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Enhancing Organizational Performance

Archive for December 2009

Job Creation, Societal Teamwork by Defiance

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“Freedom begins with an act of defiance.”

What if one company out there thumbed their nose at the generally accepted practice of laying off staff that are deemed as unnecessary during this recession/mini-depression and kept as many of their workers employed as they possibly could? Heresy? Financially irresponsible to shareholders? An act of defiance against standard business practice? SunGard Data System of Wayne Pennsylvania is doing just that, betting that as the recession winds down that they will be in a better position to capture market share, rolling out new and improved products that they have worked upon during this slower time (WSJ, December 24, 2009). There is plenty of research data to suggest that they are making a pretty good bet, research that could be summarized with a single statement, “You can’t cut your way to prosperity”. I applaud Cristóbal Conde, the CEO of SunGard. He is doing the right thing because he believes that it makes good business sense to do so. SunGard though is privately held and so may feel more latitude to take a longer-term view than public companies.

There are times when the status quo is just not acceptable. This is one of those times. We need to do extraordinary things right now in order to get people back to work. There are huge numbers of good people out there today who are suffering. Suffering economically, physically and mentally, and yet certain elements of our society who can impact this and make a difference seem to be turning a blind eye to the situation. You want the federal government to stay out of meddling in the private sector? One sure way to do that is to start creating a significant number of jobs. So what if the profits are a bit lower this quarter or this year? So what? One response may be that investors will pull their money, investing it in companies with a colder-heart, able to cut staff to the bone to shore up their bottom-line. Or that executives who refuse to operate in a cost-cutting fashion will be let go. If one company defies the standard wisdom and then another and another, keeping as many of their people employed as they possibly can, this act of defiance may be the one thing that can right the economic ship we are all on, for if the ship is not righted we will all sink together.   

If people do not have jobs, there is no one able to buy your products or services; it is as simple as that. Are we all so short-sighted, chasing that immediate bottom-line number that we forget that we are all enmeshed in a larger society, a larger organization if you will, that must function, succeed, in fact thrive, if we are all to prosper. If our society does not thrive as a whole, what happens to any one sub-organization, any company, within that society is more-or-less a foregone conclusion. You want people to buy cars? Let’s create jobs. You want people to buy houses and all the items they need to furnish them? Let’s create jobs. You want people to frequent restaurants more? Let’s create jobs. The list obviously is more or less endless.   

How I felt about this was brought home to me a few weeks ago by a friend I met for an afternoon cup of coffee. He had been laid off from his corporate job in Manhattan and I had quit my job a few months back to work on a startup. He asked me what I would most enjoy about the startup. I thought about all the different things that I have done so far during my career and what I really found to be most rewarding was creating jobs. I have worked on mergers and acquisitions, I have done CEO-level coaching, I have helped organizations with change efforts including radical culture change, I have developed selection procedures, created succession planning systems and I have grown a company approximately 3-fold, adding international operations. Yet the one thing that I have found most rewarding is when I have been able to hire another person to the team, welcoming them and their families into the organizational family. That, I told him is what gave me the most pleasure.

Company after company keeps talking about how critical employees are to the success of their organizations, their most valuable assets, yet company after company lays off these most valuable assets without any real attempt to make as many jobs as secure as possible. The public image is of organizations whose sole concern is the ongoing well-being of the organizational entity, having little concern about the individual’s who were let go. That is the government’s problem after all, right? I know I am being somewhat harsh and there are many managers out there who agonize over what they have done. I suggest we all act a little defiantly.    

There are numerous acts of defiance within various societies that have become burned into the social fabric of consciousness some of these include; A lone person standing in the path of a tank on Tiananmen Square, the marchers behind Martin Luther King being hit by water cannon and attacked by dogs, school girls being escorted into a newly desegregated high school in Little Rock by National Guardsmen, the people of Berlin tearing and dismantling the wall that had kept that city separated and firefighters raising the American flag on the ruins of the World Trade Center. The images leave one breathless.

Less known is the image of Tuvia Belski and his brothers welcoming to the Belorussian forest escapees from the Nazi ghettos. Rather than accepting only the young and strong who could fight, only those they absolutely needed who would add to their ability to survive, they took in everyone, providing as best as they could for all, an act of defiance against the Nazis. Twelve hundred people, the young, the old, men, women and children survived in the forest camp that the Belski’s created.

A group of managers at a GE management development course a number of years ago came up with a definition for teamwork that we should all keep in mind these days, “Teamwork: Not allowing others to fail.” I would like to see Teamwork as an act of defiance on the parts of CEOs out there who I know care – create jobs, even if it hurts. If enough do, you could create images that will become burned into the social fabric of our society, the CEOs who pulled us out of the grips of a recession, rather than the blind-to-risk, in-it-for-themselves image that now exists.

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

Motivating Temporary/Casual Workers

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As reported in the NY Times (December 22, 2009), for the last four months there has been an increase in the number of temporary workers, well beyond the hiring levels of permanent workers. This four month increase of hiring temporary workers over permanent workers is of longer duration than the last two recessions, which saw two month increases until increases in permanent hiring were greater than temporary ones. Are we seeing a quirk, driven by the severity of this recession/mini-depression, or have organizations decided now that for the long-term that they will operate with larger percentages of their workforce being temporary?

A quick search also turns up increasing numbers of casual workers in many countries globally, along with growing alarm that these increased numbers of inherently insecure jobs can wreck havoc with a country’s economy. Recently one HR magazine reported that a permanent shift may be underway moving the US economy from 15% casual workers to 30% or greater casual workers. If this shift occurs, it is a seismic shift in the US workforce and most organizations as well as workers are ill prepared to deal with it. While many organizations look at the financial benefits that accrue from jobs that are more easily shed, very little thought appears to be given to the costs of having a substantial component of the workforce without a long-term commitment to the organization and organizations without a long-term commitment to its employees. Loyalty died a long time ago, right?

These unexplored costs may rear their head in terms of poorer customer service, less attention to quality, little to no organizational memory on how things should get done, no commitment to seeing things through, and higher levels of turnover as people leave what is unstable employment for opportunities that may provide more stability or at least a few months of more stability. The defense industry has struggled with this for decades as people within that industry can get “hired” for a specific project and well before the project has ended, these temporary workers being to look around for their next opportunity, as they have little incentive to finish a project that upon completion leads to their termination, and only after being terminated spending time in a search of a new opportunity. The searching and exodus begins well before the end of the project.

Other organizations with the desire to look good on paper to their investors or boards when it comes to headcount will utilize temporary workers to keep the number of permanent staff below a certain threshold. They are willing to have a constant rotation of temporary workers fill positions that could be filled by a permanent worker, a permanent worker who would likely be more effective and efficient in completing work than the rotating temps who are constantly on the learning curve.

There are plenty of models out there regarding what an employer should do to motivate employees, (e.g. pay them well, have good benefits, provide them advancement opportunities, give them interesting work to do, even plenty of it), but there is a serious hole when it comes to what you can do to motivate temporary or casual workers as to maximize chances of organizational success.

While some organizations hold out the carrot of permanent employment with better wages and potential benefits should the organization’s fortune continue to rise, those promises may not always or often materialize, and these days’ workers have an awful lot to be skeptical about.  “In the past, temps who do well have often been offered regular employment, with higher pay and benefits. Given the uncertainties about this recovery, companies are not doing that now, and temps, as a result, are less likely to spend as freely as regular employees or to qualify for credit, generating less demand than permanent employment would.” (NY Times, December 22, 2009). Sounds like a self-reinforcing negative cycle to me.

The traditional motivators of pay, benefits, advancement and job security are not available to many organizations or the people working within them these days, so what can an organization offer that would be motivating to these temporary or casual workers? Well if you can’t offer job security, how about offering career security?

Job security is an attribute that affects the Personal Internal Confidence quadrant of the Employee Confidence model, a concept that I developed a number of years ago and have been collecting data upon and testing out over the last few. Personal Internal Confidence is the notion that things that happen on the job, leading to perceptions of job security being high or low, advancement opportunities being there or not and overall whether a bright future is to be had at the organization, will impact an employee’s overall confidence. These factors are internal to where the person is currently employed and are the traditional drivers of employee loyalty, and are significant motivational factors.

Personal External Confidence is the notion that, were I to leave my current employer, for whatever reason, that I could land on my feet elsewhere. I am prepared to succeed with different employers within my area of expertise or in other areas, but regardless, should I depart I will be fine as I have transportable skills, others are hiring people with skills similar to mine, and the likelihood of me finding a comparable or better job elsewhere is pretty good. In other words I am not afraid of the outside world. Helping prepare people to successfully deal with the outside world and becoming known as an organization that is very good to be “from”, is one way to motivate workers and to keep them, whether they are temporary, casual or permanent.

In fact, an article appearing in the Wall Street Journal (October 26, 2009) starts off this way: “Determined to retain your most talented executives? Well, here’s some counterintuitive advice: The best way to keep them from leaving is to prepare them to do just that.” The concept of preparing people to be successful upon leaving the organization is not only motivational but also encourages them to stay. One argument that is made against this notion, and I have heard some CEOs suggest is, “why invest in people when, as soon as you make the investment, and they get trained up, they will walk across the street for a 10% raise?” So one response to that is, “so you would rather have an untrained or unskilled workforce doing your work?” But rather than a snide comment for these executives let’s look at the data.

The data that has been collected on this topic shows that those employees who recently joined the organization and feel like they are not getting training or development will leave as soon as they possibly can, they have no loyalty. So the organization will have a continual drain of talent that the organization just worked to obtain. At the other extreme the most loyal group to the organization are long-tenured employees who feel that their skills have rusted away and that they would have difficulty finding similar employment elsewhere. So those who feel most trapped, with limited opportunity elsewhere and who are likely not in possession of start-of-the-art skills are not going anywhere. Not exactly the kind of workforce to guarantee organizational success. For those folks in the middle ranges, the data shows that those who are receiving development opportunity and are keeping their skills sharp are no more likely to leave than anyone else.

So in a nutshell, if I join a company but am not getting developed, I leave. If my skills have become obsolete, I stay, and if I get past the short term and get development opportunity I am no more likely to leave than others. That combination would seem to be a good argument, promoting the notion that it doesn’t hurt to give people what they need to develop high levels of Personal External Confidence. Some organizations have already gotten this, with one well known beverage company using this notion to recruit and retain staff. They say, “We invest in you, you invest in us. We cannot guarantee you lifetime employment, but what we can say is the time you spend here will be well spent.”

Employee Confidence has many interesting implications at the company, industry, country, even global level. If you would like to learn more about Employee Confidence and its impact on organizational performance, contact me at jeffreysaltzman@orgvitality.com.

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

Visit OV: www.orgvitality.com

Youthful Optimism, Myth or Reality?

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The legend of the fountain of youth or variations upon that theme occurs in many cultures going back centuries. It is said to yield magical water that can restore and maintain your youthful self. Ah….to be young again. But maybe it is not all that it is cracked up to be or maybe it is? One aspect often associated with youthfulness is a sense of optimism about the future, an inherent sense of immortality and that nothing can strand in your way. No mountain is too high, no river too wide… no wait that was Marvin Gaye and Tammi Terrel in 1966. Anyway, is there any evidence to support the notion that youthfulness brings with it a sense of optimism about the future?

In measuring Employee Confidence in the workplace, I contrasted younger (18-29 year olds) vs. older (50+ year old) workers on the levels of Employee Confidence they have in the workplace.   A few observations.

  • The 12 largest economies were studied (USA, UK, Canada, China, India, Russia, Germany, France, Italy, Brazil, Japan, Spain), and Employee Confidence among the younger crowd was relatively stronger as of March 2009, with the exception of Japan where the youths were a few points lower on Employee Confidence than the older folks. In most countries the benefit of youthfulness is between 5 and 15 percentage points. So in general, yes, there is youthful optimism or at least higher levels of youthful Employee Confidence. There are a few other interesting patterns that emerge.    
  • In both Spain and particularly in China in June of 2008 the older folks were expressing higher levels of Employee Confidence than the younger and by March of 2009 both of those positions are reversed with the youths now being more confident.
  • As of March 2009, the largest gap between the younger workers and the older ones, with the youths being more positive, is found in Russia followed by Italy and the UK.
  • As of March 2009, the smallest gaps between the younger and older workers was in Brazil followed by Japan.

A high level of Employee Confidence is achieved when an employee perceives their organization as being effectively managed with good business processes, competitively positioned with attractive products and believe they have a promising future with their organization, job security and if needed skills that would be attractive to other employers. Employee Confidence influences individual behavior and has implications for organizational performance and more broadly macro-economic conditions.

Should you desire more information about Employee Confidence please feel free to contact me at JeffreySaltzman@OrgVitality.com.

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

Written by Jeffrey M. Saltzman

December 20, 2009 at 8:19 pm

Commentary September 21, 2008

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I think we live in a pretty amazing world in pretty amazing times.

This past week has been no exception with all sorts of anxiety being generated about what is going on in our economy. While unemployment rises Wall Street sinks only to rise Phoenix-like at the end of last week with a government intervention that has no historical comparison. The worries floating around Washington DC that we may be heading into another depression period similar to or perhaps much worse than the crisis of 1929 are palpable. The Secretary of the Treasury along with the Chairman of the Federal Reserve are doing their best to head off that eventuality and they seem to be the ones calling the shots at the moment in terms of our economic policy. Articles are appearing this week that our form of US capitalism has been forever changed. These two economic gurus have fundamentally shifted their strategy from attacking the issues on a case-by-case basis, for example the bailout of AIG, and forcing a shot-gun marriage of Bear Sterns to trying to get at the root causes of the instability that we are experiencing. In order to do that they are trying to get congress to approve funds to buy up all the bad mortgages that have been made over the last decade so they can be taken off the books of the banks that made them.

To an average guy like me it sort of feels like the bankers are being rewarded for their folly which was originally driven by the demands of Wall Street itself (other bankers, the investment-types) to continually show growth in their company’s performance so that the bankers can continue to earn the extraordinary incomes they are so used to. I can’t help but wonder if after the bailout all these bankers will pat themselves on the back and go right on earning huge incomes, now at taxpayer expense.  I am not sure we have all that much choice at this point as these free-wheeling types have dug us a hole as a nation that literally puts us all at economic risk. Forget the lack of regulation or oversight of that behavior, how come actions that put the whole of the nation at economic risk, having the potential to destroy hundreds of thousands of lives, throwing perhaps millions out of work, unable to support their families, how come behavior like that is not a crime? I get the feeling that my grandchildren will be paying off the bills we are incurring now for the majority of their lives.

I was up early this morning, went downstairs and flipped on the TV. I wanted to catch up on any overnight news but first I had to make my way through all the early-morning Sunday shows attempting to sell me products and services that I did not need, including some kid who looked to be no more than 25 and certainly younger than 30 years of age, who had found the secret to success in today’s market, but you had to act fast because the window of opportunity is limited and closing fast. I really wanted someone to ask the kid why he was wasting his time on TV, why wasn’t he out there making so much money on the secret that he uncovered that he wouldn’t have to make sleazy TV ads. Maybe he felt he owed it to humanity to spread his knowledge.

I flipped through a few more channels on my way to the news. It really annoys my wife that I just don’t punch in the news channel station but rather flip until I get there. But if I did not flip, I could not linger for a moment on the channel showing the fabulously fit women doing their early morning exercises. I finally made it to the news but it was the kind of news that only gets shown at 5:00am or earlier. You know human interest and interviews of people who are only slightly or less famous. This one clip had a law professor telling his business students to stay in school, go to graduate school was his advice and perhaps by the time you are done the job situation will have improved. Now where did I hear that before? Oh yeah, 1979 I was sitting in class, I think it was a psychology class and the professor was telling us that we should go to graduate school because it was so difficult to get a job out there. I was experiencing déjà vu big time. I think the X-generation, or is it the D-generation, I can’t remember, but the latest generational designation, the one that wants more out of life than just a job (of course none of us older folks wanted more out of life than just a job), the one that hops from place to place in their quest for happiness,  (which was always much more of a fallacy than reality anyway), well that generation has just left the stage, and a new generation, let’s call them the R-generation, for Retro, for they get to worry about all the things that their older parents or perhaps grand-parents worried about, was just created.

There was another interview of a guy who said that based on what was happening to his retirement funds that he was now anticipating that he would have to work longer and spend less in retirement. He said he did not think there was anything wrong about working until you were 80 or so. My mom who just turned 83 and is still working part-time called me this weekend and was asking me questions about what all this turmoil meant to her and her retirement. I had to ask her when she thought she was going to retire. She told me in a few years. I told her not to worry about it. I have not been able to look at my retirement account this week, after all that would mean that I would have to dig up that box I buried in the backyard, and if I opened the box I would be worried that I would find less money in there now then what I put in. There is a lot of anxiety out there.

But all of this Wall Street action and economic concern is pulling our attention away from other notable events in the news. Did you know that 12 pristine parcels have just gone up for sale in the Adirondacks? They range in size from 30 acres to about 1000 acres. Apparently a wood-products company needs to raise some cash and is selling off the land. An acre in the Adirondacks these days is going for about $1000 if it is not on a desirable lake, about $350,000 or more if it is. I have to admit that the one tract on the Saranac River looks very interesting as does the one on Wolf Pond – but that is the hermit in me coming out. Did you know that Hooters is looking for active or passive participants in the restaurant’s rollout across the UK? You know where I live there is a Hooters on every corner, you can’t cross the street without running into one, they are just so fabulously successful. Here is a chance to get in on the ground floor on their UK unveiling. The new Super-collider at CERN needs to shut down for a few weeks for repairs, one week after it was first turned on. (So I guess we don’t have to worry about a black hole eating the earth for a few more weeks – that would be one way to end the Wall Street crisis). One of the super-cooled magnets shorted out and it lost a lot of helium that was at something like 4 degrees Kelvin, just above absolute zero. I guess you can’t run down to True-Value Hardware and pick up some helium that is at close to absolute zero so they are going to have to special order it from the frigid helium store.

We went to a crafts show on the grounds of the Lyndhurst estate yesterday afternoon. Lyndhurst is a mansion on the banks of the Hudson River, built by a traditional-type robber baron, Jay Gould, who made his fortune in the railroad business. The mansion is built out of wood, but all of the wood was painted to look like stone. Jay could certainly afford to build his house out of stone if he wanted, but at the time the really wealthy (instead of buying houses in Vail or the Bitterroot Valley or perhaps anchoring a yacht off of Manhattan) would build a house out of wood and then hire very skilled artists to make it look like stone. The better the artist the more you had to pay them and the more your wood house looked like stone. If people had a hard time telling that your wood house was not actually stone you must have been really wealthy. The things we do sometimes! Call me a contrarian, but I think I would have just built it out of stone, tell everyone it was wood and dare them to tell the difference. Anyway, I had a number of conversations with the artisans at the show, some of whom I have talked to a number of times over the years, about how business was. In general these fiercely independent people, some of whom represent the best of their respective crafts in the nation, told me that business was good. The weather was spectacular, but more than good weather simply bringing out crowds, almost all of them told me that people were buying, a sign of economic hope from the folks in the trenches.

The really big news of the week though was, no not the presidential election or whether Sarah Palin could eat a moose before actually killing it (as the author of “A Moose in the Distance” that is something I take offense to), but rather the big news was something equally regal, my colonoscopy. After putting it off for about a year beyond when I was supposed to, I headed to my doctors office for my second ever colonoscopy exam. I don’t know if the worst part is the stuff you have to drink beforehand to get ready, or the exam itself. But there I was being prepped in the outpatient examination room. A really nice nurse was getting me ready for the exam (I have to say that I am a terrible patient). It took a few tries to get the I.V. in me and then the anesthesiologist came in and ran through a game of 40 questions with me, asking me about my medical conditions. The day before I was reading about a surgeon who had operated on the wrong knee of a patient and I was worried about what would happen if the proctologist became confused and examined the wrong…wait a minute contrary to what some people think I only have one of those. The proctologist came in and we exchanged some pleasantries. And then in a matter of fact tone, he said “role on your side, bend your knees and stick your rear-end out towards me.” As I assumed the “position” I paused and said to the proctologist, “Oren, is this the point where I can call you Oren?” Since you don’t have any dignity during a colonoscopy you might as well have a sense of humor.  Just before drifting off, as the anesthesiologist was injecting something that knocked me out, I asked the proctologist “how’s business, is the end of the economic crisis in sight?” He said, “I think I can see the end now.”

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

Written by Jeffrey M. Saltzman

December 19, 2009 at 7:46 am

A Distribution Approach to Fraud Detection

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Say the Dow Jones Industrial Average rose on average 20% per year (I am not hallucinating, just want to make a point). If the Dow Jones average started at 1000, in order to get to 2000, a 1000 point increase, it would have to rise 100%. That is a very large percentage increase and would require about 5 years (simple growth not compounded). But if the Dow was at 9000 and experienced 20% growth in order to get to 10,000, also a 1000 point increase, it would take about 6.5 months. That means that the number 1, the first digit in the Dow Jones at 1000 would appear as the first digit for about 5 years and the number 9, the first digit in the Dow Jones at 9000 would have the honor of being in that position for about 6 months.

If you mapped out all the digits that could appear as the first digit in the Dow, 1, 2, 3, 4, 5, 6, 7, 8, 9, and the time duration in which they would hold that position, with a fixed rate of growth, you would find that the duration of each digit from 1 to 9 would conform to a logarithmic scale. The number 1 would be the first digit about 30% of the time, the number 2 would be the first digit about 17.6% of the time, etc. A table showing the likelihood of the duration of how long each digit would be the first digit follows:

1 – 30.1%

2 – 17.6%

3 – 12.5%

4 – 9.7%

5 – 7.9%

6 – 6.7%

7 – 5.8%

8 – 5.1%

9 – 4.6%

This is a logarithmic scale and the notion that this scale can be applied as an explanation of various naturally occurring events was first elucidated by Simon Newcomb in 1881 and then by Frank Benford, a GE physicist in 1938 and it became known as Benford’s Law. The application of this law to the real world is fairly astounding and Dr. Benford applied his law to 22,229 sets of numbers including topics as unrelated as areas of rivers, baseball statistics, street addresses and numbers appearing in magazine articles.

Here is one example. If there were 100 bacteria in a sample and the bacteria could double in number each day, it would take the first full day for the number of bacteria to move from 100 to 200, finally reaching the number 2 as the first digit at the end of the first day. But on the second day it would double from 200 to 400, moving past the number 3 as the leading digit fairly quickly, and on the third day from 400 to 800, moving past the numbers 5, 6, and 7 even faster. Each higher digit would spend less and less time as the leading digit. As the order of magnitude of the number increased the pattern would repeat and it would again take a full day to move from 1000 to 2000, or 10,000 to 20,000 or 100,000 to 200,000, in total once again giving the number 1 the lead position about 30 percent of the time.

Here is another example. Say there were a group of 100 people and you split the group into two equal groups. One group is to toss a coin 200 times and write down whether it came up heads or tails. The second group is going to try to perpetuate a fraud. They will skip the toss and just write down heads or tails 200 times. A knowing eye looking at the patterns of responses will likely be able to determine to which group each person was assigned. While most people know that over 200 coin tosses the end results would be roughly a 50/50 split between heads and tails, they are unaware of patterns likely to emerge during those 200 coin tosses, patterns which Benford’s Law predicts. Applying Benford’s Law to the written down list of heads vs. tails invariably correctly categorizes the participants in the experiment, those who honestly tossed the coin vs. those who attempted to commit the fraud.

Benford’s law has been used in forensic accounting to detect fraud as the pattern of the fraud typically deviates from the patterns that one would expect naturally to emerge in a set of books at a macro-level. It works at a mirco-level as well and in expense reports the number 24 tends to show up more often than expected due to the policy that many companies have that receipts are required for amounts over $25. This results in a greater number of receipts being submitted, than would naturally occur for $24 dollars and change.

Most recently Benford’s Law has been used by Walter Mebane a statistician at the University of Michigan to demonstrate that the last Iranian election was likely fraudulent. Mebane has studied election results from the USA, Russia and Mexico and has demonstrated that they conform to Benford’s Law in the second digit. He indicated that in any fair election there are a certain number of votes that are invalid or otherwise have to be discarded. In fraudulent elections, those stuffing the ballot box for their candidate, often fail to add the appropriate number of invalid ballots. When he analyzed the results from Iranian polling stations he found that the number of votes cast for Ahmadinejad and two of the minor candidates didn’t conform to Benford’s Law at all. And in fact in 172 out of 320 polling locations where he had data the election results did not conform to the statistical law’s expectations. He is careful to say that this is not a method that proves with 100% certainty that fraud took place but it increases the chances of the results being fraudulent and worthy of follow-up analysis. While it may not matter in the long run as you could argue that both candidates were hand selected to run anyway, so by definition it was not a free and fair election even before the voting took place, if you are going to cheat you should at least do your homework so you are perhaps less likely to get caught.

I was drawn into this evolving story and explored the technique a bit to see if it was applicable to detecting fraud in survey results. One worry that some client’s express is that the fix was in and their survey results are not to be believed because someone, a disgruntled party, perhaps a union, told all their members to respond negatively. While these concerns are most of the time unfounded, a conclusion I draw based on other analyses I have run, I am afraid that this particular technique for uncovering fraud will not provide conclusive evidence one way or the other regarding survey fraud, since the typical survey scale is not logarithmic in character. However, if this was a pressing issue for any particular client, it may be possible to change the scale to one that is logarithmic in nature.

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

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Written by Jeffrey M. Saltzman

December 12, 2009 at 7:06 am

If War is Hell and Business is War, What about those Red Balloons?

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During the warring states period in China 2300 years ago, Sun Tzu wrote The Art of Strategy, a military guide to be used to help insure victory on the battle field. There was much fodder for Sun Tzu to pull from, for in this time period in China’s history there were more than 300 wars between the independent states of China and the ruling dynasty at the time, the Chou. His premise was that proper preparation and planning is the essence of victory and that a true victory is achieved by correct tactical positioning. This enables easier victories and to avert much destructive conflict. He stated in his treatise, “Those who win one hundred triumphs in one hundred conflicts do not have supreme skill. Those who have supreme skill use strategy to bend others without coming to conflict.”

With 300 wars being fought in this time period it would seem that those thoughts were more aspiration than reality or perhaps it signaled an acute shortage of “supreme skill”. But regardless, his work has been widely read and reinterpreted by those in business as a guideline to building successful and competitive organizations. A theme in Sun Tzu’s work that strikes me as central to his philosophy and approach is the strong notion of centralized command and control.

During the time of Sun Tzu, if you wanted to send a message (something more complex than the lighting of a fire or smoke from a signal tower) from one commander to another, the best you could do was a fast rider on horseback, hoping that the currier made it to the intended location. It would be unheard of for soldiers to plan out any strategy among themselves. You took care of your soldiers, you organized them, you trained them, you fed them, and you tried to keep them alive in combat because that way they were a reusable resource and the other soldiers did not desert, but you did not have them discuss strategy, you did not listen to the common foot soldier, they were considered pawns to be moved around, deployed or spent to the greatest advantage of the strategist.

Many organizations today conduct themselves in a similar fashion. Not seeing employees as the path by which success is achieved, but seeing employees merely as pieces that are employed or deployed for the achievement of the organization’s goals, goals that may or may not be widely accepted by all within the organization. I have to wonder, did social networks exist within the military during Sun Tzu’s time? Of course they did.

Social networks are nothing new. Organizations themselves arose as social networks allowing for groups to accomplish what individuals alone could not. Extended families are social networks, a community is a social network, a church, mosque, or synagogue is a social network as is a military organization, a business, a school or other group coming together for particular purposes. Customers of a product or service are simply another form of social network when they communicate together or share experiences surrounding the purchase of the product or service.

Power (position power or influence) within traditional networks often accumulates to those that controlled the flow of information. Think of those within a religion who would communicate as a go-between between you and your god(s) or a military commander who knew the battle plan and let others know on a “need-to-know” basis. Similarly, find those within business organizations who have their fingers on the “pulse” of the organization, what is going on across the organization and you will have found people with real power within the organization.

There are those within business organizations who are concerned that the social networks that are evolving today represent a threat to the organization. Organizations traditionally liked to control the flow of information as a one-way conduit, from those in control to those who needed to know or execute (centralized command and control). Tightly controlling what information your employees see about the organization, what your customers know about your products, services or cost structure, what your investors know about issues facing the organization etc. is a traditional path of centralizing organizational power.

Those who practice these methods feel threatened by the emerging social networks for they see them as using mechanisms that traditionalists believe will erode their power over the various constituency groups that interact with the organization. Rather than embracing social networks and determining how to leverage this new found technology they seek to control it, to limit its potential impact on the organization, or to specifically shape it to their own purposes. It seems that every time a new technology comes along there are those who don’t see its usefulness or seek to inappropriately control it.  I think over the long run organizational power will not be eroded by social networks, just as organizational power was not eroded by the telephone when it came upon the scene, it will just be different and those who get to the point of understanding those differences first and how to effectively use those networks will come out ahead.

More traditional social networks grow somewhat ephemeral as distance between the members grows. Different parts of an extended network often become something other than what the original was about, as new practices and beliefs arise or local challenges are faced. Like distant cousins in your familial social network, you may know of their existence, but it becomes more and more difficult to accomplish a goal (such as the annual family reunion) as distance between the members of the social network increase.

Additional challenges with traditional large scale social networks come about because of communications limitations (clarity, timeliness, saliency of etc.) and with that our inability to organize appropriately those with needed skills and talents to deal with specific issues that arise. It is one thing to feel part of an organization, or a social network, it is another for that social network to consistently self-organize to deal successfully and quickly with specific challenges that the network is facing.

Times, it seems, might be changing, driven by something that the world has never seen before – self-organizing social networks that appear capable of working across distances, coming together to solve a problem and then just as quickly melting away. We are just at the forefront of understanding the potential power here and how best to utilize these capabilities, but the science, techniques and capabilities of these social networks are moving so fast that suffice it to say that any organization that is not making use of them today is lagging and within a few short years will unlikely be able to catch up to competitor organizations that are. The technology is also changing so rapidly that it is very difficult to surmise what kinds of social networks will be in use and most beneficial to organizations within a few short years, but waiting to see what happens at this point rather than jumping in and experimenting is extremely short-sighted.

Case in point, DARPA, the Defense Advanced Research Projects Agency, which funds some really neat cutting edge research, held a contest to celebrate the 40th anniversary of the internet. The moment of birth of the internet is considered to be the point in time when the first email was sent over Arpanet, a forerunner to the Internet. With just a few days advanced notice for groups to get organized, for six hours, on December 5th, 2009, ten large red floating balloons were tethered at various points around the nation. The first person or group to correctly report the latitude and longitude of all ten balloons won $40,000. No rules, no guidelines. The idea was to study how self-forming teams might emerge to solve problems using social networks.

Many groups formed. Some used Twitter, some Facebook, others created their own websites. Some of these groups appealed to altruistic motives, urging people to report their sightings so that the prize money could be donated to AIDS research, the Firefighters Scholarship Fund, or other worthy causes. Other groups stated that they would give a portion of the prize money to those who reported sightings correctly, appealing to people’s desire to put money in their own pockets. In the space of nine hours a group from MIT submitted the winning information. Was their winning strategy to appeal to people’s nobility, their desire to support worthy causes, or to people’s desire to put some cash in their own pockets?

Well, as might be predicted, cash in one’s own pocket triumphed over altruistic motives. (And there are still those who insist that salary, what people get paid to work in organizations is not a motivator, that other factors are important. Other factors are important, but only after you get paid what you consider to be a fair amount). But the victors from MIT had an interesting twist to how they created their social network. Some of the networks that arose to compete for the prize money simply stated that should you provide a correct positioning for one of the balloons you would receive “x” amount of dollars, but the folks from MIT added a higher order social networking strategy to that approach.

Their website said, “We’re giving $2,000 per balloon to the first person to send us the correct coordinates, but that’s not all — we’re also giving $1,000 to the person who invited them. Then we’re giving $500 whoever invited the inviter, and $250 to whoever invited them, and so on…”. A first order solution here is to provide the correct coordinates yourself resulting in the largest amount of money in your pocket, but a second order solution which will also provide money in your pocket is to refer the person to the contest who provided the correct coordinates and so on. This rewards the behavior you really want to have people report on, the correct coordinates, but also to refer people to the social network, so that it is expanding, creating a greater likelihood that this social network becomes the victor. Remember, you get the behaviors that you reward. As you set up social networks of your own, or desire to motivate certain behaviors ask yourself what you are rewarding. Not what you say you are rewarding or what you aspire to reward but what behaviors are you actually rewarding.

Times are changing, specifically, how we interact with each other, not just locally but globally. These are exciting times and those who are prepared and willing to take advantage of these social changes will likely benefit from them.

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

Written by Jeffrey M. Saltzman

December 7, 2009 at 3:18 pm

Asking the Right Questions

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I can’t count the number of times, after I have gotten involved in something, or have purchased a product, when after a period of time I kick myself for not initially asking the right or enough questions that may have led to better decision-making on my part as to whether to get involved or buy the product. I like to think I am a trusting individual and that in general things tend to work out, but sometimes it seems that my trust can be misplaced.

For instance, I have been researching renting a house in the Adirondacks for the family’s summer vacation. I immediately found that the choices this year are plentiful for the time period in which we have an interest, and so rather than the typical settling for what is available, I am trying to find something that meets our criteria fairly closely. Rustic but comfortable log cabin on a non-motor lake, (St. Regis Wilderness Area is high on my list), private, but not too far out so we can go into town for a few dinners, with a dock and canoe, near hiking trails, a sandy beach would be nice. Oh yeah, and needs to accept a rambunctious almost one-year old Labrador retriever who is an exceptionally good chewer of things….all sorts of things, but has not figured out yet how to go up or down stairs. Our cat sits at the top of the stairs sometimes, seemingly very aware that the dog has not figured out the stairs yet, looking down on the dog as if daring it to give it a try. When the dog eventually figures it out I think we will have a very surprised cat. The cat and dog seem to slowly be building a relationship and the cat will go downstairs at night when the dog is sleeping in its crate and creep close as if in study or stalking prey.

Anyway, the houses I have been looking at all have great descriptions, giving one the sense of one Shangri-la after another (in fact one of the camps was named Shangri-la). I immediately get suspicious though of any descriptions that do not have accompanying pictures or with pictures that show the beautiful sunset over the lake, but do not include a picture of the house. I also do not like it when the actual street address is not given, but only a more general location – “near the tip of Upper Saranac Lake”, reads one vague description. With the actual street address, I can view the location on Google Earth and see if the nuanced phrase about being a “stone’s throw” from the water really means it is a half-mile hike to a shared dock. Asking the right questions in this case can mean the difference between an idyllic vacation and one that is mostly compromise.

I don’t think I am the only one who faces these challenges as there are numerous jokes that play off the of notion of not quite asking the right questions, or perhaps miscommunication or a sleight of hand on the part one providing information, until that moment of asking just the right question arrives. With so many jokes on the topic it has to be a rather widespread issue. Here is an old favorite. Jane arrives home quite late one night and says to her worried husband, “Sorry, I am late. I had to take the train as I had car trouble. I think water got into the carburetor.” Jane’s husband who usually took care of the car was unaware that Jane even knew where the carburetor was. He replied, “Jane, how can you be so sure that water got into the carburetor? Tell you what, let’s go check it out. Where did you leave the car?” Jane replied, “In the lake.”

Here is another that is a play off the notion of what you see is not necessarily what you get. One day, Mike was pulling out of a parking space and to his horror he hit the car parked in front of him. There was a group of people nearby on the sidewalk who witnessed the accident and they looked over waiting to see what he would do next. So Mike got out of his car, methodically inspected the damage to the cars, and then pulled out a sheet of paper on which he wrote a note that he left under the windshield of the car he had hit. The note said, “Hi, I just hit your car and there are some people here watching me. They think I am writing this note to leave you my name and phone number, but in fact I am not. Have a good day.” Appearances do not necessarily reflect reality.

In the world of business, unfortunately, caveat emptor is a phrase that can characterize some transactions. What you see, perhaps, is not what you are getting – unless you ask the right questions. This occurs not only in purchasing decisions but can apply generally across the board. For instance, hopefully, this recession is beginning to wind down and with it many are anticipating the return of job openings. Some people will be able to find employment again and others who have felt that it is time to move on from their current employer will be able to do so. Many employers have put into place rigorous screening systems to help them determine who would be the best fit for the openings that they will have. They want to select those that they feel will be most likely to succeed in the position. At the same time that they are trying to winnow the field that are also trying to convince candidate that company XYZ should be their choice. In the intricate dance that goes on in the selection of a candidate, how is a candidate to know of the employer is a good match for them? In a book called Rebound by Martha Finney, I was interviewed for a chapter that lays out a framework for job seekers to use in evaluating potential job offers. In many respects it comes down to asking the right questions – easier said than done sometimes, as we all can attest.

Day-to-day, in decision-making some of the managers that I have had the most respect for are the ones who can ask the right questions, not shying away from the tough ones and perhaps even questions that the creator of the information had not considered. One of the best I have ever run into was John Browne, the former CEO of BP. He was very good at asking questions. Not in your face challenging questions, not what are you trying to hide questions, but rather what can we learn about this information or decision together type questions. His questioning was tough enough that it made some uncomfortable, but I always found that it was a pleasure to have a discussion with him.

Here are questions that I ask myself when evaluating a choice and when trying to figure out what questions I should be asking.

  • What are the consequences of a poor decision? Will someone die or will I just have a mediocre meal?
  • What are the long-term implications of the decision, how locked in will I be to a particular course or is the decision reversible?
  • Does the decision have to be made now? Can additional information be collected that will be improve the decision? What are the costs of collecting that information?
  • Are there alternatives that have not been fully vetted?
  • What questions have been posed in collecting information to help in the decision? Specifically, are they aimed at:
    • The correct level of analysis – micro vs. macro
    • The correct time-frame
    • The correct variables – those that are reliable and valid to the decision at hand.
  • Has common sense and logic been applied to the full extent? Are there basic flaws in the information available or the way it is presented?
  • Is there a scientific basis that the decision can be made upon? Real science not pseudoscience.
  • Is there any fine print or vagueness being presented?
  • Is there a consensus among others?
  • What do you really want to do?

While many other questions can and should be considered for decisions, the bottom line when you are evaluating information prior to making a decision is that you should be asking yourself, “Are you asking the right questions?”

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

Written by Jeffrey M. Saltzman

December 5, 2009 at 12:23 pm

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