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 28, 2006
Prescription For Failure
Here's a math question about a household budget. Say you want to understand the effect of trend lines comparing household income to a single item of household expense. That expense might be food or clothing or heat.... or, in this case, interest payments on debt. Here's the question:
What happens if household income is rising at the rate of six-tenths of 1% per year and interest payments on debt are rising 8.5% per year?
Answer: The share of income eaten up by interest payments is metasticizing like a cancer.
Now, if your income is $1 million per year and the base line interest payments are even $40,000 a year, this trend is not particularly troubling.
But, what if you are a doctor and your income is $150,000 per year while the base line interest payments from medical school and other debt are $30,000 per year? Well, then your household income is in cancer-like territory because a year from now your income will be $150,000 times 1.006, or $150,900 but your interest payments will be $30,000 times 1.085, or $32, 550 -- a net problem (before taxes) of $1,650 of more expenses than income.
Five years later, this net problem grows to slightly more than $8,000. $8,000 that the doctor needs to find from other household expenses -- or to offset with income from a second job (or, perhaps by agreeing to participate in income-generating programs offered by pharmaceutical companies). That's a cancer.
And, those are the trends lines currently describing average doctor income and average doctor indebtedness. Average. Therein lies this not-so-hidden prescription for the failure of our society's health care (at least if by 'society' we mean 'liberty and justice for all' -- for 100% of society instead of just part of society):
You are going through medical school looking at these trend lines and you have this choice -- you can sign up to be, say, a pediatrician who works with kids from all parts of society (top to bottom) at an income below the the average, or you can put yourself in a bit more debt to become a specialist focusing on the top 20% of society who have 80% of the nation's assets and, through both insurance and private means, can afford to pay bills that permit your income to be 6 to 8 times the average.
You can put yourself and your family in the position of the $1 million household with beginning debt of $40,000 -- or you can put condemn your family budget to a metasticizing cancer.
You can choose to participate in a health care system that serves the top 20% -- or you can choose justice and fairness for all.
Given our culture's sociopathological obsession with value and individualism, what's your bet on the pattern of choices made?Posted by Doug Smith at 01:37 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
Meaningless Politics, II
In his comments on the Alito hearings in The New Yorker, legal analyst Jeffrey Toobin appropriately criticizes the highly choreographed dance that makes it difficult to really learn anything substantive about folks being nominated for life time tenure on the one body in our Constitutional government that truly and fully have the power to shape law and policy without 'the consent of the governed'. If there's anything we should see and hear at all -- any single most important thing -- Toobin writes, it should be to give us a clear sense of a nominee's politics. The Alito hearings didn't do that clearly or forthrightly. They were, in Toobin's phrase, a 'charade'.
And it is in the interest of making sure words like 'charade' and 'integrity' have meaning that I suggest Toobin take a second look at his assessment that "Alito's career, as well as his testimony, shows him to be a man of intelligence and integrity." Intelligence? Certainly. He intelligently followed the rules of the dance and avoided providing a forthright, clear explanation of his beliefs, his values and his politics on the issues that most concern our nation and the world.
Integrity? No. For, let us ask Alito and let us ask Toobin, how can a human being who participates in a 'charade" claim integrity or be described to have integrity?
Alito did what he needed to do to get a job. He certainly did not share with us what he really believes in as a man, as a judge, as a lawyer, as a leader and as a fellow American.
He was the central actor in a charade. Only this charade was not some joke or after dinner game. If Alito had any integrity -- a shred of meaningful integrity -- he would have risked his self-interest in service of his nation. Integrity is not something revealed when nothing is on the line. It's best displayed -- like all virtues -- when much is on the line.
When writers like Toobin put 'integrity' in the same paragraph as 'charade', they'd be well advised not to attempt to ascribe both to the same person. Not at least if they intend their words to have meaning.Posted by Doug Smith at 09:40 PM | Permalink
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 22, 2006
The Markets, Networks and Organizations of Babel
"And the whole earth was of one language, and of one speech.... And the people said, Go to, let us build us a city and a tower, whose top may reach unto heaven.... And the Lord said, Behold, the people is one, and they have all one language, and this they begin to do: and now nothing will be restrained from them which they have imagined to do... Let us go down and there confound their language that they may not understand one another's speech... Therefore the name of the Tower is Babel; because the Lord did there confound the language of all the earth." (Genesis 11)
Why? Why did the Lord confound the single speech of people and scatter them to the winds? Because armed with the power of a single langauge, people forgot they were people and not gods -- and immediately set up a project to reach into heaven and accomplish all that rightly belongs only to a divine hand. Hubris. Instead of doing the Lord's work, human beings took advantage of a divine gift -- a single language -- to attempt to substitute the human for the divine.
There is so much to accomplish here on earth. We do not need to set ourselves up hubristically to build towers into heaven. We do not need holy wars. We do not need to destroy ourselves with divine projects aimed at undoing the gifts of common language, common principle and common law. We do not need to cynically exploit sincere beliefs in all that is holy to undo our constitutional form of government, our commitment to the rule of law and our holy obligation to live in peace with others around the globe.
In the past few decades, technology has provided human beings with yet another try at one common langauge -- or, perhaps, a family of related languages known at HTML, XML and so forth. With the Internet, we now can speak to one another across the globe. And, in that sense, we all are one click away from inhabiting a single world. But, this world is not the world of places created in part by the scattering of peoples in Genesis. Yes, billions continue to inhabit that world -- wholly or partially depending on whether they have access to that 'click'.
For hundreds of millions if not billions of the rest of us, however, we now live in a world of markets, networks, organizations, friends and families. This world -- and our shared values within it -- are much more dependent upon the purposes we bring to our lives instead of the places we happen to reside. And it is this world that offers all of us the chance to establish purposes of sanity, safety, sustainability and goodness within the ambit of what is permitted to human beings.
It is a world whose current distribution of health and well being (including the opportunity to have health and well being through work and effort) are shameful in the eyes of God -- any God or Gods, or for those whose views run to ethics only, in the eyes of any ethical standard. This distribution as well as access to opportunity arise primarily from the workings of our new world of purposes -- from the markets, networks and organizations of this new world as opposed to from places. The purposes of those of us who live out our daily lives in this new world of markets, networks, organizations, friends and families have the whip hand of the planet.
Our purposes in how we use the shared language of technology -- whether to attempt to substitute our will for the will of the divine through holy wars on others or on ourselves and our inherited forms of constitutional and democratic government -- or whether to use the divine gift of technology to share bounty, health and well being with others -- these will determine if we progress as a planet or, once again, find our common language confounded by a God, Gods or ethical precepts angered by hubristic projects.
The early returns are not promising. Consider only what has happened to accuracy and truth. "What effect," asks a columnist at the Financial Times, "is the web having on truth?" In his thoughtful response, he notes both bad news and possible good news. First, he notes that no one is around to fact check bloggers and others -- unlike editors used to do in traditional media. Of course, he rightly notes that editors and fact checkers seem no longer to fact check traditional journalists either -- that relying on newspapers for accuracy is but one more form of potential self-delusion in a world of spin. So, where is the potential good news? It lies in using the new technology in ways consistent with the new technology.
Our movement toward a single language is a many-to-many phenomenon. It is not a hierarchy. It is not a situation like the old fashioned newsroom where a division of labor and a hierarchy did the fact checking. Rather, it is many-to-many. Who will fact check the spin and bias of those who publish on the Web? Others who publish on the web. The issue is not so much will the fact checking happen. But rather will it happen fast enough and effectively enough to undo the gargantuan potential for misleading and private agendas?
A former head of NBC news has suggested, "News is what someone wants to suppress. Everything else is advertising." It's a comment that falls short of wisdom about the workings of communication in our new world of markets, networks, organizations, friends and families. In a world of places, his comment would make sense. In that world, a people lived together in a place and had to pay attention to those in power whose agendas could easily reflect the distinction between news and advertising. In our new world of purposes, however, there are always -- always, every time, permanently -- different market segments and organizations who want to suppress something that competing organzations, networks and market segments wish to expose and air.
In our world, then, every single piece of information that can be portrayed and communicated through our single language of technology is both 'news' and 'advertising' depending on the audience and the communicator. Was Clinton's sex with Lewinsky news or advertising? Both. It was news for those who would have suffered if not revealed. It was advertising for many who wanted to reveal and revel and exult in it for reasons that drove their agendas of political advantage, greed, power and self-aggrandizement. Is the Bush Administration's illegal spying on Americans news or advertising? Both -- and for similar reasons.
So, where does this leave us? With our own judgment, our own purposes, and our own concern for truth and accuracy. Neither news nor advertising in our world of markets, networks, organizations, friends and families are necessarily either true or accurate. Sometimes advertising can be truer and more accurate than news; sometimes the reverse. But, even when advertising has more truth than news, we must remember it is advertising. It is brought to us by folks with purposes -- and, as with truth and accuracy -- it is our job to figure out what those purposes and choose whether and to what degree we agree or disagree with them. The same holds for news.
Are the purposes about greed, power and self-aggrandizement? Or, do the purposes incline more toward generosity -- toward both self-interest and interest in others, toward both value and values, toward both building health and well-being for ourselves as well as others?
In periods of profound change, the scarcest resources are effort/energy and meaningful language. With the information age, we live in a period of profound change. Whether and to what extent we find common, meaningful language in our new world of markets, networks and organizations -- including the language of truth and accuracy -- will have much less to do with distinctions between news and advertising than with the shared purposes we bring to our markets, networks and organizations -- to our world. If those purposes are shaped by greed, power and selfishness, then we will find our common, shared langauge of technology destroyed -- along with peace, prosperity, safety, sanity and sustainability.
If, on the other hand, we make it our shared purposes to reintegrate our concern for value (money, winning, profits and wealth) with our concern for family, society, democracy, the rule of law, constitutional government, spiritual brother and sisterhood, our precious blue planet, fairness, equity -- liberty and justice for all -- then, with God's blessing, we shall pass along to future generations a planet that is safer, saner and more sustainable.
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
Posted by Doug Smith at 01:35 PM | Permalink | TrackBacks (1)
January 18, 2006
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.
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 11, 2006
Even The Appearance Of Impropriety
The most difficult principles of human conduct are, of course, the ones most easily abused. Still, for those who imagine the possibility of ethical behavior from lawyers (and from lawmakers), the princple that 'even the appearance of impropriety is improper" stands as a firm, strong guide to conduct. It means, for example, that in a nation committed to the rule of law -- the rule of principle instead of personality -- lawyers and lawmakers faced with a question that might -- might -- raise the spectre of impropriety ought to find a path forward that is most consistent with proper conduct and regard for the rule of law, the rule of principle itself. It is this ethical precept, for example, that suggests a judge ought to recuse him or herself if there is even the appearance of a potential conflict based on personal self-interest (something, by the way, Supreme Court nominee Alito failed to do in a case against a company in which Alito held stock).
Like any demanding precept, this is a difficult and challenging one for human beings to adhere to. But, isn't that the point? All of which makes the letter Congressman David Dreier wrote to his constituents to explain why he supported an ethics rule change in late 2004 that allowed Tom DeLay to keep his majority leadership position notwithstanding his indictment and notwithstanding the previous rule enacted by reform minded Republicans that demanded indicted officials to step down from their positions.
In the letter, Dreier (who is evidently being asked to lead the Republican Party's post-DeLay, post-Abramoff, post-Scanlon, post-Cunningham, post-Noe, post-Ney, post-Libby, post-Safavian approach to ethics) supported the rule change that favored keeping indicted Tom DeLay as majority leader because, he argued, otherwise any official would be subject to the possibility of having to step down if indicted by politically minded prosecutors. (The possibility of politically motivated prosecutions, of course, has risen in a world where politics has been made a blood sport by those like Karl Rove who now exert so much control over a Republican Party that once actually stood for principles and not just 'power and winning at all costs'. In that sense, the DeLay Rule was much more concerned with holding onto power than committing to principle.)
Put differently, lawmaker Dreier has turned the ethics precept about impropriety on its head. He had made black, white and white, black. He wrote his constituents, in effect, that even the possible appearance of a political motive by prosecutors should be enough to outweigh the possible appearance of illegality by lawmakers. His position -- the rule now governing how Republicans respond to the appearance of impropriety and illegality among their members -- is an insult to the ethical precept about impropriety and to the rule of law. This DeLay Rule is more consistent with the rule of men, the rule of Tom DeLay than the rule of law. It substitutes the interpretation of people like David Dreier and Tom DeLay for principle.
In this, Dreier advances a new approach to the world's oldest democracy. Let the rulers -- the personalities in power decide when and when not to ask their buddies to step aside. Let us turn this nation from one ruled by law to one ruled by personality.
Dreier's letter, of course, is itself an impropriety for anyone who believes in the rule of law. The Republicans in Congress who voted to amend their reform to allow the indicted DeLay to retain his powerful position acted improperly -- and, again, certainly acted to create an appearance of impropriety.
Now that Abramoff has agreed to work with prosecutors, the same Republicans are scurrying to correct for their past actions. They want to be able to claim proper conduct. Unfortunately, by the standards of the ethical rule regarding impropriety -- and in the eyes of any human being who can see past 'red' vs. 'blue' ideology -- these Republicans are focused and obsessed more on creating an 'appearance of propriety' than on reforming themselves to actually have and follow proper conduct.Posted by Doug Smith at 12:18 PM | Permalink
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