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The Science of Management Revisited

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How far have we come in 100 years?

In 1911, Frederick W. Taylor published “The Principles of Scientific Management.” (read it directly at that link for free, thanks to the Google scanning initiative).

It makes remarkable reading today.  Taylor’s proposition was simple.  We need to stop just looking for talented people, and better train and organize normal people.   Management is a science—the science of efficiency.  It applies to all jobs, and all who use it benefit.

Workers themselves are incapable—“stupid” is his preferred word—of understanding the scientific principles that maximize their efficiency.  Ditto even for initiative.  The job of management is to define people’s jobs in extraordinary detail, and to provide initiative. 

“Workmen will not submit to this more rigid standardization and will not work extra hard, unless they receive extra pay for doing it… management must inform [the worker] at frequent intervals as to the progress he is making, so that hey may not unintentionally fall off in his pace…the workman alone even with full knowledge of the new methods and with the best of intentions could not attain these startling results.”

“The average workman must be able to measure what he has accomplished and clearly see his rewards at the end of each day if he is to do his best…cooperation or “profit-sharing”…have been at the best only mildly effective in stimulating men to work hard.  The nice time which they are sure to have today if they take things easily and go slowly proves more attractive than steady hard work with a possible reward to be shared with others six months later.”

Taylor is most famous for his remarkably detailed time and motion studies of activities like shoveling coal and transporting pig iron to a rail car.   It’s easy to read Taylor as quaint.  To the objection that measuring coal-shovelers and pig-iron handlers is irrelevant to advanced workers, Taylor responds with—time and motion studies of lathe-cutters. 

But in fact, Taylor is very much with us today.

A recent emailing from Harvard Business School Publishing headlines, “If You’re Not Measuring Marketing, You’re Not Marketing.” 
It advertises a CD-ROM on Measuring Marketing Performance that tells you “how to create a marketing dashboard that can reveal the true performance of the company’s marketing activities. The dashboard can be used to inform boards of directors and senior leaders as to how well their marketing efforts are supporting customers’ needs.” 

The only thing Taylor would argue with is whether the shovelers are intelligent enough to provide the data on shoveling with which they are to be measured.  

The ubiquity of “if you can’t measure it, you can’t manage it” (see here, or here, or here),while transparently false and based on a misreading of Taylor, is testimony to the pervasiveness of his influence.
 
What we have taken—and kept—from Taylor is a passion for breaking things down into tiny tasks, measured in tiny units of time.  Technology and process engineering have enabled us to extend this philosophy to unprecedented levels.  We have come to believe that basically all management is a variation on workflow design—if we measure precisely enough, and mete out just the right carrots and sticks, we will produce a perpetual motion/money machine. 

It is easy to caricature Frederick Taylor, despite the ways in which we continue to emulate him.  But he was wise in ways we have conveniently forgotten.  The "management equals measurement" people treat measurement as both necessary and sufficient; Taylor only argued the former.

“The mechanism of management must not be mistaken for its essence, or underlying philosophy…when elements of this mechanism, such as time study, are used without being accompanied by the true philosophy of management, the results are in many cases disastrous….the really great problem involved in a change from the management of “initiative and incentive” to scientific management consists in a complete revolution in the mental attitude and the habits of all those engaged in the management, as well also the workman…this change…is a matter of from two to three years, and in some cases it requires from four to five years."

Plus ca change…

Why Modern Sales is so Anti Trust

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The Sandler Sales Institute offers one of many approaches to selling available to corporate sales organizations.

I don’t know their work personally, but they have a good reputation, as far as I know. And just two weeks ago, I heard a very solid testimonial about some of their work from a very savvy, and satisfied, client.

I say that as preamble because I have no reason to think they are worse than any other sales training approach in the market; in fact, my only first-hand data says they are better. Still. Nonetheless. Try this quote(pdf) on for size:

Sandler Rule: The professional never does anything by accident. You should never ask a question, make a statement, or behave in any way unless it is in your best selling interest.

The advice that follows is pretty good—listen more, let the customer talk—but it’s hard to get past that opening statement. Basically, it says, never do anything that won’t help close the sale for you.

That would rule out mentioning solutions that don’t rhyme with what you’re selling. It would rule out referring customers elsewhere. Or suggesting a customer can’t afford what you’re selling. Or that your product might be wrong for a particular customer.

Simply put—if your customer’s needs don’t match what you’re selling—don’t mention it. Sell it anyway. Don’t do, say, or think anything that might keep you from closing that transaction.

Think about the mindset implicit in this view. It says the seller’s interests are deeply, inextricably opposite those of the buyer. That buyer and seller are in competition, in a zero-sum game. That there can only be one winner in the customer-seller struggle—and we all know who that is supposed to be.

This is not an isolated quotation. Here’s another, from the website of a Sandler licensee.

Prospects are inherently motivated to get as much information about your company, your competitors, and the competitive alternatives (like doing nothing, or buying something that is completely different from your product/service). They want to see your complete proposal first…

Prospects LOVE proposals…Sales is the only profession where people are expected to give away valuable information prior to payment. The more technical the sale, the more information is expected prior to signing a deal.

Again, the assumed context is us against them. In this view, the customer’s job is to squeeze as much competitive information, and to gain as much competitive leverage from the seller as possible. The seller’s job is to withhold as much information, and to extract as high a price, as possible.

This is the ideology of the past. The world is moving toward more interdependence, not less. Suspicion is expensive—and there are greater and greater opportunities for suspicion in a connected world.

Trust is the counter-intuitive solution to suspicion. You can build trust in commercial relationships; contracts can either be defenses against evil perpetrators, or the occasion for in-depth discussions about expectations and transparency. One is expensive. One lowers costs.

In sales, the era of competing against your customer is over. We need something like Trust-based Selling™, based on a simple principle: if you consistently do what is good for your customers, you will end up creating more value than those who are solely motivated by self-aggrandizement.

And you will end up getting your fair share of that added value.

How Too Many Legal Contracts Are Costing Business

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What do work-for-hire contracts, email disclaimers and spam have in common? They are all getting ubiquitous, annoying—and ineffective.

Here’s what I mean.

Trend #1: Business is moving from a vertical management model to a horizontal purchasing model. Consider benefits administration: once a department reporting to the VP HR, now a purchased service, linked to the company by a commercial contract for services.

The Result: more contracts.

Trend #2: Communications and media—like books, records, movies and letters—have been fragmented, even atomized. In their place: email, twitter, web sites, links, sampling, and digitization. Far more opportunities for claims of intellectual property rights.

The Result: more contracts.

Contracts and Costs

Think of contracts as transaction costs. Unlike production costs, contracts add zero value. They are a tax on productivity—necessary for orderliness in a complex society, but a form of overhead nonetheless.

Here’s the problem. Costs of production go down with scale. Transaction costs, however, go up. Often exponentially.

The more commercial contracts, the more detailed the lawyers will want to make those contracts. The more fragmented the bits of sample music are, the more detailed must the IP contracts become to cover all eventualities.

The old response to risk was to create tighter contracts. But as the world becomes more complex, the ever-fertile legal mind will find more and more risk to be mitigated—and will unfortunately default to the only thing it knows—more and more complex contracts.

When quantity of contracts demanded is multiplied by some exponential complexity factor, you’ve got a serious economic issue. It’s hard to nail down the macro-economic costs of complexity, but they are very real. See, for example, Steven Covey’s Speed of Trust or Collaboration Rules by Philip Evans and Bob Wolf.

Still, you can get a visceral example of it by looking at email disclaimers. Spudart offers a tour of 50-plus samples—Great Moments in Email Disclaimers, so to speak—for your reading pleasure.

Or harken back to BusinessWeek’s legal advice to small business owners to use the fine print on sales receipts to protect companies from their customers.

And the Law Offices of Ernest Sasso gives you the downward spiral of logic that leads lawyers to attach such disclaimers to their own email; you can see the slippery slope by which every email by everyone to anyone should—in theory—have disclaimers attached.

It is, of course, ironic that disclaimers usually say "don’t read this if it wasn’t meant for you." Too bad they come at the end, after you’ve read the email.

More significant are increasing clauses in commercial contracts. Five years ago, I wasn’t being asked to certify that my subcontractors on a $50,000 consulting job had automobile insurance. I don’t recall being asked to indemnify huge clients against potential suits by third parties for theft of intellectual property. I don’t recall the ubiquity of IP suits I’m hearing about now.

Only Luddites object to increasing complexity. But only troglodytes insist on pushing the same old tools in changed circumstances, not noticing that the tools are making things worse, rather than better.

Interestingly, parties to contracts are beginning to push back in their own way—through the use of constructive hypocrisy. “Sorry about this, the lawyers are requiring it…you know, this won’t ever really come up…it’s just a technicality, if we ever need to address it we’ve always worked it out before…come on, this doesn’t really have to change things…”

Constructive hypocrisy is often quite preferable to actually trying to live by this contractual spam. Unfortunately, many people insist on actually meaning it. And enforcing it, if only for power plays. And it doesn’t take too many to force the rest to live by it.

Is there an alternative? You betcha. It’s called more trust.

If you think that’s fluffy, read about how one buyer bought an $800 million business in 20 minutes in this Wall Street Journal article.

The buyer? Warren Buffett.

 

Mitigating Emotional Risk

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Most service professionals share a distinguishing characteristic: they over-rate content mastery and under-rate personal connection. Professionals are less comfortable operating in the purely personal realm than they are in data-based, content-driven interactions. I have observed these patterns consistently throughout my career in professional services.

Nothing is more likely to cause an accountant, lawyer, actuary or consultant to break out sweating than the need to interact improvisationally one on one with a client without a clear agenda, in an area outside their zone of competence, with a potential sale on the line.

It feels, above all else, risky. Personally risky.

If you were to infer that professionals underrate personal skills because they are uncomfortable practicing them, I wouldn’t dissuade you. Here’s more evidence.

My online Trust Quotient self-assessment quiz has over 2500 entries so far. The quiz rates your own assessment of your credibility, reliability, intimacy, and self-orientation—the key components of the Trust Equation.

For professionals so far, the highest scores are for reliability; the lowest are for intimacy.

In other words: an under-rated and critical skill in professional services—the ability to form deep personal relationships—is, by participants’ own self-ratings, their area of greatest weakness.

In the seminar work I do with professionals, this is always evident. “Oh we couldn’t say that, that would be too direct. That might offend them. The client would be embarrassed if I did that. They might feel that’s unprofessional. I wouldn’t want them to think I was too emotional. That just isn’t done. That’s too risky.”

These people are professionals at mitigating risk—financial risk, professional risk, business process risk, sales risk, legal risk. Yet when it comes to mitigating emotional risk, they are often clueless.

There is no trust without risk. But pointing that out just makes professionals burrow even further into the hole of denial, claiming that their clients are robots who don’t really want their professionals to appear human.

What they need is a simple, formulaic tool for dealing with the perceived risk of increasing intimacy with other human beings. Hey, we could all use a little of that, right?

There is precisely such a tool, and I’m going to write about it in the next blog post. It’s called Name It and Claim It. It is a simple grammatical technique. It is a meta-tool, meaning it can be applied to whatever is causing you fear. It is easy to remember, and pretty easy to use.

There is no trust without risk. This tool mitigates emotional risk. Which means you can stop shutting down trust by no longer being excessively risk-averse.

Best of all, it works. Very well. Stay tuned for details, next post.

Why Influence Is Only Halfway to Trust

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I was interested to read, in the Wall Street Journal  that persuasion is taking the place of old-style command and control management 

True—and yet only half the truth.

The author, Erin white writes:

Managers say they increasingly must influence — rather than command — others in order to get their own jobs done. The trend is the result of leaner corporate hierarchies and the erosion of division walls. Managers now work more often with peers where lines of authority aren’t clear or don’t exist.

Historically, each business-development staffer worked with a specific engineer in Mr. Martino’s group [at IBM]. He wanted to create teams of engineers to work with business-development staffers. Business-development managers feared the move might lead to confusion and missed connections. So Mr. Martino agreed to appoint team leaders to help coordinate. He says the system is working well.

"The more we operate as a global company, you’re going to be faced with dealing more" across group boundaries, he says. "It’s just the reality."

That’s the truth part: that as organizations become more global, they must get more horizontal, matrixed, and team-based.

Now here’s the half-truth part: that isn’t the half of it.

Marry globalization to business process outsourcing, and you have a massive replacement of clear vertical management not by indirect management—but by commercial contracts with third parties.

Think it’s hard coordinating business development managers in Armonk with engineers in Tennessee? Try coordinating them with an engineering subcontractor in Bangalore.

The difficulty is not just about lines of authority—it’s about horizontal, commercial, supplier/customer relationships with the companies that now handle the work you used to handle internally across those corporate boundaries—which you used to think were complex!

Handling vague lines of authority is merely a way-station on the road to globally outsourced supply chains.

Jack Welch had it half right when he talked about the need for boundaryless companies. The half he missed was to get rid of the word “companies.”

Courses on influence are indeed taking over the corporate agenda from courses on management. But it’s a half-step and change is hampered because “influence” is still chained to an us vs. them paradigm.

The value of “influencing” skills is harshly limited if they are applied only to the achievement of sustainable corporate competitive advantage. If I’m on the same team as you, I might not mind being influenced. But if I’m the outsourcing partner you’re trying to influence, in order to increase your bottom line at the expense of mine, then every attempt at influencing me just makes me more cynical about your motives.

When applied to outsiders, when we say "influence," we mean “getting you to do what I want." Until we see customers and suppliers as on the same side of the table as we are, we cannot move to trust—helping us both get what we both want.

Trust in Singapore

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Greetings from Singapore.

The photo at left is of the Merlion, one of the city-state’s iconic statues—part lion, part mermaid. It’s a symbol of eclecticism—not “town of beans,” or “town by the bay,” or “city of light.” No, this is where water-spitting lion meets mermaid. Part land, part water; part fact, part fiction.

Singapore is part Malay, part Chinese, part Indian. Part open democracy, part tight governmental control. Part Western, part Eastern.

But all significant. Singapore’s population is only 4 and a half million. But it ranks number 9 in the world in foreign currency holdings. On a per capita basis, that dwarfs the other eight.

The Eurozone’s foreign currency holdings are about $3,000 per person. Japan is $15,000. But Singapore is $44,000 per capita. And you can double that if you include Temasek, Singapore’s quasi-Sovereign Wealth fund—a triple-A rated fund, one of whose smaller holdings is over 5% of Merrill Lynch with an option to go to just under 10%

In other words, a country on the move. And a fascinating example of diversity.

In my seminars on trust in business, there is always a discussion about whether trust varies culturally. Invariably, we rediscover that the core elements of trust are universal—but that their expression varies considerably.

The higher the diversity in the room, the higher the quality of discussion about this issue. Which is why discussions about trust in Singapore are among the best I encounter, and inevitably teach me a lot.

To live in Singapore, and to live in a large company with Asian presence, is to recognize the fact of interdependence in the emerging world economy. Your co-workers are Malays, Chinese, Indian; Muslim, Hindu, Christian; Indonesian, Pakistani, Thai, Australian. Where you go to lunch can be a cultural and religious decision. So a discussion of trust is a broad conversation indeed.

Is trust important to the Chinese? Sure, if you mean the cultural ritual of getting to know you before making business decisions. No, if you mean the suspicion that is the legacy of corrupt communist government in modern mainland China.

Is credibility an important part of trust in Asia? Sure, if you mean who you know. Not so much, if you mean technical expertise. Unless you got that expertise at a highly credible institution. Though of course on the other hand…

And so on. These discussions force us to higher levels of abstraction, in order to make sense of our daily interactions.

Here’s what I come away with. There is a universal human and social drive for connection—it manifests personally, politically, commercially, religiously, romantically, and tribally. It is reflected in political alliances, commercial ventures, etiquette, and modes of dispute resolution. All cultures and people need to express disagreement, for example. Just be careful when using Dutch approaches to disagreement in Tokyo, for example.

Arrayed against this drive are the forces and circumstances of fear, poverty, ignorance, custom, history, and xenophobia.

The conflict between the two manifests in aggression, suspicion, and—in business—an ideology based on the concept of competition.

The fundamental shift in the business world today is a move from competition toward commerce. From competing against your customers to collaborating with them. From getting over on others to getting along with them. From the replacement of contracts by trust as a means of mitigating business risk.

Asia has a lot to teach the West about the power of getting along. From reliance on contracts to the use of trust to mitigate business risk. Asia has a lot to teach the West about the power of getting along.  Economically it beats the hell out of competing with each other.

Singapore is visceral evidence of that.

Why We Don’t Trust Corporations

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Josh Bernoff asks the “who do you trust” question at the Groundswell blog, based on data from Groundswell.

 

Here’s the chart he’s talking about.

 

Bernoff’s discussion suggests:

  1. The best trust is personal
  2. 60% trust reviews by strangers in aggregate, e.g. “If 100 people on eBags say a laptop bag is great, then it is great. If they say it’s inferior, then it is inferior. Regardless of what a so-called "expert" might say.”

Bernoff then goes on to draw some conclusions for brand marketers: basically, if they like you, let them talk. If they don’t like you, you can’t shut them up; but you can listen to complaints and improve your product or service.

Phrased this baldly, it sounds like a massive dose of the obvious. But if it were so obvious, more companies would be doing it. Let’s break this down.

Trust is Personal

First, the idea that trust is personal. In my own work, trust is massively personal at root. Two of the four components of the Trust Equation developed by myself and co-authors Maister and Galford in The Trusted Advisor are overtly personal—intimacy and self-orientation.

Brands, Corporations and Trust

Corporations, brands and advertising are inherently impersonal and by their nature self-oriented; which is why ad campaigns and PR agencies have an awfully tough time when it comes to getting anyone to trust their messages.

Think about it. What are the two most trust-destroying words you can say? I nominate Trust Me.

And if that sounds blindingly obvious, then who developed these ad campaigns?

  • RCA “the most trusted names in electronics”,
  • Value Line “the most trusted name in investment research”, and
  • CNN “the most trusted name in news”.

(Do you think that’s why CNN has just been supplanted as “most trusted” by—of all sources—Fox News?)

How about Bernoff’s other conclusion: when they don’t like you, don’t shut them up, but address the complaint and improve the product?

It is astonishing how infrequently this obvious piece of advice is ignored. Let’s call it the Watergate catch-phrase: the cover-up is always worse than the crime.

Think of the iconic Johnson and Johnson response to tampering with Tylenol—ages ago. Why does such an old example of corporate ethical behavior still come to mind? Because it’s so rare. How many pharmaceutical industry kerfuffles since have been dealt with so openly?

Remember Monsanto and Dioxin?

How about the tobacco industry’s continued, chronic response to health concerns?

Remember mad cow disease and the US beef industry’s response?

Rarely is it the first instinct of business to follow Bernoff’s “obvious” advice—to hear consumer criticism as inherently constructive, and to do something about it.

Given that response, is it really so surprising that people trust personal acquaintances more than anyone else? Trust abused is trust destroyed. The biggest reason we trust people we know is that people we know are the ones we can trust.

That’s not circular. It means people we know are more trustworthy than companies who pretend to be. Whose fault is that?

 

What’s Your Trust Quotient? Announcing a New Self-Assessment Online Tool

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TQ=C+R+I/SYou may know your IQ (Intelligence Quotient). You have some sense of your EQ (Emotional Intelligence).

But what about your TQ — your Trust Quotient?

I’m excited to announce here the launch of an of a new online self-assessment tool: The Trust Quotient Self-Diagnostic to answer that question. It’s been in development for several weeks now, and I’m sharing it first only with readers of Trust Matters.

The Trust Quotient Self-Diagnostic consists of 20 questions, based on the the Trust Equation1:

(Credibility + Reliability + Intimacy)

_____________________________

Self-Orientation

The Trust Quotient Self-Diagnostic measures your Trust Quotient Score—your TQ—and compares it with all other test-takers to date. The database will get better as it gets larger, but early returns suggest it fits very well with commonsense assessments.

The Trust Quotient Self-Diagnostic also then gives you practical advice and suggestions on how to leverage your strengths, and how to address on your weaknesses.

Please go to TrustedAdvisor.com/TrustQuotient to take The Trust Quotient Self-Diagnostic . Tell your friends.

And if you don’t mind, drop us a note to say what you think of The Trust Quotient Self-Diagnostic, including how to make it better and more useful.

1see The Trusted Advisor, by David Maister, Charles Green, Robert Galford; Free Press, 2000

Warren Buffett, Confidence and Leadership

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Reading a Fortune interview with Warren Buffett the other day, I was struck—as I always am, come to think of it, when I read about him—by the simplicity and clarity of his thinking. Mostly the simplicity. Because that’s where the clarity comes from.

This ability to see simple patterns in the midst of chaos is what distinguishes a lot of fine leaders from those who are masters of complexity. Here are some samples from Fortune’s interview:
 

There are costs to Sarbanes-Oxley, some of which are wasted. But they’re not huge relative to the $20 trillion in total market value. I think we’ve got fabulous capital markets in this country, and they get screwed up often enough to make them even more fabulous. I mean, you don’t want a capital market that functions perfectly if you’re in my business.

Q. Do you think the $150 billion government stimulus plan will make an impact?
Well, it’s $150 billion more than we’d have otherwise. But it’s not like we haven’t had stimulus. And then the simultaneous, more or less, LBO boom, which was called private equity this time. The abuses keep coming back – and the terms got terrible and all that. You’ve got a banking system that’s hung up with lots of that. You’ve got a mortgage industry that’s deleveraging, and it’s going to be painful…

…Finance has gotten so complex, with so much interdependency. I argued with Alan Greenspan some about this at [Washington Post chairman] Don Graham’s dinner. He would say that you’ve spread risk throughout the world by all these instruments, and now you didn’t have it all concentrated in your banks. But what you’ve done is you’ve interconnected the solvency of institutions to a degree that probably nobody anticipated. And it’s very hard to evaluate…

..The worst thing you can have is models and spreadsheets. I mean, at Salomon, they had all these models, and you know, they fell apart….

…The American economy is going to do fine. But it won’t do fine every year and every week and every month. I mean, if you don’t believe that, forget about buying stocks anyway. But it stands to reason. I mean, we get more productive every year, you know. It’s a positive-sum game, long term. And the only way an investor can get killed is by high fees or by trying to outsmart the market….

The world is increasing in complexity; but Buffett seems one of those content to look past the complexity and see eternal patterns replaying themselves. He’s a big fish who treats big ponds just like the little ones he came from.

It seems to me this is very much tied up with a sense of assured self-confidence. The several really good leaders I have known have this. They are not egotistical, nor unrealistic, nor full of themselves. They simply have the confidence that they know how to get along in the world, understand the underlying rules, and don’t get lost in the details.

From one perspective, it’s the Great American Hustle—just believe in yourself and you too can emulate Warren Buffett. Yet pure confidence absent some grounded view of the world is just a self-con job.

The Rules of the World are simple: but that doesn’t mean they’re easy.

Do Non-Solicitation Clauses Pose Conflicts of Interest?

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I would sincerely like to ask my professional services readers, and particularly those in the legal profession, for some help. I’m not being snarky or sardonic this time, this is a genuine request for perspective.

Professional services firms commonly have several clauses affecting relationships with their employees and subcontractors. The list includes non-competes, intellectual property restrictions—and non-solicitation clauses. It’s this last one I want to focus on.

Most such clauses boil down to something like “as long as you work here and for X time after you leave (typically up to two years) thou shalt not approach a client (or future client, or anything vaguely resembling one who ever breathed the same air as you) with the intent of selling work ‘similar’ to what you did for us.”

Or, in simpler terms: hands off–that client belongs to the company, not you, and we’ll sue if you try to steal ‘our’ client from us by doing what we hired you to do.

As you can tell, there is something that rubs me the wrong way about this. Yet I also have a feeling I’m missing something. Most things in life exist for a reason. I may be missing a big fat reason on this one.

Here are the arguments against such clauses, as I see them.

• Firms requiring this clause position their clients as property to be bartered over. The phrase “who owns the client” has to be somewhat offensive to the putatively owned client.

• There is an inherent conflict of interest with the principle of client service. Say an ex-employee or subcontractor develops a better product, at a lower price, offering greater value, and meeting a need clearly expressed by a client of the existing firm. Non-solicitation clauses mean the employing firm is preventing their client—to whom they are presumably devoted to giving great service—from even hearing of the potential better deal. This is a “dog in the manger” strategy. It may not be legal restraint of trade, but isn’t it a violation of basic client service principles?

But, what’s the other side? What’s the social rationale for non-solicitation clauses? Can someone offer an explanation of how they are, on balance, in the best interests of client, employer and employee together in the long run?

Thanks in advance for any enlightenment; I look forward to the dialogue.