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Enhancing Organizational Performance

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Democratizing Organizations

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For the tyrant has the power to inflict only that which we lack the strength to resist.

Krishnalal Shridharani – 1939

There is change afoot. Arab countries that had been ruled by authoritarian/despotic figures are undergoing upheaval. And while the verdict will be out for a while, there is widespread hope that something more closely approaching democracy will replace the regimes that existed. There is a good chance that in some of these places one despot will simply be replaced by another, but there is also a chance that should a vibrant democratic entity arise, with free market conditions, that a new center of excellence for commerce, creativity and innovation, and perhaps even tolerance will emerge out of the ashes of the failed states. Allusions to the need for slow gradual change are primary driven by those who benefit the most from a slower pace of change. And contrary to their more recent behaviors, Arab countries have a longer past history of tolerance for people’s differences. The current intolerance of anyone different was and is still a mechanism by which authoritarian regimes hope to keep power, with attention focused on the made-up enemy without rather than on the emptiness within. In many lands constitutions will need to be rewritten, with freedoms enshrined and rights guaranteed. This is a great unfreezing moment, one that the world hasn’t seen since the fall of the Soviet Union, and before a refreezing takes place change needs to be wrought, as much change as possible in order to bring forth the maximum benefits to those who have suffered under oppressive rule. It is scary, yes, for many countries that depended on the stability of the status quo, uncertainty is keeping many awake at night, but the potential benefit is just too great to be ignored or not encouraged.

Could other kinds of organizations, not just nations benefit from some unfreezing of power structures and adoption of new “constitutions” of governance?

My daughter had been off school for a week of vacation surrounding President’s Day. Between vacations and snow days I think she has spent more days at home than in school this winter. At the beginning of the vacation week we headed up to Vermont and did some snow shoeing at Hildene, the summer home of Robert Todd Lincoln, the only one of Abraham Lincoln’s four sons to reach adulthood. Though he did a stint as Secretary of War under James Garfield, he did not become part of a political dynasty. Nevertheless, he did ok for himself, becoming the Chairman of the Pullman Palace Car Company which at one point controlled ¾ of the railroad track in the nation, as well as manufacturing the cars that ran on them.

Later in the week we went to see Mary Poppins on Broadway (discount tickets available at TKTS) and afterwards swung by the NY Public Library, the world’s largest marble structure, on 42nd Street. I was hoping to show her one of the original copies of the Declaration of Independence that is housed there, but found out from the security guard that it is displayed only on July 4th and even with me cajoling him to bring it out just for a few seconds for us to look at he wouldn’t budge. We took a tour of the 3rd floor reading room instead and went through an exhibition that was being held on the texts of three of the world’s religions, and there I did get to show her a Guttenberg bible. Guarding the entrance to the library on 5th Ave. and 42nd St. are Patience and Fortitude, two famous marble lions residing on the north and south side of the entryway staircase. PatienceMayor Fiorello LaGuardia named them Patience and Fortitude in 1930, for the qualities he felt New Yorkers would need to survive the economic depression. Ralph Waldo Emerson said that Patience and Fortitude conquered all things.

Most organizations tend not to be run as democracies, but more like autocracies or oligarchies, and a few like kleptocracies, and what I have been describing will provide some examples of that. Robert Todd Lincoln’s mother Mary, put her foot down and much to the embarrassment of Abraham, refused to let her son enlist in the military until the civil war was pretty much over and then only as an aide to Ulysses S. Grant to ensure that he did not see combat. There was no voting, no general agreement about that decision in the household. Mary Poppins ran her household in a “spit spot” fashion, there was no arguing with her when she wanted something done and of course she used a “spoonful of sugar” to make her “medicine” go down. And New York City’s beloved mayor, Fiorello LaGuardia was an authoritarian figure, never letting anyone forget who was in charge. Though elected he ruled with an iron fist and got his way on most issues. Examples of organizations that are not run in a democratic-like fashion can go on and on, so what exactly does it mean to democratize an organization, say a profit making enterprise, and are there any benefits?

Let’s try an experiment. Read through this list of characteristics of an organization and see how many of these describe where you work.

  • The organization is full of silos or stove piped and the cooperation of people or groups needed to operate smoothly is restricted as everyone takes care of their own interests.
  • Legacy systems and past policies limit the ability to adopt and implement new systems and policies.
  • The organization has become routine in its operation, less able to adjust quickly to new situations.
  • Personnel and resources already allocated for existing tasks are not easily available for new needs.
  • Subordinates fearful of displeasing their superiors may not report accurate or complete information needed to make decisions.
  • The initial vision of the organization, the founder’s sentiments, and what it stood for has eroded, and myths or stories of the founding of the organization as well as their symbolism fade.
  • If a strong ideology is present in the organization, firm adherence to it may cause inattention to actual external conditions and how the organization needs to change for effective functioning.
  • Deteriorating efficiency and competency of the organizational bureaucracy, or excessive controls and regulations, may make the system’s policies and operation ineffective.
  • Internal institutional conflicts and personal rivalries and hostilities may harm, and even disrupt, the operation of the organization.
  • High potential talent, top performers and those newly hired may begin to depart the organization in response to conditions, restrictions, bureaucracy and pressure to conform to “the way it is done here”.
  • Customers are beginning to become apathetic, skeptical, and a few even hostile to the organization.
  • Corporate vs. field, line of business or old guard vs. newly hired differences may become acute.
  • The power hierarchy of the organization is always unstable to some degree, and at times extremely so. Individuals do not remain in the same position in the ranking, but may rise or fall to other ranks or be removed entirely and replaced by new persons.
  • Business Units within the organization may act to achieve their own objectives, even going against the direction of the organization overall.
  • With so many decisions made by so few people in the organization, mistakes of judgment, policy, and action are likely to occur.
  • If the organization decentralizes controls and decision making, in an attempt to become more effective, its ability to coordinate the organization becomes further eroded.

There are 16 separate statements above describing organizational characteristics. How many applied to your employer? Two? Five? Eight?

I have to admit something to you. These statements were not from a list of organizational characteristics, but rather, I slightly edited and disguised the work of Gene Sharp who wrote “From Dictatorship to Democracy” and this is his list of characteristics and weaknesses of dictators and dictatorial regimes.

For profit organizations are not about to become democracies in the sense that the staff will take a vote and decide on a course of action. Organizations spend much time and effort in selecting and developing leaders whose responsibility it is to lead. The best leaders though are one’s that listen to their people, reflect on what they have learned, and they work diligently to align the organization’s goals to the personal goals of the employees, establishing a mutuality of benefit. By being part of the organization the employee’s personal goals and life ambitions are being accomplished at the same time that the organization’s goals are being accomplished, hence they have a shared interest. This shared interest will result in a greater buy-in on the part of all employees to the organization’s goals. Organizations and specifically leadership that takes into account their employees attitudes, personal goals, life ambitions are behaving in more democratic fashion. Organizations – leadership, of any sort, that attempt to impose their will on employees by means of leverage or formal power may win the battle but will lose in the long run as any employee who can escape will do so, leaving only those who are trapped by circumstance or ability.

In study after study the leadership characteristics that most strongly rise to the top as being worthy of followers are described as:

  • Honest
  • Forward Looking
  • Inspiring
  • Competent.

Those are not exactly the characteristics of someone who forcefully imposes their will on others.

________________________________________________________________________________________________________________

Kouzes, J., Pozner, B., 2007, The Leadership Challenge, 4th Edition, Jossey Bass, San Francisco.

Hildene website, 2010, http://www.hildene.org/

NY Public Library website, 2010, http://www.nypl.org/locations/schwarzman

Sharp, G., 2002, From Dictatorship to Democracy, 4th Edition, The Albert Einstein Institution, East Boston.

© 2011 by Jeffrey M. Saltzman. All rights reserved.

Visit OV: www.orgvitality.com

Political Freedom and Employee Positiveness

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A few years ago during a presentation at a conference I was attending, I noticed what I thought was a pattern in a dataset that was being presented on employee engagement scores by country. The countries that seemed to score higher on employee engagement, in general, were democracies or those that did not have despotic rulers or a history of monarchy, though they may have had a history of colonial occupation since thrown off, such as in India. There were of course exceptions, but in general the brief glance at the data I got seemed to imply that vibrant democratic countries were scoring higher on employee engagement. I tucked that thought away for future reference.

Freedom House produces an annual analysis for each independent country in the world scoring them as Free, Partly Free or Not Free. These ratings (scored 1-7) are based upon how the country performs according to these standards taken from Freedom House’s mission statement:

Freedom is possible only in democratic political systems in which the governments are accountable to their own people; the rule of law prevails; and freedoms of expression, association, and belief, as well as respect for the rights of minorities and women, are guaranteed.”

I was pretty happy to come across this group as it provided an independent and standardized rating by country, regarding the state of freedom in each. In 2006 I did an analysis of fifty-one countries regarding the degree of positiveness of employees in each country, based upon how they responded to employee surveys that their respective employers asked them to complete. That dataset included about 29 million survey items across the countries, and a country positiveness score was produced for each of the 51 countries. So for instance, if a survey had 30 questions and 1000 employees completed that survey that produced 30,000 survey item responses. Rather than looking at a specific index what I was able to do is take a step back and look overall, at the gestalt of where the more favorable responses were coming from and where the least favorable responses were coming from. This avoided item mapping across a large number of different projects with items that really did not match up very well. Since most of the projects were multi-national I was getting a good cross section of differences by country within each survey questionnaire.

With the new data from Freedom House in hand, and the tucked away thought from the presentation at the conference I attended, I wanted to revisit that dataset and see if there was a relationship between employee positiveness and how a country was rated in terms of freedom. My hypothesis was that employees, who felt they had a voice in society and were living in countries rated as more free, would respond more positively when they were given a voice in their respective organizations by being asked to complete an employee survey.

I eagerly loaded the data from Freedom House and was pretty dismayed by the correlations. They were very low and really no relationship was found to support the hypothesis. Then I looked at the data a little closer and found that the reason for no relationship being found was a classic case of range restriction. In this case, perhaps not surprisingly, countries with despotic rulers, to the extreme right or extreme left, were simply not very likely to be places where employee surveys were carried out. So most of the data came from countries identified as being Free as you can see in the table below.

2006 Country Scores Freedom House 2006 n Freedom House % Employee Survey 2006 n Employee Survey %
Free 89 46% 39 76%
Partly Free 55 29% 8 16%
Not Free 40 25% 4 8%
Total 192 100% 51 100%

Bottom line, I was disappointed not to have enough data to test out my hypothesis, but perhaps enlightened a bit by confirming the notion that in places where people are Not Free, where attempts are made to suppress freedom of expression, that attitudes of people, including employees at work are not collected. Employee surveys in countries identified as Not Free or Partly Free are not done at nearly the same rate as in countries that are identified as Free. I can’t help but wonder if more participative companies are more likely to carry out employee surveys than those that are run in a more autocratic fashion paralleling the findings at a country level.

There is a complexity in the data that needs to be mentioned and that is that most of the organizations collecting employee survey data who are in the dataset are western multinationals, either American or European, who may simply not be doing business in the countries that are Not Free and I have no ability to test for that.

© 2011 by Jeffrey M. Saltzman. All rights reserved.

Visit OV: www.orgvitality.com

Written by Jeffrey M. Saltzman

February 19, 2011 at 2:24 pm

Aligning Morality and Profits

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“Tell me why you are crying, my son

Are you frightened like most everyone

Is it the thunder in the distance you hear

Will it help if I stay very near, I am here”

Day is Done, by Peter Yarrow

of Peter, Paul and Mary

There has been much written about the greed of Wall Street, the pay of CEOs, the off-shoring of jobs to enhance corporate profits while eliminating jobs locally, the evils of globalization, the increasingly powerful corporations doing as they feel, ignoring or bending national governments and political parties to their will. Over the years, other corporations have been shown to skimp on key issues such as safety, increasing risk for their employees, or adopting procedures or processes that put their customers or the general public at risk (minimally at risk of purchasing an inferior product, but rising up to and including the risk of death).

All you have to do is read the descriptions of the egg farms associated with the recent salmonella outbreak, with bird droppings so thick that doors could not open, rodents running rampant in the henhouses, dead birds lying around, and horrible conditions for the birds themselves, to be put off of eating eggs for a long time. You question the methods of the corporate world when explosions and oil spills, that seemingly should have been prevented, contaminate vast expanses of water, destroying communities and livelihoods. Option backdating, sales figure manipulations, kickbacks, bribes, corruption, and Ponzi schemes, the selling of smoke and mirrors, snake oil and other worthless products, market manipulations, false valuations, shell corporations, tax havens, shelters and evasions, and on and on. It can be a bit overwhelming, if you let it.

The Institute for Policy Studies recently conducted research that correlated CEO pay to layoffs. CEOs among “50 companies — “layoff leaders” in the study — that laid off the most employees took home an average pay of almost $12 million in 2009, 42 percent more than the average CEO pay. Most firms — 72 percent — announced mass layoffs during periods of profit, reflecting a growing trend in corporate America: tightening the workforce to increase profit and maintain high CEO salaries.” (CBS News) Corporations seem to be rewarding to a greater extent those CEOs that can layoff the largest number of people. If everyone is laid off though, just who do these corporations and CEOs think will be buying their products and services? The notion is one of passing the buck onto someone else, some other organization or government entity to worry about, as though organizations have no social responsibility, even when the evidence suggests that organizations that minimize or have no layoffs perform better in the long-term (Cascio). The logic in the CEO’s head seems to be that “I am just paid to worry about the health of my organization, not that of society” and boards, apparently in agreement, are rewarding CEOs accordingly. To worry about society, it would require the CEO and the organization to take a long-term view of their business, its overall long-term potential growth, and not be focused on simply the next quarter’s numbers.

Consider Afghanistan, the country and its government, as an organization. In a scathing review of the corruption that is rampant and part of the “normal” operations of the government, the New York Times describes sentiments from decision makers about the need to squash the corruption in the country that flies in the face of everything we know about how people behave – what they want from life, what they expect from the heads of the various organizations to which they belong, and how they are similar to, or differ from other people elsewhere. “Since 2001, one of the unquestioned premises of American and NATO policy has been that ordinary Afghans don’t view public corruption in quite the same way that Americans and others do in the West.” (New York Times) Those sentiments are intellectually shallow and inherently wrong. Those in power in Afghanistan may not view it quite the same way, or they may rationalize that the citizens view it differently, but I can guarantee you the citizens do in fact view it like people all around the world do. They may not feel they can do anything about it, they may be resigned to it, but they resent it as much as the citizens of the USA resent corruption in their own government. (I am sure there are some in the Afghan government who are honest civil servants). And this resentment opens them up to being influenced by those (read Taliban) who promise something better (even though they are likely as corrupt as the government).

The difference between the corrupt power brokers in Afghanistan and those in the USA is not that somehow our western culture is inherently more honest, or that somehow we possess a larger percentage of people with honesty traits. The difference is that with our free press and some regulatory oversight, those in the USA are more likely to get caught and punished, and hence reign in their corrupt instincts, and given the more open, transparent nature of our society, they may find it more difficult to rise to a position of power in the first place. I am not painting a picture of inherent dishonesty being rampant, rather that if you create opportunity for individuals to behave inappropriately, a portion of them will. One role of society is to eliminate the temptation and opportunity for dishonest behavior to the extent we can.

“So you ask why I’m sighing, my son

You must inherit what mankind has done

In this world full of sorrow and woe

If you ask me why this is so, I don’t know”

Peter Yarrow

All of this behavior is in pursuit of profit or personal gain. If one were to talk to a dispassionate outside observer, you could not blame them if they were to question whether there was a better way for societies to provide for their members than those currently in use. The outsider would observe, for instance, ample evidence of organizations and individuals doing their best to maximize their positioning vis-à-vis others as though they were in some kind of race, a race that promises profit, money and personal gain laying just across the finish line.

The underlying question is this: Is the pursuit of profit and personal gain antithetical to the best interests of society as a whole, does it tend to create amoral conditions or conditions in which the average person is not treated justly? Are the conditions generated by profit seeking entities, whether they are organizations or individuals cause them to be inherently in conflict to the best interests of society as a whole?

The short answer is “no”. But it takes some explanation as to why, when we see so much abuse of the profit motive around us. In fact it gets to the point, think of Enron or even the drug cartels in Mexico for instance, where the pursuit of personal profit, personal gain or profit for the organization is clearly detrimental to society at large. Capitalism and democracy is clearly the best mechanism that we humans have devised so far to create conditions which furthers the well-being for large segments of society. But it is too easy to turn to an approach that seemingly simply provides for the greatest good, neglecting individual rights, or alternatively an approach that we should not impinge on the freedom of others to do as they choose, emphasizing individual rights, even if what they choose to do imperils others.

John Rawls (1921-2002) provides a path forward, and in recognition of that he was awarded the National Humanities Medal in 1999 for helping Americans revive their faith in democracy itself. You see, the struggles we are facing on these issues are really nothing new. John Rawls was an exceptional American philosopher who worked in the space of morality and political science.

He allowed that people are born with differing natural abilities and with uneven opportunities being handed them, because of the economic status of their parents, ethnicity, religion etc. His thinking was that “the natural distribution is neither just nor unjust; nor is it unjust that persons are born into society at some particular position. These are simply natural facts. What is just and unjust is the way that institutions deal with these facts.” In other words, yes, people are different and have different opportunities due to circumstance, but that fairness or morality when applied to these differences means that organizations are required to provide equal opportunity regardless, in order to be just. His famous thought experiment describing the “veil of ignorance” illustrated his point. What is critical is that access to differing opportunities is not institutionalized, memorialized into law, or are available simply by social contracts or norms. In the veil of ignorance, the morality of a concept is determined by how it would be implemented in society if no one knew what opportunities they would personally receive under the concept.

The profit motive is moral and it has proven much more effective than the alternatives. It has lifted countless people out of poverty and has greatly improved the lives of billions. The abuse of the profit motive, that is, profit at any cost, to the detriment of an individual or society as a whole is not moral. What Rawls would argue is that regulatory oversight of how organizations and individuals achieve profit is proper to ensure that abuse does not occur. It is up to us as a society to strike the proper balance between oversight, checks and balances that limit opportunity for improper behavior and so much regulation that we choke off the vibrancy of capitalism.

Why are you smiling, my son

Is there a secret you can tell everyone

Do you know more than men that are wise

Can you see what we all must disguise, through your loving eyes

And if you take my hand, my son,

All will be well when the day is done

Peter Yarrow

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

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