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The Trust Reader Volume 3

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This post went out the day before Thanksgiving in the US.  Which means a fair number of TrustMatters readers may have had a few other things on their mind.   So with apologies for the repetition; here it is again.

Greetings, and welcome to Edition 3 of the TrustReader. The TrustReader series announces the publication of new articles on the Trusted Advisor website.

Get the Trust Reader volume 3 here

In this edition of the TrustReader there is a common theme: the idea of applying principles to business. One applies principles-based thinking to tactics–the issue of pricing. The lead article applies principles-based thinking at a functional level–in this case, Sales. And the final article, which originally appeared in BusinessWeek.com, is about principles at the core of the way business is conducted. Please enjoy reading:

I welcome your comments, and hope your holiday season is enjoyable.

HBS’s Bill Sahlman on the Financial Crisis: Why it Happened, How to Fix It

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Few people are more qualified to explain what went wrong in the financial industry than Harvard Business School’s Bill Sahlman.  His resume covers just about every aspect of the industry.

In an HBS Working Knowledge paper titled Management and the Financial Crisis (We Have Met the Enemy and He is Us …)  he gives us a very special view of what happened—broad and deep, and holistic to boot. He also gives us an idea of what should be done.

He gets an A+ for the explanation; for the recommendation, maybe not so much.

My summary cannot do his paper justice; but to whet your appetite, I’ll touch a few bases.

Managerial Incompetence Was the Driving Factor

Black swan theory fans notwithstanding, Sahlman argues this meltdown was not unique except in scope and scale. What we had was a massive failure of five largely managerial systems: Incentives, Control and Information Technology, Accounting, Human Capital, and Culture.

Sahlman also flatly says “Greed played a role but the bigger problem was incompetence.” What he means by competence largely comes down to managers. I find this hugely commonsensical, and rare at the same time. In other words, I think he’s very right.

He is inclined also to give a bye to some of the usual suspects: accounting firms, boards of directors, and regulators, to some extent. His reasoning is hard to argue with: the complexity of the products engaged in ran far beyond the relatively meager abilities of those in the aforementioned roles.

Sahlman singles out Goldman Sachs and JPMorgan Chase’s Dimon as examples of good managers who clearly avoided most of the damage caused by their inept competitors.
His diagnosis, refreshingly, puts the blame squarely at the feet of business itself—particularly management. A management that runs the company through over-leveraging and over-optimism is a management team that is grossly incompetent. Even they wouldn’t have generally wanted the results they ended up with.

What I also like about Sahlman’s view is that it treats impersonal tools like incentives not as exogenous dehumanizing variables, but as things completely within the realm of management—and he makes management squarely responsible for their use. As far as I’m concerned, this is the best of HBS talking; the old-school HBS that assumes managers have a responsibility to run organizations holistically, for the long run, and in the interest of stakeholders–not slavishly to a few slanted metrics.

The Solution–an Overseer?

After such a great analysis, I’m left a little cold with Sahlman’s solution. It is to have a sort of outside observer—not a government interveener, since Sahlman is not sanguine about government intervention, but a new kind of monitor. This monitor would have a scope to cover the five broad areas Sahlman outlined at the outset.

The problem is not with having a holistic view; I’m all for it. And while Sahlman is rather vague about the statutory authority of the “monitor,” I figure that could be figured out.

My concern is that, in the end, Sahlman sounds like the consummate insider; his specific knowledge of the situation runs the risk of blinding him to the system’s flaws.
In this case, the one flaw that worries me is the belief that one more systemic overview will finally get it right. It’s the idea that our problem is the lack of a comprehensive enough model; that if we just had a little more data and a better model, we could finally model the world.

Here I have to agree with Taleb’s Black Swan theory: the problem with models is that they never model what hasn’t been envisioned. And while you won’t get a better dose of commonsense in business than what Sahlman serves up, I’m still sceptical about this part.

A Different Idea: Management by Values

So do I have a better idea? Well, I do have another idea. And it lies in the one area Sahlman puts least emphasis on—culture. While Sahlman talks about ethical cultures, he seems generally to mean a focus on long-term risk management and an aversion to illegality. Necessary, but not sufficient, for a good culture.

Those traits are jacks for openers. We need to be cultivating belief systems, not just management control systems.  We need mental models that talk about relationships, that actually live out the idea of long-term relationships instead of relegating them to the thin air of risk management managers.

We need baked-in beliefs about the role of business in society, that get promulgated not by monitors and smart managers, but by high school teachers and b-school profs, by bloggers and journalists and marketing managers and bankers alike, and in the most mundane areas of business. That’s a culture: a set of beliefs that people unconsciously share about ‘big’ things like fairness, relationships and the value of one’s word.

One of the best insights I ever got from HBS could easily have been articulated by Sahlman himself, I suspect: as things get more complicated, you’re better off managing by values than by policies.
 

The Trust Reader Volume 3

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The Trust Reader Volume 3

Greetings, and welcome to Edition 3 of the TrustReader. The TrustReader series announces the publication of new articles on the Trusted Advisor website.

Get the Trust Reader volume 3 here

In this edition of the TrustReader there is a common theme: the idea of applying principles to business. One applies principles-based thinking to tactics–the issue of pricing. The lead article applies principles-based thinking at a functional level–in this case, Sales. And the final article, which originally appeared in BusinessWeek.com, is about principles at the core of the way business is conducted. Please enjoy reading:

I welcome your comments, and hope your holiday season is enjoyable.

The Trust Reader Volume 3

/0 Comments/in /by

Greetings, and welcome to Edition 3 of the TrustReader. The TrustReader series announces the publication of new articles on the Trusted Advisor website.

Get the Trust Reader volume 3 here

In this edition of the TrustReader there is a common theme: the idea of applying principles to business. One applies principles-based thinking to tactics–the issue of pricing. The lead article applies principles-based thinking at a functional level–in this case, Sales. And the final article, which originally appeared in BusinessWeek.com, is about principles at the core of the way business is conducted. Please enjoy reading:

I welcome your comments, and hope your holiday season is enjoyable.

Bettelheim, Suicide and Online Social Media

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iStock_000008859658Small.jpgDepending on who you talk to, TwitBook, LinkFace and their ilk are responsible either for:

a. the death of attention, intimacy and civility; or
b. the coming of the Age of Collaboration.

We have seen this movie before, and it’s interesting to re-read the reviews from the past.

Does Living in a Highly Interactive Society Make You Neurotic?

In 1969, psychologist Bruno Bettelheim,  in Children of the Dream, wrote about children of the Israeli kibbutzim.  As Wikipedia summarizes it:

[Bettelheim] concluded that a kibbutz upbringing led to individuals’ having greater difficulty in making strong emotional commitments thereafter, such as falling in love or forming a lasting friendship. On the other hand, they appear to find it easier to have a large number of less-involved friendships, and a more active social life.

Makes sense in a simple kind of way. More interactions makes you good at shallow relationships, worse at deep ones. Presenting psychological problems are largely neurotic. A society that mistakes familiarity for intimacy.

Does Living in Highly Isolated Society Make You Psychotic?

About the time I read Bettelheim, I also read Michael Lesy’s Wisconsin Death Trip,  a disturbing book that combines 19th century photographs taken in Black River Falls, Wisconsin between 1890 and 1910, with archival frontier newspaper articles from the same era. 

The result: old glass negative plates of a 6-year old in a tiny coffin, juxtaposed with news articles like:

"Mrs. Carter… was taken sick at the marsh last week and fell down, sustaining internal injuries which have dethroned her reason. She has been removed to her home here and a few nights since arose from her bed and ran through the woods… A night or two after she was found trying to strangle herself with a towel… It is hoped the trouble is only temporary and that she may soon recover her mind." And

"The 60 year old wife of a farmer in Jackson, Washington County, killed herself by cutting her throat with a sheep shears."

Lesy himself, according to a former student quoted in the Amazon book review, stated that in assembling the book, he was observing “an American holocaust.”

Makes sense in a simple kind of way. Fewer interactions may make you powerfully vested in a few relationships, but unable to interact easily on a casual level. Presenting psychological problems are largely psychotic. A society that mistakes intimacy for ease.

Must We Choose Between Social Media and Intimacy?

Is this a trade-off?  If you’re a kibbutznik or you tweet, does that mean you’re bad marriage material (what about to other twitterers?).   And if you’re capable of deep emotions living alone with a few people in closed quarters in the long frontier wintertime, does that mean you’re hopeless when it comes to simple social skills like having conversation?

I hear the arguments pro and con. I wish we could reframe the problem away from a zero-sum, either-or trade-off problem, to one that dares to be great: how can we harness both?

How can we get really good at getting along—and not only not lose the capacity for deep connection and intimacy, but make it grow stronger right alongside?

I will note this: Bettelheim predicted the kibbutzniks would be massively unsuccessful; but as the data showed, Bettelheim was massively wrong. They were exceptionally successful. 

Methinks there is hope for us.
 

The MBA Oath: Interview with Peter Escher, Executive Director

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Springtime of the second year in an MBA program is when students turn reflective.   For the class of 2009, it was also a year in which the job market for MBAs looked daunting, to say the least. With the economy in the pits and the degree in some disrepute, several members of the Harvard Business School class of 2009, encouraged by faculty members Rakesh Kurana and Nitin Nohria, developed an earlier version of an “MBA Oath,” and began to publicize it.

In late May 2009, when the New York Times caught wind of and wrote about it, roughly 20% of the class of 2009 of Harvard Business School had signed the MBA Oath. On June 8th, when I wrote about it, the numbers had jumped significantly.
By June 11, when BusinessWeek wrote about it, over half the class had signed. Today, in November, 65% of the HBS graduating class has signed.

Perhaps more importantly, the Oath has become something of a movement. It has a permanent home, at http://mbaoath.org/ . It is a 501(c)3 organization, and has an Executive Director, Peter Escher (signer number 5 of 1704, as of today). It has spread well beyond Harvard Business School, and in fact the mission is to develop chapters globally.

I sat down (virtually) with Peter Escher to chat. Excerpts follow:
CHG: What’s the essence of the MBA Oath?

PE: It’s an embodiment of our belief that things have changed over the past few decades, and that business has responsibilities to do things right, and obligations to society. Mechanically, it’s a preamble about the role of business, and eight specific tenets. A key part of the statement is “my purpose is to serve the greater good.” A sample tenet is “I will act with utmost integrity and pursue my work in an ethical manner.”

CHG: It has really taken off; were you surprised?
PE: Candidly, yes. It turned out we were part of a very big wave. It’s humbling, as well as exciting.
CHG: What drove you to do it?

PE: The spring was a time of reflection—the role of an MBA was very much on our mind, what with Harvard MBAs in leadership positions at so many Wall Street institutions, and the indictment of business leadership in general. Rakesh and Nitin pointed us to some early versions of the Oath that had been developed, along with the World Economic Forum. We took it from there, aiming just to get 100 signers. Of course it went well beyond that.

CHG: On the face of it, the Oath sounds unobjectionable. But you have gotten objections, yes?
PE: Oh yes. The top ones are:
1.    I don’t need an oath to be ethical; in fact, this implies I’m not.
2.    I won’t sign because there’s no enforcement mechanism.
3.    It’s all just Harvard spin.
CHG: And how do you answer those?

PE: To the oath/ethics connection, we note that law and medicine have very similar oaths. We are trying to get business to emulate those models.

To the enforcement issue, the oath won’t prevent bad actors from acting badly; but it can give aid and comfort to those who want to do the right thing by saying it publicly, along with others.

To the Harvard spin, we want to make this very much not about Harvard, but about business and MBAs in general. As to spin in general, well that’s a sad indicator of how big a hole we’ve dug ourselves as MBAs and businesspeople.

CHG: What activities are you undertaking to move forward?

PE: We have oath signers from over 250 MBA school programs at this point, and have active participation (attend our conference calls and the like) from over 25 campuses. We’d like this active participation to grow to even more schools. We want to expand our Board membership to other schools.

We held a Fall Summit, with representatives from 9 business schools, and from the Aspen Institute and the United Nations Global Compact.

CHG: What are your ambitions?

PE: We’d like to get 10,000 MBA signers by next year at this time. Since the top-55 US-based MBA programs (according to US News & World) generate roughly 12,000 graduates annually, it implies that we need to focus on US and non-US programs, and alumni as well.

CHG: How do you wish the MBA Oath will be used?

PE: As a touchstone, a guideline for discussion, and a tool for education.  It is a way for like-minded people to identify each other. We’re not out to codify rules or procedures for every situation. We want to productively guide discussions, and to enable signers to have guidelines in mind before they go into challenging situations.

CHG: Trust seems clearly implied in some of the Oath; is that how you see it?

PE: One thing we’re aware of is that transaction costs in the economy are increasing massively. Trust is the scale answer to cutting down on transaction costs. If you didn’t have trust, business wouldn’t happen at all. And if we had more trust, it’d work a lot better.

CHG: You’ve got the bully pulpit; anything more you want to say?
PE: Just read what we’re about; agree or not, please have a point of view. Our website is www.mbaoath.org
CHG: Peter, thanks very much for your time, and best wishes to you and MBAOath.

Is Your Marketing Poisoning the Well?

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I met Joan at a group dinner the other night. When she found out what I did, she said:

The other day I got a call from the local Ford dealership—I had bought my car from them several years ago. They wanted to know if I’d be willing to refer several of my friends to them.

“Refer my friends!” I said. “You’ve got to be kidding! Your dealership behaved very badly towards me twice in the last six months—unethically, even—and despite my complaining about it, I have yet to hear anyone there apologize, or even take responsibility for it.

“In fact, I’ve already told a number of my friends to never do business with you. And you call me and ask me to refer business? Do you know what ‘fat chance’ means?”

Ouch, Mr. Ford Dealer.

In the “olden” days, it was lore that a good customer service story might be retold a dozen times, while a bad customer service story would be told a hundred times or more.

Nowadays: make that a hundred thousand times—or more. And within days. The now-classic example: the United Airlines broken guitar video , which garnered 3 million views in seven days. (It’s a pretty catchy song, if you haven’t heard it).

Reputation Marketing 2.0

Industry after industry has historically made an implicit assumption in their marketing: that the supply of new customers is endless, and endlessly renewable. Don Peppers and Martha Rogers took a head-on shot at this fallacy in their under-appreciated 2005 book "Return on Customer," stating that customers are, in fact, the scarcest resource.

In other words, the very common slash and burn marketing tactics that most companies use to churn through leads—massive emailing, lead culling, indifferent customer service reps—are now poisoning the well.

They were right in 2005, and they’re about 100 times more right in 2009.

How many of the 3,000,000 YouTube views made in one week were of people who were potential customers of United? Existing customers of United? Employees of United? It’s a hard number to calculate, but let’s agree on three things:

  • it’s big
  • it’s bigger than it used to be
  • it’s very not good for United.

Is Your Marketing Poisoning Your Well?

Back to Joan and her local Ford dealer. Can you imagine the impact on that dealerships’ local market if Joan had access to local media? Well guess what, she does. And since all media is local in this age of Craigslist and YouTube, Ford itself could and should be concerned about such things.

The biggest impact of all this bad-news-traveling-faster world is that Darwinian selection can act a lot faster. Businesses using anti-customer tactics are subject to being outed on a massive, nearly real-time basis. Customers can make up their own minds, and increasingly trust surveys show that we trust others like us more than we do nearly all other institutions.

Which means users of classic anti-consumer bad marketing tactics are now more likely to have the gun pointed right back at them.

I’m going to give the Ford dealership a break and not name them by name. But rest assured I’ll send them a link to this blog. They dodged a bullet this time; but bullet-dodging is not a good strategy going forward.

How Presenters Can Deal With A.D.D. Audiences

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Two things happened to me at the end of last week that gave me pause.

On day one, I gave a corporate seminar for about 40 people. On the following day, I was an attendee in a 200-person conference. (It feels great to occasionally be in the stadium seats, instead of down there with the lions).

In the first case, there was a very mild form of the seminar-business occupational hazard known as multi-tasking: desktops open, blackberries, Twitter, Facebook, email. It’s been getting worse for several years. I made my usual clever plea for paying attention, and got reasonably good compliance; though it did deteriorate during the day.

I find that doing workshops lately is a little tougher in some respects; it’s harder to get the audience to interact. They’re not leaving, they’re just slightly checked-out. It’s not just ADD—it’s ADOSO, as in “Attention Deficit—Oh! Shiny Object!” (Thanks @scobleizer)

In an attempt to control that behavior, I’m acutely aware that I’m stumbling these days in the no-man’s land between requesting, ordering, and pleading. When I’m doing keynotes, it’s fine; it’s the workshop scene that feels different.

On day two, I came in deliciously a minute late and sat down where I felt like—not my gig, time to relax and enjoy. It was a social media conference; they had a very large screen for slides, and next to it, a smaller one displaying ongoing real-time twitter notes (check it out at #bdi). Each presenter had about 20-25 minutes, including Q&A.

Pretty much everyone in the audience had their heads down looking at their newest super-lightweight portables, iPhones and Droids. When they looked up, it was often as not to look at the public tweet-screen. (Yes,I tweezed out a few tweets myself).

At first I cringed instinctively out of sympathy for the speakers. Until I noticed that they did not seem noticeably bothered by it at all. In fact, lots of speakers today are using Twitter as part of the real-time interaction. The line for open mics for Q&A was not empty, the questions were great, and the real-time twitter dialogue was on point.

The conference subject matter itself—like a Greek chorus—gave the meta-text of what I was seeing. Social CRM goes beyond seller-to-buyer dialogue to include buyer-to-buyer. The old line about one satisfied customer tells four but one dissatisfied customer tells 12—that’s history. They now tell 500,000, and do so instantly. The web is your new website. Inbound not outbound marketing.

In other words—the heads-down twittering was definitely multi-tasking, but that doesn’t mean there was no dialogue going on. In fact, there was a ton of dialogue.

More content per minute flowed through that room than if everyone had hung on every word a speaker said. One speaker is limited by the human ability to enunciate sounds rapidly, and—it’s only one speaker. We can all read much faster than someone can talk. Asynchronous one-off communication is bound to be less rich than everyone talking at once; it’s just that it’s harder to focus in the latter case.

There are 2 things you can say about all this. First, it’s not wrong, just different. There are deep intensive interactions with other human beings, and there are shallow, broad interactions with other human beings. We’re seeing a shift from the former to the latter–in terms of gross numbers at least.

There’s no right or wrong about this. What is important is the ability to go in either direction as the situation demands. And, there is a huge benefit. The involvement of others is exactly how you get collaboration. We are, at a large level, sacrificing some intimacy for the sake of collaboration.

It’s also true that, in a world where intimacy holds a smaller “share of relationship,” the ability to gain that intimacy will command a premium. It’s not gone, just more rare, and more valuable for its rarity.

The second point is simply, this is the future. Disapproval of the downside of social-babble has very little impact on whether it’s going to keep on happening. Our failure to approve of the downside simply keeps us from gaining the benefits of the inevitable upside.

Presenters, get used to it. The only relevant question is: how will you respond?

For starters, don’t stand there in front of the tsunami. But don’t just get out of the way, either. Grab your surfboard.

And Better Off for Living on the Edge of Life

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P. has multiple myeloma, a particularly virulent and incurable form of cancer. Median survival is 50-55 months.

This is from a letter she sent yesterday to family and friends:

Yup. I am on the train, heading west. Not Kansas City, but Winona, MN via Amtrak. From there, a limo ride will take me to Rochester, Minnesota & the famed Mayo Clinic.

Today has been full of ‘deja vu’ experiences; it was almost exactly 15 years ago (October, 1994) that Husband 1 & I drove from [hometown] to Mayo Clinic, still reeling from the news of a dreadful diagnosis. I was suffering from a sinus infection in addition to a deep sense of despair. The multiple myeloma had invaded 90% of my bone marrow and I was severely anemic. Oooooh, what a difficult time it was — so many of you remember, especially daughter 1 and daughter 2.

Fast forward to today! Husband 1 is accompanying me again, since Husband 2 has very limited time off from his job. I am feeling good, my body having had 2 months without the effects of chemotherapy.

Life at home has finally settled into a wonderful rhythm. I breezed through thirteen days of radiation treatments focused on a lime-sized growth on my ribs. These lasted less than 5 minutes & the only side effect was perhaps some fatigue. Most days, I car-pooled with the husband of a dear friend who was also receiving radiation. So the process was quite enjoyable (and was moderately effective, though there is still a growth, the size of a fried egg — sunny side up).

The issue of what to do next was still unresolved. My decision to turn down the clinical trial at State U. was a clear one. However, it brought recognition that I was facing the beginning of the end (Aren’t we all? Every day?)

This decision – to focus on quality rather than quantity, was filled with both sadness & a sense of freedom. Along with making sure that all my affairs were in order (they aren’t – yet), I relished spending time in our woods, either sitting under a favorite tree & listening to the birds heading south, or cutting, hauling, splitting, & stacking wood for our fireplace/stove. We are planning a trip to California over Thanksgiving. I am holding onto the possibility of traveling to both Europe to visit Daughter 2, and a trip to Hawaii with Daughter 1. Have you seen the movie “The Bucket List”? There I was.

Then came a series of events, both big & small, that absolutely FILLED me with energy, enthusiasm, hope, and a sense of direction. To make this story short, I ran across a clinical trial going on at Mayo Clinic that looks very hopeful, requires minimal change in my daily routine, and I believe (fingers crossed) will accept me. This all occurred in about one week, everything falling into place.

Over the past FIFTEEN years, I have come to points such as this, where the end appeared near. And each time, something has shifted. I am here; filled to overflowing with gratitude, surrounded by love, a bit worse for the wear, but thoroughly enjoying the ride.

And better off for living on the edge of life.

Why It’s So Hard To Collaborate

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Many words are written in an attempt to describe the next new thing. These days that list includes: trust, authenticity, collaboration, holistic, personal, sustainability, engagement, and relationship capitalism.

You could make a case that the ‘most likely to succeed’ is collaboration.

Why Collaboration Seems An Obvious Winner

For one thing, the economic benefits of collaboration seem somewhat obvious. Philip Evans of BCG has written about the massive cost advantage accruing to Toyota vs. the US auto producers due to their ability to collaborate with their suppliers. Steven M.R. Covey Jr. has written about the stark cost and speed savings available to those who seek it. I’ve written about it at some length too and in fact collaboration is one of the Four Trust Principles in my own work.

Furthermore, it’s not hard to understand what collaboration looks like. It means cooperating, not fighting. Our mothers taught us that regarding our siblings, and our teachers taught us about playing nicely together in the playground. There’s a sense that ‘we know how to do this.’

So—Why Don’t We Collaborate?

We know why to do it. We know how to do it (or at least we think we do). So why don’t we do it? I learned an axiom about ten years ago from Phil McGee: if you see negativity happening, the odds are good that you’ll find fear at the heart of it. Personal fear.

At this level, I can’t presume to speak for others, so I’ll have to just put out there why I fail to collaborate. And I do fail—constantly. The more calm I get, the more I am capable of noticing just how anti-instinctive it is for me to collaborate.

Let’s say someone calls me to say, “Hi, I see you wrote something about collaboration; maybe we could collaborate on writing more about that, get to know each other, maybe work together in some way?”

My first instant reaction—if I’m honest—is negative. This person is trying to steal my thunder, trying to get something from me. I careen back and forth between dismissing the person and fearing they’ll overpower me. Are they worthy of my time? Worse yet—am I worthy of theirs?

I know the benefits: I’ll learn and grow, and have more chances for good things to happen by behaving collaboratively than not.

And I know how to do it: just say, “Hey that could be really interesting, let’s talk,” and then do so, from a place of curiosity.

And yet—those first instincts rise in me.

I’ve gotten much better at it. I almost always notice those instincts now, right away. Not that long ago, I just lived in them.

Sometimes I get over it and say/do the right thing within 30-60 seconds. Other times it may take up to a day of thinking on it before I end up doing the right thing.

Yet there are still those times I have managed to put things off indefinitely. Or others where the opportunity is now long-gone, and exists only on my should’ve guilt list.

The Logic of Avoiding Collaboration

I don’t really think it’s just me. In the face of astonishingly obvious economic benefits, and a fairly obvious set of “how-to’s,” I think the main reason we don’t collaborate is simple. Simple fear.

There are two simple approaches to lowering fear. One is to mitigate risk. The other is to stop being so fearful. The first one is getting most of the press; we need more of the second.