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Enhancing Organizational Performance

Archive for November 13th, 2009

Heart of Hearts

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There is an old story that describes a very special clock. This clock does not work like most clocks, keeping track of the passage of time. Rather this clock, though it looks like a regular clock, keeps track of the time until a certain event is supposed to happen. It counts down the days, hours and minutes until that moment is to occur. What strikes me about this is not that you can create a clock that is a count down timer rather than a tracker of the passage of time, but that a single aspect of reality can be thought of in distinctly two fashions. One is to keep track of the passage of time and the other is to keep track of time until an event is to occur, one aspect of reality, time and 2 distinct points of view about how to measure it. The clocks can look identical, both are measuring time, yet they operate in distinctly differing fashions.

As I spend more and more time with various organizations I am struck by another duality of what I view as another single aspect of reality. And that reality is how employees are viewed. In order to make the point I will put it into stark terms using extreme descriptions while realizing that most organizations do not fall at one extreme or the other.

At one extreme there are management teams of organizations that truly believe that their success is because of their employees and at the other extreme you have management teams that view employees as costs to be controlled, two extreme points on one scale. And to me there is a very interesting part to this concept. On the surface it can be extremely difficult to tell the difference between these two groups. Much of what they do looks similar. Among the one group’s goals will be to retain the valuable assets called employees and among the other group’s goals will be to make sure everyone is replaceable, that the cogs in the wheel are easily replaced should one fall off. 

Both groups will have impressive plaques on the wall describing their mission, vision and values. Both groups will say things like “employees are our most important asset”. Both could have certain employee benefit programs in place. And both could be very respectful of employees treating them well and providing opportunity for all to succeed – in good times. The difference while there all along becomes much more obvious when there is an economic downturn or when the organization feels some kind of stress.

In the organizations that view employees as the true reason for their success, an overriding theme seems to permeate. What can we do to help make our employees more capable of success? How can we knock down the barriers that get in their way, those things that prevent them from performing? How can we enable them more? How do we maintain the motivation that they brought with them when they first came to this job?

It has been documented over and over that the most positive employees in most organizations are the ones you just hired and it takes the average organization about 3 years to beat that “positiveness” out of them. What happens to these employees that their degree of positiveness flags? The data suggest that they begin dealing more and more with the organization’s bureaucracy. They are not given the same amount of attention as when they first joined up. Their jobs did not deliver on the salary expectations they may have thought were there. They were not given recognition for their performance over time. They did not advance as quickly as they thought and in fact they seem to feel that their talents are not being recognized. Realistic job previews help in this area but they are only part of the answer and this pattern of decline is not necessarily seen in all organizations, but is seen in a relatively large number of them.

Some management teams upon hearing this will think to themselves, “well then turnover is not so bad, after all as we hire new people we will get people with more positive attitudes and hey, if they stick around for 3 years or so, great we can just hire more replacements at that time.” People after all are just costs to be controlled.

Other management teams will view the turnover as a loss of organizational memory and with that goes capability and long-standing relationships with others that can characterize successful organizations. While some of this comes from a Wall Street and its resultant short term orientation, with managers of today feeling intense pressure to make their profit numbers, I think another component of this comes from the heart. I think some managers in their heart-of-hearts believe that the path to organizational success is through their employees and others believe that employees are simply part of the problem, preventing organizations from being as profitable as they could be. I think is shows up in hundreds of subtle ways and some not so subtle ways in the day-to-day actions of the organization.

In some recent conversations I have had with senior managers of various types on this idea, I get general agreement, but I also get a good deal of discomfort. It seems that some organizational managers don’t necessarily want to operate in this fashion but feel that because everyone else is, in order to remain competitive they have to as well.  What may cause this to show up more starkly once again is that we are now in a period of economic uncertainty, with many betting that we are already in a recession and speculating on how long it will last. Some organizations will immediately go to layoffs, cutting off those expenses called employees, while others will try to figure out how to better utilize those assets called employees to help weather the storm.

Wayne Cascio a professor of management and international business at the University of Colorado in Denver and an Industrial Organizational Psychologist has conducted a series of studies and has published a book on alternatives to layoffs in down cycles, and has found that those companies that follow these practices of retaining valuable employees, treating them as assets, in the long-term outperform those that quickly resort to layoffs. He finds that those companies that “view their workers as assets to be developed rather than costs to be cut” will be more likely to succeed and “In general, we found that it was just not possible for firms to ‘save’ or ‘shrink’ their way to prosperity.”

But in order to operate in this fashion the organization has to believe, it has to believe in its employees in its heart of hearts.

Written by Jeffrey M. Saltzman

November 13, 2009 at 8:09 am

Abnormal Change

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“How far back can you remember?” a friend asked me the other day. I thought about it for awhile searching my old memories and finally responded “Maybe 28 or 30”. “Years ago?” he asked. “No, waist size”, I responded.  Change happens.

Dandelions are the perennial weed that are just about impossible to get rid of from your lawn. Tough as nails they show up everywhere you don’t want them to. Upon closer inspection the yellow flower of the dandelion is actually made up of numerous small flowers, each yellow petal being a separate flower capable of turning into an individual seed and in aggregate yielding the cottony ball that was so much fun to blow upon and scatter so long ago. I can remember that. Dandelions are adaptable. One study of them recently showed that in as little as 12 generations dandelions adapted from having that familiar cottony seed distribution system, with seeds drifting in the wind, to one that favored seeds that fell immediately around the mother (and father since they are asexual) plant. The plant was able to evolve, incorporating a new adaptation in as little as 12 seasons.  The new adaptation was the development of seeds without the white cottony tufts upon which to float in the wind. What was the reason for this change? When dandelions found themselves growing in urban locations with concrete all around, it became more advantageous to them to fall immediately next to mom, who was already conveniently gowning in a crack in the sidewalk filled with soil, then to scatter seeds in all directions looking for the next bit of dirt in which to put down roots.  In as little as 12 seasons dandelions took an evolutionary process that is often viewed as glacially slow and made fairly dramatic change.

Organizations of course need to be able to change or they will eventually die out, advice that any dandelion can give. A critically important point about organizational change though is that the most successful organizations need to consider how to control the definition of what are the normal standards of performance for their products and services. Being able to control the definition of standard or normal can be a path to greatly increasing market share and profitability. This is as true for the little restaurant on the corner as it is for the global behemoth. Organizations that can control the definition of “normal” performance or “normal” service are the standard bearers in their respective markets. Being able to control the definition of normal is also how some upstart startup can shake up an industry and penetrate the traditional barriers to competition.

Federal Express changed the definition of “normal” delivery times for packages and letters, doing something that no one else seemed to consider and grew into an extremely profitable, very successful organization. They again changed the definition of what a customer could expect when tracking packages, greatly increasing transparency and again setting the standard which everyone strove to emulate.

Henry Ford with his concept of mass production changed the definition of what a “normal” car should cost, greatly increasing the ability for the average person to own a personal transportation machine. His working definition of affordability was that a Ford Motor Company worker on the assembly line should be able to afford the product which they were producing.

The Japanese car companies, Toyota, Honda, Nissan among others came along much latter and changed the definition of what normal quality was, tapping into a desire of the consumer to own a quality, reliable product with fewer defects at a reasonable cost and quickly captured enormous market share. (They did not start out that way but came to see the light as they evolved and adopted the six-sigma tools made available by Dr. Deming).

Apple, a company that takes the notion of owning the “norm” seriously, of course changed the definition of how we buy and purchase music, driving traditional retail record stores to near or into bankruptcy as they could not adapt their traditional retail model. Apple is trying to do that again with the iPhone.

Amazon changed the way we purchase products on-line and Google changed the norm by which we search for and access information. eBay forever changed the way  that garage or lawn sales happen and has spurred an entire secondary economy employing hundred of thousands.

Starbucks changed the definition of how you purchase and how much you purchase coffee for and for a long time now a cup of high octane coffee has cost more then a gallon of high octane gasoline, but I think gasoline is pulling ahead once again. I can’t help but wonder if part of what is happening with the new highs in gasoline prices is to establish a new norm around what a gallon of gas should cost. (I can remember back to the 60’s – cents per gallon).

Wal-Mart established a new norm around pricing models and Target and Kohl’s added in more of a quality and shopping experience component (where did I hear that before?). A similar battle rages between Home Depot and Lowes. The list goes on and on.

The challenge to organizations as they seek to improve their performance is not to simply incrementally improve but to strive for breakthroughs that allow them to leapfrog the competition – to create not simply normal change but abnormal change, change beyond what is expected; to reinvent not only themselves but their products in such a fashion that it creates a new standard, a new norm of performance and then to make it happen. That takes creativity and insight, it takes a workforce that is willing and ready to adapt to new ideas and concepts and can work outside the box. To paraphrase one company’s motto, “We have a better idea” – do you?

© 2010 by OrgVitality, Jeffrey M. Saltzman. All rights reserved.

Visit OV: www.orgvitality.com

Written by Jeffrey M. Saltzman

November 13, 2009 at 8:07 am

Generational Differences at Work

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“They poison the mind and corrupt the morals of the young, who waste their time sitting on sofas immersed in dangerous fantasy worlds”.

What is this statement decrying? At first glance you might assume video games but it was written in the 1700’s and was aimed at a new medium that was springing up at the time, a medium that the older generation was lamenting was going to be the ruin of the younger generation, that medium was novels.  Today of course we would be thrilled if the younger generation became immersed in novels and got hooked on reading, it would be considered a virtue.

Whether it is novels, motion pictures, cars with rumble seats, rock and roll, hip hop, tattoos, green and orange hair or body piercing the older generation has looked at the younger generation and has always seen peril in the different fads or standards that get adopted. One has to wonder if it has more to do with the younger generation expressing their individuality and freedom to make their own choices or with the older generation wondering why the kids can’t find value in the same virtues that they did. It is a story that gets repeated with every generation and it is likely a bit of both.

The differing behaviors that the various generations adopt have the potential to set up interesting situations within the work environment. One generation may expect that certain behaviors be deemed acceptable or even necessary within the working environment, behavior that another generation might find unacceptable or unrealistic. One has to be very careful though not to paint with a broad brush and to characterize a generation in a certain way without regard to individual differences. After all generations are made up of individuals who are free to express their thoughts and behaviors as they desire. You are likely to find more variation of expression and behavior within one generation than you are across generations. General statements about what one generation is looking for over another are often nothing more than marketing contrivances. But you will also find an interesting thing when you scratch a bit below the surface of some of the more obvious characteristics expressed as generational differences and that is great similarity, especially when it comes to the world of work.

The current school year is just about finishing up and the next generation of kids is out there now searching for employment, for many of them their first real job. What new attitudes will they bring with them into the workplace and how will they affect their ability to personally succeed and interact successfully with the previous generations that came before them? Ron Zemke along with his co-authors captured in a book called “Generations at Work”, a listing of water cooler conversations of what one generation at work might be saying about another. Here are some examples of the statements he captured:

  • They have no work ethic. They are just a bunch of slackers.
  • So I told my boss, “If you are looking for loyalty, buy a dog”.
  • A hiring bonus! Wet behind the ears and he wants a hiring bonus! At his age I was grateful to have a job!
  • I have a new rule. I will not attend meetings that start after 5pm. I have a life.
  • He asks me, “Do you have an e-mail address?” I felt like telling him “Since you were in diapers buddy!”
  • If I hear “We tried that in ’87’ one more time, I’ll hurl in his wrinkly old face”.

These statements give rise to the idea that there are vast differences between generations in the work place. One has to wonder that since every older generation seems to see peril in the behaviors and attitudes of every younger generation whether that “vision of peril” is in fact wired into who we are as a species. Does it help our survival as a species for each younger generation to rebel in its own fashion and to try new things? Does that behavior increase our adaptability as a species, allowing the younger generation to deal with new unexpected situations that might arise? Does it demarcate or set up conditions to prepare the younger generation and instill the ability to separate from their parents, to live independently? While some of us may consider our kids to be some new form of human as we gaze into their rooms and review their behavior, they are just as human as you and I when we were their age and are today. And as humans they carry the same psychological make up that you and I do. So where do these differences come from?

Common statements that you hear today indicate that this “younger” generation cares less about job security and expects promotions faster than previous ones, among other differing expectations. Why might this younger generation care less about job security? It is a question I have asked groups that I speak to numerous times. I usually get a variety of answers, but then I probe. Did we evolve somehow into another form of human from the previous generation that cared greatly about job security to this generation that cares not? Did our psychological make-up somehow change? What caused this generation to care less?

Let’s examine what employment conditions were like when this younger generation grew up.  In general this new generation who has recently or is entering the workplace now grew up during a period of remarkably low unemployment. Take New York the state where I graduated from high school and college as an example. According to the Bureau of Labor Statistics (BLS) the historical high for unemployment in New York was 10.5% in 1976, the year I was a junior in high school. The historical low was 4% in 1988 and today (March 2008) it is 4.8%. I can clearly remember a professor in one of my college classes telling me to go to graduate school since there were no jobs currently available. And I can remember when I was hiring employees in the late 80’s to the late 90’s, when there were more jobs available then there were people to fill them.

If there were 2-3 job opportunities for each person looking for a new job might there be less concern about job security on the part of the worker? Might long-term loyalty be less important to them? I believe that the differing attitudes observed regarding unemployment between the various generations are largely due to economic opportunity difference available to them. Further I believe that should this younger generation experience economic conditions similar to “my” generation that job security would be just as important to them as it was to me. Our generational differences were driven in large part by economic opportunity differences, and some other differences experienced in the environment in which we were raised. Given the same environmental conditions each generation will make the same choices, we are after all, each of us human.

When you take an outcome measure of pride in, satisfaction or engagement with the workplace and examine the drivers of those measures for generational differences, while you will find some differences you will also find much greater similarity. (Drivers are areas of importance that move in tandem with an outcome measure. As the driver moves in the positive direction the outcome, say pride, moves in the positive direction as well. Strong drivers are those that most closely match the movements of the outcome variable).  And I believe that the differences you do find can be explained as environmental variables, things that occur at some times and not others due to changes in the environment in which people live rather than due to differences in who people fundamentally are. You will find differences in the absolute scores regarding how positively one aspect of the workplace is viewed or not, but you will find much fewer differences in the drivers, especially those drivers that are fundamental.

Fundamental drivers are those things that while they may be expressed differently in the day-to-day are constant underneath. For instance, I would defy you to find any worker on this planet, from any generation, that did not want to be treated with respect and dignity as work. Whether they perceive themselves as in fact being treated with respect and dignity (the absolute score) and what they would have to experience to say they are being treated with respect and dignity will vary, but the desired end state, the state that will create a positively perceived environment for the employee, being treated with respect and dignity does not change. The organizational goal should be to create the conditions that allow each worker to feel that they are being treated with respect and dignity. The range of conditions needed to allow that to occur in the environment may differ, but not the desired end state.  Other fundamental drivers include things like sense of fairness and equity (that for the effort expended there is a commensurate reward), a sense of accomplishment (that what they are doing is meaningful), a sense of trust in the organization (the organization and its management do what they say), a sense of future (that there are compelling reasons to stick around), a sense of effectiveness (that the organizations provides what is needed to get the job done), and a sense of vision (that the work of the organization itself is important and the workers role in accomplishing that is clear).

Yes, we are all humans and with that comes both sameness between and among us and a uniqueness which allows for our differences, both individual and generational to emerge.

© 2010 by Jeffrey M. Saltzman. All rights reserved.

Visit OV: www.orgvitality.com

Written by Jeffrey M. Saltzman

November 13, 2009 at 8:04 am

The First Second

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What makes an organization viable for human life? Does there exist a small number of organizational variables that have to be within acceptable range for an organization to support life? If they exist when do the values of those variables get set? And once set can they be changed?

“Everything should be made as simple as possible but no simpler.”

Albert Einstein (1879-1955)

The universe does not have to be the way it is. There are a small number of variables that should their values have come out differently, we would not be here and life as we know it would not be possible. Life exists in the universe because there are values in place for certain fundamental constants that allow for matter to achieve high levels of organization. This led to the creation of stars and galaxies and other structures that permeate the universe. Other variables allow for stars to burn at a rate that allows them to be around long enough for life to develop and for carbon, what life as we know it is based upon, to be found in abundance. Life and our universe are interconnected but it did not need to be that way, the values of the constants did not need to be exactly as they are. Why are they so? The simple answer is that it is the way it is because we are here to measure it. There could have been an infinite number of universes before ours and there could be an infinite number of universes after ours is done or according to M-theory, there could be an infinite number of parallel universes to ours currently in existence. The reason why we are in possibly the one universe that supports life is because we are here in the first place to ask the question, and we would not be able to ask the question in any other universe that did not support life – this notion is called Anthropic principles. 

Nature does nothing in vain, and more is in vain when less will serve.”

Sir Isaac Newton (1642 – 1727)

The constants, the values that those critical variables adopted were determined within the first fraction of a fraction of a second that this universe existed. At the very beginning of our time, our universe, a course was set. This course determined whether the possibility existed that we would be here now. If the numbers had not come out the way they did, I would not be sitting here writing this and you would not be reading it. In fact, there would in all likelihood be no life anywhere in this universe. The moment of origination was critical.

“Behind it all is surely an idea so simple, so beautiful, that when we grasp it – in a decade, a century, or a millennium – we will all say to each other, how could it have been otherwise? How could we have been so stupid for so long?”

John Archibald Wheeler (1911-2008)

What about organizational life? Can we draw a parallel to life in the universe or are humans and our societies more complex than the universe? Does there exist a relatively small number of variables or factors that creates conditions within an organization, allowing employees to flourish, possibly according to Maslow to self-actualize?  And when do these variables become part of the fabric of the organizational universe?

Each organization has a unique history, a unique story about its origins. Within a fairly short time span of its origins the initial culture of the organization may be set, not necessarily in stone, but in fairly strong stuff never-the-less. I am constantly amazed at how in high turnover organizations the cultures can be as robust as they are, resistant to movement in one direction or the other, even though they constantly fill with new people.

If you asked me to define the initial variables that determine whether an organization can support life I would choose the following:

  • A clear and compelling Message regarding what the organization is about, what it stands for, what it hopes to accomplish and knowledge of how each individual can support that Message in a meaningful fashion
  • Performance enablement – the organization providing what you need to accomplish your tasks in a way of which you can be proud and alignment of the Performance expectations to the Message, as well as:
    • Working for a management team that is effective and puts sensible business processes in place and positions itself well within its markets  
  • A sense of Future – compelling reasons to stick around including:
    • Fair and respectful treatment – you get out what you consider to be fair for what you put in, covering pay, benefits, recognition, rewards and advancement as well as being treated in a respectful and dignified fashion
    • The ability to stay current in your skills or to develop new skills

I think the leadership of an organization needs to make up its mind regarding how they will operate against these variables during the initial formulation of the organization. While I do believe these variables can change, they are much more difficult to change later on in the organizational life-cycle than if they are set up appropriately at the beginning.  The moment of origination is critical.

 “What can be done with fewer assumptions is done in vain with more.”

William of Ockham (1285-1349)

 

Written by Jeffrey M. Saltzman

November 13, 2009 at 8:01 am

The Next 1000 Years

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I was on a business trip in Italy when the driver of the car indicated to me that we were traveling along the Appian Way. I was a bit stunned. Here I was on a business trip, where you typically see the airport, the inside of a taxi, a hotel and meeting room, all accouterments of the modern world, and I was cruising in a car on a road that was more than 2000 years old! I asked them to stop the car and I got out and touched the road. Majestic old trees lined both sides of the cobblestone straight as an arrow roadway and as we made our way along it, I got chills as I thought about the Roman Legions perhaps marching along the very road I now traversed. This was the roadway that helped Rome become an empire. Infrastructure matters, especially when it is a game changer – no one else had roadways like the Romans, allowing them to achieve things that others could not.

Let’s do a thought exercise. What would you do differently in your life if you really stretched out your time horizon, say you knew that you were going to live for 1000 years? Today we all seem to operate with a fairly short time horizon. I know I am thrilled if I get 10 years out of a car, others itch for a new one after 3-5 years. How would you feel if you knew you would be driving for the better part of 1000 years? What would you demand in a car? Does the Buick Century all of a sudden become more attractive; perhaps the Millennium series of various Dodge vehicles or maybe you would only shop the Infinity brand?

How would you educate yourself? Maybe I could take my time getting through college, say 50 years, and finally figure out calculus. It would probably take me that long, but then maybe new avenues would open to me. A Ph.D. would become the equivalent of a high school diploma at best and a new higher standard of academic excellence would need to be invented. (A new variation on an old joke – “What do you call someone with a Master’s degree?” – and the punch line is “a dropout”.)

What would you look for in a house or other dwelling? Only a 20-year guarantee on that roof? Can I get a roof with a 200-year guarantee? After all I don’t want to have to replace the roof constantly; I need something a little more durable. If your time horizon is 1000 years, how would you handle issues that today are considered relatively rare? For instance a 100 year storm may happen 10 times in your lifetime and be absolutely devastating to homes and buildings in its path, buildings that are not built to standards to last 1000 years. What about economic cycles or long term development, research or construction projects? How about natural resources? What natural resources are we using today in such a fashion that they will be sustainable in 1000 years time?

Why do you think banks are usually built out of bricks and stone, or with strong looking cement or marble columns? The bank wants to give the impression of longevity that they will be around for 1000 years. How would you feel about going into a bank branch located in a trailer on wheels to deposit your hard earned money? Might make you hesitate. Interesting things happen with a long-term time horizon. For instance if you deposited $1000.00 in a CD at 3% interest for 1000 years it would be worth $6,874,240,231,169,627.00 at maturity. That is 6 almost 7 quadrillion and represents a lot of money. But in 1000 years a quadrillion might not buy what it used to. Just to keep up with inflation at 3.01% during those 1000 years, you would need $7,575,079,084,827,028.00. In other words, .01% inflation above your interest rate would put you almost 1 quadrillion dollars down in purchasing power. What a bummer.     

What about relationships? Would you behave any differently if you knew that the argument you just had might linger for 1000 years? Would we not get into as many arguments or would they just last longer? A mother might say, “Johnny, go to your room and don’t come out until you are prepared to be civil to you sister”. Five years later…. Would we still enter into marriage or would some new form of relationship between men and women emerge? The average marriage today is said to last about 7 years and 50% of all marriages end in divorce. Daunting numbers if you might be around for 1000 years. Say you held off and did not get married until you were 100 years old, with an average marriage lasting 7 years that would mean you would have about 128 marriages in your lifetime. While there are a few celebrities today who approach that number for most of us something would have to change. (I must make mention here that my 28th wedding anniversary is coming up and I have no intention on aligning myself to the average duration of a marriage.)

It seems like our time horizons are getting shorter and shorter and that impacts our organizations and our careers as well. Public companies today are focused upon making next quarter’s goals, a 3 month time horizon, and those that do not are severely punished in the marketplace. Today’s marketplace clearly does not reward organizations for taking a long-term view.

Take a step back for a moment and take a very long-term view. How would you build a company if you wanted it to last for 1000 years? What would you do differently? How would it be structured? What emphasis would you place on product development and research, on sales and marketing, on quality, on maintaining its reputation? How would you recruit? What personnel policies and practices would you put into place? What competencies must the organization develop that would make it enduring? What would be sacred, unchanging during the life span of the organization and what would be malleable? And how much sense would it make to focus on the next quarter if you were aiming for a 1000 year time horizon?

There was an interview in a documentary about the construction of The Large Hadron Collider at CERN that sticks in my mind. CERN is part of the European Organization for Nuclear Research. The Large Hadron Collider is a new piece of equipment coming online (June 2008 is the estimated date for the first experiments to occur) and represents the culmination of a 13 year design and construction process and an engineering tour-de-force that has pushed the state-of-the art to the limit. The Large Hadron Collider will allow physicists to go where they have never been able to go before and to test out theories on the fundamental make-up of the universe. A construction engineer who was involved in building the Large Hadron Collider was being interviewed and in the project construction reviews he indicated that he is continually asked, “what unforeseen events or obstacles have you been able to foresee?” You could literally see his blood pressure rise as he turned red thinking about what was in his mind clear lunacy to ask about how he has foreseen the unforeseen. If you were building an organization with a 1000 year time horizon, while you might not be able to foresee the unforeseen your organization certainly needs to be able to handle the unforeseen. How would you build that in?

James Collins and Jerry Porras wrote “Built to Last” a best selling book about what makes companies endure for the long-term. But more than endure, what makes them the standout leader in their respective industries. They suggest that a company develop core values; things that hold true for the long-term and that around those core values organizations learn how to change those things that need to be adaptable in changing market conditions.  They matched up companies that they felt were truly outstanding organizations against those that while successful they viewed as second tier. It is interesting to me to note that a number of companies that they viewed as outstanding, while still successful by most measures have recently fallen upon harder times. These include companies such as Ford, Citicorp, HP, and IBM. Did they lose their vision, their core? What caused the decline? Maybe they could do a follow up book on how outstanding companies lose their way. It reminds me a bit of the splash that the service profit chain at Sears made when it hit the Harvard Business Review, and while it represents a lot of very good work that approach did not prevent Sears from almost going belly up. The fundamentals need to be in place and the organization needs to be able to cope with changing market conditions in addition to holding onto their cores, their essence.  

So what if your organization was to be built for 1000 years, would you do anything different? What if your life was to last for 1000 years, would you do anything different? And I think most importantly would we derive any shorter-term benefit by thinking with longer-term time horizons? Maybe I should try to tackle calculus one more time.

Written by Jeffrey M. Saltzman

November 13, 2009 at 7:57 am

10,000 Children

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The Wall Street Journal in a series of articles wrote up a detailed account of how Bear Stearns imploded leaving JP Morgan and the Federal Reserve to patch together a solution. The series discussed how Bear’s CEO, Alan Schwartz, in meetings with his direct reports, called the precipitous decline in the value of the firms stock over a short period of time “a whole lot of noise”, a reference to a passing moment. Client after client were pulling their assets from the firm resulting in a modern day version of a run on the bank. The Wall Street Journal goes on to say that in a business such as Bear’s that rely on “Trust” and relationships that a decline in “Trust” could lead to the demise of the firm.  But I don’t think that “Trust” or a decline in “Trust” really captures what went on. I think a more appropriate concept would be “Confidence” of which trust is a component. When Alan Schwartz was talking to his direct reports he was trying to calm their nerves and instill “Confidence”. They likely trusted him already as they had relationships with him and worked with him day-to-day, but what they seemed to lack (according to the article) was confidence that a course was being charted for the firm that would lead out of their current difficulties and to a successful outcome. The lack of confidence in Bear, by its customers resulted in a seminal and final moment for that storied institution and its 13,000+ employees.

Confidence as a broad concept is defined as “a state of being certain, either that a hypothesis or prediction is correct, or that a chosen course of action is the best or most effective given the circumstances. Confidence can be described as a subjective, emotional state of mind, but is also represented statistically as a confidence level within which one may be certain that a hypothesis will either be rejected or deemed plausible.”

Among the deaths counted in the earthquake that ravaged central China’s Sichuan province are an estimated 10,000 school children. This tragedy is still unfolding and is of course heartbreaking to watch. The parents of these school children are now taking on an unusual role for people within the communist state, that of protester. Many of them appear to be angry that the schools that serviced their children, from poorer backgrounds, collapsed in the earthquake to a much greater degree than schools that serviced wealthier families and other nearby government office buildings. There is speculation that corruption and official indifference caused the schools that collapsed to be built in a substandard fashion. The unstated assumption is that officials either did not care as much about poorer families or thought they could get away without imposing the same due diligence on the buildings constructed to service the poor. Due to that corruption and indifference parents have lost the one child they were allowed to have, they have lost their sense of future, they have lost their confidence that the government was at least minimally looking after their interests. Parents are often willing to put up with much hardship and suffering if they feel that they are working towards a better future for their children. The parent protests are increasing and a riveting picture appearing in the New York Times and flashing around the internet shows a local official on his knees pleading with the parents to discontinue their march and allow the local party to investigate why so many school buildings collapsed. Parents ignored his pleas and continued their march. One public official associated with the schools was quoted as saying that each family would be compensated $4500, several years’ worth of wages for each child that died. I don’t think the parents are looking for money.  Some statements from the parents were quoted in the New York Times. “We don’t want their money. We just want this corruption to end.” “We demand that the government severely punish the killers who caused the collapse of the school building,” “The people responsible for this should be brought here and have a bullet put in their head.” “Why can’t you do the right things for us? Why do you cheat us?” The lack of confidence of the parents that the system is looking after their interests and their children in a fair and just manner may be creating a seminal moment for China. But 10,000 children is a very high price to pay for societal change. And when society decides that the price it has paid for the continuation of the status quo is too high it will change.

On Saturday, March 25th, 1911, on the top 3 floors of the ten story Asch building located at 23-29 Washington Place, on the lower east side of Manhattan a fire broke out. The incident became known as the Triangle Shirtwaist Factory fire and resulted in the deaths of 148 of the 500 workers in the factory, who either burned or jumped to their deaths. This was and continued to be the worst industrial accident in NYC until 911 occurred. One exit stairway had been chained shut, the flimsy fire escape soon collapsed as people struggled to flee, the elevator stopped working and the remaining staircase was inadequate for the number of people in the building. The workers were mostly young immigrants, some only 15 years old who toiled for 14 hour shifts, 60-72 hours per week. The average weekly wage was between $6 and $7. After the fire the owners were put on trial and were acquitted but then lost a civil suit which compensated the average family $75 for each killed worker or about 11 weeks worth of wages. I don’t think those parents, survivors or relatives were looking for money either. They had lost confidence in the current system, organized themselves and the outrage that followed the deaths caused new and enhanced safety requirements for buildings to be enacted and also resulted in the slow improvement of working conditions for factory workers throughout the USA. “The people demanded restitution, justice, and action that would safeguard the vulnerable and the oppressed. Outraged cries calling for action to improve the unsafe conditions in workshops could be heard from every quarter, from the mainstream conservative to the progressive and union press” (Cornell University Archives). It was a seminal moment, but 148 lives was a very high price to pay for societal change.

Confidence, it is critical to our everyday lives. Without confidence not only would many of our institutions collapse, but our society overall would cease to function. Whether you deposit money into a bank is determined by your confidence that the money will be there when you need it, that the bank will not disappear, squander or lose your money. Whether you go to a hospital when you are sick is driven by the confidence you have that going to the hospital would in fact help heal you. Interest in our national elections, the percentage of voter turnout, is clearly dependent on whether voters are confident that their vote is meaningful. Whether you stay with your current employer or seek employment elsewhere is driven by your confidence that you will benefit by staying put or benefit more by going elsewhere. Whether you go to college or not is driven by your confidence that going to college will result in positive outcomes for you personally. The value of our money, our paper currency, is dependent on the confidence that people have that the government has the means to stand behind the currency. When you buy or use a product from a company you need to have confidence that the product will work as advertised or you would not buy it in the first place. The list could go on and on.

Confidence© could be thought of as having two very broad components, Organizational Confidence© and Personal Confidence©. Organizational Confidence is confidence in the various organizations or institutions that we interact with and Personal Confidence is confidence in our selves, of our future or abilities and each of these dimensions has an internal and an external component.

Confidence Organizational Personal
Internal
External

Each cell in the confidence table above could be defined based upon the overall concept being assessed. For instance if we take Employee Confidence© as the concept to be assessed, Organizational Confidence-Internal would cover the quality of the management team and the business processes that are in place. Organizational Confidence-External would cover the positioning of the organization in its markets and the robustness of the industry that the organization operates. Personal Confidence-Internal would cover job security and how bright the future appears for you at your current employer and Personal Confidence-External covers your ability to find another comparable job to the one you have.

Consumer confidence measured and tracked religiously could be thought of within this framework as well, as could Military confidence, Political confidence, Educational confidence, Health confidence etc. Confidence becomes an over-riding rubric allowing for various slices of confidence, differing types of confidence to be defined and measured. Each type of confidence may likely predict to varying societal outcomes or organizational performance depending on how it is defined and measured.

© 2010 by OrgVitality, Jeffrey M. Saltzman. All rights reserved.

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Written by Jeffrey M. Saltzman

November 13, 2009 at 7:54 am

The Center of the Organization

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I asked a physicist friend of mine a question. Since the prevailing wisdom is that the universe started with a singularity, is it possible to look at the current shape of the universe and to trace back to that point of origin, in effect to find the center of the universe? He answered me without hesitation that is was a nonsensical question. The current shape of the universe is unknown and the singularity actually created space/time, it did not expand into it. We then engaged in the kind of discussion that makes my head swim.  

Is it possible to find the center of an organization or is that a nonsensical question as well? It is very common within organizations to have the various silos view themselves as the center of the organization. Manufacturing/Operations will feel that without us the organization has nothing, no products we are the center. Sales retort that without us you would have no need to manufacture anything, we are the heart of this organization. R&D and Engineering are designing new products and throwing them over the fence almost daring Manufacturing to be able to produce the product and Sales to able to sell it, without us they proclaim you would have nothing to sell and nothing to manufacture. Management feels that without them overseeing the operations, demanding advances and pushing the organization nothing would happen, they feel they must be the center of the organization. Each of these functions can be duplicated across product lines creating even more silos.

A comparison to the human body might be apropos. The body while evolving some duplicative functions to help ensure survival and having tremendous healing power over time has a large number of critical components, the failure of any one of which  would result in death. The heart or the brain thinking that they were the center of the body’s universe without realizing the true interdependence might be very surprised to find that they could not go on without the other components.

Unfortunately many organizations find themselves in the middle of “turf” wars with various management teams trying to consolidate their power base and looking only inward, inside their own organizations, thinking about what can they do make their part, their silo the strongest possible sometimes at the expense of the other components. Senior management often times does their organizations no favor, creating reward systems and setting goals that reinforces that kind of narrow thinking rather then broader thinking on the part of their executives.

You get what you reward. CEO’s need to ask themselves what are they rewarding, what behaviors are they getting from those rewards, what behaviors do they need to have prevalent throughout the entire organization for the organization to be successful and then how do we set up reward systems that will accomplish that? How can we reinforce the kind of behavior that should be prevalent in the organization? How can the silos be broken down to serve the best interests of the organization as a whole? At the same time organizations need to be careful that they are not substituting unique one-off kind of rewards for not delivering the kind of motivational working environment that will obtain the best out of people day in and day out. First and foremost an environment needs to be created, provided, that allows and motivates people to perform to their full potential. Some organizations will back away from creating this environment because it can be more expensive to give people what they need to perform their jobs day in and day out adequately than it is to provide unique one-time rewards and to view those as motivational – as a substitution for what really should be done.

I am reminded of an organizational myth that seems to continually raise its head – that pay is not really motivational and what you need to do is to find what really motivates people and then pay is really not that important. (This is simply wishful thinking on the part of people who are tasked with keeping expenses associated with pay low). Pay is very motivational and will show up as a key driver of a whole host of organizational outcomes when it is deemed to be low. Pay will drop out as an organizational driver when people feel they are paid fairly. In other words once you meet my needs I stop worrying about it, but until then it will be key.

An associated myth is that people never rate their pay positively – it will be rated poorly so as to give employees perceived leverage in their struggle to get more pay. The norm on pay is somewhat lower then the norm on other items, however pay will be rated favorably when it is favorable. One retail organization was benchmark on pay in the top few percent of all organizations. A large portion of their population could be described as low skilled, the kind of workforce generally paid minimum wage. Yet their ratings of pay were very positive. They were benchmarked by another client who also had a large population of low skilled employees. They were hoping to find the magical elixir that this organization had found and importantly determine if it could be bottled and transferred to their organization. The magical elixir ended up being something quite simple. This organization paid their people 25% over market for comparable jobs and had a number of associated reward systems that all employees enjoyed. They received a better score on pay then others because they paid more.   

The story of how rewards have been used throughout history to control the “masses” is a fascinating one. One that often times played off of people’s innate tendencies, fears and weaknesses and one that has all sorts of conspiracy theories associated with it.   

I can remember one client, a well known hospital, which wanted to give out lottery tickets, one to each person who completed an employee survey. They wanted to award very substantial prizes, a new refrigerator, a vacation in the Caribbean etc., in order to motivate people to complete the survey. (Hospital populations are notoriously difficult to get them to complete an employee survey, with response rates averaging about ½ what you see elsewhere).  I counseled against it. In this case you were creating a special reward for what people, with the right environment surrounding them, should be expected to do as part of their normal job – that is giving management feedback on the performance of the organization so as to allow it to improve; a goal which is in everyone’s best interest. 

Another organization in attempting to create a “new” environment where silos were broken down changed their definition of “high potential” employees. High potential managers traditionally were those that could “hit their numbers”, often times completely to the exclusion of that was going on in other parts of the organization and often times without regard to what was being done to the people in the trenches actually responsible for making those numbers happen. Managers would move around a lot and it was not uncommon for an organization to hit their numbers several years in a row and then to have a new manager come in only to find the organization in need of a complete overhaul, with demoralized burnt out employees and processes that were propped up by a host of band aid like fixes. This organization wanted to change the paradigm.  They changed their definition of high potential to be those that not only could run their own organizations well, but could reach out to other parts of the organization and bring them along. Who would you want as your next CEO, someone who was inwardly focused, self absorbed, or someone who can reach out to others within the organization and help them to accomplish their goals as well?

Another organization created rewards and recognition programs that were more heavily weighted towards group performance rather then individual silo performance, all the while fretting that they were diluting the sense of accountability they had worked to install within the silos. All of these approaches are of course a balance between local accountability and a group focus.

Silo thinking is not limited to the corporate world of course. It raises its head anytime you have humans interacting with other humans. From a broader perspective I can’t help but think about China which just launched a missile blowing out of the sky one of their weather satellites near the end of its life span. The rationale for this was multifold from the various analyses that I have read. But many countries are up in arms, not because of the new military capability that this represents for China but because of the hazards this has created for everyone else’s satellites in orbit. It is estimated that there are now 300,000 small bullets, the remnants of the weather satellite, orbiting the earth, any one of which now has the ability to destroy inadvertently other country’s satellites including communication systems now critical to the world’s economies. It would be ironic if with silo thinking the Chinese upon destroying the weather satellite have created conditions whereby satellites vital to their own economic success were destroyed.

Each country, each person, each organizational silo thinking that they are the center of the universe without realizing the true interdependencies and collaboration opportunities that exist, or without organizations creating conditions for those collaboration opportunities and interdependencies to be enhanced and benefited from, creates conditions that can result in unforeseen negative circumstances not just for themselves but for everyone. Let’s hope that the new Chinese space junk does not drive home this point.

As I finish writing this piece, I can hear the center of my universe, my family, calling me to dinner. (I hope we are not having singularity tonight).

Written by Jeffrey M. Saltzman

November 13, 2009 at 7:47 am

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