Can we save us from ourselves

What do Amazon, Apple, Facebook and Google have in common?  Eric Schmidt, Executive Chair at Google, identifies them as 'The Gang of Four" and suggests that their collective and competitive efforts will shape the future of the internet.  Schmidt states that Google has a value system that supports free and open internet access and that this value system, supported by the others, is the best thing that can happen to the internet.

Seriously, he said that. See his interview with Charlie Rose on PBS.

Just what are the credentials of this Gang?

Amazon started selling books online in 1995 and while you cannot dispute its retail success (Sales in excess of $70 billion in 2013), there has been a huge human cost to the smaller local retailer.

Apple was a floundering niche computer manufacturer until the unexpected success of the iPod, first introduced in October 2001.  Apple has subsequently grown to become the world's largest company based on stock value.  But its' future remains clouded without the Steve Jobs personality to guide future product development and already it faces serious competition in both its iPhone and iPad product lines.

Facebook is the social media darling of the day.  But even with over 1 billion users, it is already looking for the 'next' in order to remain relevant.  Last week it spent over $16 billion on a company with less than 60 employees simply because it had over 400 million users.

Finally Google, a company which is essentially an online library and reference tool, makes it money from clicks.  That is hardly an awe-inspiring mission statement.

Collectively these companies have about 75 years of corporate life and yet Schmidt has the audacity to believe that they will shape the future of the internet.  I am not sure which frightens me more; the fact that he believes it or the possibility that he is right!

While I do not dispute the concept of  a 'free and open internet', I am troubled by the suggestion that the values and principles of so few may be the guiding light for this evolution.  Any institution that operates without boundaries will inevitably devolve to the lowest common  denominator.  Consequently  a tool intended for good is vulnerable to corruption and more often used for evil. 

If the 'free and open' means that there cannot be any censorship, who decides what is good and what is not?  Do we leave that up to the Gang of Four and their long history of sound judgement? 

I don't profess to have all the answers.  But this much I do know.  The internet has the capacity to be   one of the greatest tools for good that humanity has seen.  Paradoxically, it has an even more grave potential for harm.  Any suggestion that the Gang of Four can make the important value decisions on its future is naïve in the extreme. 

The question then becomes '...can we save us from ourselves...' or are we already trapped in this labyrinth, a black hole from which no light can escape.  

Ethical not mythical

Over the past couple of years SNC Lavalin, one of Canada's pre-eminent companies operating in the international marketplace, has been found to have acted in a corrupt manner.  Charges have been laid against current and former employees for alleged criminal activities in both Canada and abroad - typically relating to bribery.  The company has already agreed to certain sanctions imposed by the World Bank and more penalties are likely to follow.

Beyond the obvious public relations issues that this kind of corporate behaviour elicits, consider some of the deeper implications that are less apparent at first glance.

1. When any company participates in illegal, immoral or unethical activities - bribery, price fixing, influence peddling etc. - the message to all employees essentially says "we are not good enough to compete on a level playing field".  Whether the indictment is interpreted about the company's products, services, systems or people does not matter.  The message is the medium.  The workplace is poisoned and employees are embarrassed and disheartened by the fact that leadership has such a low opinion of the company's ability to compete.
2. When these kinds of activities are known internally they establish the standard for acceptable behaviour for all employees.  While the corruption may be played out at the executive level, the bar is set for everyone.  How is anyone held to account for cheating on an expense account; for taking that extra long lunch; for abusing company benefits etc.  When the line of acceptable conduct is blurred at the highest levels, the implications flow to the deepest levels of the company.
3. What happens to the opinions of key suppliers?  Will they feel that they have been cheated in their negotiations to supply products or services to the company?  Will they want the speculation that they have somehow directly or indirectly supported the activities of the cheater in order to benefit from future sales?  Will they be concerned about the opinion of other companies that they serve and the potential that these firms will not want to be tainted by association? 
4. Then there is the attitude of other clients whose business with the offender has been conducted above board.  Unfortunately the same potential to be tainted by association must be considered.  It is only natural that the questions will be asked to determine how wide spread the corrupt activities have spread.  This brings an unnecessary and costly focus on others who must assert and defend their innocence.    Furthermore it will dissuade other companies from considering business with the offender simply because of the optics.

SNC Lavalin and others conducting themselves in a like manner often use the time worn argument that others do it or that this is the customary way to conduct business in the particular market.  Effectively they are justifying their actions through the application of situational ethics.  Whether you operate in a local or in a global market those arguments simply don't hold water.  There are no shades of grey, only black and white.  Just a 2+2 always equals 4, right is right and wrong is wrong.  It is not a case of perspectives.

As my title implies, ethics cannot be mythical.  Ethics are not some unicorn or Cyclops or other fantacy of literature.  Ethics are real, measurable and consistent.  And they hold you accountable.

Too often, for the SNC's of the world, ethics have been found difficult and thus left untried without due consideration of the extent of damage that their choices will inflict.  Don't compromise your leadership role by sacrificing that which is easy to build but almost impossible to rebuild.

Fear not!

It seems that the most basic human emotion is that of fear.  For millennia, those in positions of power have used this reality to control their subjects.  Whether that role was as the head of a nation or simply the local tribe, fear was the over-riding means by which control was exerted and leadership was maintained. 

Fear played itself out in various means.  At its' extreme, fear of death motivated people to stay in line.  But fear of being criticized; fear of failure; fear of injury or harm; fear of humiliation or rejection; fear of the unknown; all of these prevented individuals from doing anything that might upset the status quo.  As long as one had the basic necessities of life there was little likelihood that someone would take a risk.  For all intents and purposes, people were paralyzed by fear.  And those in positions of authority used this knowledge to take and retain power.

We would like to think that as we have matured as individuals and as a society that this primal instinct would have subsided. After all, we live in a civilized democracy in which one is essentially free to express themselves and to make educated choices. 

But in truth, fear remains our default response.  This continues to be evident in many levels of leadership.  Those individuals entrusted with authority, acting out of their own fear of failure or rejection, repeatedly use fear as their primary tool to motivate others. In the workplace the fear of death is clearly not an option.  But the fear of termination or the fear of humiliation are almost as effective weapons to control the activities of the employees.  During this period that we call the Great Recession, fear has become an even more effective option because, with the high levels of personal debt, one can simply not risk becoming unemployed.

What a commentary it is when, at a time when we most need to have a positive message, we are instead guided by fear...

At one time in our history, fear was a protective emotion that evoked our flight or fight response to danger.  The adrenalin that our bodies produced spurred a defensive posture for our protection.  But in the absence of danger, fear is an entirely inappropriate response to the challenges we face and it is an especially inappropriate way in which to provide leadership.

Fear does not encourage, it criticizes.  Fear does not produce an environment of safety but one of  dismay.  Fear does not promote creativity, it provokes stagnation.  Fear does not provide hope, it instils hopelessness.  Fear does not free, it paralyzes.  Fear produces only more fear.

We must have leaders who approach each day with joy.  They do not  deny the realities or the challenges that they and their teams face.  But rather than view these as obstacles they look at them as opportunities.  Leaders must inspire by communicating a vision in which all things are possible. 

Imagine reporting to your workplace knowing that your ideas and contributions will be welcomed; where your best efforts are appreciated even when they came up short; where you are supported and encouraged ; and where hope produces more hope. Surely this in the primary objective of every leader!

If you lead, I encourage you to discard fear as an option.  It never was a good idea and today it is even worse. Instead, instill a passion for the opportunity set before you.  If you have a joy towards the goal, your team will join you in a manner that you can never fully appreciate until you try. 

When fear is not an option, neither is failure.



 

Lessons from Amish, Inc.

On a recent trip through the US, we stopped at a favourite location in south-east Pennsylvania.  This is an area that has a large Amish population.  These people are as recession proof a group as you can find.  And they are incredibly successful! 

As this was not our first trip to  the area, I decided to take some time and really observe this group in action.  There must be some lessons for us to apply to our daily activities.  Here are the top ten insights that I gleaned.

1. Be focused.  Do what you do best and do it better than anyone else.  Long ago the Amish decided to be the best farmers and craftsmen that they could be.  Using livestock to pull plows and wagons, they have developed skill sets that have served them well for centuries.  And their yields are outstanding.
2. Use everyone's talents in the best way.  Not everyone is gifted with the same skills and abilities.  But everyone can contribute something and the Amish are great at delegating responsibilities to the appropriate individuals.
3. Train and equip before assigning work.  Before anyone is expected to take on a task, the leaders ensure that the individual has the training and tools to do the job properly.  No one is simply thrown into the fire and allowed to fail.
4. Count the cost before you start.  The Amish do not take on debt.  Before they take on a task - buying more land; building a home or barn - they save the money and are able to pay for everything up front.  In this way there is never a serious concern if the harvest is less than expected.
5. Be thankful, not entitled.  The community never 'expects' success.  They put in the hours and effort.  There is never a feeling of entitlement when things work out well.  Rather they are thankful and know the same level of effort must be applied the next day, the next month and the next year in order to achieve the results that they  need.
6. Committed to the leadership.  Within the context of the community there are certain individuals who are nominated into leadership. From them, everyone understands the goals and the importance of their contributions.  Therefore they are committed to the leaders.
7. Do something that gives you joy.  No one is forced to stay in the community.  At an age of maturity young people are even encouraged to take a year away to experience the broader world.  If they choose to return, it is because the community and the work fulfils them...it brings them joy.
8. Plan for succession.  Often the most difficult transition in any company is from one leadership group to the next.  The Amish have understood this for hundreds of years and have proven very adept at identifying and preparing the next generation of leaders.  Their results demonstrate the importance that they place on this process.
9. Grow with a purpose.  With large families the rule and not the exception, the communities outgrow the available space.  As a result, expansion is a planned event.  They also understand that a new community cannot consist of one family...it must be a community.  All the skills needed to support a community are represented in the families that participate in the expansion.  This ensures the greatest likelihood of success.  Nothing is left to chance.
10. Be moral, ethical and legal.  The Amish operate with a religious imperative and these values are implicit in their operations.  But a lack of religion in your workplace does not mean that these principles should not be intrinsic to the way in which your company operates.  Employees, clients, suppliers and others all respond better when they know that you can be trusted to keep your word and to deal fairly.

Take a look, take a long look, at how Amish Incorporated has managed to outperform all others for almost 300 years.  They may not be the biggest land owners, they don`t drive Mercedes or BMW`s or any other German made vehicle.  Their horses and buggies won`t set land speed records. 

 

But they are successful, happy and content.  Their formula works and their principles set a fine example.  There`s not a lot wrong with that!

Before the next one hits...

As we begin to emerge from the second worst economic downturn in the last century, I submit that we need to rethink our response to the next time we are faced with a recession.  I don't know when that will come but history clearly demonstrates that it is the very nature of our world financial systems to experience periods of growth followed by 'corrections' that we call recessions or, in their worst iterations, depressions.

Those in leadership roles at publicly traded companies have followed a fairly predicable path to respond to these downturns.  They may cloak it in different terms such as 'restructuring'; 'rightsizing'; 'workforce adjustment' or some other euphemism. But the bottom line is the same.  They fire a lot of people and force the remaining employees to be more productive with fewer resources. 

This approach is done, first and foremost, to satisfy other stakeholders, most specifically those who own shares of the company.  Demonstrating to 'the street' that you are being proactive in responding to an economic downturn somehow suggests that the executives know what they are doing and thereby expect to retain the trust and confidence that first gained them the positions they hold.

I have been around long enough to have worked through several recessions.  Since 1950 there have been 8-10 recessions. ( Some commentators combined some events, hence the difference.)

The fallacy with the traditional response is that most recessions are short-lived, the current event notwithstanding.  What that means is that more often than not, the impacts of layoffs have only just subsided when it comes time to fill the vacancies to meet returning demand. 

Here is the truth.  Layoffs and the associated severance costs are incurred in a year in which profits are already going to miss budget.  These costs cloud the underlying reasons that objectives are not being met- that is poor planning and/or execution at a leadership level- and they allow for executive management to mask overall results. 

The following year it becomes a relatively easy matter to exceed prior year results and to show 'double digit growth' and thereby restore shareholder and market confidence.  The corner office is able to polish its' 'messiah complex' while never acknowledging that they should have been managing the company with the knowledge that a downturn was inevitable.

This charade comes with a huge human cost that in many, if not most, instances is entirely unnecessary.  So here are my recommendations for what ought to occur in the face of the next recession...because there will be a 'next'.  These all must be implemented before any layoffs are contemplated or initiated.

1. All bonuses are immediately suspended.  In my opinion, when the alternative is for someone to lose their job it is better to cut out bonuses for those whose strategic plans and lack of execution have put the company in the position that requires these discussions.
2. The company should determine the actual amount of savings that are anticipated from the terminations. Instead of layoffs there should be salary rollbacks on a sliding scale starting at the most senior levels.  Executives at the CEO and VP levels should be cut 10%; next level managers 7.5% and mid level managers 5%.  If these cuts have not achieved the dollar objective, then the balance needs to be shared amongst the remaining staff.  In all likelihood it would be a 2-3%  rollback which, after taxes, represents a negligible reduction in actual take home pay.
3. An option to a salary rollback would be job sharing or reduced hours.  For example, someone can contribute a 2% reduction in compensation by working about half a day per month less.  Most people would be able to accommodate that kind of change.

Adopting this kind of approach to recessionary pressures has several benefits, some of which include the following:

1. The reduction in bonuses hits those whose failures have had the most significant impact in the company performance.  At the same time it affects those who are most capable of withstanding the financial impact.  Very few executives are young and fiscally vulnerable.  They don't have mortgages and loans that stretch the family budget to the extreme.  The failure to collect a bonus translates into one less European vacation or a delay of a year before they replace that BMW in the driveway.
2. When everyone participates in the pain, there is a greater sense of community in the workplace.  If everyone is considered to be part of the solution, then respect and commitment to the cause is improved because the objective is the same for everyone...to restore the company to the levels of profitability that allow wages to be recovered.
3. Whenever layoffs occur in a company, those who remain work under a cloud of guilt  and  they grieve for friends and co-workers who have gone.  Furthermore they tend to have a 'whose next' kind of attitude and their work reflects this defensive posture.  If this guilt and grief can instead be replaced by gratitude and joy, how much more positive will the effort be to face the challenges ahead. 
4. Finally,  this approach recognizes that the true stakeholders are not the pension plans, fund managers and analysts who hold and/or rate the stock value.  Rather, the employees have the greatest stake in the company and their futures are more important that any other.  As such, the pain should first be felt by the ownership group for they are the ones who have appointed and supported the executive team and they should share in the failure in the way that really hurts, in their wallets. 

A front page report today stated that the top 85 billionaires in the world have a combined wealth equal to that of half of the world's population.   Talk about a concentration of wealth.  This represents the extreme but symbolically it also illustrates the issue that I have referenced above. 

A relative few at the top are making decisions, at times poorly, but the consequences of those decisions primarily impact others.  Next time around why not have a protocol in place that anticipates the need for short term adjustments that will impact those most responsible for the predicament.  Perhaps the recognition that this protocol exists will be the impetus for this group to make fundamentally better decisions that demonstrate an understanding that business cycles truly exist and that corporations should be built with this expectation in mind. 

Or is that just too much to ask...

 

Just a little accountability please.

Recently I expressed my concerns about executive compensation and specifically the size of that compensation when compared to the average wage earned in their organizations.  This disparity seems to be most notable in the financial industries.  It is ironic that in an industry that does not make anything, we find that the distribution of compensation is most disparate.

Let me explain that last comment.  General Motors makes cars; farmers grow meats, fruits and vegetables.  But financial institutions do not make anything.  What they do is to redistribute wealth and take a commission for doing so.  Their efforts really do not rely on a profitable transaction taking place; they make a commission for facilitating the transaction.

So in the absence of truly creating something tangible; and in being overcompensated in the process; how is it that we also have left these executive halls unaccountable for the malfeasance that has come to light since the beginning of the Great Recession.  Keep in mind that the main reason for the downturn in the economy was bank failures brought about by something called derivative trading and sub-prime mortgages.  (Without getting into the specifics, US banks had to trade outside the country with these financial initiatives because they were illegal in the US. Go to this website for more insight http://www.pbs.org/wgbh/pages/frontline/oral-history/financial-crisis/tags/subprime-mortgages/)

Although some of the financial institutions are now paying large fines associated with these activities - JP Morgan just paid $13 billion - not one executive has faced any criminal charges.  This despite the fact that the actions were illegal and the executives were compensated very handsomely through their bonuses for the profits generated from these schemes.  In fact, not one Wall Street financial executive has faced any criminal complaint several years after this all began.

In a different but similar kind of action, JP Morgan agreed to pay over $2.6 billion to settle allegations of criminal and civil activities related to the Bernie Madoff Ponzi scheme.  Madoff is serving a life sentence for his actions.  No one at the Bank will serve any time for facilitating Madoff for over 15 years.

In Canada, The Royal Bank agreed to pay $17 million  to settle claims in the Earl Jones Ponzi case, all the while denying any responsibility. ``RBC has closely examined its role in providing Earl Jones with a bank account and is satisfied that it was not negligent,” the bank said in a statement.   That strikes me as a pretty expensive denial.  Again, no executives were hurt in the issuing of the statement...

All I would like to see is some accountability.  If the activities noted here had been perpetrated by a Branch Manager, she or he would have been thrown under the bus in a heartbeat.  But because the executives are `connected` both fiscally and politically, they are seemingly above the law.  And that is just not right!

If you drive the get away car, you are considered just as guilty as those who actually robbed the store.  So how is it any different for these bank executives?  They endorsed an environment that facilitated the abuses.  How is that any different from driving the car...

A rose by any other name...

Shakespeare completed the statement by declaring that it would still '...smell as sweet...'  In essence, it matters not what we call something but rather what it is.

So, what do you think of when you hear these titles?

Boss...manager...owner...president...supervisor...commander...head...chief...dictator. 

Each of them brings to mind someone with a position of responsibility that includes the direction of others.  Note that I have used the word 'direction' advisedly because there is a distinct difference between directing others and the more powerful and effective act of 'leading' others.

By definition, a leader must have followers.  One does not lead oneself...

Furthermore, followers must be willing participants.  It is a contradiction in terms to suggest that a follower who is pushed, pulled, coerced or threatened to allegiance to a cause or a goal is, at the same time, a willing subject.

Herein lies the important distinction between any of those whom have been identified in the list above and the authentic leader.

Only the authentic leader has the ability to inspire others.  And it is the inspired follower who is able to accomplish so much more than you can imagine. 

Just look at your own experiences.  When you are 'commanded' to perform a task you will do it.  But without your heart felt investment the result will almost always fall short of your best.  It will be 'good enough'.

But if you are truly inspired to contribute you will look for ways to improve on even your best.

As we enter a new year, my challenge to you is this.  Are you leading or are you directing?  Are you leading or managing?  Are you leading or commanding?

If it is the latter, the year ahead will be filled with the same challenges you had last year and the year before that and the years before that.  Do you want employees who simply show up, keep up and shut up?

Or do you want an environment in which your leadership inspires them to go above and beyond your expectations?

The question may seem rhetorical.  But the difference in results are anything but.

The real question though is this.  Do YOU have the character that inspires?  Or will this be another year 'in command'?  Remember, it matters not what we call something, but rather what it truly is.