this is not a version of the Forbes 400. It doesn't tell you how the 400 wealthiest people in the world use their money for something other than consumption and further enrichment. Rather, the Philanthropy 400 reports the annual donations received by the 400 largest charities. In 2004, those gifts totaled $53.9 billion -- roughly 25% of the $248.5 billion the American Association of Fundraising Counsel estimates was raised by America's more than one million non-profits.

The United States has a $12.4 trillion economy. $250 billion in charity represents 2% of that amount. Meanwhile, assuming that there are at least 1,000,400 non-profits, these numbers mean that roughly 1.5% (three quarters) go to a million organizations. In dollar terms, that means the typcial non-profit takes in about $187,000 a year.

At wage, benefit and support (i.e. rent plus some overhead) levels of, say, $40,000 per person -- a number I think is actually too low -- this means the typical non-profit is a tiny (and struggling) team of four or so folks trying to respond to needs ranging from social services to education to arts to health and so forth.

Put differently, the non-profit sector is characterized by complexity at small size.

According to wikipedia, stock market capitalization is roughly equal to GDP of $12.4 trillion (and that only reflects publicly traded equities -- wikipedia estimates the size of all equities is maybe double, or $25 trillion).

Equities, of course, represent only part of the capital markets. Still, these number provide some sense of the tremendous lift that could happen if we could find some way to link non-profits to the capital markets -- other than through 'annual giving'.

In On Value and Values, I propose 'dynamic deductibility' as an avenue to link the non-profit sector to the wonderful engine of efficient capital markets.

Here's a snapshot of how it works: Non-profits would have the option of issuing 'dynamically deductible units' ("DDUs"). Purchasers of DDUs would not deduct the money in the year they provided the money -- but, instead, hold the DDUs for a later trade in the market for DDUs. Holders of DDUs would take their deductions in the year they sold the DDUs.

For example, you purchased 100 DDUs from Charity X at $25 per DDU this year (2005). You would not deduct the $2500 this year. Instead you would hold the DDUs. Say you sold all 100 DDUs in 2007 for $32 per DDU. In that year, you could deduct $3200 (minus any charge for 'capital gains').

2% of GDP is a pitifully small amount of resources with which to tackle the tremendous challenges that the non-profit sector now confronts. This is made all the more difficult by a non-profit industry structure that is way too complex and filled with far too many 'tiny' players. (All industries benefit from 'tiny' players -- my point is not to denigrate small size. Rather, it is to point out that all industries also benefit from structures that also have large players in representive numbers and scope -- something mostly lacking in non-profit industries).

Yes, by all means, let's do whatever we can to encourage Americans to give more -- to raise the 2%, say, to 2.5% or 3%. But, even at those levels, we'd still face a non-profit sector overmatched by the challenges and expectations confronting it.

We need to fix this. And a powerful way to do so is to link our incredibly large and productive capital markets to organizations who only need capital to grow. 'Dynamically deductible units" -- or other proposals in this vein -- can do this. And, in the process, make us all better off.

Posted by Doug Smith at 04:49 PM | Permalink

October 23, 2005

Ben & Jerry's Redux

Many who admired Ben & Jerry's iconic status as a socially responsible company worried about the dilutive effect of Unilever's acquisition of the ice cream maker in 2000. And not without reason. According to current CEO Walt Freese, the company under Unilever softened its commitment to continuing the efforts of its founders. There's a lesson in this about corporate social responsibility (which we'll return to below). But, in addition, there's a profound lesson about brand.

If most people knew one thing about Ben & Jerry's brand it was this: the mission and the company were not just about crazily named ice cream. The brand stood for both making good ice cream and taking action to improve the lives of people.

When Unilever went 'soft' on Ben & Jerry's social mission, they also turned their backs on one of their own core competencies: branding. They jeopardized the soul of Ben & Jerry's brand. So, CEO Freese's decision to embark on a $5 million dollar campaign to save small family farms is both good corporate social policy and good corporate economic policy. It is Ben & Jerry's redux -- a return to what the company stands for.

From it's beginning, Ben & Jerry's brand -- like it's mission -- stood for both the pursuit of value and the pursuit of values. The two were intertwined; each contributing to the success or failure of the other. Like many other businesses facing growth and competition, Ben & Jerry's stumbled. Eventually, the company reached a point of mediocrity -- but it was mediocre performance with regard to both value and values. The failures on both fronts reinforced each other -- just as the earlier successes had done.

The orthodox business press (those who worship shareholder value as if it were an idol), jumped on the failure as evidence that Darwinian concern for profits is the one true path. Celebrations must have ensued when Unilever took over the troubled company.

Based on Freese's announcements, these celebrations were premature. But, there's yet another and deeper lesson in all this: It is a heck of a lot easier to reestablish a brand that stood for integrating value and values than to change 'value-only' brands into more sustainable promises and experiences.

Unilever has hundreds of brands for products it makes and distributes around the world. As our interconnected globe of markets, networks and organizations spirals into ever increasing complexity and messiness where social, environmental, political, technological, religious, medical, and legal challenges cannot be disentangled from economic ones, Unilever -- like all enterprises -- must find its way to an integrated concern for value and values.

This goes beyond the profoundly unethical so-called balanced scorecard -- the wolf in sheep's clothing that justifies concern for values only if it promotes shareholder value. Instead, drawing from the heritage of Eastern philosophy, we must learn to see and act on our legitimate concern for profits with our equally legitimate concern for all human values. Each -- like the original vision of Ben & Jerry's -- must serve the other in reinforcing ways. This is not the one-way street of the balanced scorecard (concern for employees and customers okayed as long as shareholders benefit). The ethical scorecard demands that the pursuit of value serve the pursuit of values that serves the pursuit of value that serves the pursuit of values.... and on and on.

It's extraordinarily difficult and complicated to turn a behemoth of Unilever's size away from 'profits and value only' to a more sustainable approach. The sheer number of issues they are tackling is mind boggling. The challenge they've set to find some coherent and transparent way to set goals and evaluate progress is daunting. (And, as can been seen in their 'five year record', they have yet to wrap their minds around the true integration of the financial with the non-financial).

Still, kudos to the employees (including executives) of Unilever. They've given deep thought to the challenges ahead. They have publicly declared their intention and commitment. And, with enough focus on performance -- real outcome-based goals that integrate concern for value with concern for values -- they have a real chance to get where Ben & Jerry's was at the beginning: a brand that stands for the fully human enterprise.

Posted by Doug Smith at 01:28 PM | Permalink | TrackBacks (1)

October 20, 2005

Dead End Giving

We've all heard about the 'gift that keeps on giving' -- an aspiration that connects sustainability with charity. This is particularly important in a world of markets, networks, organizations, friends and family because (1) organizations use charitable resources to achieve chosen ends; and, (2) all organizations are businesses -- that is, have some kind of focused set of services or products that depend on continually generating as well as using resources.

Put differently, gone are the days when most charity went from individuals to individuals. Instead, our charitable gifts go to organizations -- intervening businesses whose purpose is to provide assistance and help to individuals.

And that means we who give must pay attention to the sustainability and performance of the business of those charities we favor. We must think of ourselves, at least in part, as investors in those businesses.

All of which makes the following anecdote troublesome. An extremely wealthy person recently chose to gather other wealthy people to hear from a variety of experts about philanthropy. As initially designed, one panel was to cover 'social investing' -- an entire field of thought that specifically connects investment thinking with organizations who 'do good'.

Yesterday, I learned that the panel had been cancelled by the wealthy sponsor who declared, "There is nothing about so-called social investing that is remotely connected to philanthropy."

We need to celebrate all -- rich and poor -- who give charity. Let us then stand up and applaud this wealthy person for the initiative behind this gathering. It is a good thing.

And, let us hope that the conference sponsor will hear and learn more about 'gifts that keep on giving' because the same investment thinking that made this person's wealth can and do make charitable organizations more sustainable.

Posted by Doug Smith at 02:13 PM | Permalink

October 19, 2005

Shareholder Values at Roche

As of today, scientists know two things about avian influenza ( the 'bird flu"). First, that the disease is deadly. Second, that transmission from birds to humans is rare. In the dice game of mutation, however, both characteristics could change. Humans might become vulnerable to birds. The disease might become less deadly.

Mutation at this biological level happens lightening fast. Both shifts could very well happen over the course of this autumn and winter. All of which means we need to pay attention to the pace and effectiveness of the other mutating phenonmenon -- human kind's medical response as determined by markets, governments, networks and organizations.

Looking over the past several decades, we can find much to give us confidence here. There is a nearly vertical growth curve in indicators of scientific advance (patents, scholarly articles, technological advances, etc). And, still, we must remind ourselves that we are human. There is that other part of the picture: greed, selfishness, fear, bigotry and so on. There is the track record of governments that have not distinguished themselves in terms of performance that matters such as planning, preparedness, fairness, coordination and so forth.

And, there is the profit motive -- the celebrated engine of bringing good things to life. Good things like Tamiflu, the patented pharmaceutical owned by Roche. Big Pharma has not distinguished itself over the past several years in adhering to the Hippocratic Oath, that, among other things, demands all health professionals to 'keep the sick from harm and injustice'.

Roche, like other big pharmaceutical companies, has recently written a caveat into this oath: so long as they can pay, we can make profits and we can preserve our patent rights.

All of which means Roche's reversal of its announcement last week that it would remain the sole manufacturer of Tamiflu is good news on two counts: (1) that Roche will now consider licensing others; and, (2) the speed of the change.

One week. That's much, much faster than any similar shift has happened with those pharmaceutical companies who have refused to sell anti-viral AIDS patented medicines to impoverished peoples. It is, as the management gurus like to say, a dramatic improvement in cycle time.

At least two potential causes are known. Kofi Annan has put pressure on Roche. And, Cipla, an Indian pharmaceutical company announced it is nearing readiness to distribute an un-patented version of Tamiflu. Put differently, we can see both governments (the UN) and markets (competition from Cipla) at work in the 'mutating phenomenon" that will determine human response.

Both are good news. Now, let's ask Roche and it's shareholders (as well as employees): At what profit margins will you license Tamiflu? Will you use 'quality requirements" according to the Hippocratic Oath, or as a smokescreen for restricting distribution?

Put differently, what do you stand for? What are your values?

Posted by Doug Smith at 12:17 PM | Permalink

October 18, 2005

Ignorance at The Economist

Over the years since 9/11, The Economist has run a series of commentaries on globalization, corporate responsibility and the common good under such titles as "Profits over people", "Globalization and its critics", "The good company", and "Profits and the public good". The pieces are clearly written and worth reading -- if you're interested in a refresher course on the best available thinking about 19th century economics.

Those of us who struggle with 21st century realities, however, need access to better and different thinking. It's been more than 230 years since Adam Smith wrote about the power of self interest to motivate his local butcher, brewer and baker. Today, the vast majority of those who read The Economist, like the rest of us, get our dinner from 'farm through food' chains that stretch across the globe and run through thousands of corporations. "Self interest" continues to matter tremendously. But, the 'self' in the phrase is no longer traceable to a local baker or butcher. It's just more complicated than that.

Continuing to preach -- and the tone in these pieces could easily come from a pulpit - about the wondrous power of the profit orientation to bring good things to life has all the superficial appeal of an idiot savant. Yes, there is wisdom. Profits and the profit orientation in markets matters to the health and well being of the globe.

But, note to The Economist: we already know that.

How about taking the risk to learn something new -- something that can actually help the rest of us make choices in dealing with complex current reality?

Posted by Doug Smith at 12:01 PM | Permalink

October 12, 2005

What Does Good Credit Mean To Citigroup?

In the wake of September 11th (and the burst of the dotcom bubble), Citigroup started an ad campaign they hoped would capture the spirit of the times. Out went 90s exhortations about value and money; in came reminders about values and what’s most worthwhile in life:

“Don't wait” Citi told audiences, “until someone says ‘Your money or your life’ to remember that they are two different things.”

The ads must have struck a nerve because the campaign still runs years later. Citigroup, like other organizations, pays attention to the benefits and costs of advertising and brand building. Whatever metrics they use to gauge consumer response must be positive.

Another interesting question, though, is this: What’s been the impact of the campaign on employees at Citigroup? (When I write ‘employees”, I include executives.)

Thousands of people work for Citigroup. And, like all of us, they bring some blend of values to the office each day. On most days, most of the time, they must be good folks who seek to do reasonably good things – like, for example, providing good credit to others.

The Citi ad campaign, though, raises the bar on what ‘good’ credit means.

Citi employees are making a promise about ‘good credit’ when their ads tell customers:

"Be independently happy".

If the brand promise in this ad is to be matched by the brand experience, Citi employees must hold themselves accountable for building consumer independence – a corollary of which means assisting their customers in avoiding dependencies that drive out happiness.

Credit is a source of potential dependency. Potential. Credit need not lead to dependency. Half of cardholders, for example, pay their bills on time and in full each month.

There are millions of Americans, however, for whom credit is a dependency. For some, the dependency derives from financial necessity; for others, from inadequate skills and knowledge; and, for others still, it is an addiction.

Hence, this question for Citigroup employees: Why and under what circumstances do you provide credit to these Americans?

One answer could be: Because it is profitable.

That is consistent with the governing orthodoxy of capitalism. It also matches the first first part of the following Citi ad:

"People make money. Not the other way around".

But it’s the second half that reflects Citi’s current brand promise:

Another response could be about opportunity and freedom. While money does not ‘make people’, it surely helps provide the material basis for happiness in a market economy. Citi and other credit card providers assist customers in climbing the economic ladder.

To match brand experience with Citi’s current brand promise, though, Citi employees need to take steps to make certain they provide ladder climbing credit assistance only to folks who use it to achieve independence. Citi has a variety of business practices that help their employees succeed at this.

In addition, like other credit card companies, Citi has sophisticated statistical modeling and data techniques that predict with stunning accuracy consumer credit card usage and behavior. Citi uses these tools to price different cards to different groups. Some get credit at 10%, some at 16% -- and some at just under 30%.

That’s right. 30%.

It’s that number that raises the curtain on whether Citi employees' shared values match the brand promise in their ads. Because the same models instructing Citi to charge 30% to higher risk consumers predict that consumers who pay such high rates are headed into dependency instead of financial independence or happiness.

Which takes us back to the initial question about what 'good' credit actually means to the employees of Citigroup. For those who are sincere, ‘good credit’ must mean credit that is both profitable for Citi and ‘good’ for their customers.

30% rates don’t meet that test.

Citi employees have a choice every single day they show up to work: match brand experience with brand promise by ceasing to offer consumer credit at 30%.

When they make that choice, they will surely take a huge step toward fulfilling yet one more promise in their ads:

“Human decency is up a point and kindness is making a rally”.

Posted by Doug Smith at 10:54 PM | Permalink

October 11, 2005

Delphi's Viral Bankruptcy

Two centuries from now Robert Miller, the CEO who took Delphi Corp into Chapter 11 last Saturday, will be as little remembered as Ebenezer Monroe -- the farmer who may have fired ‘the shot heard round the world’ on Lexington green in 1775.

Miller’s filing, though, has already ricocheted across the planet. In just a few days, the Delphi bankruptcy reached into and shook up the lives of hundreds of thousands of people. Tens of thousands of United Auto Workers (current and retired) –- and their families -- awoke Sunday to the possibility of strikes, radically reduced wages and benefits, lost jobs and diminshed or eliminated pensions. Eventually, some will follow Delphi to bankruptcy court.

Thousands of auto parts suppliers (hundreds who sell to Delphi) are already revisiting options that include fire sales, mergers, closing down and, yes, bankruptcy. Tens of thousands of people work for these copmanies. They, too, heard Miller’s filing. Tonyia Young worries her employer Guide Corp. will match the steep wage and benefit cuts planned at Delphi. Tonyia will undoubtedly witness some in her position follow Delphi into bankruptcy.

Men and women who run small businesses near Delphi and other affected companies could hear the “bang!” of Miller’s court action, too. Said Mary Mosley, owner of the Lighthouse Bakery and Deli about a mile from a Delphi plant: "It's scary because a lot of businesses are connected to Delphi. It makes a big difference."

Some of these merchants will follow Delphi into bankruptcy.

What to Mary and Toniya were anxious murmurs must have been a sonic boom to people at GM. It’s not just the $1.2 billion Delphi owes GM. Far worse are these twin threats: (1) Any disruption in Delphi operations could shutter GM plants heavily dependent on Delphi parts; and, (2) GM might have to reassume $11 billion of liabilities it had hoped to shed when it spun Delphi off six years ago.

By Monday, GM stock had plummeted and some openly speculated on what was once unimaginable: That GM might follow Delphi into bankruptcy.

Not everyone rose to cold gruel for Sunday breakfast. Chinese auto parts manufacturers whose business has tripled since 2001 are looking at the kind of sustained growth that, fifty years ago, prompted the head of GM to brag, “What’s good for General Motors is good for the country.” European auto parts suppliers who've done a better job of implementing strategy than Delphi see opportunities to pick up assets and become stronger. And, many investors think the tea leaves finally point to the kind of industrial restructuring that can make them rich (or richer).

Unlike these potential winners from Delphi's bankruptcy, the thousands of workers, families, businesses, merchants and others who stand to lose will see the viral contagion pile trouble upon trouble onto the quality of their lives in the places they reside: personal and business bankruptcies, divorces, worsening drug and alcohol abuse, broken local government budgets, deteriorating services, a sense of isolation and despair.

In 1775, people like Ebenezer Monroe shared fates with others because of the places they lived together. People from other places were unwelcome if they brought trouble with them. We don't live in a world of places anymore. Instead, ours is a world of markets, networks, and organizations. In our new world, place is contained by - and is subject to -- business, not the reverse.

And, so it is that CEO Miller's message heard round the world is quite the opposite of what echoed from Ebenezer Monroe's musket. Monroe exclaimed to the British, "Take your business out of my place!" Miller of Delphi proclaims to all adversely affected by his Chapter 11 filing, "Take the problems of your places out of my business.”

Posted by Doug Smith at 08:46 PM | Permalink | TrackBacks (1)

October 09, 2005

Suggested Reading

A few weeks back in a post entitled Downsizing Journalism, I commented on the suicidal effects that cost-focused strategies have on newspapers: cost reductions in the face of declining circulation reach into the newsroom which, eventually, reduces the quality of the news which leads to declining circulation and more cost reductions.

There are three parts to the phrase "newspaper business": (1) news; (2) paper; and, (3) business. With the rise of the Internet -- and shifting habits of younger people -- paper has emerged as a very expensive form of distributing news. Put differently, paper drives a wedge between part one (news) and part three (business).

This is not trivial. And, that's why every executive and employee in newspaper organizations (and anyone else who cares about this topic) should read Ken Auletta's article in the October 10, 2005 issue of The New Yorker. (Sorry: The magazine, at least as of today, chose not to post the article on its website).

Auletta uses the recent resignation of the Los Angeles Times' editor as a focal point to explore the fundamental problems facing newspapers. He has done a masterful job of presenting in clear and compelling ways the tensions between the Los Angeles Times' editors' desires to be a world class newspaper versus the coporate headquarters' desire to deliver steady growth and earnings from the newspaper business.

The title of Auletta's article is "Fault Line". It's brilliant. Not only because he so clearly lays out the inherent tension between striving for quality news versus meeting bottom line expectations - but also because, as happens too often in organizations facing profound change, the leaders from both sides fell too easily into a game of finding fault - the 'we/they' battles that never produce win/win strategies for change. Never.

Auletta has done something else in this article. He has provided journalists an example of excellent journalism. He has done a careful job of reporting both sides of this story. He has not pulled punches; but, neither has he taken cheap shots. He has succeeded in portraying all the players as human beings trying to do their jobs in a tough situation. In other words, he has shown respect to the people in his story and, thereby, shown respect to the readers of his story.

The Los Angeles Times can achieve both aspirations: (1) world class news; and, (2) profits and growth. But it cannot succeed if either goal trumps the other. Auletta's piece -- if carefully read and used -- can help the people of the Los Angeles Times find their best future together. Indeed, it can help all people in newspaper businesses convert the 'paper' wedge pitting 'news' against 'business' into a clarion call for shared collaboration and creativity required to deliver both high quality 'news' and high quality 'business'. Both/and. Not either/or.

Posted by Doug Smith at 01:46 PM | Permalink

October 08, 2005

Comfort Zones

“Comfort zone” is a wonderful – and wonderfully effective - piece of language. It communicates in plain English a wise insight about leadership and management in the face of change.

The basic message is this: We are all more comfortable in our comfort zones than out of those comfort zones. Often, however, the challenges at hand demand that we risk stepping beyond our comfort zone if we hope to lead and manage effectively.

Simple, elegant and wise.

And, like other pieces of wisdom, subject to a significant, if subtle, misreading; namely: that it is somehow ‘bad’ to be in our comfort zone.

I was reminded of this yesterday when Marv, a friend (and talented, experienced leader) mentioned, “Hey, I’d rather be in my comfort zone if and when it can get things done easier.”

Here’s what Marv meant. If he and others in his organization faced a performance challenge that could be achieved in their comfort zones, that would be okay. That would not be ‘bad’.

I agree. We live in a dynamic, chaotic world that confronts us with profound challenges. We are more likely to succeed if we tap into the wisdom about comfort zones. Doing so, though, also demands that we distinguish the aspects of challenges that can be achieved in our comfort zones from those that will require us to step beyond our comfort zones.

Most challenges of any richness and subtleness have both parts. Yet, many of us have inherited an instinctive ‘either/or’ response to clear distinctions . We too often associate ‘good’ versus ‘bad’ to opposing ideas.

We hear about the value of understanding the limits to our ‘comfort zones’ and, as leaders, we overreact. We associate being in our comfort zone as always bad – and outside our comfort zones as always good.

This reaction happens with other distinctions as well. People hear or read, for example, about the ‘team discipline’ versus the ‘single leader discipline’ and quickly link ‘team’ to all that is ‘good’, ‘single leader’ to all that is bad.

For some challenges, though, the single leader discipline (an effective boss who knows how to divide up tasks and hold folks accountable for individual contributions) is the best way to move forward. While, in other performance challenges, the team discipline is best (for example, when the sum of individual best performance simply won’t add up).

Distinctions like “in comfort zone/outside comfort zone” and “single leader discipline/team discipline” are not about either/or or good versus bad. They are about leading effectively in the face of challenge and change.

It seems that many of us are comfortable with instinctively pinning either/or, good/bad onto clear distinctions. That’s a deep aspect of our comfort zone.

My friend Marv is suggesting we might want to move beyond this instinctive good/bad and either/or part of our comfort zone in order, ironically enough, to know when other parts of our comfort zones can help, not hurt, in meeting the challenges ahead.

Yes, this means a risk. We might think the skills and approaches inside our comfort zones will work and be wrong. Indeed, the elegant wisdom of comfort zones is a warning against too easily sticking with our comfort zones.

But the 'good/bad' overreaction to comfort zones means that we are at great risk of not picking the comfort zone alternative when it would be best. By making both choices real -- by challenging ourselves to use comfort zones as guides to what works and what doesn't -- we all increase the odds of success and, I think, enrich the meaning of distinctions and choices instead of diluting them.

Posted by Doug Smith at 03:19 PM | Permalink

October 07, 2005

Enlightened Disagreement

Think about a hot topic at work – hot because the moment it comes up, heat rises from the under the collars of folks in the room. Perhaps you’re a product or market manager at GM and face tough choices about the mix of hybrids and SUVs in your product line up. Or, you work for the baseball players union and need to figure out what to do about steroids. Or, you’ve been with a big pharmaceutical company long enough to know that the future looks dim for industry pricing and marketing practices.

Now take this test:

When we disagree about hot topics,

A: Each party to the disagreement can articulate to the other party’s satisfaction, the other party’s point of view.

B: Neither party to the disagreement can articulate to the other party’s satisfaction, the other party’s point of view.

“A” is ‘enlightened disagreement. The manager at GM supporting a higher percentage of hybrids can articulate to the SUV stalwart the SUV point of view. And vice versa. Neither side necessarily changes positions. But they do understand one another – and can demonstrate it by ‘making the other’s case’ to other’s complete satisfaction.

Odds are, however, this debate at GM, like ‘hot topics’ elsewhere, suffer from “B”: unenlightened disagreement.

And that’s a shame. We all know that confronting tough choices benefits from the ‘two heads” rule – as in “two heads are better than one”. Different perspectives produce richer and better understanding.

And, we also know that disagreement is a natural by-product of contrary perspectives. But, too often we don’t reap the full benefits in our disagreements because, instead of taking the risk to actually articulate the other side’s position, we merely go round in circles – repeating our own positions over and over, each time more loudly than the time before.

Converting unenlightened disagreement into enlightened disagreement takes some effort. But it is not earth-shatteringly difficult or complex. Mostly, we only need is to listen well, ask questions and, when we think we’ve got the opposite point of view down, articulate it with sincerity.

Nothing is lost in this effort. Neither honor nor character nor authority nor leadership suffers when we risk satisfying the other side that we understand them. Indeed, quite the reverse.

Much is gained in converting unenlightened disagreement to enlightened disagreement. Surprisingly often, heated disagreements spring from facts that are missing or questions that have not been asked. Frequently, one or other of the parties has misinterpreted what’s being proposed and only sees this when he or she takes the trouble to repeat the other side’s point of view.

Enlightened disagreement does not mean agreement. However, it does mean that, after choices are made, no one can later claim, “When we decided to go down your path, I didn’t understand what you meant.”

Posted by Doug Smith at 07:59 AM | Permalink

October 01, 2005

Plato to Red Cross: Know Thy Brand

In Katrina’s wake, folks at the American Red Cross might want to sneak a peek at this snippet from Plato’s Alcibiades:

SOCRATES: But should we ever have known what art makes a shoe better, if we did not know a shoe?

ALCIBIADES: Impossible.

SOCRATES: Nor should we know what art makes a ring better, if we did not know a ring?

ALCIBIADES: That is true.

SOCRATES: And can we ever know what art makes a man better, if we do not know what we are ourselves?

ALCIBIADES: Impossible.

SOCRATES: And can we ever know what art makes our organization’s brand better, if we do not know our brand?

ALCIBIADES: Now, you’ve lost me Socrates. What the heck is a brand?

Unlike 26 centuries ago when Socrates and Alcibiades chatted, brands are an essential element in our 21st century world of markets, networks, organizations, friends and families. Among the many reasons: human beings depend on pattern recognition to make quick judgments. Bu in our new world, we don’t look for footprints, broken twigs and scat in the woods. We look for brands.

Katrina devastates the Gulf Coast. We want to help. “Red Cross” comes to mind.

It is no surprise that as of this week, Katrina donations to the Red Cross neared the $1 billion mark – more than double the total amount donated to all other charities combined.

Put differently, Red Cross’s powerful brand helps explain its overwhelming market share in disaster relief.

Disaster relief. That sits at the heart of the Red Cross brand. And, it’s why a review of Plato’s Alcibiades dialogue should be high on the ‘to do’ list for leaders of the Red Cross – because it could help them find the limits of what their brand stands for and avoid, once again, incurring the displeasure of their donors.

First, a quick look back to 9/11. $1.1 billion flowed into the Red Cross – but, the organization chose to shift $200 billion to ‘future crises’. People had given for the 9/11 crisis – not ‘future crises’. People were upset. The Red Cross – and it’s vaunted brand – took a hit.

Only, in that case, the hit came from a communications failure – not a failure to know thy brand. In shifting $200 billion to future crises, the Red Cross stuck to it’s mission and brand and what it is excellent at doing. It should have been more forthcoming with the donating public about this. But it did not move ‘off brand’.

Burned by 9/11 criticism, now the Red Cross may be headed toward a different and more subtle mistake – spending all the money on disaster relief even in the face of profound needs for rebuilding and other ‘second phase’ efforts.

Part of ‘knowing thy brand’ is also knowing what your brand does not stand for – what your organization is not particularly good at. The Red Cross is as good as they come at disaster relief. But, the Red Cross lacks the institutional skills, experiences and traditions at ‘second phase’ recovery – the longer term, tougher job of helping people put their lives and communities back together.

Who is good at that? Ask yourself what brand pops to mind? Probably, you’ll have a tough time. But, leaders at the Red Cross have answers to this question because they'be been through this many times and have long standing business realtionships with organizations who do provide 'second phase' support.

In Katrina’s aftermath, 'second phase' support creates a huge dilemma for the Gulf Coast and for the Red Cross. There are no ‘brands’ – organizations well known to the donating public for medium-to-longer term community and economic development. But, that task is sorely needed and one fact stands out: The Red Cross now has huge monetary resources with which to find and partner with organizations that can take on ‘second phase’ rebuilding.

Will they do it? We hope so. Let’s note, though, Red Cross' leadership face some tough choices:

First, to avoid the miscues of 9/11, they would need to mount a communications effort explaining why they believe these uses of donations are consistent with meeting the Katrina disaster.

Second, they’d need to move quickly in identifying and partnering with reputable ‘second phase’ organizations.

Third, they’d need to look deep into their ‘brand souls’ – to practice Plato’s dictum – and acknowledge to themselves and the world what they are good at and what they are not good at.

Posted by Doug Smith at 01:34 PM | Permalink

September 30, 2005

Ten Faces of Innovation

October’s Fast Company includes an excellent summary of the ten different types of people Ideo considers essential for successful innovation. Given Ideo’s track record, we should pay attention.

Ideo buckets the ten roles into three groups:

Those with an unquenchable desire to learn:

- The Anthropologist: Great observers of human behavior and how people interact with products, services and situations
- The Experimenter: Continuous (as in never stops) trial and error
- The Cross-Pollinator: Steals shamelessly from other industries – ones no one else would think to look to for lessons and ideas

Those who are savvy about how organizations work and what it takes to get folks to collaborate

- The Hurdler: Can and will get over, under and around any and all company policies and budget limits
- The Collaborator: No two or more people, regardless of how different, will fail to work together with the Collaborator’s help
- The Director: Knows how to make music of all the different roles

Those who convert ideas and collaboration into reality in your organization

- The Experience Architect: Designs and makes real undeniable experiences that bring ideas to life for customers, employees, executives and others
- The Set Designer: Integrates all the action into physical spaces that go beyond facilitating creativity to actively assisting it
- The Caregiver: Knows the last mile separating customer service from true and complete customer care. For the Caregiver, it’s all about the customer’s complete experience.
- The Storyteller: Weaves product, service, experience and brand together into a compelling narrative that gives meaning to life.

Any of you who’ve participated in successful innovation will recognize the faces in this excellent list. And, if you’ve seen failures, it’s probable there have been some faces missing. In Xerox’s famous failure to commercialize personal distributed computing, for example, there were not enough Hurdlers or Directors.

Ideo knows what it’s about. Let's add to their wisdom with these reflections:

- These ten faces of innovation will increase the odds of success. But, don’t read the list mechanically. Don’t demand that these faces always belong to ten different people. Think of them as perspectives and roles more than individual jobs.

- Don’t stop with individuals. Remember teams: no successful innovation ever happens in an organization without the contribution of one or more real teams.

- Add one more role and perspective: The “Company-risk” Risk Taker. Sorry for the redundancy. All ten of the roles and perspectives take risks. None of them necessarily, though, take ‘company risk’. Innovation at the far end of the spectrum cannot move forward without someone authorizing ‘company risk’ – that is, willing to put something that risks company performance on the limb. The brand, existing customer relationships, a heckuva lot of money, careers, supplier or vendor relationships, shareholder value – these are but some of the candidates that often define the lines between ‘company caution’ and ‘company risk’.

Posted by Doug Smith at 01:45 PM | Permalink

September 28, 2005

Lose Weight or Feel Better

Performance begins with focusing on outcomes instead of activities. Surprisingly, however, aside from familiar financial indicators, using outcomes as goals instead of activities is the exception instead of the rule.

Outcome-based goals start with answering this question: How would we know we succeeded?

Go ahead. Try it. Identify something you and others are working toward – whether at work, in your church or other religious organization, even at home.

Sometimes, the answer is quite straightforward. “How would I know I succeeded at losing weight?” By taking some number of pounds off and keeping them off for a period of time.

Other challenges are more difficult. ‘How would I know I succeeded at reducing the stress in my life and feeling better?” “I’ll know I feel better when I feel better” comes up short. It’s circular – and it provides little with which to gauge progress.

Whether you’re at work or church or part of any group facing a significant performance challenge, it helps to know if your challenge falls in the ‘lose weight’ or ‘fell better’ category.

“Lose weight’ challenges have outcomes such as revenues, number of customers served, speed, costs, number and success of new products, elimination of defects or errors and so forth.

“Feel better” challenges are more difficult. Consider, for example, total customer satisfaction, ‘most respected brand’, ‘best place to work’, ‘being the preferred provider’, ‘building new core competencies’ and ‘achieving diversity’. Yes, there are a variety of leading and lagging quantitative indicators that point to success. The number and quality of job candidates is a leading indicator of ‘best place to work’. Retention can measure lagging effects of a ‘best place to work’.

But concurrent, real time outcomes that directly reflect such aspects of ‘best place to work’ as ‘using our values everyday” are more difficult. Setting and achieving outcome-based goals for this kind of ‘feel better’ challenge may demand dropping our bias for easily collected metrics. Instead, it often helps to articulate qualitative goals that, even if lengthy, are verifiable through objective reflection.

“At least 4 out of 5 project teams in our organization that set and achieve performance outcomes will, when debriefed, be able to articulately connect the specific values they used to succeed and why they mattered.”

This is not as easily measured as a ‘lose weight’ kind of goal such as revenues, profits, speed or defects. But, it is just as powerful. Project teams knowing in advance that they will be accountable for this outcome are more likely to take the time to specifically identify and link values that the organization claims to practice to their job at hand. The teams – and, indeed, the rest of the organization – are more likely to see why and how ‘values’ are real – how and why they really make a difference.

Most challenges of any interest contain both ‘lose weight’ and ‘feel better’ parts. Managing performance demands paying attention to each, especially in a world that now requires attention to so many dimensions beyond financial results.

Posted by Doug Smith at 07:26 PM | Permalink

Downsizing Journalism

It’s like a scene from The Godfather – the staccato, serial elimination of the enemy’s key players in a single moment. Only, according to the Columbia Journalism Review, the enemy are journalists and those doing the firing are their media bosses.

In less than two months of carnage in the newsroom, media companies have put big numbers of journalists out on the street: 45 at The New York Times, 35 at The Boston Globe, 25 at The Philadelphia Daily News, 75 at The Philadelphia Inquirer, 52 at The San Jose Mercury News, and 100 at Newsday. Similar efforts are apparently underway at The Los Angeles Times and San Francisco Chronicle.

Jon Friedman at Dow Jones’ MarketWatch writes, “This is a scary time to be a journalist.”

Not to mention other employees – hundreds of them are also getting pink slips along with the journalists.

Friedman says Wall Street is to blame – claiming that media companies’ fear of failure to achieve profit expectations drive the cost cutting moves. Susie Madrak atSuburban Guerilla agrees and also adds that a serious decline in professionalism and the quality of the product explain the mass layoffs.

In other words, these events at newspapers across the nation are raising questions about performance – what does it mean, who benefits from it, and what are the best strategies and approaches for delivering it.

We have a deep problem in this country. With the predictability of Pavlov’s dog, we equate performance with the bottom line – with profits and shareholder value and winning. When, in a business context, we say “performance’, this is what we mean: financial performance and only financial performance.

Yes, over the past few decades, popular frameworks like the balanced scorecard have taught us to quickly mention other constituencies beyond top management and shareholders: customers, employees, communities and so forth. But, as actually practiced, the Balanced Scorecard is not balanced. It is an important contribution for which we all should be thankful. But it has become a deeply flawed approach that, when all is said and done, merely reinforces our maniacal obsession with profits and shareholder value. Customers? Yes. Pay attention to them. Why? Because they are the means to deliver profits and shareholder value. Employees? Yes. Pay attention to them. Why? Because they are the means to delivering good customer experiences that deliver profits and shareholder value.

Profits and shareholder value are essential to success in a market economy. No one can argue with that. But – and here’s what’s leading to the mass firings of employees at newspapers – when businesses make shareholder value the “be all/end all” of everything they do, they undercut the very value they mistakenly think they’re creating.

Simple math explains this. How much profits are enough? Answer in our capital markets: No profit margin is too high. How many consecutive periods of compounded profit growth is enough. Answer in our capital markets: There’s no such thing as too many.

Well, start with whatever level of profits you want. Now, to satisfy the endless demand for shareholder value (not to mention management compensation and reward) make the profit margin higher and higher and higher. Now, pick an actually number. Say, $10 million in annual profits. And grow it at some rate every accounting period into the endless future.

You can’t. But the pressures to do this very thing lead to many observable phenomena. When performance means profits and shareholder value exclusively, performance itself is not tethered by any other dimension of reality. If floats, like a helium balloon – only no one is actually holding a string. It’s an illusion.

In newspapers, the untethered drive for profits to satisfy shareholders produce editorial practices that, to cut costs and curry favor, print the press releases of those they are supposedly monitoring and call it ‘reporting’, journalists who, to advance careers, stop questioning and challenging those with power in our society, and advertising and circulation folks who push beyond the edge of the envelope in ethical practices.

When it comes to the ‘news’ in ‘newspapers’, the product is cheapened, thinned out, spun dry. The strategy for news becomes what business gurus call ‘cost focused’ instead of ‘value focused’. And, that’s a death knell – at least for news. Because, while technology and other factors can help papers manage costs, reporting, fact checking, gathering multiple sources, weighing wisdom and judgment and all that goes into ethical and professional journalism is not, at the end of the day, a cost-driven business.

Media companies and newspapers have other lines of business that might lend themselves to cost-driven approaches (although, most strategists agree that both cost and value are always part of the equation). The New York Times, for example, recently described multiple strategies for growth.

But newspapers seem to have herded themselves to cost-focused strategies when it comes to the news. And, a close reading of the Times’ strategy presentation reveals the damage: ‘circulation is soft’. Why? Because as long as they call themselves newspapers, these offerings must deliver news as part of the product.

The last few months have been brutal on journalists and other employees. But the carnage won’t stop until the journalists and their colleagues from top to bottom figure out how to articulate and pursue performance that matters to all they serve in sustainable and reinforcing ways. The Godfather’s carnage is the tale of turf wars between rival organizations. It’s about serial homicide and assassination. What’s happening in America’s leading papers, though, is a tale of organizations at war with themselves. It’s not homicide.

It’s suicide.

Posted by Doug Smith at 06:20 PM | Permalink