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

December 09, 2006

Responsibility and Instability

In a post about the Iraq Study Group Report earlier this week, Josh Marshall notes, "The rub of the issue I don't see being discussed -- at least not directly -- is this category question: are US troops more a cause of instability in Iraq or a solution/buffer against instability?"

It is a crucial question. Yet, I think, there is a more critical category question, one that has to do with the essential role of adult responsibility in fostering change. In any human enterprise faced with profound change (a nation, a company, a set of friends, a family, a church and so forth), only the adults involved in that situation can take responsibility for bringing about whatever changes are to come -- whether those changes are good, bad or in between. To illustrate: if you smoke, only you can take responsibility for stopping (or continuing). No one else can do it for you. (In this, by the way, I'm not using 'responsibility' in the sense of credit or blame; but, rather, in the sense of ownership, duty and care required to act and be accountable to one's self for those actions -- the kind of responsibility that, by the way, George W. Bush has not been fitted out by nature or nurture to exercise.)

In the case of Iraq, this means that Iraqis must take responsibility for whatever changes are to come -- neither US soldiers nor US contractors nor anyone else can take that responsibility for Iraqis unless we and/or other non-Iraqis are intent on carrying out that responsibility over a long haul. Thus, should we choose, we could take responsibility for implementing changes in Iraq over an open ended, long period of time (10 to 20 years). So, could Iran.

But absent our or Iran's or anyone else's choosing to participate as open ended, long term players in Iraq, we revert to this reality: only Iraqis can take responsibility for their own changes and situation.

Now, if stability is one desirable change to be sought, then only Iraqis can take responsibility for that stability. We cannot do it for them.

The inevitable route to stability in Iraq (absent a miracle) is through the instability currently characterizing what's happening there -- and, probably, worse instability to come. There must be instability on the path to stability. But, and this is key, there will not be stability unless and until Iraqis take responsibility for whatever instability comes first. And, as long as we are present, this will not happen. In this sense, the question about whether we are a cause, or buffer against, instability is unresponsive to the question of what must happen to create conditions where Iraqis take responsibility for their own change. If we are the cause of instability, Iraqis do not take responsibility. If we are the buffer against instability, Iraqis do not take responsibility.

In this sense, all the chat about embedding our forces and doing other things to train Iraqi security forces misses a huge point: however important such training and education might be, they never substitute for the act of an adult taking responsibility for his or her own change. I can educate you until the cows come home about the negative effects of smoking cigarettes. But, until you decide to go buy a patch or otherwise cut down on cigarettes, all that education is just so much wind. Yes, education might be a rational approach to inducing you to take such responsibility -- to persuading and convincing you. But, it is demonstrable that education works best when it is directed at adults who have already chosen to take responsibility for whatever changes are to be aided by such learning. This is not the situation in Iraq.

Among the tragic consequences of this reality is that The United States of America initiated a unilateral war of choice that, in turn, led to a horrendous situation where only an inevitable period of instability in which Iraqis take responsibility for killing one another will lead to a return to stability. The United States of America has this blood - and the blood to come -- on our hands. This is the other sense of the word responsible, as in credit and blame.

But, at this point, our only option to exercise responsibility in the sense of owning the way forward demands an open ended, long term occupation of Iraq -- a 10 or 20 year commitment to, first, enforce stability and then, gradually, gradually, gradually manage the situation toward Iraqi responsibility for the direction and evolution of that stability into something better than stability alone.

If we are not going to make such a commitment - a commitment where we take responsibility for bringing about stability -- then our only responsible option is to leave so that Iraqis have no option but to take that responsibility themselves. And anyone suggesting or claiming otherwise, including the Iraq Study Group, Josh Marshall, Dick Cheney, Nancy Pelosi or anyone else is more interested in responsibility as blame/credit than responsibility as a duty of care toward Iraqis and Iraqi stability.

Posted by Doug Smith at 01:18 PM | Permalink

November 26, 2006

Honest Problem Solving

Problem definition is among the most critical -- essential -- elements of effective problem solving. Taking the time, putting in the effort and gathering as many views as possible about the nature of the problem at hand dramatically increases the odds that effective solutions will be found. As a quick illustration, consider the family who, month after month, see themselves falling deeper in debt. Does this family have a credit problem to solve or a spending problem to solve? The airwaves are filled with commercials offering to help such families solve their credit problem -- an indirect, anecdotal piece of evidence that a whole lot of families in this situation are choosing to define their problem as access to credit instead of finding different approaches to spending. Until the families change the way they define their problem, the odds are against them finding solutions that work.

That's plain common sense.

So, what are we to make of these sentiments from Senator Chuck Hagel on the problem we call Iraq:

"The time for more U.S. troops in Iraq has passed. We do not have more troops to send and, even if we did, they would not bring a resolution to Iraq. Militaries are built to fight and win wars, not bind together failing nations. We are once again learning a very hard lesson in foreign affairs: America cannot impose a democracy on any nation -- regardless of our noble purpose.

We have misunderstood, misread, misplanned and mismanaged our honorable intentions in Iraq with an arrogant self-delusion reminiscent of Vietnam. Honorable intentions are not policies and plans. Iraq belongs to the 25 million Iraqis who live there. They will decide their fate and form of government."

Problem definition: We've got to move beyond noble purpose and honorable intentions if we are to find a solution to this problem.

That, of course, is dishonest. Senator Hagel knows very well that the government of George W. Bush did not enter Iraq with a noble purpose or honorable intentions. The record shows that less than two weeks after taking office, the Bush Administration began plans for "taking out Sadaam". It used 9/11 to push those plans forward. They lied about WMD. They lied about Sadaam's connections to 9/11. They lied about Sadaam's connection to al-qaeda. They lied about the cost of the war. They lied about their preparedness for the post-war occupation. They lied about how things were going. They lied about their questionable methods, such as those used at Abu Ghraib. They continued to change the definition of the problem they were seeking to solve (e.g. what constitutes 'victory') and misrepresented and lied about how they described the situation in order to fit the message of the day. Throughout the affair (and as recently as a month ago in the run up to the mid-term elections), they demonized as traitors anyone who did not agree with their lies.

There were no honorable intentions. There never was a noble purpose. Quite the opposite. Yes, there was ideology. But, ideology and noble purpose are not synonyms. Did Hitler have a noble purpose? Did Stalin? Would you call the events triggered by the madness of Rev. Jim Jones linked to a noble purpose? How about Osama bin Laden? Noble purpose? Honorable intentions?

The Bush Administration defined the problem to be solved in at least three ways: First, to win and retain political power in the United States. Second, to "take out Sadaam" as part of Rumsfeld's 21st century military vision. And, third, to strike anywhere and everywhere that, famously, there was even a 1 percent chance that anti-Americanism and/or terrorism could be found.

There is nothing either noble or honorable about any of this.

And until folks like Senator Hagel rid their problem definitions of perpetuating these lies, the big lie of honorable intentions and noble purpose will continue to cloud our capacity for clear problem definitions and clear problem solutions.

We will make much faster progress when people like Senator Hagel find the stomach to acknowledge the full picture. The Senator correctly describes the actions of the US government when he writes: "misunderstood, misread, misplanned and mismanaged."

Now, the Senator -- and others -- must also speak as clearly about the fact that the Government of The United States acted dishonorably and did so with purposes linked to power, greed and arrogance. If our government is now to move forward, it must do so with a renewed fidelity to the rule of law and our historic aspirations toward decency, fairness, tolerance and liberty and justice for all. And the first and truest step toward doing this is: stop lying.

Our government has acted wrongly. And like a family who continues to seek easy credit instead of taking responsibility for spending, we will not find workable solutions to the mess we've created if we perpertuate the dishonarable lies that produced this mess in the first place.

When one reads Senator Hagel -- especially when he concludes on the note of supporting the Baker-led Iraq Study Group - one sees that the real problem being defined is still the first plank of the problem as defined by George W. Bush's crowd from the beginning: how to win elections and retain political power in the United States? How to spin the messages through our media and political markets about Iraq in a way that will let political leaders who compete in those markets -- as well as the media companies and their celebrities who have replaced news with promotion -- get the troops home without acknowledging that those same troops were sent off to fight, get injured and die for a lie.

Senator Hagel -- and James Baker -- are seeking access to more credit. And they most definitely are not prepared to take full responsibility for our spending problem -- i.e. what's been and will continue to be spent in blood, treasure, values, the rule of law and our national honor and decency.


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 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

November 08, 2006

Moving The Foul Lines

This past Sunday, the local newspaper endorsed the incumbent Congressman John Sweeney against his challenger Kirsten Gillibrand. Throughout his career in politics, Sweeney has repeatedly behaved in ways that raise questions about his character -- incidents suggestive of problems with alcohol, a variety of questionable fundraising and lobbying practices, and violent behavior -- including a report of domestic violence in December 2005. He has never, however, been charged with any specific crime.

He did, though, rise within the Republican-controlled Congress. As the endorsing editorial noted, he held a position of power that could benefit bringing home the bacon to his district. And, with regard to Iraq, the endorsing editors noted that, while Sweeney has voted with Bush, he had recently questioned the wisdom of some of the choices made by the Bush Administration.

On the other hand, the endorsing editors went on to point out Ms. Gillibrand had lived much of her adult life outside the Congressional district and had failed to run for a more local office.

The day after the endorsement, a group of leaders met with the endorsing editors to criticize their choice -- mostly because of Sweeney's domestic violence incident -- an incident that Sweeney first denied, then acknowledged, then denied, then acknowledged, then refused to cooperate with.

The endorsing editors told their visitors that, while they appreciated their concern, they believed they had made the correct endorsement because Sweeney has not been charged with any crime.

So, there we have it. The foul lines on what is permissable to consider about questions of character -- at least for sitting members of Congress who have power to bring home the bacon -- has moved. If you are a challenger, you can be judged not ready for office because you've lived most of your adult life outside the district and you haven't earned higher office by holding more local office. If, however, you are a powerful, sitting member of Congress, you deserve re-election so long as you haven't been charged with any crime.


Posted by Doug Smith at 01:35 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

August 13, 2006

Up Close And Personal

One of the recurring themes over the nearly five years of war in Afghanistan and nearly three-and-a-half in Iraq has been the Bush admiinstration policy to discourage photographs and video of the coffins returning home. In our new world of markets, networks, organizations, friends and families, a relentless stream of coffin imagery would risk conveying one element of the human cost of war -- and do so in a way that might personalize that cost to folks beyond the freinds and families of the brave men and women who make the ultimate sacrifice. Moral philosophers -- indeed, any human being who would like to consider him or herself moral -- would argue that personalizing the costs of war is a necessary element in making war moral and justifiable. Such folks might or might not continue to support the war; but, the point is that mere abstractions (e.g. a number of dead and injured) do not bear the weight of intense, real information and meaning. Indeed, even pictures of coffins would be less real than the visit families receive from military officials bearing the bad news. Still, in our world of markets, networks and organizations, there is a premium on ensuring that our democracy is strengthened through information that matters to making choices.

Having said all that, a recent set of experiments cast an additional and unexpected perspective on the morality of choices like war that put human beings in harm's way for larger purposes. The experiments have to do with time frame and raise a profound point about the value of information before another human being is put in danger rather than after that person has been injured or died.

In the first of these two experiments, participants are told that they are standing on a train platform watching the immenent approach of a runaway train. There are five people who have fallen on the tracks and are helpless to get out of the way. Next to the participant on the platform stands a very large man.

Question: Would you push the large man onto the tracks to absorb the impact of the train and save the five people?

85% of respondents say, "No."

Second experiment. Same situation. Only this time, instead of a large man standing next to the participant, there's a switch that, if pulled, will send the on rushing train to another track out of sight on which, the participant is told, stands one person.

Question: Would you pull the switch?

The majority of respondents say, "Yes."

Among the many interpretations about how reason and emotion battle to explain this difference is what one might call the 'eye contact' factor. In the first experiment, the large man is more real than is the person standing on the tracks in the second experiment. A second and critical explanation also points to the difference between specifically using a human being as an instrument in the first experiment versus the sense that the death in the second experiment is a 'by product'.

When the United States attacked Afghanistan one month after September 11th, the facts known at the time and subsequently verified on the ground were that the Taliban government housed Osama bin Ladin, Osama bin Ladin had ordered the September 11th attacks, and the attack on Afghanistan would give U.S. forces a reasonable chance of capturing Osama bin Ladin.

In light of this, it's worth asking if you were the decision maker, whether and how much it would have changed your decision had you personally met the men and women of the U.S. armed forces who would be put in harm's way in Afghanistan versus not having met them but knowing that some would die and be injured as a consequence of a choice to go after bin Ladin?

When the United States attacked Iraq a year-and-a-half after September 11th, the stated reasons for doing so included charges that Sadaam Hussein had weapons of mass destruction, had the delivery capability to use them on the United States, had direct contacts with Osama bin Ladin and actively supported the September 11th attacks. Subsequent to the invasion, each of these stated facts turned out to be false -- and that those making the decisions knew or should have known they were false.

It's worth asking if you were the decision maker (and you knew or should have known the stated reasons were false), whether and how much it would have changed your decision to invade Iraq had you personally met the men and women of the U.S. armed forces who would be put in harm's way in Afghanistan versus not having met them but knowing that some would die and be injured as a consequence of a choice to go after bin Ladin?

Now, over five years after invading Afghanistan (and failing to capture bin Ladin) and over three-and-a-half years after invading Iraq (and failing to achieve the security and stability that Donald Rumsfeld names as conditions to a military victory -- let alone the many conditions he describes as critical to overall success), it continues to be worth asking yourself -- as a moral person -- if it would make any difference to you in continuing to 'stay the course' in either or both of these theaters of war were you required to meet every man and women sent to their possible death or injury as a precondition to your choice to use them as instruments for your policy? And, would you answer differently if you were not required to meet them; but, rather, only thought of them as abstractions on a different track?


Posted by Doug Smith at 01:04 PM | Permalink

July 18, 2006

It's The Pronoun, Folks

In the Bush-Blair exchange caught unexpectedly on microphone yesterday, Bush said to Blair, "See, the irony is what they need to do is get Syria to get Hizbollah to stop doing this shit and it's over."

Predictably, the corporate media -- recognizing instinctively that the word 'shit' can attract an American audience that has been infantalized by the media itself -- were characteristically either playing up the word 'shit' or, if the media organizations come from self-perceived higher class neighborhoods, substituting (expletive) or describing the word ("Mr Bush used a profanity") instead of naming the word.

It's farcical. At least so far we've been spared the description that Bush had a 'language malfunction' -- perhaps because in a defensive posture, the major media's general counsel have advised that calling attention to the word 'shit' might lead the Senate of the United States to name a committee demanding that the FCC use their brand spanking new indecency regulations to fine news organizations that named the word or played the audio.

Meanwhile, the key word in Bush's candid moment is not 'shit". It's the word 'they'.

Much has been made about the lack of accountability in this administration. One typical leading indicator of folks who hold themselves accountable are those who also take responsibility in the first place.

Someone assuming responsibility does not comment from the sidelines, like a spectator, about what 'they' should do.

"They"?

How about "we", or "I"?


Posted by Doug Smith at 12:04 PM | 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 20, 2006

Airlines, Presidents and Institutionalized Lies

Folks who work in the airline industry cannot differ from the population in general in terms of their proclivity toward mendacity. Yet, as every air traveler understands from repeated experience, stewardesses/stewards, pilots and check-in folks at airlines lie over and over again in their arrival and departure communications. They do not tell the truth -- instead, they always -- always -- exaggerate what is possible into expressions of the probable and the spin is unidirectional: it's always the most optimistic possible.

This is institutional, not personal. Grant airline folks this: they must communicate within a complicated context of air traffic control, equipment and personnel readiness, and customer service guidelines. Not to mention the stress that most regular travelers feel -- and that the airline folks must feel themselves.

Airlines, however, are not unique in institutional mendacity. As is made extraordinarily clear in Daniel Ellsberg's Secrets: A Memoir of Vietnam and the Pentagon Papers, so is the insitution of the presidency when it comes to foreign policy.

His book recounts the institutional pressures that make it prohibitive for presidents to even consider options that might be construed as 'losing' -- in the history recounted in his book, 'losing Vietnam'. Truman, Eisenhower, Kennedy, Johnson and Nixon all demonstrated that this institutional defect was bipartisan. It was a disease that infected Democrats and Republicans, men of reasonable honor and intellegence as well as the reverse.

Ellsberg's tale, among many other things, conveys how essential it is for other branches of government as well as the press to do their job if our nation and the world are to be spared the costs of this institutional mendacity. His book is terrifically well written -- it's like a thriller yet better because it's nonfiction.

As you might expect, the book is a record of our experience in Vietnam. Yet, while Ellsberg never mentions anything beyond 1974, the book is also a preview of Iraq, Afghanistan and the war on terror. Every mendacious act of the presidency has been replayed -- right down to last week's visit to Baghdad and the Rovian inspired political messages now being echoed by a press and Congress yet to wake up to their Constitutional responsibilities.

And it is this last point that makes the final paragraph in Ellsberg's book so devastatingly tragic. Having wrapped up his story with the indictments and resignations of the key players in the Nixon administration (including Nixon himself) -- all of whom conspired actively to lie their way toward a policy far beyond what the public wanted or a functioning democracy and rule of law would have permitted -- Ellberg writes :

"What we had come back to was a democratic republic -- not an elected monarchy -- a government under law, with Congress, the courts, and the press functioning to curtail executive abuses, as our Constitution envisioned. Moreover, for the first time in this or any country the legislature was casting its whole vote against an ongoing presidential war. It was reclaiming, through its control of the purse, the war power it had fecklessly delegated nine years earlier. Congress was stopping the bombing, and the war was going to end."

We are now approaching four years since Congress fecklessly handed over the war power to the Bush Administration and nearly as long since Bush -- and his team -- embraced the institutional mendacity of the highest office in our land to commit the lives, honor, treasury and fate of our nation to three wars -- Afghanistan, Iraq and terror. There have been more than 20,000 U.S. and hundreds of thousands of non-U.S casualties to date along with hundreds of billions of dollars spent. The 'brand' of the United States is linked to torture, unilateral war, and the rule of personality over the rule of law -- causing hundreds of millions of people both at home and abroad to live in fear of the Bush Administration.

For some time now, the popular press has bandied about the question: Is Iraq another Vietnam? Remember that the feckless press fought hard against this idea for years -- editorial boards censured anyone who suggested the word 'quagmire' -- and politicians who dared to utter it knew they were risking the Big Smear from Bush, Cheney and others.

What's fascinating about the Ellsberg book, though, is how it portrays something far more profound than this. Yes, Vietnam and Iraq bear many resemblences (and, some important differences: for example, Vietnam from the mid-1940s through to our exit was a battle for national independence while Iraq has always had about it -- even under Sadaam -- the barely suppresed conflicts more akin to civil war).

But, what's far more critical than the resemblences of the actual conflicts is the direct, straight-line identical institutional defect that contributes to situations like Vietnam and Iraq. Same institutional defect; different players.

The Presidency itself is broken in this regard. And, what is terribly worse, the insitutional mendacity that Truman through Nixon parlayed into national tragedy in foreign affairs has metasticized into reigning policy in all matters: economics, emergency management, science, the environment, the separation of powers, judiciary appointments, the Constitution, the rule of law, elections, civil rights and more.

Ellsberg recounts the famous line of John Dean that 'there's a cancer on the presidency'. With the expansion of institutional mendacity to domestic as well as foreign affairs, we now live in an age where the presidency itself is a cancer on our nation.

Notwithstanding the Bush Administration's broad gauged criminal assault on it, however, the Contstitution -- and the institutions it set up to deal with monarchial tendencies in the executive -- can still act to protect our democratic republic.

But, to do so, the human beings in those institutions must stop being feckless.

Posted by Doug Smith at 12:34 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

The Shared Idea Of Authenticity

In our new world of markets, networks, organizations, friends and family, the ideas we share have greater power to lead and mislead us than ever before in history. I'm not saying that ideas lacked potency in previous eras. Not at all. Ideas such as witchcraft, Aryanism... even phrenology had plenty of power to cause ill -- just as the ideas of empiricism and the rights of man produced much good.

Rather, I'm saying that in this new world of ours, ideas are not bounded by place. Instead of having to penetrate borders -- both state/national borders and, more importantly, highly localized borders -- ideas travel with lightning speed across markets and networks. Moreover, powerful vehicles created by human kind -- organizations -- increasingly push and drive ideas as a core basis for competing in the contexts of markets and networks. Ideas that become widely shared ideas -- ideas linked to brand and product and service -- become powerful assets that help win market share and produce gains.

As pointed out in Chapter 8 of On Value and Values, though, shared ideas have no requirement of accuracy. That is, to be shared, there is only a requirement that some understanding of the idea be shared -- not necessarily that the understanding be accurate. Thus, for example, 'weapons of mass destruction controlled by Sadaam Hussein" became an extensively shared idea through the power of markets and networks after September 11th. And, a variety of powerful organizations marketed, promoted and pushed this shared idea -- for reasons linked to those organizations' efforts to win and grow 'market share' in political, media, defense industry, religious and other markets.

It is, of course, possible that "WMD in Iraq" could have become a widely shared idea in an earlier era when most folks still lived out their lives in places as opposed to living 24/7/365 in the contexts of markets, networks, organizations, friends and families. The "Red Scare" of the 1950s points out that possibility. Still, one thing dramatically differs between now and then: lightning speed.

The speed with which the inaccurate shared idea of "WMD in Iraq" took hold was breathtakingly faster than would have been possible in the 1950s. And, that in turn, means that our precious planet -- the planet we'd like to turn over to our children and their children -- is more vulnerable to shared ideas than ever before.

More vulnerable -- more liable to suffer -- to dangerously inaccurate shared ideas. And, more liable to gain and prosper from widely shared ideas grounded in fact, accuracy and the intention to solve real problems in ways that help instead of harm.

Having said all that, we must remember this: Shared ideas do not become widely shared in the absence of ORGANIZATIONS who make it core to their vision, strategy and success to develop, market and push those ideas.

Organizations can be political parties such as The Republican Party of The United States of America. Organizations can be corporations such as NBC or The Washington Post. Organizations can be religious such as The Catholic Church. And, organizations can be tiny, small and even informal -- such as some folks I know who for many years have met several times each year to hold each other accountable for making a difference to others.

Individuals play an essential role is 'spreading the word' about potentially shared ideas. Still, there is no comparison between the role of individuals versus the power of organizations in a world of markets and networks. Indeed, when a single individual really is dedicated to some idea, the key point of progression in that passion and effort happens with the formation of some kind of organized effort.

You want to change local zoning laws, shift to a new focus in politics or commerce or culture? Do you want to take some idea and make an impact with it?

Then get organized! Get at least one organization going and put the heart, soul and resources of that organization into spreading your ideas through markets and networks.

Because that is how things get done.

All of which raises a variety of interesting questions when you read this -- an essay about how numerous media organizations and their celebrity employees have successfully marketed an immensely widely shared idea of authenticity in our culture that is, tragically, an inaccurate and dangerous idea.

These celebrity media types who promote their own careers, celebrity status and, of course, financial well being -- just like the companies they work for who choose to marry their strategy for winning, market share and profits to pushing an inaccurate shared idea of authenticity -- have this in common: They choose value over values.

Of course the fantastic charade is how fraudulent -- how inauthentic - these men and women condemn themselves and their organizations to being. It is tragic -- both for the erosion of their own souls but also -- and worse -- for the destructiveness done to hundreds of millions of real and authentic people who get up every day just trying to struggle through a world gone mad with this trumped up and false shared idea of authenticity -- a 'product' that has a conjurer's mind, a devil's eyes and a hollow-man's heart.

Every single one of us on this planet have the honor and privilege to personally know one or more truly authentic people. What organziations, then, are going to have the courage, the wisdom and the foresight to ground their visions, strategies, products and services on taking the lead to reconnect our actual every day experiences with authenticity to a widely shared idea of authenticity that is also an accurate one?

For how can we find our way out of this darkness without authentic hope? And how can we find authentic hope in the presence of con artists selling us on a shared idea of hope that is hopeless and a shared idea of authenticity that is inauthentic?


Posted by Doug Smith at 02:27 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 24, 2006

The Wolf At Our Door

Susie Madrak notes that Howard Zinn has written the all-too-predictable commentary about those who forget history are condemned to repeat it. "Now that most Americans no longer believe in the war", Zinn asks, "now that they no longer trust Bush and his Administration, now that the evidence of deception has become overwhelming (so overwhelming that even the major media, always late, have begun to register indignation), we might ask: How come so many people were so easily fooled?"

Zinn's article is worth reading -- especially for his appeal that we focus on the accurate facts about poverty, health and other difficulties that have beggared at least half our population instead of the lies of self-serving presidents who are interested in power instead of the common good or the greater good.

Still, hidden within Zinn's lament is a critical problem we all face -- namely, of paying a price for remembering recent history not wisely but too well. The Bush Administration has forfeited all ethical, legal, and practical right to our credulity. Bush = Lies is simply too evident and painful. (Even the Bushophiles cannot keep their spin spun consistently.)

Let us not, as Zinn notes, be misled by self-interested liars. But, there is an additional question of great importance. As highlighted in the children's parable of the boy and the wolf, how will we proceed to judge if any threats and dangers in the coming years are real and, if so, what to do about them?

For that boy is not just one individual. He is our nation and the world.

Posted by Doug Smith at 12:51 PM | Permalink

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 obscene pay package 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 spending is out of control while the quality of our health care lags other that of other nations. 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 private sector health insurers who now have dangerous amounts of market power in most of the United States.

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 17, 2006

Principle of Disagreement

Edward Rothstein of the The NY Times has a wonderful summary and set of reflections about a recent Yale conference on strong leadership versus the popular will. Here's my letter to him:

Dear Mr. Rothstein,

Thank you for the excellent report from the recent Yale conference about leadership and democracy. There is a strand -- a view -- that may not have been fully revealed at the conference; namely, that all human societies find some blend of hierarchy and democracy in how they govern or manage themselves. Sometimes that blend balances toward one or the other -- but there's always both at work. The discussion about strong leadership - about lions and eagles -- sounds like it reflected the uses of hierarchy which, as your fine article pointed out, might be 'good' or 'bad' -- the same as democracy.

Perhaps most critical, though, is your point near the bottom about the principle of disagreement. Think of this in terms of beliefs, behaviors, and attitude -- and ask yourself, from what sources do those beliefs, behaviors and attitudes spring so that they become a predictable set of values? How does it happen that a principle of disagreement exists in real life, not just in democractic/hierarchical theory?

(And, quick note: hierarchy itself cannot work well in the absence of some 'principle of disagreement'. See, for example, the recent Time magazine piece by the retired general who points out that officers owe their duty to the Constitution. In other words, even within the hierarchy of the military, there is a source for legitimate disagreement.)

There are a variety of well established sources for what makes human belief and behavior predictable -- that is, how it might happen that a principle of disagreement becomes habit. In addition to genetics (e.g. evolutionary psychology), human relationships, shared roles and status and shared ideas all shape values.

Those who attended the conference, like your readers, cannot answer your profound questions about the principle of disagreement and virtue without taking a deep breath and 'seeing' that these sources of shared values have radically altered as a result of how we live our lives today (versus how the folks who were discussed -- Lincoln, Hitler, and so forth -- lived theirs).

They -- and importantly those who followed their leads -- lived out lives mostly in contexts of place: of neighborhood and town and among friends and family so determined. Not all. Not 100%. But mostly. And, the values they predictably shared (e.g. a principle of disgreement; the blend of hierarchy and democracy in problem-solving and government) happened as a consequence of the human relationships, roles, status and ideas they shared because of place. In this sense, place operated like a forge whose heat forced folks to share values so that they could co-exist and achieve what mattered to them.

We don't. We live in markets, networks, organizations, friends and family. Our shared values derive from relationships that happen in these contexts (e.g. the folks we interact with at work often shape our values more than neighbors whose names we might not even know), from the strong shared roles of customer, employee and investor, and from ideas that spread because of markets and networks. For example, unlike our ancestors whose place-based ignorance stemmed from an absence of new ideas, our ignorance comes from too many ideas and the lack of information about which are accurate and useful (see, e.g., the widely shared idea of 'WMD' a few years back - the use of a powerful idea in our new contexts of markets and networks by leaders more bent on hierarchy than democracy -- importantly, even within their own organizations, let alone the nation.).

One of the predictable patterns of belief, behavior and attitude in our new world of markets, etc. is 'either/or-ism': the all-or-nothing, on-off, 'red' versus 'blue' pattern that so quickly turns any interesting question into declarations instead of real debates. This is not a healthy sign for any real principle of disagreement.

And, yet, if we examine our life in organizations, we find that the blend of hierarchy and democracy quite often offers a healthier support for the principle of disagreement than our life in markets. Markets aren't very promising contexts in which to disagree in constructive ways. We make choices in markets (Pepsi v. Coke; Republican v. Democrat; and so forth). But, even when we vociferously support our choices, we are not engaged in either real debate or real dissent. We are more likely acting out our role as consumers (or investors) in an unbelievable large context (markets) where our voices aren't actually heard in the manner of dissent or problem solving about truly shared purposes so much as feedback to those selling us ideas and products.

This behavior in markets is useful. It does provide feedback. But we should not confuse it with the principle of disagreement in the context of family, among friends or in organizations. It is in those contexts where our roles, relationships and ideas must blend to help us make choices that actually go beyond consumption to some form of the 'common good' -- that is, toward the identification and implementation of shared purposes that matter to our lives together with other people we actually know and care about.

This is why the blend of hierarchy and democracy -- and the presence or absence of leaders who interact with followers in testing the limits of both -- matters much more in organizations than markets.

When I look at organizations that are even reasonably succeeding in today's chaotic world, I tend to see a principle of disagreement that is healthy and predictable. When I look at organizations that are failing (e.g. the Bush White House), I do not see this.

Your excellent article is profoundly important in it's note about the essential nature of a principle of disagreement. Now, let's hope that more and more of our colleagues and others will start connecting the dots of where, why and how such a principle thrives versus does not -- and why it matters to the safety, sanity and sustainability of the planet.

Posted by Doug Smith at 02:24 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 post 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 Constitutional Amendment gauranteeing every American child the right to a quality education. 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 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 19, 2006

The Politics of Incompetence

We are well versed now in a Republican Party ruled by folks whose sole objective is power and winning and who have the support of marketing experts armed with block by block, 9 digit zip code level information on which to base branding campaigns that appeal to fear, greed, bigotry and the twin fundamentalism of our age (religious and financial) -- all delivered through a corporate controlled media whose ownership benefits from the financial fundamentalism. It's all a pretty sweet deal -- if you are maniacally concerned with me instead of we.

In addition to trotting out wars as 'products', this Republican Party also, of course, gins up spin campaigns aimed directly at elected Democrats whose timidity is critical to the Bush plutocratic putsch to replace the Constitution with a more pliant set of rules. Over the winter, for example, the meme trotted out was that Democrats are only angry -- that they have no ideas and can only rally themselves by being "anti anything Bush".

You've heard of this right? This is anti-branding campaign - branding the Democrats in ways so that, notwithstanding the abysmal poll numbers for Bush, folks' minds are poisoned with 'but imagine how much worse it would be if we elected people who are just angry?'

Of course, it's the Republican Party that has no ideas -- if by ideas we mean rational conceptions aimed at solving the most critical probems now facing our nation and the world. There are, undoubtedly, Republicans with such problem solving ideas - expressions of rational concern. But not the official Republican Party -- that Party, that organization is ruled by the irrationalists -- the folks whose anger, greed, fear and bigotry have accumulated to the point where there is really only one test for policy: does it support what is cast as the Bush position of the moment?

This test of loyalty to an ideology of power is the last possible position for a Party and an Administration riddled by incompetence. Utter and complete incompetence. Imagine, just for a moment, that the 'won/loss' record of the Bush years were even a mixed picture? Iraq, fiscal responsibility, education, medicare, environmental responsibility, Constitutional government and the rule of law, political appointments, disaster relief, the war of terror -- please make the list as long as you like and, just for a moment, imagine that the Bush administration even had a decent major league batting average of, say, .250 (or one in four)? (One request: do not include winning elections in the list. Winning elections are, of course, a condition precedent to governing -- or in this case ruling -- a nation. But, for our purposes, winning elections has nothing conceptually to do with actually solving problems that 'we' face together. It might be on a list of solving problems that "Republicans" face -- but not that "Americans" face.)

Were that the case, the quick sands of reality would not now be swirling -- the government would not be in a free fall of incompetence. But it is not the case. On too many critical matters of our day, the Bush Administration has failed the test of competence. It doesn't even have a decent minor league batting average -- let alone one we would hope for the major leagues of being a world power.

Consequently, taking the 'anti anything Bush' position is the epitome of cool rationality and the opposite of anger. The surest way our nation can make choices over the remaining three years of this administration is to "Just Say No" to anything the Bush administration proposes because, based on their atrocious batting average, we know this: Whatever they choose to do, they will do incompetently.

In matters of great and small import, when you are choosing policy, strategy, and direction, you will be well advised to include competency as a minimum threshold of debate and discussion. For example, consider the debates over how best to invest/save for college and/or retirement. There are many choices out there -- and if you and your family discuss them, it's a good idea to have a conversation open to many ideas and thoughts. But, one thing is certain. Whether the idea is putting some investment in non-US equities versus bonds versus small cap mutual funds versus a house versus any-number-of-a-zillion alternatives, you had better be sure that you (and those advising and working with you) are competent.

If, by any chance, you were 'taken' by any number of incompetent financial advisors who misread or misled you during any number of recent bubbles, etc -- the one thing you for sure should avoid is continuing to work with them. Whatever ideas they propose, you should reject. NOT because the ideas in the abstract lack any potential appeal. (Remember, for example, that the Republican Party once believed in ideas like small government, fiscal responsibility, 'realistic' foreign policy, and the Constitution). No, you should unhesitatingly reject any idea from such failed advisors because the ideas come from folks whose track record has proven one practical and overwhelmingly obvious fact: they are utterly and completely incompetent.

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

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 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 effort 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 Our Education 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 website -- 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 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 expectmore.gov 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 management. 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 Reinventing Government.

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

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)

February 07, 2006

Best Super Bowl Ad

Kudos to Unilever and Dove soap for this year's best Super Bowl Ad. These ads run just under $90,000 a second. Unilever, a multibusiness unit company whose brands are known the world over, chose to spend it's millions on promoting self-esteem in young girls. It's all part of Unilever/Dove's 'campaign for real beauty' and, no surprise, offered quite a contrast to the the GoDaddy girls and some other car company's knock off of the Peterbilt girl and the cheerleaders on the sidelines and.... well, just about every other female image offered to young girls before, during and after the game.

An earlier post pointed out Unilever's effort to restore the Ben & Jerry's brand to it's original blend of concern for value and values. Congratulations to Unilever for extending the effort to Dove.

Posted by Doug Smith at 01:26 PM | Permalink | TrackBacks (1)

February 03, 2006

Accuracy and Truth

When we share an understanding about roles such as customer and employee (or parent and child), the values we share -- the predictability of our beliefs and behaviors -- rises. For example, when you walk into a clothing store, there are a variety of highly predictable beliefs and behaviors that you as customer and those who, as employees, serve you can count on. These are shared values. The shared roles of customer and employee influence those shared values. They help explain predictable belief and behavior and do so without comment on whether those values are 'good' or 'bad' or anything in between.

Shared relationships also are highly predictive of shared values (again, whether 'good' or 'bad'). When you persistently interact with others known to you by name in some open ended way, the values you and they share -- the pattern of belief and behavior -- become predictable. At home or work these values might explain who makes what kind of effort, how you respond to certain situations or opportunities, what your shared beliefs and behaviors are with respect to decision-making, faith, the environment and more.

Shared relationships and shared roles are two of the most powerful determinants of shared values. Another are shared ideas. Consider the shared idea of 'red state' and 'blue state'. This idea has spread across our new world of markets, networks, organizations, friends and families to fuel any number of beliefs and behaviors. For example, it is highly predictive of the way media employees approach a wide array of stories. You personally may not like that, or you may. You might think it 'good' or 'bad'. But as a predictor of some shared values, the shared idea of 'red state/blue state' exists and does explain much of what happens in the media.

Unlike the world of places in which our grandparents and their grandparents lived, shared ideas have much broader potential influence in our new world of markets, networks, organizations, friends and families. I say potential because, before any shared idea might shape shared values, there must be awareness. If the 'red state/blue state' idea had never been so widely aired in the media, it quite simply wouldn't have become so powerful a shaper of shared values.

Consider, for example, the idea of 'water ice in comets'. It is a shared idea that shapes certain behaviors and beliefs among some scientists. In all likelihood, however, it has zero influence on the shared values of you and folks you know because you've never really heard about and, if you have, you've pretty much forgotten it.

Now, imagine for a moment that people well set up to spread ideas through the media -- people who work with media companies that have large audiences, people in powerful positions in government and corporations, and so forth -- decided that water ice in comets was important. In making that choice, of course, they would need to have some explanation for its importance. All of us in this new world of markets, networks and organizations are quite busy. Our attention comes at a premium - and if folks in media, governmental and corporate organizations wish us to pay attention to water ice in comets, they'll need to explain why.

So, let us assume they do. Let us assume, for the moment, that the explanation is "X". "Water ice in comets is important to all of you because of X". And, let's assume these organizations and the people in them succeed. A concerted campaign is made over the next three to six weeks through media, governmental and corporate (and, perhaps also certain 'interest group' organizations such as the Heritage Foundation or MoveOn) and we all wake up this coming Spring sharing the idea that 'water ice in comets is important because of X'.

Now, let's talk about truth and accuracy. By the standards of strongly shared ideas, most of us who bought into this whole thing would believe "Water ice in comets is important" to be the truth-- especially in a culture in which shared ideas spread through markets, networks and organizations have become so powerfully oriented to ideology (compare 'red state/blue state'). "Truth" as a shared idea that influences shared values comes dressed more and more as ideology -- as repeated opportunities for us to affirm what we stand for, who we are, what we believe.

What about accuracy? Is the statement "Water ice in comets is important because of X" an accurate statement?

Well, you don't know, do you? Because I've written "X" as opposed to any specific content. You do not know whether the statement is accurate. But what you do know is that our shared experience in the world of markets, networks, organizations, friends and familes predicts that -- so long as X is not ridiculously inaccurate -- there would be widespread shared belief and behavior that 'water ice in comets is important' -- that the importance would be held as truth.

In light of this phenomenon, the standards for what might pass as 'accurate enough' to get believed become quite important. Consider, for example, this news item about a lawsuit against the former head of the Bush Admiinstation's Enivornmental Protection Agency who, immediately after September 11th, used all the power of government and media to assure people the air quality was safe enough for them to return to their homes and apartments in the areas affected by the terrorist attacks. That became a powerful shared idea -- both for the folks who lived in lower Manhattan and, probably for a brief time, for folks around the country. "The air quality is safe enough" became the 'truth'. But, it turns out it wasn't accurate.

Or, consider this. In his State of the Union address this week, the president declared his administration and his party were intent on reducing the nation's dependence on oil through, among other things, investing in alternative energy technologies. That is now a widely shared idea. It is the truth -- at least among people (in red states? 'red' people in 'blue states'? children?) who have a shared value -- a predictable pattern of belief and behavior -- to credit what a president of the United States announces in a State of the Union address.

Was it accurate? Well if behavior must match belief in order for accuracy to be claimed, perhaps not. A day after the speech, funding for key alternative energy efforts was cut.

Later in the week, the House of Representatives passed legislation reducing health, education and other spending aimed at alleviating difficulties faced by the poorest Americans. The shared idea here is "fiscal restraint". That is what is syndicated as 'truth' in our markets, networks and organizations.

But is it accurate? The fiscal savings involved here are but a tiny fraction of 1% of the budget deficit and an absolute dollar amount quickly canceled out by other spending increases in a government that has generated record-breaking deficits. In a language that values 'accuracy', it's hard to apply the description 'fiscal restraint' accurately to the Bush Adminstration. That's just 'what is' -- it's about predictable beliefs and behaviors -- about values shared by those in the federal government and elsewhere whether or not any of us think it is 'good', 'bad' or 'in between'.

Ideas cannot become shared ideas without some awareness of those ideas. You and others will not share beliefs and behaviors regarding water ice in comets without first having awareness. But, in an age of markets, networks and organizations, we all can and do become aware of ideas without regard to their accuracy. Our understanding --even if completely inaccurate and wrong -- can and does lead to shared ideas and shared values. When this happens, truth deviates from accuracy. We share ideas and accept them as truth even though they are inaccurate.

All of which suggests that our future and the future of our children and others around the globe will become more sustainable when our markets, networks, organizations, friends and families put more effort into the shared idea of accuracy than the shared idea of truth.

Posted by Doug Smith at 01:26 PM | Permalink

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.

Posted by Doug Smith at 01:30 PM | Permalink | TrackBacks (1)

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?"

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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 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 27, 2005

John Yoo and The Liar's Paradox

Most readers have heard of The Liar's Paradox: "This sentence is false." For most of us, it is a kind of linguistic game -- a curiousity demonstrating the flexibility of language. For philosophers and logicians, however, it has sparked centuries of debate and reflection -- one upshot of which is to point out the sentence's primary purpose is to confuse us.

We must try to make sense of the world we live in. We cannot always depend on clear language to be clear - and the Liar's Paradox teaches us to be wary of those who manipulate our desire for clarity to mislead and confuse us.

Consider, then, this version of the Liar's Paradox: "The rule of law is that there are no rules."

Or, if you prefer, read any number of memoranda and books by John Yoo, the lawyer whose devotion to executive branch 'flexibility' eviscerates the plain meaning of constitutional law in favor of confusion. Yoo's writings about 'flexibility' are now policy in an executive branch who -- in the name of The United States of America, in our name -- apply them to "lock up human beings indefinitely without charges or hearings, to subject them to brutally coercive interrogation tactics, to send them to other countries with a record of doing worse, to assassinate persons it describes as the enemy without trial, and to keep the courts from interfering with all such actions."

Yoo claims that September 11th demanded legal reasoning in the face of unprecedented challenges -- challenges for which, he asserts, there were no books to look into. For a lawyer, this is an astonishing statement -- among the most venerable aspects of lawyering is looking to the past for guidance. His assertion is a sham. That there are unprecedented aspects of today's complex challenges (e.g. asymmetrical warfare) is not a logical corollary for the statement: there are no books to look into.

There are in fact zillions of books and other writings to look into (including The Constitution) for guidance about how to conduct an effective campaign against terrorism within the dictates of the rule of law and a constitutional form of government that separates powers into three branches and guarantees certain rights to its citizens.

John Yoo is described by professional colleagues as brilliant. He is undoubtedly clever. But cleverness and wisdom are no more identical than the rule of law is with the rule of lawyers.


Posted by Doug Smith at 01:05 PM | Permalink | Comments (1)

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.


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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 Chris Mooney's new book, 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

Hope For The Holidays

Thomas Rice (who with his colleagues at the Interaction Institute for Social Change have brought hope to literally millions of people) sent along this reflection on HOPE by Vaclav Havel and suggested that it be shared with others:

HOPE

Either we have hope within us or we do not.
It is a dimension of the soul and is not essentailly dependent on some
particular observation of the world. HOPE is an orientation of the spirit, an
orientation of the heart. It transcends the world that is immediately
experienced and is anchored somewhere beyond its horizons. HOPE in
this deep and powerful sense is not the same as joy that things are going well
or willingness to invest in enterprises that are obviously headed for
early success, but rather an ability to work for something because it is good,
not because it stands a chance to succeed. HOPE is definitely not the same thing as optimism.
It is not the conviction that some thing will turn out well, but certainty that something makes sense
regardless of how it turns out. It is HOPE, above all. which gives the strength to live and continually
try new things.

Vaclav Havel

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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 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 28, 2005

Show 'Em Some Love

When the truth is found to be lies
And all the joy within you dies

Don't you want somebody to love
Don't you need somebody to love
Wouldn't you love somebody to love
You better find somebody to love

-- The Jefferson Airplane

Posted by Doug Smith at 12:40 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 announced 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 16, 2005

The Rule Of Principle, Not Personality

Any widespread belief and practice of 'the rule of law' can be understood as a strong commitment to principle over personality. Consider, for example, a game such as Scrabble. The rule of law applied to Scrabble means that the players mutually accept a set of rules -- a set of laws -- for playing the game; and, that, while playing any particular game, the players abide by them.

There are occasions, as any regular Scrabble players knows, when words are spelled out that are not covered by existing rules; that is, particular plays that demand review under a set of agreed upon rules that leave the acceptability of the word unclear. Many Scrabble players agree on a rule that words must exist in dictionaries. Only by playing the game do they, in the heat of competition, come to agree on 'what particular dictionary or dictionaries". Then, at some point having specified dictionaries, they find themselves debating the acceptability of words such as 'app' in common usage that have yet to find themselves in those dicitonaries -- and so on.

The rule of law in Scrabble evolves during games and between games. Perhaps 'app' is not accepted during a particular game; but agreement is reached to find and accept a dictionary with more updated contents.

One phenomenon than any Scrabble player understands, however, is this: It is simply neither possible nor credible to claim 100% objectivity. Players are involved in these difficult moments and choices. What the players aspire to is the use of agreed upon principles to outweigh their individual subjectivity. But, subjectivity -- the potential for a rule of people not principle -- is always present. For example, one player may be more 'up' on current words than another. When the 'between game' rule making chooses whether to include newer, more conteporary dictionary, that is a reality that is undeniable. Each of the players -- each of the rule makers -- involved cannot credibly deny that their relative skills, knowledge, persoanal preferences and so forth are involved.

What they can credibly suggest is that, with all humility, they seek to continue playing Scrabble together with orderly expectations about the rules and an overall commitment to rules.

Humility in a regime of law, then, demands that we acknowledge the reality that our personal points of view are part of the reality within which we set and abide by rules. What we demand of those who very actively participate in rule making is that they both acknowledge this reality with humility and that, as part of their contributions to the rule of law, that they tell us when their personal beliefs are most at risk of influencing the game.

We ask them to be human beings, not machines -- and to be honest about that.

Thus, if a client seeks an advocate -- say, a corporation charged with sex discrimiination seeks a talented, accomplished female attorney to represent the corporation -- the client expects the attorney to avoid letting personal beliefs from getting in the way. But the client does not expect -- nor will the attorney find it possible -- to deny or ignore the existence of those beliefs. This is why some attorneys -- both men and women -- don't accept certain assignments and why others do.

Of course, the opposite is also evident; namely, that some lawyers actively seek assignments because those assignments are strongly in line with their personal views. Many lawyers, for example, actively volunteer for death penality cases because they so strongly oppose the death penality.

This, it would seem, is what must have motivated Sam Alito when he sought the Reagan Justice Department job in 1985. He strongly opposed a woman's right to choose and he wanted to work in a Justice Department that might do something to curtail or reverse that right. He evidently felt just as strongly about working for a Justice Department that might seek to disenfranchise voters by reversing the Constitutional right of 'one person, one vote'.

In other words, Sam Alito pursued the opportunity to change the world in a way he actively supported -- to make the United States a nation that reflected his strong personal beliefs -- to change the rules.

Suggesting that he would 'say anything just to get a job', it seems to me, fails to give Sam Alito credit for (1) his deep personal opposition to one person, one vote and a woman's right to choose; and, (2) his deep desire to use the skills and tools he had acquired to actively participate in a Repubican administration he believed would seek to change those principles.

Alito, though, went on to differentiate for Feinstein his sense of an advocate's job versus a judge's job. "I'm now a judge... I'm not an advocate. I don't give heed to my personal views, what I do is interpret the law."

Well, let's first note that he fails the test of humility. It would be refreshing for a nominee to the Supreme Court to acknowledge that they have personal views and to explain what those views are. In doing so, the nominee can -- and indeed should -- explain what and how he works hard to limit the effect or influence of those personal views in matters at hand. But to suggest that judges somehow are not human beings - that they do not have subjectivity -- is neither credible nor, frankly, human.

Second, though, let's also acknowledge that Alito understands through his experience as a judge that he is expected to put his personal beliefs to one side. I simply cannot accept any other proposition.

But, third, let's go on to ask about the risks of personal points of view influencing the interpretation of law. Those are even larger in the world of courtrooms than they are in Scrabble. And, the stronger a personal point of view, the more likely that point of view will find it's way into law.

So, based on his comments to Feinstein, we know this:

Alito deeply opposes a woman's right to choose as well as one person, one vote.
Alito lacks the humility to acknowledge that he is a human being with deep personal views that are necessarily part of the reality of doing his job.
Alito understands that a judge is supposed to avoid having the rule of personality/subjectivity interfere with the rule of principle/law

And, finally, Alito is seeking a job for which he has been nominated by a Republican administration that itself deeply lacks humility and is just as deeply opposed to a woman's right to choose and works hard to discourage voters from exercising their franchise.

Values are best understood by looking at that combination of belief and behavior that is most predictable. Before jumping to 'good' versus 'bad', let's look hard at 'what is and why'. Alito's beliefs and behaviors are laid out across a life in which he has worked hard to reverse a woman's right to choose as well as one person, one vote. This is who he is; this is what he stands for.

And, in our rule of law, there is no current rule that makes anything he's done illegal. He's a person seeking to change the world and taking action in whatever sphere is available to him to do so. That is his right according to how we play 'Scrabble' in our nation today.

Another part of how we play 'Scrabble' is this: the Senate must decide whether or not to put Alito on the Supreme Court. As they make their decision, let's hope they will look at the nominee's deep personal beliefs and choose whether those beliefs best serve the rule of law in the United States. Put differently, the Senate must choose whether to put Sam Alito the human being -- not some fictitious Sam Alito as computer -- on the Supreme Court.


Posted by Doug Smith at 01:14 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 11, 2005

Soul Searching At NY Times

If I'm understanding this correctly, the publisher of the NY Times has said the Judith Miller affair is minor when contrasted with the Jayson Blair affair. Among other things, Blair plagiarized his way through the ranks and, at some point along the way, did so without sufficient oversight from management. These failings put in question all that the Times -- and the thick we who work there -- stood for. Miller, in comparison, used her position to promote a war and the political careers of those who wanted it. Along the way, she lied to her colleagues, hoodwinked her publisher, reported fiction instead of facts, took the Times's honor to jail on false pretenses -- and did untold damage to her nation.

Both are disgraceful. And, while much worthwhile discussion might arise from contrasting the two for lessons learned, there is one unavoidable reason why I think the Miller affair is worse for the NY Times: it came second.

It came after folks at the Times spent untold resources and energy rooting out the causes of journalistic and management misbehavior and declared to the world not only what the NYTImes stood for - but any number of serious steps being taken to live up to those values.

And, all the while people at the Times were working hard to reform while also proclaiming revitalized virtue, Judith Miller -- acting as 'star' reporter without adequate management oversight -- was eating away and violating the soul and the heritage of the company.


Posted by Doug Smith at 01:17 PM | Permalink | Comments (1)

November 08, 2005

Law Quiz

If you visit Dave Wilton's wordorigins, you can explore the evolution of meaning for various words from A to Z. "Quiz", for example, has gone from a noun describing an odd person to a verb about mocking or making fun to our contemporary verb of testing. This phenomenon -- that the meaning of words do not stand still -- is neither new nor surprising. Any parent of any teenager experiences it almost daily.

All of which should bring some humility to the raging controversy over judical activism, results-oriented judges and so-called legal originalists. "Law" itself has meant many things to many peoples over time. One constant, though, is this: the law is expressed in words.

If those words do not speak to us in our times, then the words are written in dead letters. This is reality. We cannot hope to govern ourselves if we do not have judges who understand both that words must mean something and that those meanings must relate to our lives as we live them today. The notion that, for example, the Constitution is as inert at stone is a sophistical sleight-of-hand. It is proposed by those who wish to bring their own meaning into our national conversation. Meanwhile, the opposite concept that the Constitution is a hyper-active, attention deficit riddled engine for social change is equally suspect.

Judges have jobs like the rest of us. Their unique responsibility lies in significant ways in the interpretation of words to fit both principles and our lives. That's a hard job. But none of us advance either our undertanding or their performance by denying legal words the same standing we routinely grant to 'quiz' -- or 'hot' or 'right on' or 'cool'. So, let's 'get over it'.

Posted by Doug Smith at 01:00 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 05, 2005

Thick We's

In his book The Ethics of Memory, the contemporary philosopher Avishai Margalit differentiates between what he calls 'thick we's' and 'thin we's'. Thin we's have abstract, thin bonds -- all Americans, all human beings, all "20-somethings". Margalit is more interested in exploring ethical issues among people whose relationships are 'thicker'; who have shared experiences and shared memories that raise questions of caring and hatred.

There's much we can do with this distinction. Especially, if we expand and enrich the two concepts to fit how we actually lead our lives in the 21st century. In my book On Value and Values -- and in the posts to this website like my other writing -- a 'thick we' is made up of people who inescapably share one or more meaningful aspects of their fates with one another and who inevitably must together balance individual self-interest with the purposes they share as a 'we'. Because they share fates in various real, tangible and everyday ways, thick we's must both shape and implement some common good together.

Let's unpack this a bit. Your family is a thick we. You have friends who together with you make for a thick we. Those with whom you interact daily at work are a thick we. If you regularly play soccer or go bowling with others, that's a thick we. If you attend religious services with a persistent set of folks, that's another thick we.

In each of these illustrations, there is some meaningul and important aspect of your fate - of your health, wealth, well being, etc -- that is wrapped up with the same aspects for the other folks involved in your thick we.

In contrast, people who might identify themselves with 'thin we's' have simliar interests or concerns, but do not really share any aspect of their fates with one another in tangible, gritty and everyday ways. They do not even know one another by name. There's nothing requiring them to shape a common good or take action together -- to hold one another accountable -- for implementing their common good.

Consider, then, "red" versus "blue" Americans. Yes, these thin we's matter a heckuva lot to the future of the United States (and the world). But, 'red' and 'blue" Americans are better understood as market segments comprised of individuals who in their roles as voters and customers influence political and other markets. Importantly, the people in these 'thin we's' have no responsibility whatsoever to implement or hold themselves accountable for the actions of the candidates or the impact of the policies supported. Rather, as voters, consumers, family members and friends, people in thin we's look to the thick we's elected -- political parties, congresses, executive offices, governmental organizations -- to shape and implement the share purposes of those organizations - -of those 'thick we's'.

Thus, Congress is a thick we. Indeed, it's an excellent example of the following nuance: in differentiating thick from thin, I am not suggesting 'good vs. bad'. Thick we's have the strongest and most predictable shared values - but those values - that blend of belief, behavior, attitude and speech -- can be predictably bad, predictably good or predictably in-between. Congress is a thick we on whom the thin we's named 'red' versus 'blue' Americans depend. The question for Congress -- like any thick we -- is what constitutes Congress' common good, Congress' shared purposes, Congress' blend of concern for value ('reelection') with the concern for values ('governance'; 'liberty and justice for all")?

It is in thick we's -- not thin we's -- that our concern for value (money, profits, winning) is most tested against our concern for values (family, social, political, religious and so on). It is in thick we's -- not thin we's -- that our individual concerns about ourselves -- about 'me' -- are most tested against the concerns and purposes of the group, of the thick we.

In the early 21st century, most thick we's in which any of us participate tend to favor one of these concerns over the other. At work, our thick we's -- the organizations in which we are employed -- routinely use value as a trump card over values. The shared purposes -- the common good -- is denominated in terms of profits, winning, shareholder value and the like.

At home, in church or at play, our dominant concern is one or more values as opposed to value.

All of which contributes to the profound split between value and values in our culture. We lead dual lives -- pursuing value over values from 9 to 5 and the reverse during the remainder of each day.

This is not sustainable. Consider only resources and power. We live in a world of markets, networks, organizations, friends and families. The vast majority of power and resources lie in organizations and, therefore, shape where those organizations will take the markets and networks of our world -- indeed, the world itself.

Today, the vast majority of those organizations pursue value over values. Others -- and the less powerful ones -- pursue values over value. Neither of these strategies are sustainable. Churches, schools, non-profits and so forth cannot sustain themselves by ignoring and being blind to value. But -- and this is by far the more serious challenge -- neither can for-profit organizations (whether Wal-Mart or GM or Roche -- or a small bookstore or cleaners or barbershop) sustain itself if value -- if profits, wealth, shareholder value or winning -- is the trump card for every single serious issue and question on the table. Eventually, that approach eviscerates and hollows out the values -- social, political, spiritual, environmental, medical, legal and others -- on which the very value pursued rests.

Thick we's have become the central, most critical crucible in which our thin we's fates -- all six billion of us on the planet -- are now being shaped. If we can restore a healthy, blended concern for both value and values in our thick we's, we can and will pass along a healthier, saner and more sustainable planet to our children and grandchildren.

Posted by Doug Smith at 02:14 PM | Permalink | TrackBacks (14)

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 16, 2005

Meaningless Politics

We know we live in fractious, partisan times. Our public discourse weighs in with more heat than light. Truth is up for grabs. Not that truth is an easy matter. Still, our contemporary beliefs, behaviors, attitudes and speech have made the always challenging prospect of determining truth – especially shared truths – more complicated.

For the moment, though, let’s distinguish between truth as evidenced by reasonably observable facts from truth that is more purely linguistic and definitional. “The sun rises in the morning and sets in the evening”. Few among us, whether “Red” or “Blue” or “Liberal” or "Moderate" or “Movement Conservative” would debate this empirically observable statement.

Facts, though, often require more work to observe. Do 21st century market economies contribute to the risks of global warming? As we’ve seen in the debate over this question, even facts (e.g. about ‘causes’ and ‘risks’) can find themselves heavily subject, even perhaps hostage, to the other flavor of truth sharing: truth as language.

The most famous recent example of this flavor may be former President Clinton's declaration: “It depends on what the meaning of ‘is’ is”. His was, at a minimum, the classic lawyer’s response to a question; namely, ‘let’s define our terms’.

There is a critical difference, though, between lawyers who define terms for purposes of a particular transaction and the body politic having some minimal agreement on the language needed to govern together – to make sense of shared lives.

And, so, consider this incident from a recent election. A candidate for a city office receives a questionnaire from a politically active interest group. One of the questions asks ‘whether the candidate would favor city ordinances” supportive of the interest groups proposed policies?

The candidate responds, “I prefer a legislative solution to the issues raised by these questions.”

As a matter of language, ‘city ordinances’ are legislation. The candidate has been asked, “Would you favor legislative solutions of the type we’re proposing?” The candidate answers, “I prefer legislative solutions to the questions you raise.”

The candidate has given a 'non answer' answer. But, the problem here goes beyond a candidate being slick. The audiences for this comment -- voters and others including young adults and children -- become accomodated to langauge without meaning. They are told by candidates who, if elected, will be their political leaders, that there is a difference between 'city ordinances' and 'legislation'.

We cannot have shared values without shared language. It is not humanly possible. If we politicize language beyond the reach of shared meaning, we cannot govern together. Indeed, we cannot hope to live together in anything other than cheap ignorance and moral despair.

Posted by Doug Smith at 01:02 PM | Permalink | Comments (1)

October 13, 2005

Box Cutters, Mad Cows and Wetlands

Roughly three million people lived in the United States when the Constitution was ratified. Today, more than 300 million do. Yes, there are also many more states – a much larger geographic area over which the 300 million of us spread out. Still, the prospect has sharply risen that individual and group actions and behavior can affect many more people in many more ways than a few centuries back.

We spread ourselves over more than geography in our world of markets, networks and organizations. For example, as described in yesterday’s post about Citigroup, choices made by people in Citi’s New York offices can profoundly affect the happiness (or lack thereof) of people throughout the 50 states. Thus, it’s no surprise that the choices made by the nine people who sit on the Supreme Court reach far more broadly and deeply in the early 21st century than the late 18th century.

Yesterday, the Court (led by new Chief Justice Roberts) chose to hear three cases concerning the Clean Water Act of 1972. The cause celebre of the three involves John Rapanos, a Michigan farmer found civilly and criminally liable for filling in wetlands on his farm.

Serious issues of fact exist about whether the Rapanos site was a wetland and adjacent to, or by hydrology, connected to navigable waterways. The Supreme Court and other appellate courts, though, have a long tradition of focusing more on the law than facts. So, with Rapanos and the other two cases, the arguments and choices will more likely be about the scope, reach and legitimacy of the Clean Water Act of 1972 than about how wet was John Rapanos’ land seventeen years ago.

These cases pit the legitimate use of government regulatory authority against the legitimate uses of property. Folks who are more ideological than reasonable are lining up on predictable sides. But most of the 300 million of us don’t live our lives in idealized abstractions. We live in a real world that is profoundly interconnected and complex. A world where quite recently for example, the private property interests in a cow and box cutters were entirely eliminated if the cow happened to be mad or the box cutter owner brought his or her property to an airport.

Indeed, just a month ago, we experienced the adverse effects of improperly – even dangerously -- mishandled wetlands, navigable waterways, and hydrological connections when Katrina hit a Gulf Coast imperiled by erosion notwithstanding the Clean Water Act of 1972.

Our complicated world of markets, networks and organizations uses private property to build immense economic value of great benefit to all of us. In doing so, though, these markets, networks and organization also handle chemicals, poison, disease, earthmovers, concrete, steel, fish, microorganisms, bio-engineered plants and on and on. As much as they help to regulate our affairs, neither the laws of contract nor tort (personal injury)— nor property -- are sufficient to govern ourselves in such a world.

With these three cases, we are going to get our first glimpse of how the nine human beings on the Roberts Court choose to shape how and when government helps us govern ourselves. And the choice of these nine will affect the other 300 million of us. Indeed, it will reach into and affect the lives of hundreds of millions outside the United States who are, nonetheless, connected to us, hydorlogically and otherwise.

Posted by Doug Smith at 03:02 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 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 28, 2005

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 performancewhat 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