Trust and Culture Archives - Page 11 of 26 - Trusted Advisor Associates

Trust, Lying and Apologies – the Brian Williams Case

UPDATE 9:30PM Feb 10: Since this post was first written, NBC News has suspended Brian Williams for 6 months. This will only heighten the buzz around something really not all that important (except to Wiliams, of course). He has become the gossip du jour, and I don’t see anyone achieving escape velocity beyond the obsession with “what should be done about him.”

That is SO the wrong question. The real question – and the one this blogpost originally set out to address – is “what are the learnings for all of us who find ourselves in positions of trust: what threatens our perceived trustworthiness? How do we keep trust? And, can we recover trust lost – and how?”

That question is relevant to nearly everyone reading this blog. The question of whither Brian Williams will occupy magazine covers and water cooler chit chat for 10 days max, before Bruce Jenner knocks him off the hashtag list. But when that happens – what will we have learned from it? What will you have learned from it?

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Original post Feb 8: The fate of US newscaster Brian Williams is still unknown at this writing. The facts as they are emerging suggest that truth was stretched, it was stretched by Williams, and it was not a blinding surprise to a lot of news insiders.

I’ll leave it to others to talk about ethics, or to predict Williams’ fate. But it does offer a teachable moment about human frailties, about apologies, and in particular how to recover – and how not to recover – from trust disasters.

Human Memory is Not Binary

Williams went from correctly recalling past events in the far past, to revising them more recently. While some people do consciously lie, it is much more common that we deceive ourselves, through a process of constant repetition of a story.

I can relate to this personally. I used someone else’s case study to round out a trio of cases I had created (I wrote the first two). Over years of using them, I somehow came to believe I had written all three. When confronted dramatically in a class session by none other than the real case author, I was at first righteously indignant. How dare you accuse me of plagiarism? Yet over the course of the next 12 hours, I began to recall, and realized to my horror that that was exactly what I had done. And I had to completely eat my earlier words, taking full responsibility.

Just this past week, I wrote a sharply worded email to someone who had inappropriately used some intellectual property of mine on Slideshare, without attribution. He wrote back quickly in a tone of annoyance, disingenuously saying it wasn’t important and was aimed at a higher goal. I wrote back even more sharply.

Less than 24 hours later, I received another email from the person, this time very clearly acknowledging the transgression, accepting full responsibility, and offering not only a correction but a form of restitution. I gratefully accepted, 100% – it was, after all, a totally proper apology. And I know, first hand, how easy it is to fool one’s own memory.

Something like this is almost certainly what’s happing with Brian Williams. His first halting attempt at apology suggested that he was involved in a higher mission, and that his intentions were good.

I strongly suspect Mr Williams is going through agonizing soul-searching right now, wondering how he could have possibly gotten things so wrong over the years. The word ‘hubris’ will be mentioned by others, and eventually I suspect he’ll see it in himself.

Trust and Apologies

There is a very simple rule, which is constantly violated by nearly all tellers-of-untruth. It is this:

Rule 1: Never, ever, under-estimate your responsibility for what happened.

If you were Richard Nixon, never refer to Watergate as “a two-bit burglary.”
If you were Bill Clinton, never suggest culpability depends on the meaning of the word ‘is.’
If you were Brian Williams, never suggest your error was justified by good intentions or a higher cause.

A corollary to the rule: the likelihood of your being condemned in the public’s eye increases with the square of the time you take to acknowledge Rule 1.

To recover trust, you must first acknowledge. It’s hard to over-acknowledge, and in fact we want and expect a bit of exaggeration of responsibility – that’s how we know you “got it.” But it’s the kiss of death to under-estimate your responsibility.

And of course, you’ve got to do it soon.

Brian Williams may feel he bought himself time by voluntarily stepping down for “several days” as anchor.

My feeling is that he misunderstood the role of time; in this case, time is not on his side. He didn’t buy time – he squandered it.

A Better New Year’s Resolution

December 31, 2014/4 Comments/in Improving Client Relationships, Improving Employee Relationships, Leadership Skills, Trust and Culture /by Charles H. Green

It’s that time of year again. Resolutions come in full swing and we all start to assess how we can improve on the last year. It just so happens that I wrote a pretty good blog post at this time eight years ago, and I haven’t improved on it yet. Here it is again.

Happy New Year!

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My unscientific sampling says many people make New Years resolutions, but few follow through. Net result—unhappiness.

It doesn’t have to be that way.

You could, of course, just try harder, stiffen your resolve, etc. But you’ve been there, tried that.

You could also ditch the whole idea and just stop making resolutions. Avoid goal-failure by eliminating goal-setting. Effective, but at the cost of giving up on aspirations.

I heard another idea: replace the New Year’s Resolution List with a New Year’s Gratitude List. Here’s why it makes sense.

First, most resolutions are about self-improvement—this year I resolve to: quit smoking, lose weight, cut the gossip, drink less, exercise more, and so on.

All those resolutions are rooted in a dissatisfaction with the current state of affairs—or with oneself.

In other words: resolutions often have a component of dissatisfaction with self. For many, it isn’t just dissatisfaction—it’s self-hatred. And the stronger the loathing of self, the stronger the resolutions—and the more they hurt when they go unfulfilled. It can be a very vicious circle.

Second, happy people do better. This has some verification in science, and it’s a common point of view in religion and psychology—and in common sense.

People who are slightly optimistic do better in life. People who are happy are more attractive to other people. In a very real sense, you empower what you fear—and attract what you put out.

Ergo, replace resolutions with gratitude. The best way to improve oneself is paradoxical—start by being grateful for what you already have. That turns your aspirations from negative (fixing a bad situation) to positive (making a fine situation even better).

Gratitude forces our attention outwards, to others—a common recommendation of almost all spiritual programs.

Finally, gratitude calms us. We worry less. We don’t obsess. We attract others by our calm, which makes our lives connected and meaningful. And before long, we tend to smoke less, drink less, exercise more, gossip less, and so on. Which of course is what we thought we wanted in the first place.

But the real truth is—it wasn’t the resolutions we wanted in the first place. It was the peace that comes with gratitude. We mistook cause for effect.

Go for an attitude of gratitude. The rest are positive side-effects.

Actually, We’re Run by Pre-Adolescents: Why Reason Deserts us at Make or Break Moments…and Restoring Sanity

December 4, 2014/2 Comments/in Increasing Sales, Trust and Culture /by Mark Hurwich

I was recently chatting with a good friend, Mark Hurwich, about some of the struggles we encounter when it comes to walking into a sales meeting. I think Mark hit the nail on the head when he spoke about how we can really be run by inner pre-adolescents that can take over even when we’re the most prepared–inevitably keeping us from closing a sale. I asked him to speak more on the subject–and it turned into this week’s guest blog post.

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Isn’t it amazing? You diligently trained—be it around trust, negotiation, whatever. You did homework and composed your mind. And now, 15 minutes into a critical meeting, you’re hiding out, puffing yourself up, or…or, anything but demonstrating that mature partnership-building way of being you earnestly practiced.

What happened?

Quite probably, you were hijacked by parts of you that got their jobs when you were between a toddler and 12 years old…parts that haven’t matured much since pre-adolescence!

The longer story: We like to think we’re rational beings who operate in an integrated, intentional way. And when life is calm, that’s passably true.

But when threatened, we get triggered, and reason takes a back seat to our emotional programming. Like if you’re trying to build trust in a selling situation and a client asks you to talk about experience in an area you don’t have. Or, negotiating when your job is at risk. Despite all the training you got about how honest, vulnerable disclosure builds trust. When the stakes are high it can be SOOO hard to speak a truth you think a client would prefer not to hear.

Why is that hard?

Internal Family Systems shows that when threats move us from our essential Self, we go to a back-up system: parts of ourselves that were recruited in situations that have similar emotional signatures as the apparent threat. These parts take over our defense in that moment. So, when it feels like we are at risk of being judged as inadequate, we’ve got “managers” that puff up our credentials…and if that fails, we might even have “firefighters” that respond by undermining the person challenging us.

Ever find yourself in a sales conversation with the intention of developing a trusted relationship—but somehow treating your prospect as an adversary without knowing how you got there? That’s why.

Consider the kinds of experiences that recruited these parts to their jobs in the first place. Maybe…arguing with a sibling or quarreling on a playground in grade school? When these parts are animating you now, chances are your language has improved…but the emotional signature and energy hasn’t changed all that much. And while you were training to build skills, those pre-adolescent parts didn’t attend, so when a situation comes up that triggers them, they’re pretty much stuck where they used to be.

So, what can you do about it?

One way is actually to invite these parts of you into a dialog. Put yourself back in the situation where you started to get triggered. Notice where in your body that young/defensive energy seems to be located. Focus on that sensation as if it’s a little person. As you approach that part of you with compassion and curiosity, it can start to reveal what’s going on. Simply being self-present to these parts can help them—like young children, if they don’t experience you as present and trustworthy, nothing else can happen.

For example, in a situation like this, one client connected to parts largely created in a grade-school bullying scenario. To these parts, challenging questions from a prospect were a similar threat. Once he understood how these parts felt threatened, and the parts felt his connection to them, he was able to talk to them about what he could do to help them not be so scared. He told them it wasn’t their job to sell or negotiate…if they liked, they could even go to a safe place. The parts identified a place they loved in childhood (grandparents’ cabin), and he found that mentally checking in with the parts before a meeting and bringing them to this place gave him the ability to bring new skills to the selling situation. [The result, by the way, transformed this client’s perspective of a negotiating situation from a selfish act he didn’t have the right or enough skills to do to an authentic way to serve those he cared about—and a contract worth $500,000 above the initial offer.]

Once internal trust has been established, you can start to see parts as positively intended, but not having the best strategies to realize what they seek. Understanding parts’ positive intentions and fears as an ally opens the doors to finding a different strategy that satisfies these parts and enables you to apply the new skills you just learned.

Sometimes it helps to talk to another person, especially one trained in deepening your connection to deep intentions behind the skills you’re struggling to apply, as well as help parts relax into alignment with these intentions. You may have a friend or colleague with natural gifts along these lines. It’s also something I do with clients over the phone, by Skype, or in my office.

Good luck.

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Mark Hurwich founded Concentrated Coaching to help entrepreneurs, innovative business leaders, and writers/other creatives who’ve become “stuck:” there’s something they have skills to do, but struggle to do it. For more info, visit ConcentratedCoaching.NET, or email Mark at [email protected]

Trust and The Future of Work: A Podcast With Jacob Morgan

September 17, 2014/0 Comments/in Improving Client Relationships, Improving Employee Relationships, Leadership Skills, Trust and Culture /by Charles H. Green

Trust has been a main discussion point for most of my career. Trust in business, trust in selling, trust in relationships. Increasingly, people are discussing how trust in business and in organizations (or the lack thereof) is starting to affect how we all do business and people are starting to wonder how it will affect the future of work life.

I recently interviewed Jacob Morgan, author of “The Future of Work” (Wiley 2014), about his book in my Books We Trust blog series. In turn, he recently interviewed me for his own podcast series,on issues of trust including why modern businesses have trust issues, how technology has simplified trust with the simple click of a button, the distinction between a lack of trustworthiness and a lack of willingness to trust.

We also delve into solutions on to how to better build trust in the future’s work environment including building trust with your employees, increasing loyalty of your employees and thereby raising employee retention, utilizing collaboration platforms to increase trust and even how to gain a better understanding of millennials and job-hopping–and how it might not be a bad thing.

Take a listen here. I think this just may be my best podcast yet.

http://hwcdn.libsyn.com/p/6/e/e/6ee2fa3fa84eb99e/Charliepodcastmp3.mp3?c_id=7607942&expiration=1410704130&hwt=34c156d5106fbb20a6280bc8bca7c5f0

Accountants Not Getting Trust

September 1, 2014/7 Comments/in Trust and Culture /by Charles H. Green

I’m starting to believe that the biggest obstacle to increasing trust in business is the conceptual confusion that exists around trust itself. We literally cannot agree on what we are talking about.

The latest case in point: Public Company Accounting Oversight Board (PCAOB) Chairman James R. Doty, keynoting on the subject of Integrity at the Seventh Annual Auditing Conference:

Item 1. “[Doty said] the worst thing a firm can do is to blame a problem on an individual, rather than recognizing it occurred as a result of the way the firm was operating.”

Apparently issues of trust and integrity in business are institutional.

Item 2. “[A] student asked, ‘What drives people to act unethically in the accounting profession?’ Chair Doty responded that a similar pattern is evident in other professions, as there are some who should not have become professionals because they have to deceive. However, other people get on a slippery slope when they know they are approaching the limits of professional practice, then step over the line, and then rationalize their behavior.”

Apparently issues of trust and integrity in business are personal.

Well, Mr. Doty – which is it? Is integrity an issue of institutions, or of personal character and ethics? Does it depend on whether the business in question is an accounting firm? If so, why? And above all – what problem are we trying to solve here?

Because the solutions are very different. You can’t expect a decent solution if you can’t first decide which problem you’re trying to address.

Personal vs. Institutional Trust

The right answer, had anyone asked Mr. Doty, should have been, “Both – and here’s how they fit together.” But this rarely happens; instead, too many business speakers on trust blithely go on talking about very distinct problems as if they were one. No wonder we make so little progress.

Here is the right answer, in two principles:

Principle 1. Integrity and trust must be personal traits: Citizens United notwithstanding, human beings do not “trust” policies, regulations, or ultimately even audits. They trust – or do not trust – that people are acting in trustworthy ways. The role of regulations et al is to articulate boundaries and principles underlying that behavior.

This principle is violated by focusing solely on rules and regulations, as if the regulations were a substitute for management itself. The result is what we see in the financial industry – a morally bereft place that confuses ethics with cat-and-mouse games. The regulators (and the auditors too!) are as much at fault as the regulated, because they focus only on the behaviors – not on demonstrated lack of character.

Principle 2. Integrity and trust are greatly influenced by corporate environments. If unethical behavior is tolerated, of course it will increase. But the same is true if unethical behavior is simply treated as a cost-benefit calculation. And if ethical behavior is not modeled, people will (rightly) conclude it’s all hypocrisy.

This principle is violated by a calculus of economically matching the punishment to the crime. Industries who cynically compute violations as analyses of the cost of doing business are at fault, but even more so are regulators and legislators who set up that system. It is also violated by managers and leaders who don’t walk the talk. All corporate “values” lose their juice if not modeled; but in no case is this more important than in trust.

Solutions

A proper view of trust and integrity in business would squarely locate accountability on individuals. The penalties for violating rules should be in the range of 3X the ill-gotten gains, not 1X or less. Auditors may or may not be considered accountable for integrity and trust, but they shouldn’t think they can address these issues solely through risk assessment, monitoring and communications – not unless they address whether or not managers are clearly accountable (cf the recent GM mess), and whether or not the sanctions imposed on them for misbehavior are absolutely clear (e.g. swift termination for ethics violations, period).

Trust in business rests on trust-based organizations. Trust-based organizations are organizations in which people a) trust others, and b) are themselves trustworthy.

Organizational policies which encourage personal trusting and trustworthiness help create trust.

Organizational policies which eliminate personal responsibility and risk-taking destroy trust.

Management structures and policies which enforce accountability for trust-based behavior – including disproportionate sanctions for violations – are necessary. Management-by-policy-alone, however, is defaulting to mistrust.

Trust is both personal and institutional: but it’s critical to get the interface right. It starts with simple, clear thinking.

CARFAX, Cops, and Car Dealers: The Good, the Bad, and the Ugly

August 13, 2014/7 Comments/in Client/Customer Relationships, Trust and Culture /by Charles H. Green

It began with a trip to an Audi dealership. I liked what I saw, and was ready to buy. Then the dealer ran the CARFAX report.

I’d had a side-bump accident two years prior that popped the driver-side windows and door panels, and knew that would cost me some trade-in value.

But I wasn’t prepared for, “CARFAX says the front airbag deployed. That’ll cut your trade-in value by $3,000.”

I knew that was a mistake – I was there, and no airbags had gone off. There wasn’t even front or rear damage. But, the dealer said, “Sorry, we don’t write the reports.”

I said, “OK, I’ll go fix this – I’ll be back.” And thus began my quixotic adventure.

NJ State Police – the Bad

CARFAX was easy. Despite their apparently being phone-phobic, I quickly got in touch via email with a real person, literate, prompt, and customer focused. She confirmed the problem came straight from the NJ State Police accident report. The trooper who filled out the report had made a mistake. “If you can get the police to change the accident report, we’ll immediately alter the CARFAX report,” she said.

Fast forward: five personal visits to the Totowa NJ State Police substation, and as many calls. The police were usually polite (only one cop yelled at me), but never came out from behind the bullet-proof glass window. And their response was always the same: leave the information here and we’ll get back to you tomorrow. They never did.

I gave them insurance reports, which indicated no front end damage or airbag repair. I gave them a signed statement from the repair shop owner, who stated the original airbag was still in the car, so it could hardly have deployed two years prior.

Finally they got me in touch with the trooper himself (via phone, 3 days after having left a message). Very politely, he said, “Look, as far as I know you could be in cahoots with the repair shop. And though I don’t remember this particular incident, I pride myself on being very careful and not making mistakes. So I very much doubt I made a mistake here. And so I’m not going to change it.”

What about the flagrant physical contradiction of the original airbag still being in the car? “Sorry, how do I know I can believe what you’re telling me, and anyway I haven’t got time to check it myself. So I’m not going to change it.”

I spoke to his commanding officer. “It’s really a decision for the individual officer, I’m not going to overrule him,” he said. Never mind that business about the laws of physics.

CARFAX – the Good

At this point, I went back to CARFAX out of frustration. I described the situation, and they not only empathized, but clearly took me seriously. “If you can send along the kinds of reports you indicated, we can add a contra-note on the file.”

So that’s what I did. And that’s what happened. Underneath the “airbag deployed” checkbox on the CarFax report there is now a line saying, “Airbag deployment reported in error. Other independent documentation shows the airbag did not deploy.”

In plain English: the police blew this one and won’t admit it.

Thank you, CARFAX.

(By the way, if you’re curious, here’s what a sample CARFAX report looks like).

Car Dealer – the Ugly

Car dealers all resent the bad reputation they have – but they keep on earning it. Three things were clear to me when I walked out the door of the Audi dealership:

1. I knew I was going to get the CARFAX report changed to reflect reality
2. They doubted anyone could beat CARFAX or the cops
3. They figured they’d never hear from me.

And so they defaulted to an old rule-of-thumb in the car sales business: there are no “be-backs” (as in, “I’ll be back”). I had said I’d be back, therefore I was an obvious liar, and a no-sale, and there would therefore be no point in wasting a perfectly good 60 seconds on a phone call to me.

And so I defaulted to an old rule-of-thumb of my own: when people disbelieve me or refuse to give me the time of day, I do business with their competitor. I like my new Hyundai.

The Movie

What’s sad about the car dealership is that if the salesman had placed one simple call to me – “Hey, how’s it going with the CARFAX thing?” – it would have kept me engaged. I would have returned, and I would have bought. So by refusing to invest 60 seconds in a phone call, one salesman lost a good deal, a nice commission (I am not very price-sensitive), and a shot at a lifetime (profitable) customer.

The NJ State Police, by contrast, are downright scary. The trooper was polite, and clearly competent. But he had been allowed to elevate the importance of his “personal honor” to the point where a) he valued his ‘track record’ over the truth, and b) the organization had no recourse when he made a mistake.

“Honor” without accountability is a disastrous combination. You end up with all the para-military trappings, and none of the justice (aka customer focus) legitimizing it.

I’m an older, educated, white male. Imagine if I’d been a young, black guy. (And if you have trouble imagining, you’re not paying attention.)

On the other hand, CARFAX is a legitimate customer service hero – at least in this case.

For one thing, they show that you can deliver great customer service even via email contact – you just have to be smart, dedicated – and care about end-users.

But most importantly, they showed a commitment to truth and honesty, even if it meant going up against an important information provider. They (correctly) realize that their long-term success depends on the credibility of their information, not on sucking up to a powerful but circle-the-wagons self-absorbed police organization.

My suggestion: reward providers who do good for customers – they’re the ones working to make business work for society.

And for those who are selfish, short-term oriented, and anti-customer – call them out.

I’ll be sending links to this post to DCH Millburn Audi, and to the NJ State Police.

PostScript: As a result of sending links to the NJ State Police, I heard from an internal “Integrity Control Officer” assigned to investigate concerns brought to the force’s attention. He listened to my story, with some skepticism but with an open mind.

In addition to interviewing me, he spoke to the insurance company, and requested a photo of the car taken by the adjuster (why hadn’t I thought of that?). He was satisfied by both that there had been no airbag deployment; he therefore officially instigated a reversal of the mistaken accident report.

I thanked him for his objective work, and we emailed a bit about how to prevent such incidents happening in the future. He spoke to the trooper and his supervisor, and told me that “I think we are all on the same page now.” I choose to believe that. Case closed.

Brain Science: Reductio ad Absurdum

July 28, 2014/4 Comments/in Trust and Culture, Uncategorized /by Charles H. Green

Neuroscience is the hot new kid on the science block. And not without reason; the ability to map the brain’s inner workings offers huge medical potential.

But along the way, neuroscientists – and their fans in business and society in general – frequently commit a basic error that wouldn’t pass muster in a philosophy 101 class. It’s called the error of reductionism, and its most recent incarnation is in the pages of the NYTimes.

Why Powerful People Lack Empathy

The article cites interesting research showing that powerful people lack empathy. The question is why? The authors (associate professors of psychology at McMaster and University of Toronto) say this:

Why does power leave people seemingly coldhearted? Some, like the Princeton psychologist Susan Fiske, have suggested that powerful people don’t attend well to others around them because they don’t need them in order to access important resources; as powerful people, they already have plentiful access to those.
We suggest a different, albeit complementary, reason from cognitive neuroscience…when people experience power, their brains fundamentally change how sensitive they are to the actions of others. [emphasis added]

Note: they cite one answer to the question “why,” and then proceed to offer a different answer. Or, what they claim is a different answer.

The Error of Reductionism

Suppose I described a television series plot to you. You might ask me why a certain character acted a certain way. And I might answer in several ways, including reference to the character’s personality, or a parallel plot line, or the motivations of another character interacting with this one. All of those might be good explanations, or answers to your ‘why’ question.

But suppose I answered in terms of the changing phosphors on the television screen when you watched the episode in question. Suppose I “explained” the character’s action by enumerating the sequence of LEDs firing in the back of the TV set. (I’m sure I’m wrong on my TV technology, but you get my drift).

You wouldn’t for a moment accept that as an “explanation.” By reducing a phenomenon to some underlying set of physical phenomena (typically chemistry or physics), you succeed in an powerful act of translation – but not of explanation.

You don’t “explain” history by reciting events. You don’t “explain” a French movie by translating it into English. You don’t “explain” genetics by mapping the human genome. And you don’t “explain” why powerful people are cold by pointing to parts of the brain. Such mechanical knowledge is critical to medical intervention, to be sure – but the broader world isn’t asking a medical question, it’s asking a human one.

Reductionism in Business and Society

When the likes of the New York Times and Harvard Business Review go all gaga over our increasing ability to “understand” or “explain” complex phenomena – and are committing the reductionist fallacy – well, Houston we have a problem. And it’s deeper than just scientists being un-educated in the liberal arts.

There is a strong inclination toward the reductionist fallacy in business in general. The wish to break things down, deconstruct, compartmentalize, and quantify is deeply embedded in management theory. Delegate, establish metrics, and manage by the numbers.

This is fine when we’re dealing with supply chains. It reaches absurd levels when we try to “manage” complex human behaviors, social interactions, leadership, corporate culture and the like. The reductionist tendency closely correlates with behavioralism; in training, we see it in the focus on skills to the exclusion of beliefs and mindsets.

We’ve seen a massive failure of the reductionist tendency in the world of education. The No Child Left Behind movement is, more than anything else, about teaching to tests; the mastery of thousands of specific components, in the mistaken belief that if you map enough details, the whole will emerge from the sum of the parts.

It’s not true. Sometimes you lose the forest for the trees. Sometimes the soul is not to be found in the electron. Sometimes the explanation is not to be found by reciting the brain chemistry at play. We require something more to qualify as an answer to the question “why.”

The Sharing Economy: The End of the Summer of Love

June 22, 2014/2 Comments/in Client/Customer Relationships, Trust and Culture /by Charles H. Green

The Summer of Love – early 1967, to be precise – was a high point in 60s-era ideology, when reality seemed to match the hype. Shortly after, things began to fall apart. 1967 was also the summer of riots in Newark, Detroit and 126 other US cities. Drugs and violence popped up.

By late 1969, the Altamont Festival heralded an end to the 60s; but the seeds were sown well before.

The Sharing Economy Summer of Love

The high priestesses of the sharing economy – Lisa Gansky and Rachel Botsman – were early promoters, long on utopian idealism. They spoke about trust, and about transforming business, consumerism, and the way people related to each other. And there’s still a lot to like about that story.

It’s all based on vastly under-utilized resources. How often do you use your video camera, anyway? Your bicycle? Table saw? Your car? Your apartment? What if there were a way other people could use them, and you could get paid for that use? And, amazingly, there were apps for that. Lots and lots of apps. And so the “sharing economy” got its name.

With karma and economics moving in parallel, what could possibly go wrong?

Disintermediation by Any Other Name…

The sharing economy was originally rooted in peer to peer sharing. But we temporarily forget there are two kinds of peer-to-peer situations.

In Type A, mi camera es su camera (or gardening tool, or bicycle, etc.), all through the miracle of an app that connects us – peer to peer. Directly. No intermediary, no middleman. Works great, and we don’t mind paying the app-producer a bit, or even more than a bit, for arranging and facilitating the serendipity.

Of course, there was that pesky issue of trust. But in fairness, outfits like eBay figured that one out to a great extent – reputation, track records, public shaming. And it works pretty well.

It worked well enough that we could vacation on AirBnB at half the price – partly because the owners didn’t have to deal with irksome regulations and taxes on hotels. Ditto rides on Uber and Lyft – who needs all that regulation, and taxes, and for that matter all those lazy taxi drivers waiting in queues.

But then another Fact of Life showed up. In this day and age of Thomas Picketty’s best-selling book Capital, we have re-learned the word for an important phenomenon: it is, indeed, capital. When the peer supply of the good in question falls short of the peer demand of the good in question, capital emerges to fill the gap. These are Type B peer situations – where intermediaries, or middleman, have a role to play. In e-babble, it’s called scaling.

Type B works like this. Not everyone has a spare apartment to rent out when they’re on vacation; maybe because they hardly ever go on vacation, or maybe because their condo in central Pennsylvania doesn’t sound all that attractive in February anyway.

Not everyone has a car with a backseat you’d want to ride in, much less the time to drive around waiting for people to call their app.

The solution: The app-makers team up with capital-owners, integrate downstream into buying assets, then hire cheap labor to manage the pool. Buy a bunch of apartments; buy a bunch of cars. Hire freelance maids and drivers.

Suddenly, there are lots of people who own multiple apartments and rent them out as a business. Of course, they’re not in the hotel business, they’ll tell you, hence they shouldn’t be taxed by cities or subjected to safety or labor regulations.

What just happened? Maids just got disintermediated, and returns to capital just went up, while aggregate wages just went down.

If there aren’t already, there very shortly will be people who get the idea of hiring their neighbors to run the family car for hire in their own off hours; and maybe of buying a few more cars, for more neighbors. But don’t call it a taxi service, because those services are regulated and pay taxes.

What just happened? Taxi drivers just got distintermediated, and returns to capital just went up, while aggregate wages just went down.

With Uber sporting an implied $17B valuation, and AirBnB at $10B, don’t forget to ask yourself to whom these returns accrue. The answer is not you and your car, or you and your apartment. It’s capital.

Economic Change is Fast: Economic Justice Takes Longer

To be clear, there’s nothing immoral going on here. Nor is this anything economically unique (though it may be dysfunctional). The legal and regulatory status of these new capital intensive businesses is under review through the normal legal and regulatory channels, and will proceed quickly; see, for example, the insurance industry is taking aim at Uber and Lyft.

But let’s be clear – this is not the second coming of peace, love and understanding. While there are lots of small-scale apps and programs that link peers directly to peers, the big money, as always, will be found where capital joins labor. Where there’s room to scale, you will find capital. That’s precisely the case in Big Businesses like transportation and lodging.

And while capital owners in big scale businesses are delighted to continue the “little guy against the corporation” myth, in truth it’s nothing more than another round of disintermediation. It’s important to note that while you may save a bit on a vacation room or a trip to the airport, there are also jobs at stake – jobs staffed by real people whose unions and representatives took decades to hammer out economic agreements with employers.

At the risk of grossly over-simplifying Picketty’s core dictum: absent world wars and a booming economy, capital grows faster than wages. This is a prime case in point. What looks like technological progress driving social integration with the lights dimmed down, looks a whole lot more like traditional disintermediation in the harsh light of day.

We do ourselves and society an injustice if we let new economy happy-talk blind us to the social effects of the same-old same-old economic shifts.

A Successful 7th Generation Family Company

June 20, 2014/0 Comments/in Improving Employee Relationships, Trust and Culture /by Charles H. Green

This is a guest post from old friend Jim Monk. Jim is a Texan by way of MIT who now grows coffee in Hawaii. H also writes great travelogues. He sent me this, about a tour of the Crane Paper Company. I just had to share it.

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Once in a while you get a chance to see something different. Yesterday was one of those. I am on a week long tour of New England – the home of the American Industrial Revolution.

We started out in Lowell, Massachusetts, where the American textile industry took a major leap forward. There we looked at the canal system that powered up to 175 mills at one time and where employment was up over 80,000 at its peak in the late 1800’s. From there we have visited an iron works, a shipyard, a museum dedicated to precision machine tools that enabled companies to manufacture products with interchangeable parts and, yesterday afternoon, a special paper company.

You may have used some Crane Paper company products when you have written nice notes to someone – Crane paper has been synonymous with quality and upscale for a long time. But the reality is you probably use a Crane Paper product every day, without even thinking about it.

Crane Paper

Since 1871, the Crane Paper Company has been the sole supplier of the paper for the US currency. However, “paper” is not quite correct. What the company supplies to the government doesn’t contain an ounce of tree in it – it is all cotton and linen, with nowadays a slight admixture of very special fibers made by the government in a special laboratory and handed to Crane to be poured into the batches of material that will be made into greenbacks.

Greenbacks first got their name in the early 1800’s when the federal government finally started producing bills to replace the banknotes then in circulation. “Banknotes” had been made by individual banks in various cities and states – hence the term banknote.

What we use now are no longer “banknotes”, even though we call them that. The federal government made its first notes with the backside of them all in green ink – at that time green was difficult to photograph well and was hard to obtain, so the government felt the green would help to keep the bills from being counterfeited.

Today, thanks to North Korea, our bills are a whole lot more sophisticated. It seems North Korea has been working on producing counterfeit $100 bills for some time to disrupt the American currency situation. An observant teller at a federal reserve bank noticed one bill that had a different feel than the others – and that was the first time the government knew about the new counterfeit bills. Eventually they traced them to North Korea, who then seems to have moved operations to Canada, where the percentage of counterfeit bills in circulation is far higher than in the US.

But American bills now have a nanotechnology woven into them as the latest round against counterfeiting – a whole concept that Crane developed. Our speaker said they have some 40 patents on the technology but they have withheld lots of information on how the technology is used – “tradecraft” — so no one else has been able to duplicate the new measures yet.

A special tape runs down the bills and has the interesting property that when you tilt the bill back and forth, you will see the image in the tape section move from side to side. Rotate the bill side to side, and the image will move up and down! And the image changes from a liberty bell to a “100” if the bill is a hundred dollar bill or the number of any other denomination it might happen to be. This is done with a whole series of 2 micron wide lenses that are looking at images down below them. The image you see is formed from hundreds of the lenses collecting bits of the images below them and compositing them towards your eyes.

The Present Mr. Crane

Now all of this was interesting, but for me the most interesting part of the presentation was the presenter, Doug Crane. He’s in his early 50’s, judging from appearances, has children in high school and college and has already retired. He came in to talk to us because he, too, went to MIT and just felt like talking to a bunch of MIT folks.

He said he is the seventh generation of his family to be involved (!) with the Crane Paper Company. It is a privately held company – his family are the sole owners of the only company that has made our currency paper for over 140 years.

Towards the end of his talk his cell phone started ringing where it had been placed next to the computer that was controlling his presentation images. He looked at it, looked sheepish and said, “Sorry, I have to take this one.” We heard him arrange that the person would come to the place where we were to pick him up.

When he hung up, he said that was his Dad, who was coming to take him out to dinner because it was his birthday that day.

Now just how many seventh generation, successful company owners do you know? Especially who seem quite modest, clearly knowledgeable about their business, plainly dressed and being picked up by their father that evening after coming in to give a talk to some strangers on their birthday?

When he left, he slung a back pack over his shoulder on his way out. If America had more companies run by folks like that, we would be doing very well.

My tour is a success. I hope your day is as well, Jim.

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It is now, Jim, many thanks.

Grow Trust with Delegation and Boundaries

May 21, 2014/2 Comments/in Leadership Skills, Trust and Culture, Trust Principles /by Jurgen Appelo

Taking Care of The Horses

We often think of ‘management’ as black and white. It’s not. I’m delighted to welcome Jurgen Appelo, one of Europe’s finest management writers, to Trust Matters, to finely articulate some shades of gray. Check out Jurgen’s new book, Management 3.0 Workout, as well.”

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I once tried to figure out what the difference is between the words responsible and accountable. I honestly didn’t know. The words are often used interchangeably. And in Dutch, German, Swedish, Finnish, and other European languages, they even translate to the same word! This makes the use of the two words confusing for readers and annoying for translators. The Wikipedia entry on Delegation tries to clarify it like this:

“Delegation (or passing down) is the assignment of authority and responsibility to another person (normally from a manager to a subordinate) to carry out specific activities (…) However the person who delegated the work remains accountable for the outcome of the delegated work.”

Wikipedia, “Delegation”

In my own words:

You are responsible for your own agreement to be held accountable by someone else.

Beware the accountability trap

It is crucial that you understand that this works in both directions. In any value exchange between two people, each is responsible for his own actions, and for agreeing that he can be held accountable by the other. Sadly, this is often misunderstood. In management 1.0 and management 2.0 organizations, “superiors” seek fulfillment of their own goals over the fulfillment of others, and they hold their “subordinates” accountable without acknowledging that they themselves should be held accountable for the well-being of the workers. Some call it the accountability trap. [Mayer, “The Accountability Trap”] This one-sided view of accountability leads down the path to compliance, compulsion, and complicacy and probably some complaints. You can escape this trap by not only ignoring the difference between the words (as we do in some European languages), but also by acknowledging that empowerment is a reflexive relationship between two equal partners.

Defining Boundaries

The word “management” is derived from the Italian word “manneggiare,” which means “taking care of horses.” I often compare teams and organizations—not people!—with horses, and I believe in mutually respectful relationships between horses and their caretakers. The caretaking of horses includes giving direction and setting boundaries. Quite often, when managers delegate work to teams, they don’t give them clear boundaries of authority [Vozza, “How to Set Healthy Boundaries in Your Workplace”]. By trial and error, teams need to find out what they can and cannot do usually incurring some emotional damage along the way. This was described by Donald Reinertsen as the “discovery of invisible electric fences,” [Reinertsen, Managing the Design Factory pag:107]. Repeatedly running into an electric fence is not only a waste of time and resources but it also kills motivation. And it ruins the coat of the horse. With no idea of what the invisible boundaries are around it, the horse will prefer to stand still or kick another in the head.

Reinertsen suggests creating a list of key decision areas to address the problem of not setting boundaries. The list can include things like working hours, key technologies, product design, and team membership. A manager should make it perfectly clear what the team’s authority level is for each key decision area in this list. When the horse can actually see the fence, there will be less fear and pain. And the farther away the fence, the more the horse will enjoy its territory.

It also works the other way around because of the reflexive relationship of responsibility and accountability. A team usually delegates work to management, such as rewards and remuneration, business partnerships, market strategy, and parking space. The horse is not required to simply accept any kind of boundaries, constraints, and abuse. Nature gave the horse strong teeth and hind legs for this very reason.

Balancing Authority

There’s nothing that scares an inexperienced rider more than the loss of control over the horse. Indeed, a well-managed horse will heed the instructions of its rider, while at the same time the rider will understand the needs and desires of the horse. When we consider a manager and a team, is there an equivalent of the bridle and the reins? Delegation is not a binary thing; there are shades of grey between a dictator and an anarchist. Managers can hand over responsibilities to teams in a controlled and gradual way. The art of management is in finding the right balance. You want to delegate as much as possible in order to decrease bureaucracy and increase power. But if you go too far, self-organization might lead to an undesirable and costly outcome, maybe even chaos. How much you can delegate depends on the maturity of the team, the status of its work, and the impact of decisions on the organization.

Delegation is context-dependent and reflexive. Teams are responsible for their agreement to be held accountable by their managers, and vice versa. Trust between the horse and the rider should always work both ways.

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