In 1854, President Franklin Pierce made an offer for a large area of land in Washington State that was occupied by the Puget Sound Indians, and promised a reservation for the Indian people. Chief Seattle’s reply, in full below, has been described as the most beautiful and profound statement on the environment ever made.
“How can you buy or sell the sky, the warmth of the land? The idea is strange to us. If we do not own the freshness of the air and the sparkle of the water, how can you buy them?
Every part of this earth is sacred to my people. Every shining pine needle, every sandy shore, every mist in the dark woods, every clearing, and humming insect is holy in the memory and experience of my people. The sap which courses through the trees carries the memories of the red man.
The white man’s dead forget the country of their birth when they go to walk among the stars. Our dead never forget this beautiful earth, for it is the mother of the red man. We are part of the earth and it is a part of us. The perfumed flowers are our sisters; the deer, the horse, the great eagle, these are our brothers. The rocky crests, the juices in the meadows, the body heat of the pony, and man – all belong to the same family.
So, when the Great Chief in Washington sends word that he wishes to buy our land, he asks much of us. The Great Chief sends word he will reserve us a place so that we can live comfortably to ourselves. He will be our father and we will be his children. So we will consider your offer to buy our land. But it will not be easy. For this land is sacred to us.
This shining water that moves in the streams and the rivers is not just water but the blood of our ancestors. If we sell you land, you must remember that it is sacred, and you must teach your children that it is sacred and that each ghastly reflection in the clear water of the lakes tells of events and memories in the life of my people. The water’s murmur is the voice of my father’s father.
The rivers are our brothers, they quench our thirst. The rivers carry our canoes, and feed our children. If we sell you our land, you must remember, and teach your children, that the rivers are our brothers, and yours, and you must henceforth give the rivers the kindness you would give any brother.
We know that the white man does not understand our ways. One portion of land is the same to him as the next, for he is a stranger who comes in the night and takes from the land whatever he needs. The earth is not his brother but his enemy, and when he has conquered it, he moves on. He leaves his fathers’ graves and his children’s birthright is forgotten. He treats his mother, the earth, and his brother, the sky, as things to be bought, plundered, sold like sheep or bright beads. His appetite will devour the earth and leave behind only a desert.
I do not know. Our ways are different from your ways. The sight of your cities pains the eyes of the red man. But perhaps it is because the red man is a savage and does not understand.
There is no quiet place in the white man’s cities. No place to hear the unfurling of leaves in spring, or the rustle of an insect’s wings. But perhaps it is because I am a savage and do not understand. The clatter only seems to insult the ears. And what is there to life if a man cannot hear the lonely cry of the whippoorwill or the arguments of the frogs around a pond at night? I am a red man and do not understand. The Indian prefers the soft sound of the wind darting over the face of a pond, and the smell of the wind itself, cleansed by rain or scented with the pine cone.
The air is precious to the red man. For all things share the same breath; the beast, the tree, the man, they all share the same breath. The white men, they all share the same breath. The white man does not seem to notice the air he breathes. Like a man dying for many days, he is numb to the stench. But if we sell you our land, you must remember that the air is precious to us, that the air shares its spirit with all the life it supports. The wind that gave our grandfather his first breath also received his last sigh. And if we sell you our land, you must keep it apart and sacred, as a place where even the white man can go to taste the wind that is sweetened by the meadow’s flowers.
So we will consider your offer to buy our land. If we decide to accept I will make one condition. The white man must treat the beasts of this land as his brothers.
I am savage and I do no understand any other way. I save seen a thousand rotting buffaloes on the prairie, left by the white man who shot them from a passing train. I am a savage an I do not understand how the smoking iron horse can be more important than the buffalo that we kill only to stay alive.
What is man without the beasts? If all the beasts were gone, man would die from a great loneliness of spirit. For whatever happens to the beasts, soon happens to man. All things are connected.
You must teach your children that the ground beneath their feet is the ashes of our grandfathers. So that they will respect the land, tell your children that the earth is rich with the lives of our kin. Teach your children what we have taught our children, that the earth is our mother. Whatever befalls the earth befalls the sons of the earth. Man did not weave the web of life, he is merely a strand in it. Whatever he does to the web, he does to himself.
Even the white man, whose God walks and talks with him as friend to friend, cannot be exempt from the common destiny. We may be brothers after all. We shall see. One thing we know, which the white man may one day discover – our God is the same God. You may think now that you own Him as you wish to own our land; but you cannot. He is the God of man and his compassion is equal for the red man and the white. The earth is precious to him, and to harm the earth is to heap contempt upon its Creator. The Whites, too, shall pass; perhaps sooner than all other tribes. Contaminate your bed, and you will one night suffocate in your own waste.
But in your perishing, you will shine brightly, fired by the strength of the God who brought you to this land and for some special purpose gave you dominion over this land and over the red man. That destiny is a mystery to us, for we do not understand when the buffalo are all slaughtered, the wild horses are tamed, the secret corners of the forest heavy with the scent of many men and the view of the ripe hills blotted out by talking wires. Where is the thicket? Gone. Where is the eagle? Gone.”
Chief Seattle
1854
Sunday, May 31, 2009
Saturday, May 23, 2009
The Next "Greatest Generation"
It is Memorial Day weekend and everyone is piling into their cars and SUVs to enjoy the first holiday of the summer. Memorial Day is meant to honor all service men and women who have served in all wars & conflicts but many of our minds turn to my parent’s generation, The Greatest Generation, those that served in WWII.
Today, as we lose the last of The Greatest Generation we have a new Greatest Generation, the men and women (and their families) who have served three and four tours in Afghanistan and Iraq. We remember and honor all those who have experienced the horror of war, the stress of prolonged separation, and the compound effects of our recession.
I recall a story related to me of a son in his early twenties on patrol in Iraq. Insurgents would frequently booby-trap women and children and force them to sit in the path of (rapidly) oncoming military vehicles. If the victim stood up the booby-trap was rigged to explode. If the vehicles stopped to assist the victim the booby-trap would be detonated by remote control to kill American soldiers. Our soldiers had to make split second decisions on whether to stop their vehicles and expose themselves to a predictable ambush – or run them over.
One day there was a young girl, maybe 10, sitting in the middle of a bridge. On this occasion the young man driving the Humvee decided to stop a safe distance away. They waited in the vehicle for a moment to assess the situation. They watched as the little girl looked at them, stood up, and disappeared into a pink mist. She had saved their lives.
The horror of war has not changed. The courage to go out and face a faceless enemy has not changed. The strength needed to uphold our honor and values in the face of mindless violence has not changed.
Today I remember and honor all those who serve, and their families. I salute you. You have my undying gratitude and my deepest respect.
You are our new, the next, Greatest Generation.
Today, as we lose the last of The Greatest Generation we have a new Greatest Generation, the men and women (and their families) who have served three and four tours in Afghanistan and Iraq. We remember and honor all those who have experienced the horror of war, the stress of prolonged separation, and the compound effects of our recession.
I recall a story related to me of a son in his early twenties on patrol in Iraq. Insurgents would frequently booby-trap women and children and force them to sit in the path of (rapidly) oncoming military vehicles. If the victim stood up the booby-trap was rigged to explode. If the vehicles stopped to assist the victim the booby-trap would be detonated by remote control to kill American soldiers. Our soldiers had to make split second decisions on whether to stop their vehicles and expose themselves to a predictable ambush – or run them over.
One day there was a young girl, maybe 10, sitting in the middle of a bridge. On this occasion the young man driving the Humvee decided to stop a safe distance away. They waited in the vehicle for a moment to assess the situation. They watched as the little girl looked at them, stood up, and disappeared into a pink mist. She had saved their lives.
The horror of war has not changed. The courage to go out and face a faceless enemy has not changed. The strength needed to uphold our honor and values in the face of mindless violence has not changed.
Today I remember and honor all those who serve, and their families. I salute you. You have my undying gratitude and my deepest respect.
You are our new, the next, Greatest Generation.
Friday, May 1, 2009
Fool Me Twice
They’re back and ready to do it again. The same credit rating agencies, Standard & Poor’s, Moody’s, and Fitch, which did such a fine job of rating the risk of mortgage backed securities now have a monopoly on rating collateral being used in the Fed’s commercial paper lending program and Term Asset-Backed Securities Loan Facility. The Fed has determined that it will only accept collateral that has been appraised by the one of the “major” (read big three) rating agencies. This leaves out seven rating agencies that have recently been recognized by the SEC.
The banks and their managers have been raked over the coals for bad business decisions based on the ratings that the big three provided but I haven’t heard of rating agency executives being held to account for their disastrous risk assessments. I also haven’t heard of any justification why the leaders of our most critical financial regulatory bodies now believe in the assessments from the very people who drove the economy over a cliff.
Fool me once, shame on you. Fool me twice, shame on me…
The banks and their managers have been raked over the coals for bad business decisions based on the ratings that the big three provided but I haven’t heard of rating agency executives being held to account for their disastrous risk assessments. I also haven’t heard of any justification why the leaders of our most critical financial regulatory bodies now believe in the assessments from the very people who drove the economy over a cliff.
Fool me once, shame on you. Fool me twice, shame on me…
Thursday, April 30, 2009
Leading to Recovery: Part 3 of 3 - Opportunity
Leading to Recovery
Part 3 of 3
Opportunities
Let me share some thoughts that I hope will generate continued discussions and creative solutions in our own community.
The new realities are that business of every size is under enormous pressure to cut costs. Markets are radically changing and business 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?
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 for distribution 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, political, and natural disaster risks, excellent transportation links, redundant high speed telecomm and data capabilities, an educated, English speaking workforce that will be easy to manage located within a few time zones and in the same legal system.
Sound like anyplace we know?
This presents large opportunities for communities like ours to present our value proposition. Notice that the word “presents” means that we must get the word out about our community’s potential. Just because we know it is here does NOT mean that people will be beating a path to our door. Just because you build it does NOT mean they will come.
To take advantage of the new realities we must bring new alternatives to business. We cannot wait for them to figure it out because most of them won’t and it is easier for them to continue as is with existing outsourcing relationships.
We must also assess as yet unwritten government policies to assure we take every advantage of them. We must be particularly vigilant to anticipate 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 our community to capture this business.
I hope that this has been a thought provoking discussion. We have covered 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.
In closing I would like to share a thought on how to reach out to those who have been impacted in so many ways by the 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 or retired. Drop them a note of support or take them out to lunch.”
Part 3 of 3
Opportunities
Let me share some thoughts that I hope will generate continued discussions and creative solutions in our own community.
The new realities are that business of every size is under enormous pressure to cut costs. Markets are radically changing and business 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?
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 for distribution 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, political, and natural disaster risks, excellent transportation links, redundant high speed telecomm and data capabilities, an educated, English speaking workforce that will be easy to manage located within a few time zones and in the same legal system.
Sound like anyplace we know?
This presents large opportunities for communities like ours to present our value proposition. Notice that the word “presents” means that we must get the word out about our community’s potential. Just because we know it is here does NOT mean that people will be beating a path to our door. Just because you build it does NOT mean they will come.
To take advantage of the new realities we must bring new alternatives to business. We cannot wait for them to figure it out because most of them won’t and it is easier for them to continue as is with existing outsourcing relationships.
We must also assess as yet unwritten government policies to assure we take every advantage of them. We must be particularly vigilant to anticipate 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 our community to capture this business.
I hope that this has been a thought provoking discussion. We have covered 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.
In closing I would like to share a thought on how to reach out to those who have been impacted in so many ways by the 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 or retired. Drop them a note of support or take them out to lunch.”
Wednesday, April 29, 2009
Leading to Recovery: Part 2 of 3 - Reform
Leading to Recovery
Part 2 of 3
Reform
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.
What happened to ethics? How did we create Tom Peters, Bernie Madoffs, and Allen Stanfords? 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 and require the philosopher’s stone, but those situations bear no relation to the lapses that brought us to where we are today.
What we are experiencing is nothing less that the fruits of a massive loss of personal integrity in leadership. Heraclitus, 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 Peter 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 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 before our state legislature. Elimination of GRAD requirement (HF 501, Mariani, DFL-St. Paul/SF 405, Wiger, DFL-North St. Paul): This bill would allow students who cannot pass the GRAD test – Graduation-Required Assessments for Diploma – to still receive a high school diploma.
Here are some things that need to be part of our educational reform.
1. Stop social promotion – students need to perform at grade level. This does not mean that a student needs to be at a uniform grade level in all subjects. Some kids are gifted or challenged in certain areas.
2. Establish uniform standards for subjects at each grade level. These standards must compete with world class standards in place 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 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 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 at noon had an excellent discussion relevant to needed educational reforms. I suggest you access it online and listen to it. http://minnesota.publicradio.org/display/web/2009/03/26/midday2/
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 itself 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 the post investment banking economy. Consider the costs of continuing as we are where dropout rates are high, many “graduates” are ill prepared for higher education, and 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 need.
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 (clean) 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?? Just a few months 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. Now that gas is $2 a gallon we don’t hear about these anymore. Trucks are selling again and cars that get good mileage sit 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.
In order 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 still believes that her first duty is to her patients, not the bottom line of some health care giant.
As I said, I don’t have answers but I do have 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 and become the insurance companies?
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 the skid marks from tennis shoes and wailing for the next one and a half blocks 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. The doctors provided 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.
Part 2 of 3
Reform
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.
What happened to ethics? How did we create Tom Peters, Bernie Madoffs, and Allen Stanfords? 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 and require the philosopher’s stone, but those situations bear no relation to the lapses that brought us to where we are today.
What we are experiencing is nothing less that the fruits of a massive loss of personal integrity in leadership. Heraclitus, 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 Peter 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 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 before our state legislature. Elimination of GRAD requirement (HF 501, Mariani, DFL-St. Paul/SF 405, Wiger, DFL-North St. Paul): This bill would allow students who cannot pass the GRAD test – Graduation-Required Assessments for Diploma – to still receive a high school diploma.
Here are some things that need to be part of our educational reform.
1. Stop social promotion – students need to perform at grade level. This does not mean that a student needs to be at a uniform grade level in all subjects. Some kids are gifted or challenged in certain areas.
2. Establish uniform standards for subjects at each grade level. These standards must compete with world class standards in place 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 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 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 at noon had an excellent discussion relevant to needed educational reforms. I suggest you access it online and listen to it. http://minnesota.publicradio.org/display/web/2009/03/26/midday2/
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 itself 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 the post investment banking economy. Consider the costs of continuing as we are where dropout rates are high, many “graduates” are ill prepared for higher education, and 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 need.
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 (clean) 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?? Just a few months 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. Now that gas is $2 a gallon we don’t hear about these anymore. Trucks are selling again and cars that get good mileage sit 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.
In order 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 still believes that her first duty is to her patients, not the bottom line of some health care giant.
As I said, I don’t have answers but I do have 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 and become the insurance companies?
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 the skid marks from tennis shoes and wailing for the next one and a half blocks 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. The doctors provided 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.
Tuesday, April 28, 2009
Leading to Recovery: Part 1 of 3 - Leadership & Change
Leading to Recovery
Part 1 of 3
Leadership & Change
I’ve been spending a considerable amount of time pondering how we are going to turn the enormous baskets of lemons that have been dumped on our doorsteps into lemonade. To get to the lemonade, I would like to share some thoughts on leadership, the changes we’ve experienced, and reforms that are needed.
Today we face challenges that have not been seen for three generations and probably not in the memories of many 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 lives whether we are in a position to have followers or not.
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 tech 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.
Unfortunately management 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 but 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 is between those who master the context and those who surrender to it.
· Manager administers, leader innovates
· Manager is a copy, leader is an original
· Manager maintains, leader develops
· Manager focuses on systems & structure, leader focus on people
· Manager relies on control, leader inspires trust
· Manager has a short range view, leader has a long range perspective
· Manager asks how and when, leader asks what and why
· Manager’s eye is always on the bottom line, leader’s is on the horizon
· Manager imitates, leader originates
· Manager accepts the status quo, leader challenges it
· Manager is the classic good soldier, leader is his own person
· Manager does things right, leader does the right things
If you are like me, I’m sure you are uncomfortable 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 not good 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.
Now that we are again 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.
Leadership is not easy. Remember, Steve Jobs was kicked out of his own company. In fact this is not uncommon. You can usually tell who the leaders are. They are the ones face down in the mud with arrows in their back.
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.”
Peter Drucker identified the following characteristics for the next generation of leaders:
1. Broad education
2. Boundless curiosity – ask endless questions
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. Based on the changes we’ve seen in the last 12 months there is fertile ground for leadership.
Because leaders are continuously learning and adapting, you can substitute Leaders for learners.
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 MBA school - Corporate debt is good for the balance sheet and shareholders – the underlying now untrue 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. The market will regulate itself
5. Profit motive will prevent risky investment and behaviors
6. Companies are too big to fail
7. Government oversight is adequate
8. Regulators regulate
9. Auditor reports are reliable (PWC and Satyam)
10. Investment bankers and risk assessment 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 a 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. And one prediction - Onerous credit card rules/interest rates are out – consumer rights will be 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 managements of businesses, or in union leadership – and the realities.”
Part 1 of 3
Leadership & Change
I’ve been spending a considerable amount of time pondering how we are going to turn the enormous baskets of lemons that have been dumped on our doorsteps into lemonade. To get to the lemonade, I would like to share some thoughts on leadership, the changes we’ve experienced, and reforms that are needed.
Today we face challenges that have not been seen for three generations and probably not in the memories of many 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 lives whether we are in a position to have followers or not.
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 tech 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.
Unfortunately management 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 but 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 is between those who master the context and those who surrender to it.
· Manager administers, leader innovates
· Manager is a copy, leader is an original
· Manager maintains, leader develops
· Manager focuses on systems & structure, leader focus on people
· Manager relies on control, leader inspires trust
· Manager has a short range view, leader has a long range perspective
· Manager asks how and when, leader asks what and why
· Manager’s eye is always on the bottom line, leader’s is on the horizon
· Manager imitates, leader originates
· Manager accepts the status quo, leader challenges it
· Manager is the classic good soldier, leader is his own person
· Manager does things right, leader does the right things
If you are like me, I’m sure you are uncomfortable 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 not good 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.
Now that we are again 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.
Leadership is not easy. Remember, Steve Jobs was kicked out of his own company. In fact this is not uncommon. You can usually tell who the leaders are. They are the ones face down in the mud with arrows in their back.
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.”
Peter Drucker identified the following characteristics for the next generation of leaders:
1. Broad education
2. Boundless curiosity – ask endless questions
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. Based on the changes we’ve seen in the last 12 months there is fertile ground for leadership.
Because leaders are continuously learning and adapting, you can substitute Leaders for learners.
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 MBA school - Corporate debt is good for the balance sheet and shareholders – the underlying now untrue 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. The market will regulate itself
5. Profit motive will prevent risky investment and behaviors
6. Companies are too big to fail
7. Government oversight is adequate
8. Regulators regulate
9. Auditor reports are reliable (PWC and Satyam)
10. Investment bankers and risk assessment 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 a 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. And one prediction - Onerous credit card rules/interest rates are out – consumer rights will be 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 managements of businesses, or in union leadership – and the realities.”
Thursday, March 26, 2009
Big Bonuses – Big Deal…
Lately there has been much wailing and gnashing of teeth over the bonuses paid at AIG. Big deal. Have we forgotten about the $3.6 billion in bonuses that Merrill Lynch paid out just hours before the deal to be bought by Bank of America was to close? AIG’s bonuses are less than 5% of Merrill’s. $165 million now days is chump change. Let’s get back to working on fixing the problem.
Distasteful as it is the bonuses were legal. If we don’t like the laws then our elected legislators should thoughtfully change them. If they don’t, we can change the legislators.
We are now working on laws to allow the government to take over failing financial institutions (not just banks). This is reactive. Laws are needed to prevent companies becoming so big that they pose a systemic risk to our financial system in the first place. Financial instruments like derivatives and others need to be regulated like securities, which also need better regulation or more competent enforcement of existing laws. If companies then fail, existing bankruptcy laws can apply.
Existing credit card company practices make it exceptionally difficult for people in credit trouble to get out. The credit card industry needs reforms to protect consumers. Here are some ideas. All terms and conditions must be printed on 8 ½ by 11 inch paper in 10 point font so people can actually read them. It should not be legal to charge interest on money that is no longer owed as rolling two month average daily balance calculations do. Conditions that will cause an interest rate change should be explicitly listed. Sufficient advanced notice of an interest rate change must be given. Interest rates should not be allowed to become usurious. The grace period to pay must allow sufficient time for payment.
People must also assume responsibility for their credit cards use. If people don’t have money to pay for something up front they certainly won’t have money to pay for it at 30% interest. We need to stop financing our lifestyles and live within our means.
Distasteful as it is the bonuses were legal. If we don’t like the laws then our elected legislators should thoughtfully change them. If they don’t, we can change the legislators.
We are now working on laws to allow the government to take over failing financial institutions (not just banks). This is reactive. Laws are needed to prevent companies becoming so big that they pose a systemic risk to our financial system in the first place. Financial instruments like derivatives and others need to be regulated like securities, which also need better regulation or more competent enforcement of existing laws. If companies then fail, existing bankruptcy laws can apply.
Existing credit card company practices make it exceptionally difficult for people in credit trouble to get out. The credit card industry needs reforms to protect consumers. Here are some ideas. All terms and conditions must be printed on 8 ½ by 11 inch paper in 10 point font so people can actually read them. It should not be legal to charge interest on money that is no longer owed as rolling two month average daily balance calculations do. Conditions that will cause an interest rate change should be explicitly listed. Sufficient advanced notice of an interest rate change must be given. Interest rates should not be allowed to become usurious. The grace period to pay must allow sufficient time for payment.
People must also assume responsibility for their credit cards use. If people don’t have money to pay for something up front they certainly won’t have money to pay for it at 30% interest. We need to stop financing our lifestyles and live within our means.
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