Leading to Recovery - Presentation at 2009 PMI MN Professional Development Days

Leading to Recovery


GOOD MORNING!! - Thank you for coming. When I looked at the presentation schedule I was a bit surprised to find myself speaking about leadership in the Technical Skills & Tools track. But it works out well as the two sessions in the Soft Skills track this afternoon, “Influencing Others: How to Get the Results You Want” and “Leadership: the Final Frontier”, will be excellent follow-on discussions to this presentation.

In thinking about what I could share with you today I considered topics like best practices in project management, reasons projects fail, characteristics of successful project managers, and similar topics – but these have been covered very well by many others. The thing that kept coming to mind was the monumental change we’ve experienced in our economy and how we can cope and compete in a post investment banking world. A situation brought about largely by a massive lack of leadership by many people at many levels.


Today I will discuss how we might turn the enormous baskets of lemons that have been dumped on our doorsteps into lemonade. I will share insights from a management guru, contrast characteristics of leadership and management, examine some of the changes we’ve experienced, discuss reforms needed to lead to recovery, and present opportunities hiding in desperate situations.

A word of warning, You will undoubtedly find the distinctions between I am going to present between leadership and management quite harsh as I initially did. However I hope you will accept the challenge to reflect on these distinctions and allow new insights to form.

Reflecting on the massive change we are experiencing I began to wonder if what I’ve learned from my formal education and subsequent experience was still valid, what adjustments to my mental model of the world were needed, and what opportunities could be realized from such a catastrophic economic situation. I found myself revisiting writings from people whose experiences span decades and still remain relevant. I was particularly struck by the insights of Peter Drucker, recognized as the founder of modern business management and self described “social ecologist”.

Drucker was born in 1909. He authored 39 books, countless articles, and was still actively contributing to the management body of knowledge when he died in 2005 at the youthful age of 96. At the risk of turning this into a Drucker fest I will share more than a few of his insights that seem particularly relevant now. Reflect on these quotes in the context of what we are experiencing.


On Banking. “Commercial paper (that is, short-term notes originated by nonbank financial institutions) did not originate with banks, but had a tremendous negative impact on them. Under U.S. law, commercial paper is considered a security, which means that commercial banks cannot deal in it. Because financial service companies, such as Goldman Sachs, Merrill Lynch, GE Capital, and so on, discovered this, they have largely replaced commercial banks as the world’s most important and leading financial institutions.”


On corporate greed and corruption. “It is easy to look good in a boom. But also, every boom – and I have lived and worked through four or five – puts crooks at the top. The only thing new is that the last boom considerably increased the temptation to fake the books – the exclusive emphasis on quarterly figures, the overemphasis on the stock price, the well-meant but idiotic belief that executives should have major financial stakes in the company, the stock options (which I have always considered an open invitation to mismanagement), and so on.”


On excessive compensation. “I am for the free market. Even though it doesn’t work too well, nothing else works at all. But I have serious reservations about capitalism as a system because it idolized economics as the be-all and end-all of life. It is one-dimensional. I have often advised managers that a 20-1 salary ratio between senior executives and rank and file white collar workers is the limit beyond which they cannot go if they don’t’ want resentment and falling morale to hit their companies.

Today, I believe it is socially and morally unforgivable when managers reap huge profits for themselves but fire workers. As societies, we will pay a heavy price for the contempt this generates among middle managers and workers. In short, whole dimensions of what it means to be a human being and treated as one are not incorporated into the economic calculus of capitalism. For such a myopic system to dominate other aspects of life is not good for any society.”


On our government. “We are rapidly moving to doubt and distrust of government. We still revise unsuccessful programs over and over again, and assert that nothing is wrong with them that a change in procedure will not cure. But we no longer believe these promises where we reform a bungled program for the third time. We no longer expect results from government.”

Today we face challenges the likes of which have not been seen for three generations and probably not in the memories of many, or any, here today. Clearly, we will not be able to manage our way out. What we will need is strong leadership – in many places, at many levels.

It is important to understand the distinction between leadership and management. One is not better than the other. Both are essential. We probably all think of ourselves as leaders and we probably are in our own unique situations but most people are better suited to one or the other.

There is one incontrovertible maxim in leadership. You can only lead if you have followers. There are many reasons to follow but you will only have (loyal) followers if people trust you. Trust is earned. It is given. Trust will only exist if you CONSISTENTLY:


1. Demonstrate integrity. Honor your commitments & promises.
2. Set high – but achievable standards.
3. Listen – seek first to understand then be understood. It is easy. All you have to do is keep your mouth shut.
4. Engage people in creating the future. People will (or are more likely) to accept change they helped create but will predictably resist or outright reject change that is forced upon them.
5. Treat people with respect and trust in their abilities. Support your coworkers. Be there for them when it counts. Encourage them to freely share their thoughts and feedback – encourage constructive dissent - and act to incorporate their views.
6. Publically recognize success as the accomplishments of others. Don’t claim success as your own. Have a sense of humility.
7. Treat people fairly in all things. Be consistent.
8. Accept and do not punish failure – provided one learns from the experience and does not repeat the mistake.
9. Inspire optimism
10. Speak truth to power

We would all follow someone who lived these principles and I believe that we all aspire to these things in our own lives .

We are only successful to the extent that we make those around us successful – up, down, and sideways. This is true whether you are a leader or a manager. So what are the distinctions?

In his book Leading Change, John Kotter, professor of Leadership at the Harvard Business School, describes management and leadership as follows.


“Management is a set of processes that keep a complicated system of people and technology running smoothly. The most important aspects include planning, budgeting, organizing, staffing, controlling, and problem solving. Leadership is a set of processes that creates organizations in the first place or adapts them to significantly changing circumstances. It defines what the future should look like, aligns people with that vision, and inspires them to make it happen despite the obstacles.”

A good friend of mine observed that the positional power of management is given by superiors. The influential power of leadership is given by people above, around, and below. You cannot manage outside your position in an organization but you can lead from anywhere.

Frequently, leadership and management are conflated. Typically, management and control is what is emphasized & institutionalized. Change is a disturbance to the smooth functioning of an organization and is something to be systematically controlled or better yet – squashed. The result is organizations that are over-managed and under-led. That being said – managing change is important otherwise a well structured transformation process can get out of control. However, for most organizations the bigger challenge is leading change. Successful transformation is 70-90% leadership and 10-30% management. Yet almost everyone thinks about the problem as “managing” change.

Warren Bennis, Professor and chairman of The Leadership Institute at the University of Southern California, makes a harsher, but essentially compatible, distinction in his book On Becoming a Leader. In the following try to focus on what is being said – not how it is being said.


Bennis says that the difference between managers and leaders is defined by those who master the context and those who surrender to it.
· Managers administer, leaders innovate
· Managers are a copy, leaders are original
· Managers maintain, leaders develop
· Managers focus on systems & structure, leaders focus on people
· Managers rely on control, leaders inspire trust
· Managers have a short range view, leaders have a long range perspective
· Managers ask how and when, leaders ask what and why
· Managers’ eyes are always on the bottom line, a leader’s eye is on the horizon
· Managers imitate, leaders originate
· Managers accept the status quo, leaders challenge it
· Managers are the classic good soldier, a leader is his own person
· Managers do things right, leaders do the right things

If you are like me, I’m sure you are, to say the least uncomfortable, perhaps downright incensed, with Warren’s judgmental characterization of management. Forcing myself to re-read and examine what he has said I’m more inclined to accept his words as statements of fact rather than indictments.

The truth is that we need both leaders and managers. In fact we need fewer leaders than managers. If everyone were “leading” establishing their vision, setting direction,… we would have chaos. Leaders are not the people who make things happen. Leaders are frequently quite poor at detailed implementation.

Think of Steve Jobs. He is a very creative and inspiring leader. No one else in the company is like him. Now imagine the disciplined management it takes to transform his vision into and I-phone or and I-pod. However, also recognize that this management comes after setting the vision and leading the needed change.

Leadership is not easy. Remember, Steve Jobs was kicked out of his own company. In fact this is not an uncommon fate for entrepreneurial leaders.

Now that we are again supremely comfortable with the role of management and feel power and purpose again coursing through our veins, just remember – the manager is the boss and boss spelled backward is double SOB.

Leaders create an atmosphere of collaboration. If a leader creates an atmosphere where people are more concerned about failing at what they are doing rather than doing it the leader will not succeed. Fear leads to massive waste. The same can be said for internal competition. A company must have internally focused collaboration and externally focused competition.


Max DePree said in Leadership Is an Art, “The first responsibility of a leader is to define reality. The last is to say thank you. In between, the leader is a servant.”


Drucker identified the following characteristics for the next generation of leaders:
1. Broad education
2. Boundless curiosity
3. Boundless enthusiasm
4. Contagious optimism
5. Belief in people & teamwork
6. Willingness to take risks
7. Devotion to long-term growth rather than short term profit
8. Commitment to excellence
9. Adaptive capacity – comfortable with ambiguity
10. Empathy
11. Authenticity
12. Integrity
13. Vision

Leaders are needed to lead change as well as to react to unexpected change – to see opportunities, revise the vision, and set the new direction. Change creates opportunity – in this case is opportunity of a lifetime. What we are experiencing is a paradigm shift and in a paradigm shift everyone goes back to square one.

Because leaders are continuously learning and adapting, you can substitute learners for leaders.


Eric Hoffer of Vanguard Management observed, “In a time of drastic change, it is the learners who inherit the future. The learned find themselves equipped to live in a world that no longer exists.”

Well there are a lot of things that no longer fit our assumptions. It has been said that it is not the things that we don’t know that cause problems. It is the things we know for sure that just ain’t so.


Here are some things that we used to know for sure that just ain’t so:
1. Here is one straight from business school - Corporate debt is good for shareholders – the underlying now questionable assumption being that financing is readily available
2. Home prices will go up forever
3. You can always refinance a mortgage that you can’t afford
4. Regulators Regulate
5. The market will regulate itself
6. Profit motive will prevent risky investment and behaviors
7. Government oversight is adequate
8. Auditor reports are reliable (PWC and Satyam)
9. Investment bankers and credit rating agencies properly assign and manage risk


In response, consumers have drastically altered their buying habits. Here is a short list of what’s in and what’s out
1. Neiman Marcus is out – garage sales are chic
2. Land barges and corporate jets are out – Prius is in
3. Dirty energy is out – alternative energy is in
4. Financing lavish lifestyles is out – living within our means is in
5. Onerous credit card debt is out – paying off debt is in
6. Making loans with no documentation of income & debt is out –bringing mountains of papers to prove every nickel of income or obligation is in
7. Complex un-ratable financial instruments are out – treasuries are in
8. Lavish compensation is out – clawbacks are in
9. Lax oversight and enforcement is out – accountability and regulation is in
10. Onerous credit card rules & interest rates are out – consumer rights are in
Reality has changed. Our paradigms have drastically shifted.


Drucker says the following, “In a time of change you need to carefully examine “the future that has already happened”. Assess what has occurred that does not fit your current assumptions and thus creates a new reality – a need for a new intellectual framework to win in the new market.

Today’s realities fit neither the assumptions of the Left nor those of the Right. They don’t mesh at all with “what everybody knows.” They differ even more from what everybody, regardless of political persuasion, still believes reality to be. “What is” differs totally from what both the Right and the Left believe “ought to be.” The greatest and most dangerous turbulence today results from the collision between the delusions of the decision makers – whether in governments, in the top management of businesses, or in union leadership – and the realities.”


I believe that our ability to recover and indeed to lead the recovery requires sweeping reforms in government and the regulation of financial institutions (which I won’t address today), ethics, education, energy and the environment (which are inextricably linked), and health care. In recent months some progress has been made on some of these issues but much remains to be done.

What happened to ethics? How did we create Tom Peters, Bernie Madoff, and Allen Stanford? Why would loan originators push families into home loans for which they clearly were not qualified?

We talk about business ethics as if it were separate form any other form of ethics. Why is there any notion that our business ethics should be any different than our personal ethics? Hippocrates established the basis of ethics 2,400 years ago with the oath among other things, to "Above all, do no harm". This applies to everyone and to all endeavors. It is a sad commentary that we need to write policies on business ethics, provide training on business ethics. To be sure there are cases that present dilemmas but those situations bear no relation to the lapses that brought us to where we are today.

What we are experiencing is nothing less than the fruits of a massive loss of personal integrity in leadership.


Heraclitus (hair a clight us) , the Greek philosopher, said, “The soul is dyed the color of its thoughts. Think only on those things that are in line with your principles and can bear the full light of day. The content of your character is your choice. Day by day, what you choose, what you think, and what you do is who you become. Your integrity is your destiny. It is the light that guides your way.”

Leadership cannot be faked and integrity cannot be acquired at a later date. Our deeds are who we are. As Emerson echoed, “What you are speaks to loudly that I cannot hear what you are saying.”

What is needed is nothing less than the expectation that we return to the private virtues that Drucker describes.


He said, “In a moral society the public good must always rest on private virtue. To make what is good for the country good for the enterprise requires hard work, great management skill, high standards of responsibility, and broad vision. It is a counsel of perfection. To carry it out completely would require the philosopher’s stone that can translate the basest element into pure gold. But, if management is to remain a leading group, it must make this rule the lodestone of its conduct, must consciously strive to live up to it, and must actually do so with a fair degree of success. For in a good, a moral, a lasting society, the public good must always rest on private virtue. Every leading group must be able to claim that the public good determines its own interest. This assertion is the only legitimate basis for leadership; to make it a reality is the first duty of the leaders.”

Back in 1959 Drucker coined the term “knowledge worker” as distinct from craftsman performing manual work that relied on skills acquired through apprenticeship. Knowledge and skill are different in that skills change very, very slowly. Knowledge changes itself and makes itself obsolete and very rapidly. To stay relevant, knowledge workers must engage in continuous learning throughout their careers.


Knowledge workers rely on substantial formal education and the ability to acquire and apply theoretical and analytical knowledge. Knowledge workers change the nature of work itself and the structure of organizations. The ascendance of knowledge and the transition from manual to knowledge work made workers free agents. Information technology has rapidly accelerated this transition and continuously changes the speed and dynamics of knowledge and information exchange in nearly unimaginable ways and has lead to the DIS-integration of the familiar corporate structure, the most visible manifestation of which is currently outsourcing. In today’s global economy, a vast and increasing percentage of work is “knowledge” work. We are in competition daily with the best and brightest knowledge workers around the globe and we are steadily losing our ability to compete.

We need to reform education in order to maintain our leadership position in a knowledge-based world and particularly in one where a paradigm shift has set everyone back to square one. Further, the foundation of any successful reform, any breakthroughs in any field, is education, and in that respect we are in serious trouble. Our schools are not world class, the products of our K-12 education system are high dropout rates and a minority of students actually performing at the level of a high school senior.

Consider as a poster child for reform, a bill that passed our state legislature. Elimination of GRAD requirement (HF 501, Mariani, DFL-St. Paul/SF 405, Wiger, DFL-North St. Paul): This bill allows students who cannot pass the GRAD test – Graduation-Required Assessments for Diploma – to still receive a high school diploma.

There is plenty of data to show that our schools are failing. Nationwide, 58% of ADULTS cannot calculate a 10% tip on a $24 restaurant bill. 30% of high school students drop out and in inner cities the rate exceeds 50%. The percentage of students going on to college is falling as is affordability and the number of students pursuing math, science, and engineering careers.


The Trends in International Mathematics and Science Study 2007 International Mathematics Report presents some worrisome findings - emphasis mine.
(report available at http://timssandpirls.bc.edu/TIMSS2007/mathreport.html )


“At the eighth grade, Chinese Taipei (known to us as Taiwan), Korea, and Singapore had the highest average mathematics achievement. These three countries were followed by Hong Kong and Japan, also performing similarly and having higher achievement than all the other countries except the top three performers. There was a substantial gap in average mathematics achievement between the five Asian countries and the next group of four similarly performing countries, including Hungary, England, the Russian Federation, and the United States. Among the benchmarking participants, the two U.S. states, Massachusetts and Minnesota, and the province of Quebec were outperformed by the five Asian countries but had higher average achievement than the group of four countries.


Remarkable percentages of students in Asian countries reached the Advanced International Benchmark for mathematics, representing fluency on items involving the most complex topics and reasoning skills. In particular, at the fourth grade, Singapore and Hong Kong had 41 and 40 percent of their students, respectively, achieving at or above the Advanced International Benchmark. At the eighth grade, Chinese Taipei, Korea, and Singapore had 40 to 45 percent of their students achieving at or above the Advanced International Benchmark. The median percentage of students reaching this Benchmark was 5 percent at the fourth grade and 2 percent at the eighth grade.”

Let’s look at some of the results.
Page 82 – International benchmarks 4th & 8th grade
Difference between 4th & 8th grade
Interesting finding Page 70 – Gender performance


Here were the factors for higher achievement. None of these will be a surprise.
Homes with more books
Higher levels of parent’s education
Access & use of computers (at home & at school)
Positive attitude towards math
Schools with fewer students from economically disadvantaged homes
Schools with few attendance problems (particularly in 8th grade)
Few resource shortages & good working conditions for teachers
Teacher’s positive view of school climate & student perception of being safe


Here are some things that I believe need to be part of educational reform.

1. Stop social promotion – students need to perform at grade level. Social promotion may be an easy solution for teachers and administrators but this practice does an incredible disservice to students and condemns them to continual failure as they are promoted to ever higher levels of expectations when they cannot perform even at the lower level.
2. Establish uniform standards for subjects at each grade level. These standards must compete with world class standards in other (even developing) countries. Local communities can choose to exceed these standards but they set a competitive floor on expected knowledge. When a student graduates there needs to be a uniform understanding across the country and around the world about the level of mastery achieved.
3. Establish a system that rewards excellence in teaching and prepares teachers to effectively present world class learning opportunities
4. Assure that teaching is of uniform quality regardless of where it is delivered.
5. Assure that our schools focus on teaching. It is not possible for schools to solve social problems that result in kids who are not ready to learn or see no value in learning.
6. Create a system that uniformly funds schools so that schools in Hector are as equipped to deliver a 21st century education as those in the Hamptons.
7. Fund programs that help prepare kids for school and keep them in school. Kids don’t learn when they are hungry, or afraid, or tired from working to support their families, or associated with gangs that to say the least, disparage academic achievement.
8. Assure that higher education is available to those who are prepared. This implies two things. First that those going on to college are indeed prepared to master work at that level. Too many resources are expended within our state college system trying to remediate problems that should have been addressed in high school. The increasingly scarce funds for higher education need to be focused on higher education – not continuation of high school. Second it implies that higher education is affordable. Just as we as a country decided that government sponsored K-12 education was necessary to complete in an industrial society we need to recognize that a college education or similar advanced training is now the entry level standard to succeed in a knowledge-based, global economy.


The March 26th, 2009 Minnesota Public Radio’s MidDay program had an excellent discussion relevant to needed educational reforms. You may want to access it online and listen to it.

For the above to be judged a success, and indeed to measure the success of any effort, metrics and criteria for success must be established.


Drucker observed, “In any social situation of the kind we deal with in enterprise, the act of measurement is neither objective nor neutral. It is subjective and of necessity biased. It changes both the event and the observer. Events in the social situation acquire value by the fact that they are being singled out for the attention of being measured. The fact that this or that set of phenomena is singled out for being “controlled” signals that it is considered to be important. Controls in a social institution such as a business are goal-setting and value-setting. They are not objective. They are of necessity moral. Controls create vision. They change both the events measured and the observer. They endow events not only with meaning but with value. And this means that the basic question is not “How do we control?” but “What do we measure in our control system?”

Drucker has essentially restated the Heisenberg uncertainty principle that essentially says that the very act of measurement changes the system. What you measure is what you get so care must be taken in choosing the metrics to avoid harmful distortions as people predictably try to game the system.

For sure these are drastic and potentially costly changes, but they are necessary for our competitiveness and indeed our security. Consider the payback on investing in 16 years of education and 50 years of productive work, paying taxes, and leading in production and delivery of the goods and services needed in a globally competitive, knowledge-based economy. Consider the costs of continuing as we are where dropout rates are high, many “graduates” are ill prepared for higher education, and many of those that are cannot afford it. Consider the costs of more crime, more jails, more social programs, teen pregnancy, health care for the indigent, and ever shrinking tax revenues in the face of ever increasing demand.

We view education as an expense rather than as an investment, particularly if it is other people’s children that are being educated. No substantial progress will be made as long as we hold this view. The reality is that there is nothing with a higher return on investment than education. It is an investment we simply cannot afford NOT to make.

In the sixties our educational system was devoted to math and science so that we could put a man on the moon before the decade was out. Today, our efforts in the sciences face a no less daunting challenge – the remaking of our energy system to avoid catastrophic climate change.

To be sure there are people who do not believe that climate change is real or if it is that it is manmade. There are also those who believe that we did not go to the moon, that the earth is flat, and that Elvis is not dead. I don’t believe any amount of rational discourse is going to alter these people’s minds. But even if global warming is not real, surely it is still better to not pollute. It surely will not harm us to develop sources of clean energy that will not be depleted. Given that virtually the entire world’s scientific community agrees on the causes and effects of global warming, that changes are happening even faster than they have predicted, and given the magnitude of the social and economic effects – I think we are better off accepting that global warming is real and that we had better deal with it NOW.

In our capitalistic world (including China, Russia, India, - virtually all but the most failed, totalitarian states) nothing will happen until the cost of doing something are outweighed by the costs of doing nothing. Only advances in technology and supporting government policies are going to make that happen. No single company can make the necessary long term investments in basic R&D in alternative energy nor can companies create policies that encourage commercialization and adoption. This is the role of government. We have the talent available, we know the need, there are many technologies to develop. We need to act NOW!

Why is it important to make these investments? Other than not toasting the ice caps, it will be hugely PROFITABLE - IF we are in a position to lead. Currently the largest producers of photovoltaics are in China and Germany. .


Of the 10 leading wind turbines manufacturers one, only one, GE, is a U.S. company. Will we invent, license, and sell worldwide or will we be buying someone else’s technology, sending them our money instead of reaping the rewards.

Consider the global market for technologies that reduce consumption, reduce emissions, remediate existing contamination, recycle existing resources (anyone for mining our landfills?) and provide renewable energy resources. Consider that China is in fact recognizing the impact of pollution on its economic wellbeing and the wellbeing of it citizens. Consider the fact that as soon as the economy recovers the demand for energy will rebound and again drive prices sky high increasing our security risks as we compete for scarce resources and trigger another economic slowdown.

In setting policies we must be much more aware of unintended consequences of well intended actions. Ethanol is big – but we didn’t fully understand the energy efficiency of its entire life-cycle nor did we foresee the global impacts of burning food for fuel. When considering the next generation of biomass incinerators and cellulosic ethanol plants we must think about the implications of burning or fermenting everything that grows, leaving nothing left in fields and forests to return to the soil, increasing erosion and the need for more petroleum-based fertilizers.

Our new challenges are long term, the solutions are long term, and the investment required is long term. The problem is that we have an exceedingly short memory.

Thanks goodness for the economy that we again have cheap gas – right?? A year ago when gas was $4 a gallon you couldn’t give SUVs away. If you bought a high mileage car dealers would throw in a SUV for $50. All we heard about on the news was high mileage cars, hyper-mileing, alternative energy sources we hadn’t even heard of – algae, new photovoltaic, bio-diesel from coffee grounds, hydrogen comes back every time, and now even salt power. Earlier this year when gas was back to $1.45 we stopped hearing about these things. Trucks were selling and cars that got good mileage sat on dealer’s lots.

There is no single solution to the world’s energy needs. The solution will involve every imaginable energy source standardized for delivery into transportation fuels and smart electrical distribution systems. Our future lies not in the rumble of Hummers but in the hum of electric vehicles and the swoosh of wind turbines – but these are today’s technologies and can only be the start.

To recover sustainably and to our full potential will require finally addressing the issue of health care. I don’t pretend to have answers but I would suggest that you have a cup of coffee with my sister, a physician who constantly struggles to balance the tension between the time she would like to spend with her patients and the demands for “productivity”.

As I said, I don’t have answers and the topic is too complex to cover here but I do have some basic questions. When did the practice of medicine shift from the physician’s office to a call center cube in an insurance company staffed by a high school dropout telling doctors what they can and cannot do? When did health care’s customers cease being the patient become the insurance companies? And more recently, just when did the focus change from health care reform to “health insurance reform”?

I remember a different era in health care. It was a time when the statue of Chief Kandiyohi was on the bank at the corner of 5th street and Litchfield Avenue in Willmar, MN. It was a time when, if I walked with my Mom from my grandparent’s apartment above Shorty’s hardware and she took at right at the statue, the entire city of Willmar knew from tennis shoe skid marks and wailing for the next block and a half that I was being taken to the clinic where I would be punctured with HUGE needles. It was a time when doctors practiced medicine, not insurance companies. Doctors were able to spend time with patients and provide the care needed without ordering all possible diagnostics in order to defend against lawsuits. Aside from the needles, I think it was the golden age of medicine.

Education, energy and the environment, and healthcare - these are government level issues. Only the government can set policies and bring sufficient resources to bear. Our role is to become engaged in the discussion, communicate with facts, provide our elected representatives workable solutions, and demand fiscally responsible, effective, programs with accountability for success. The resulting policies and programs must direct investment to areas that will provide both a short term boost and long term value.

Let me share some thoughts that I hope will generate continued discussions and creative solutions in our own communities.

The new realities are that businesses of every size are under enormous pressure to cut costs. Markets are radically changing and businesses must be able to react or they will cease to be in business. The world is in agreement about the reality and threat of global warming. People and business in particular are becoming more conscious of their own carbon footprint not only because of environmental correctness but also because of economic savings. The centers of outsourcing are losing their attractiveness due to decreasing labor arbitrage advantage, and increasing political instability.

So what does this mean for us? Here is one possibility. It means that short supply chains could easily trump global supply chains. Why? .


1. Reduced transportation costs throughout the supply chain. Currently many countries import raw materials to make (for instance) circuit boards and integrated circuits. These components then get shipped to (more often than not) to China for assembly. After that, the finished products are shipped around the world to distribution centers, then to retailers, and finally to the end customer.
2. Shorter chains are more responsive and have less inventory in process
3. Shorter chains are less complex and costly to manage
4. Geographically “close” suppliers likely operate in the same language, in the same legal system, and within a few time zones
5. Efficient manufacturing and engineering offset the decreasing advantage of low wage locations
6. Goodwill is generated by creating and keeping jobs at home. I am NOT advocating protectionism. I am suggesting that when the fully allocated costs (including carbon) of global supply chains are taken into account I believe there is a case to be made that short supply chains provide economic and competitive advantage.

Companies are desperate to find low cost, productive, easily accessible areas with low turnover, low political and natural disaster risks, excellent transportation links, redundant high speed telecomm and data capabilities, and an educated, English speaking, easily managed workforce, located within a few time zones, in the same legal system.

This presents large opportunities for communities outside traditional locations to present their value proposition. Notice that the word “presents” means that they must get the word out about their community’s potential. Just because they know their potential does NOT mean that people will be beating a path to their door. Just because you build it does NOT mean they will come.

To take advantage of the new realities communities must bring new alternatives to business. They cannot wait for business to figure it out because most of them won’t and it is easier for them to continue with existing business relationships.

We must also assess government policies to identify and leverage unintended consequences. For example:

Firms that have received government bailout funds have restrictions on hiring people with H-1B visas. This doesn’t sound so bad, but it doesn’t apply to the outsourcing vendors working for these firms. This can have the consequence of driving companies that had planned on keeping jobs onshore – even if partly done by H-1B vias holders – to take all the work offshore. This presents an opportunity for creative communities to capture this business.

Not all challenges involve technology, outsourcing, or the politics of immigration. Consider opportunities hiding in the most desperate situations. Take Flint, MI where entire blocks of housing are deserted and elected officials are actively considering bulldozing large tracts of their own city and shrinking the city’s boundaries. The sad fact is that some places simply are not going to come back to their former glory. Other areas are going to grow. How to reconcile supply with demand? Clearly we can’t move houses across the county – or can we if we move them in small pieces. What if we provided jobs to an army of unemployed or underemployed workers to recycle entire houses? Some companies already do this. We need to scale this up massively.


This is a win win win opportunity. Benefits include:
Reuse & Recycling virtually entire homes
Rafters, doors, floors, cabinets, lumber, electrical outlets & faceplates,…
Roofs and foundations – ground to provide aggregate for road construction
Essentially everything except the sheetrock can be recycled – and perhaps even this
Reduced demand for natural resources
Employment to dismantle and build new homes
Learning new skills
Dismantling is not destruction
Learn how things are built
Apply skills to building new homes

I hope that this has been a thought provoking discussion. We have covered prescient observations of a management guru, the need for and the qualities of leadership, examined what has changed, what reforms and investments need to be made, and shown that there are substantial opportunities available if we frame the new realities correctly.

Although we call ourselves project managers we in fact have the capability to engage in our communities as leaders as envisioned by Kotter, Bennis, and Drucker.

In closing I would like to share two more thoughts. First a thought on competition.


“Every morning in Africa a gazelle wakes up. It knows it must run faster than the fastest lion or it will be killed. Every morning a lion wakes up. It knows if must outrun the slowest gazelle or it will starve to death. It doesn’t matter if you are a lion or a gazelle. When the sun comes up you’d better be running.”

Lastly, a thought on how to reach out to those who have been impacted in so many ways by this recession. Although we can do more I think this would be a good start.


Here is Peter Drucker on the purpose of society: “For the individual there is no society unless he has social status and function. There must be a definite functional relationship between individual life and group life. For the individual without function and status, society is irrational, incalculable, and shapeless. The “rootless” individual, the outcast – for absence of social function and status casts a man from the society of his fellows – sees no society, He sees only demoniac forces, half sensible, half meaningless, half in light and half in darkness, but never predictable. They decide about his life and his livelihood without the possibility of interference on his part, indeed without the possibility of his understanding them. He is like a blindfolded man in a strange room playing a game of which he does not know the rules. Make time to reach out to a “rootless” person who may be unemployed. Drop them a note of support or take them out to lunch.”


Thank you. I look forward to hearing your comments and taking your questions. Two comments before I do. I deliberately presented controversial distinctions between management and leadership in order to provoke a gut reaction and get everyone thinking. I also talked about leadership as if it exists only in the upper echelons of companies. If this is big “L” leadership then there are an infinite number of little “l” leadership opportunities for all of us to be leaders in our own situations.

If you are a mentor, if you exude the characteristics necessary to establish trust, if you exemplify Drucker’s characteristics of leadership – then you are recognizing and seizing these little “l” opportunities and are likely already recognized as a leader.