Goldman Sachs and the Need for Hangings in the Village Square
Are public hangings an essential feature of capitalism? Or, can we trust in principle based morality?
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This is not a trivial question. The child like and pseudo religious belief that the free market will, by itself, right all wrongs in time, a belief adhered to by Alan Greenspan and other groupies of Ayn Rand, is at the heart of our financial crisis and the crisis of capitalism. This Greek tragedy was played out at Enron, Lehman Brothers, and now Goldman and BP. It is the failed reliance on “rational self-interest” as a moral code.
The question is whether corporate executives are capable of adhering to principled behavior, behavior that supports a good other than their own, in the absence of punishment of significant severity to balance out the significance of potential rewards for unprincipled behavior.
Extreme rewards cause the mind’s eye to be severely out of focus and nothing serves as well to focus the mind as the anticipation of hanging in the village square at sunrise. So it appears that we must periodically publicly execute an executive to assist us to become principled. It would be nice if they didn’t make themselves such convenient and obvious targets.
I have been in the corporate world long enough to know two things: most executives are principled and do seek to adhere to fundamental values; and, there are companies and there are subcultures in which the value of “winning” as defined by financial performance alone, completely overwhelms any other morality.
On June 10th Goldman Sachs stock hit a one year low after another report of legal problems. This time the SEC is investigating a mortgage investment Goldman bundled and sold in 2006. They were already investigating possible fraud involved with an investment Goldman created called Abacus, a CDO, that was allegedly set up to enable Paulson & Co. to take short positions against this basket of what they believed to be distressed mortgage securities, while at the same time marketing this to their customers.

Goldman Sachs CEO Lloyd Blankfein
This was obviously not set up on the Deming philosophy of “delighting” your customers. If you are selling something you have created to your customers while at the same time betting against it, you are shafting your customers and you are, therefore, not trustworthy. The morality of this is simple.
What proves to me, beyond a reasonable doubt, that Goldman has not learned the lessons of principle centered leadership is not the above charges. It is the pathetic game being played with a Congressional Commission investigating Goldman’s dealings.This week the Wall Street Journal reported that…
A commission probing the financial crisis denounced Goldman Sachs Group Inc., saying the firm first dragged its feet over requests for information then dumped hundreds of millions of pages of documents on the panel.
This is an old and tired lawyer’s trick: You want documents? OK, here is a truckload of documents. See what you can find! And the investigators are so overwhelmed with irrelevant documents that they never find what they are looking for. As the police tell young thieves everyday, “If your not guilty, why are you running away and making yourself look guilty?” The Goldman legal team is either tacitly admitting guilt or is too dumb to know what “guilty” looks like.
The virtual collapse of every major Wall Street financial firm was not sufficient to awaken the spirit of moral conduct or the sensibility of moderation. The intervention of the government, required to prevent the collapse of the entire financial system, allowed many of these executives to obfuscate their own participation in the events that led up to that disaster and caused their minds eye to be blurred to consequences of their own behavior.
Before I was a parent, and a student of behavior modification and the power of positive reinforcement, I was convinced that I could raise my children without ever resorting to the “old way” of punishment for bad behavior. Nothing humbles one as well as parenting. I did resort to punishment, sparingly, as I realized that even the most superior children (my own!) occasionally needed to experience the pain associated with misconduct. But, you hope that as one matures, the intellect takes over, and the ability to adhere to moral principles, religious or otherwise, will be sufficient to keep behavior within acceptable control limits.
But, I fear that the more one is paid into the millions, the more one develops a childlike need to test the limits of the environment, to exceed the bounds of what is obviously “right conduct” until one once again one must contemplate the significance of a well constructed scaffold erected in the village square.
Lean Politics: Give Up Ideological Waste
The environmental disaster in the Gulf of Mexico is in part the result of political/ideological waste. Lean management focuses on the elimination of waste from manufacturing and other processes. Lean managers develop a keen sense for what adds value and everything else is waste.
I normally do not comment on politics in this blog, but in this instance I must. Our politics have been dominated by the left/right, big government/little government, politics and debate. Most of this debate is an entire waste! It is adolescent nonsense that belongs, and will end up, in the historical trash bin!
Maria Bartiromo’s (CNBC) Logic:
This debate has made us crazy. On Friday I was watching Maria Bartiromo on CNBC.
The DOW was dropping more than 300 poi
nts because the jobs report had revealed a lower than expected rate of private sector job creation. She commented that the low rate of private sector job creation proved that government policies were failing. So, the failure of the private sector to create jobs is, in the mind of this free enterprise advocate, the fault of government to do more to create private sector jobs. This despite hundreds of billions of tax dollars spent to save the private sector banking institutions, saving GM and all its suppliers, and lowering taxes on small businesses. Why isn’t creating private sector jobs the responsibility of the private sector?
Somehow the failure of BP to stop the leak from their own well becomes the burden of the President who knows nothing about oil exploration or production and can’t possibly know how to stop the leak. We blame the government for the failure of the private sector to operate in a safe manner while at the same time arguing for less government regulation and control.Every conservative politician on the Gulf Coast is now arguing for the Federal Government to do more to rescue their beaches and business, not to do less. The libertarians would argue for virtually no regulation and letting the free market sort it all out. How many Gulf disasters would it take for consumers to put BP out of business or force their stock holders to give up their dividends?
There is some mass schizophrenia when it comes to the role of government and the private sector. This madness is a complete waste of resources and is itself responsible for many of our problems. It is past time to get beyond this madness.
Both the BP disaster and the collapse of the banking system have proven the need for effective government regulation – not more or less – better. Not waste, but value-adding actions. I have no doubt that we did not need more inspectors or more money spent at the Minerals Management Service that regulates the safety of offshore oil drilling. But, we did need regulators who were focused on serving the public good, not serving those who may violate safety and put the public at risk, as was BPs practice! Why didn’t the government do its job in administering justice to a serial criminal whose behavior has been well known and widely reported? In recent years BP killed thirty workers in its operations before the Deepwater Horizon explosion killed eleven: From ABC News…
BP’s safety violations far outstrip its fellow oil companies. According to the Center for Public Integrity, in the last three years, BP refineries in Ohio and Texas have accounted for 97 percent of the “egregious, willful” violations handed out by the Occupational Safety and Health Administration (OSHA). The violations are determined when an employer demonstrated either an “intentional disregard for the requirements of the [law], or showed plain indifference to employee safety and health.” OSHA statistics show BP ran up 760 “egregious, willful” safety violations, while Sunoco and Conoco-Phillips each had eight, Citgo had two and Exxon had one comparable citation.
Can anyone seriously argue that we do not need government regulation of the oil industry’s environmental and safety practices? Can anyone seriously argue that we do not need regulation to prevent excessive risk and transparency in the banking industry? Or, effective pharmaceutical regulation, food labeling, traffic laws, or a national defense?
What we need is effective government action, not too much of it, not too little of it, but effectiveness. Of course, we would all like to pay as few taxes as possible. Of course, we do not want government bureaucracy inhibiting business formation or innovation. Of course, we all want small government. But, we want a government that utilizes its resources well; that does its job in the most effective manner with the least wasted resources.
In the corporate world we do not argue whether we should have management or not. We do not argue whether we should have accounting or not. We accept the need for “governance”. But, we know that management and accounting can be efficient or wasteful. Why can’t we focus our political debate on creating effectiveness of government, not whether government is good or bad? Ronald Reagan famously said that “Government is not the solution. Government is the problem!” It was one of those incredibly simplistic comments that created a demon one group could rally around. Demonizing has been a favorite tool of politics and demagogues since the beginning of time. Government is not the demon. Poor government, ineffective government, wasteful government, is the problem. The opposite is the solution.
It is time to get beyond the adolescent ideological nonsense of “government good”, “government bad.” The entire discussion is cultural waste. Let’s get lean and eliminate it and focus on what is important… the effective enforcement of practical regulations that protect the public safety, while encouraging business creation and innovation. Effective rules and referees do not destroy, but enable, great competition in sports. This should be the goal of every politician. As citizens, it is this that we should be demanding from our politicians and from our political discourse.
Obama’s Gulf Leadership Lesson: The Limits of Power and the Power of Empathy
I admire President Obama. I support him. He is smart, has a world view and understanding that makes him well suited to the modern world. Unfortunately, in the past few weeks we have not experienced his finest hour. There are times when intelligence, analytic ability, is far less important than urgency and empathy. It is the difference between leadership in combat and leadership in a court room or academic setting.
Some readers may be familiar with my situational leadership model described in Barbarians to Bureaucrats, following Toynbee’s lessons of the rise and fall of civilizations, leaders and cultures go from the imaginative and creative “Prophet” to the conquering “Barbarian” and into the more mature periods in which systems, structure become more important than personalities.
You may remember that great scene in the movie Patton in which George C. Scott, playing Patton, visits the beds of his wounded men, kneels down and prays with them. He then literally leaves his jeep and marches gleefully through the mud with his troops as they race to relieve the surrounded 101st Airborne Division. Of course, Patton is playing Alexander the Great who did the same. Patton believes he is the reincarnated spirit of Alexander. He is the Barbarian, the conquering hero who demonstrates his love for his soldiers and receives their love in return. And, this love, what we call “loyalty” in organizations, is not the result of deep analysis, intelligence or good policies. It is the result of emotions. It is the result of the leader demonstrating the same emotional sensibility of his soldiers, their urgency for the battle, and pure empathy for the fear and pain they are asked to bear.
Having consulted with Shell, Exxon, Texaco and Amoco in years past, and having coached senior teams at those companies, I have some appreciation for the process of deep water drilling. It is a fact that no one, in either government or industry, knows a sure solution to the tragic flow of oil into the Gulf of Mexico.
I am somewhat amazed at news commentators who want Obama to take charge of the efforts to cap the well and stop the flow as if he had some unused magical powers. The U.S. Navy, Coast Guard, or anyone else in government has no answer to this. There is no power that can be commanded into action by the President to stop the flow. In a real sense, the president is helpless and must rely on the best efforts of BP and the other companies involved. Perhaps he could command more forces to the clean up effort.
But, that is not his problem or his failure. His failure is to perform the great theater of leadership in which the leader does as Alexander did, as Patton did, when they visited the tents of the wounded men, kneeled and prayed with their followers, and demonstrated the emotion of love and empathy for those who are in pain. There are little limits to the power of empathy, the power of letting those in pain know that you are with them, you are feeling what they feel, and that you will be by their side in their suffering. This is what George Bush failed to do in the aftermath of Katrina and I am afraid it is what Obama is failing to do or understand in the present case.
John Adams, speaking of the American Revolution, said that “A whole government of our own choice, managed by those persons whom we love, revere and can confide in, has charms in it for which men will fight.” He did not speak of intellect or analysis. He did not speak of factually correct decisions. He said that men will fight for leaders in whom they can confide, whom we love. And, we love those who demonstrate empathy and understanding for our own situation; who demonstrate the urgency that we feel; the fear that we feel. The tragedy of the BP Gulf spill may be more in the loss of affection for this president, a loss at his own hands, than for the coastline that in time will recover.
Decision Making Chaos on the Deepwater Horizon
I have long been an advocate for team decision-making, but more importantly, for decision-making appropriate to the situation. It appears clear now that the Deepwater Horizon, the Transocean drilling rig under contract with BP, suffered from poorly designed decision processes.
The Wall Street Journal reported recently that
“The chain of command broke down at times during the crisis, according to many crew members. They report that there was disarray on the bridge and pandemonium in the lifeboat area, where some people jumped overboard and others called for boats to be launched only partially filled.
The vessel’s written safety procedures appear to have made it difficult to respond swiftly to a disaster that escalated at the speed of the events on April 20. For example, the guidelines require that a rig worker attempting to contain a gas emergency had to call two senior rig officials before deciding what to do. One of them was in the shower during the critical minutes, according to several crew members.”
An important consideration when establishing team decision-making processes is to clarify which decisions should be command, which consultative, and which should be consensus decisions.
Acknowledging the legitimacy and critical need for effective command decision making is the only way to gain an acceptance for the situational appropriateness of consultative and consensus decisions. In any environment in which there is a potential for crisis it is essential that there is a well defined and well rehearsed command decision process. It is insane that a rig worker attempting to contain a gas emergency would have to call two senior rig officials before deciding what to do. That is the equivalent of a marine on the ground in a combat zone coming under fire and having to go two levels above to get instructions to take action. That is a certain way to get your marines killed and lose a war. It was a certain way to get eleven rig workers killed, also.
Soldiers on the ground are trained to take action, to take initiative, to improvise, and are drilled in those actions that require instantaneous responses. Bureaucratic control is not the same as effective command. In a crisis it must be assumed that the means of communication are incapacitated, that individual leaders have been cut off from the action on the ground. Those who can and must act must know that they are expected to take initiative and they must be trained in the appropriate responses.
You can use consultative and consensus decision making to arrive at the best procedures… long before the crisis. In the crisis, everyone must know who in command, who can take action, and what action must be taken immediately. This is a good time for every organization to study this negative case and use it as an opportunity to review your own crisis management procedures.
Management Waste – Get Lean and Eliminate It!
One of the core ideas of Lean Management is the elimination of waste. This usually means eliminating unnecessary tasks, motions, inventory, rework, etc. However, the new challenge for lean management is to improve the efficiency of management itself. Much management activity is waste. This waste is just as destructive, or more so, than waste on the factory floor.
What does this waste look like? I have identified six forms of management waste. Feel free to add to the list.
Management Waste # 1: Sucking decisions up due to the lack of empowerment, education and encouragement at lower levels. Management thinks they are busy because they are doing other people’s work and they do this because they have not structured the organization, established the training and systems to create competent problem solving and decisions at lower levels.
Management Waste #2: Displaying contradictory models. If you want to teach your children not to smoke, drink or swear, but you walk around the house smoking, drinking and swearing, your efforts are going to be little more than waste. Management, leaders, must model the behavior they desire of others. The failure to do so cripples any change effort. Millions of dollars in consulting and training have become waste because management didn’t walk the talk.
Management Waste #3: Failure to define and manage your own processes. There are processes that are owned by the senior management team. Every team, at every level, should have a SIPOC that defines input, output, and value adding processes owned by that team. They don’t own any process? Than the entire team is waste! Tell them to go home. MOST management teams do not know what there processes are, and reinvent them in a random or annual manner. Developing strategy is a senior management value-adding process. Where is the map that visualizes how they develop strategy? When they did it last year, did they study the process and what did they learn? Unfortunately, they probably learned nothing and are not themselves engaged in continuous improvement. Therefore, they don’t understand it and do not set the model.
Management Waste #4: Failure of decision making: I have coached dozens of senior management teams. One would think, logically, that the higher you go in the company, the more skilled would be the decision makers and decision making process. The value of decisions made at the top, should be of greatest value. Errors made at the top are the most expensive. The truth is that in most companies, the decision making process at the top is terrible.
Many years ago I was doing a socio-tech redesign of a major financial organization on Wall Street. The only room the design team could find to meet in was THE BOARD ROOM!! Very expensive furniture, huge table, mahogany paneled walls, etc. After a day or two the design team had half the wall area covered with flip chart sheets. In stormed the official keeper of the room with steam spurting out of his ears. He yelled, “Take that down immediately! No one has ever put anything on these walls!” I asked, “Really? No one has ever brainstormed or put flip charts on the walls in here?” “Absolutely Not!” He yelled back. Poor fellow. He had never seen a room in which people were actually solving problems, brainstorming, reaching consensus, developing action plans, etc. It tells you a lot about how senior management teams fail to employ disciplined decision processes.
Management Waste #5: Wasted space and resources. That board room was used once a quarter. It sat empty and unused most of the time. Why do managers need larger offices as they move up the ladder. Do they get fatter? Do they have bigger computers or more books? What is that about? It is about waste. It is the waste of ego. The time spent at resorts doing annual strategic planning that could be done in their own conference room, or in someone’s home, is also waste. Apply the same disciplined standards of waste and resource utilization at the executive and management level as you apply to the factory floor.
Management Waste #6: The failure of trust. An effective management team, like any team, is a social system built on trust. That trust enables members to share, to ask questions, to offer suggestions, and to listen well to each other. On MOST management teams there is a failure of trust among its members that inhibits their ability to solve problems and make effective decisions.
The solution to these forms of waste, which is the opposite of lean management, is not only training, but coaching and feedback. They need hands on help in order to change their behavior, their habits. It is these habits that define the culture.
Larry Miller
Toyota: Did they believe too much in their own reputation?
More than anything else, the mindset of leaders will determine the success or failure of any company. This is once again a lesson in how spiritual capital (values and purpose) will determine social capital (internal trust and brand equity), which in turn will determine the entire fate of the enterprise.
The Washington Post today reports Toyota’s own explanation of their failure. By their own account, they put growth ahead of quality. They did not have the sense of urgency to respond to customer feedback. Again, nothing in this condemns shop floor practices, the essence of the Toyota Production System, or “lean”, rather it condemns the priority and actions of senior managers. The culture of lean failed at the top, at the level of strategic thinking and action. This is a lesson in both where lean begins and where it ends.
Dr. Demings used to preach that we must “manage by the facts”, something so apparently obvious, yet something from which the human mind so easily deviates. The rigor of analyzing data to solve quality problems must be practiced at every level of management. The essence of lean is a focus on facts to continuously improve, and here the facts were ignored.
“As Toyota weathers the worst public-relations disaster in its history, its top executives are beginning to acknowledge that the company has majo
r systemic failings.


“At a news conference in Tokyo this week, Toyota’s vice president for quality control, Shinichi Sasaki, detailed three major weaknesses that the company has diagnosed in its quality monitoring and customer relations since October. That’s when Toyota began its largest-ever round of recalls.
“As described by Sasaki, the problems include:
– Lack of thoroughness in testing new cars and car parts under varying weather conditions, as demonstrated by the recently recalled gas-pedal mechanism that tended to stick more as humidity increased.
– Failures in gathering information from customer complaints, especially in the United States.
– Inability to analyze and act quickly on complaints that have been received.
“Company President Akio Toyoda wrote this week in The Washington Post that the carmaker created by his grandfather “has not lived up to the high standards we set for ourselves.”
“He also acknowledged that global sprawl and lack of quality control, especially in the United States, have weakened the company’s capacity to respond to complaints and share safety information. He noted that when sticking gas pedals were discovered and replaced in Europe, the company did not alert dealers in the United States.
“We failed to connect the dots,” he wrote.
How did Toyota lose its way?
The core reason, according to a number of auto-industry experts, is that the carmaker outgrew its human expertise.
“Toyota cannot develop engineers as fast as they can proliferate new models,” said Jeffrey Liker, a professor of engineering at the University of Michigan and author of five recent books on the virtues of the Toyota Way. “Each engineer is doing more and has more opportunity for error.”
“Before the avalanche of growth, Toyota took about 10 years to train first-class engineers, Liker said.
“These engineers and senior managers had time to absorb company values that gave them an intuitive feel for weighing quality demands against cost concerns — and how to squeeze suppliers on cost without getting inferior parts, said Susan Helper, a professor of economics at Case Western University in Cleveland and an expert on global manufacturing.
“So much of what made the company work well was that each manager was personally trained by a mentor who himself had long experience with the company,” she said. “When the fast expansion came, Toyota was very short of senior managers who were ready to become mentors. My sense is that decisions were made more on numbers, without understanding fully whether those numbers were measuring the right thing.”
So What Happened to Toyota???
With the rash of recalls, deadly accidents and a pending congressional investigation into Toyota’s quality problems an entire industry of consultants, book publishing, and training has been thrown into disarray.
Last week I was at a client and I was explaining some point of lean culture and I used an example from Toyota. The union president who was in attendance stood up and said “I’ll tell you one thing, you better not tell us to do anything because Toyota did it. Ten people in the past week have come up to me and told me that we aren’t doing anything because Toyota does it.” That about sums up the sentiment out there.
I was tempted to reply that my relationship had been with Honda anyway and I didn’t see why Toyota got so much credit, but I restrained myself… wisely, I think.
So the question is… has all the adoration, the pursuit of the Toyota Production System (TPS), aka “lean manufacturing”, “lean thinking” and anything else “lean” that might make a good book title, been a completely mistaken pursuit? Have we all been misled?
The short answer is an emphatic “no!”
Every automotive company, in fact every manufacturing company worth a darn, has adopted TPS to some degree and would benefit by adopting more. Honda freely acknowledges that they copied TPS and have developed their own adaptations and innovations, as have others. The essential elements of eliminating waste, reducing throughput times, creating a high involvement-high responsibility workforce, continuous flow assembly and continuous improvement, are indisputably effective.
What went wrong at Toyota has NOTHING to do with the factory floor operations. What went wrong was entirely a problem of senior management failing to respond in a timely and effective way. What happened to Toyota is what happens to virtually every great company.
At this risk of appearing to shamelessly promote my own book, in Barbarians to Bureaucrats, I described the parallel of great companies to the rise and fall of civilizations. In achieving greatness the leaders most often also achieve hubris, the arrogance of success and power. Humility is an essential element of learning and improvement and its antithesis, arrogance, is the assassin of success.
The problem with unpredictable acceleration has been in the lap of Toyota senior managers for years. They engaged in self-denial, halfhearted measures to fix the problem, and hoped it would go away. When executives become so certain of the success of their company they lose a healthy paranoia. Andy Grove was right: Only the paranoid survive.
I feel deeply sorry for the tens of thousands of Toyota workers and front line managers who everyday are working to make the best possible cars, continuously improving their product and process. They had nothing to do with this. It was a design problem and a leadership problem. I also feel sorry for any manufacturers who take glee in this and choose to dismiss all of the many valuable lessons that can and should be learned from Toyota, Honda, and other lean companies.

Ordering Lean Team Management
Amazon and other online retailers do have Lean Team Management available.
However… I’ll make you a deal! The list price of the manual is $38.
Order copies of ten or more through me!
- If you purchase ten or more copies I will fulfill that order for $28 each.
- If you order 25 or more copies I will provide you with a complete set of Powerpoints and teaching notes/lesson plans for the entire manual for free. This is to make life easy for internal or external trainers and consultants who wish to use the manual to develop teams in their organizations.
- If you order 100 or more copies (see it gets better and better) I will provide all of the above, plus I will provide a link to an online pre and post survey and will provide the results of those surveys free of charge. The online survey asks 40 questions concerning the culture of the organization, the functioning of teams, trust, scorekeeping, customer focus and other characteristics of lean organizations. The survey can be sorted by department, management/employee, etc.
If you have any questions about the above, email me at LMMiller@lmmiller.com.
Lean Team Management
Before we sold Miller-Howard Consulting Group to Towers Perrin in 1998, the core of our work was implementing team-based organization. We had two workbooks that defined our process and enabled our clients. These were the Team Management manual and Change Management or Whole System Architecture manual.
Because teams are the core social system, the foundation, of lean organizations I felt it was more than past time for a new team manual that updated the essential components
of implementing teams and incorporated the language and links to lean organization. So… I am happy to announce that I have completed work on Lean Team Management which is now in the printing process.
It is my intention to provide a courtesy copy of this manual to any former Miller Howard client who might wish one. Just email me. In addition, I have created an online survey that is based on ten cultural characteristics of lean organizations. For any former client, current client, or purchaser of more than 20 copies of the workbook, I will be happy to provide access and scoring of this survey at no charge. Again, just email me.
Table of Contents
Introduction
Gaining Understanding and Perspective
1. Family Farm to Lean Team Management
2. Lean Culture: Characteristics of High Performing Organizations
3. The Process of Change
Getting Started – The Basics
4. Defining Principles, Purpose and Goals
5. Organizing and Developing Your Team
6. Leading Effective Team Meetings
7. Defining Customers, Suppliers and Team Goals
Managing and Improving Performance
8. Defining Customer Requirements
9. Developing the Team Scorecard
10. Mapping Your Team’s Work Process
11. Analyzing Variances
12. The Basic Method of Problem-solving
13. From Debate to Dialogue
14. Motivation and Human Performance
The Role of Leaders
15. The Job of Leadership and Management
16. Leadership by Design: Aligning Systems and Structure
Appendices:
· Pre/Post High Performance Team Self-Assessment
· Group Process Self-Assessment
Index
Introduction:
The team in an organization is like the family in a society. It is the fundamental building block of trust and competence. Lean organizations are a social system, a culture, as well as technical system. At the heart of that social system is the small work group, the team, both at the front line level and at all levels of management. It doesn’t matter whether your organization is entirely comprised of knowledge workers sitting at desks, a not-for-profit service organization, or a manufacturing plant, the most effective organizations are all built on the foundation of effective teams.
“What are the truly important organizational features of a lean plant – the specific aspects of plant operations that account for up to half of the overall performance differences among plants across the world? The truly lean plant has two key organizational features: It transfers the maximum number of tasks and responsibilities to those workers actually adding value to the car on the line, and it has in place a system for detecting defects that quickly traces every problem, once discovered, to its ultimate cause….So in the end, it is the dynamic work team that emerges as the heart of the lean factory.”[1]
The majority of companies implementing lean organization are not achieving the results they could achieve because they are primarily focused on the technical things, the JIT, Kanban, etc. All of the technical arrangements of work and materials amount to no more than half of what creates the genuine competitive advantage of lean. The other half is the human side, the culture of the organization. This is the hard part because it is about you – how you think, feel and behave. It is about the relationships between team members, between different functions and levels in the organization. It is about trust. This is the hard part.
This manual is an attempt to present the most essential practices and skills of effective workgroup and managing teams. It is intended for teams at every level of the organization. It is based both on knowledge of the Toyota Production System as well as the history of and learning developing self-managed or high performance teams. It in no way includes everything that might be useful for teams to know. There are dozens of problem-solving techniques and methods that can be added into the training and skills of teams. This manual simply provides the structure, the essential skills, and the system that is the foundation of lean organization. That foundation is an organization in which everyone serves on teams that manage their own work; serve the customers who receive their work; give feedback to their suppliers; and continuously seek to improve their process. The goal is to empower every team by making them the “world’s greatest experts” in their own work.
It is important to understand what Lean Team Management is and is not. Lean Team Management for most companies is a change in culture. It is a culture of responsibility for performance at every level of the organization. It is a culture that is very focused on data, the facts of performance. It requires everyone to know and serve their customers, internally and externally. It is a culture of competence in decision-making and group problem-solving. And, perhaps most important, it is a culture that must be practiced by managers as well as employees. Each of these characteristics is true of any genuinely lean organization. Lean is not a set of problem-solving techniques. Lean is a culture that is practiced top-to-bottom, left-to-right, in the organization.
There is no question that Lean Team Management works. It is the backbone of how Honda and Toyota manage work. It has been implemented in companies as diverse as Chick-fil-A, newspaper offices, petroleum exploration and production organizations and non-profit organizations. But, it doesn’t work automatically. When it does not work, it is almost always because it was poorly implemented and there was a lack of what Dr. Deming called “constancy of purpose.”
What I hope I have provided in this manual is the essential process, structure and skills required to create this change in culture.
[1] Womack, J.P., Jones, D. T., and Roos D. The Machine That Changed the World. New York: Rawson Associates, 1990, P. 99.
Sustainable Wealth
Among other things, and the BIG thing I am working on now is a re-write of the New Capitalism book.
So, why am I re-writing? That book had already been through several revisions and it took me a while to realize that the one important idea in that book, the idea that could make a real difference, is the redefinition of capital or capitalism, in terms of the five forms of capital: spiritual, social, human, technology or process, and financial. As I have presented this to management groups, this is the important idea, not the nine principles in the front of the book. But, the five forms of capital model is buried toward the back. Not good.
Second, it dawned on me (hey, I’m slow sometimes!) that my Barbarians to Bureaucrats life cycle model has everything to do with these five forms of capital. In the early days of a civilization or corporation, the “wealth” or “capital” of the human spirit and values, spiritual capital is strong; while financial capital and other forms of capital are just beginning to develop. In the later days, the reverse is true. A simple idea perhaps, but with significant implications for how we measure our success, develop strategic plans, etc. Here are two diagrams that I hope tell the much of the story.
This is intended to illustrate the relative measure or capacity in terms of each form of capital, in this case, in the Bureaucratic stage, after the company is well down the life cycle curve.
The following is meant to illustrate a potential curve for each of the forms of capital at the different stages of development of the culture. Of course, every company is different and no one pattern can apply to every organization. Some companies are born with a lot of financial capital and then go looking for some technical or process innovation on which to build a business. However, it is more common for some entrepreneur to develop an innovation (Google, Facebook, etc.) then go looking for financial capital or build financial capital from operations. It is simply a way of illustrating the progress, and decline, of capital through the cycle.
And, for those of you who might say, “Hey, wait a minute, I already bought the New Capitalism book and now your revising it??!!!” Relax… when the new book is available, I will be happy to replace the old version you have with the new one. Free.
Morgan Stanley and the Global Financial Village
If you doubt that we are decisively entering the age of a global financial village note the following from the WSJ weekly summary:
“When we left him and Morgan Stanley last week, they were peering into the abyss. This week they are alive to fight another day. Morgan Stanley closed a $9 billion equity injection from Japan’s Mitsubishi UFJ Financial Group and agreed to a $10 billion capital injection by the U.S. government. Yes, the government will have a huge stake in the company, but at least the storied firm is still independent. Now the hard part begins–turning a profit in this changed and difficult environment.”
So, now the great Morgan Stanly is largely owned by a Japanese bank and by the U.S. government. But, the CEO of Morgan Stanley was also quoted this week as saying (to the horror of some): “What we don’t have and what we need is a global financial regulator. These problems cannot be solved by any nation alone.”
When French President Sarkozy spoke with our president this week there was a tone of anger, of “we’re not going to allow this to happen again” when speaking of the need for global financial reform. It is clear that the current crisis began with unregulated financial instruments and hedge funds, as well as loose mortgage lending practices, in the United States. But, the entire world financial system is suffering as a result. It is not just “our problem.” Americans now have to accustom themselves to the reality of life in this global village: that we are a debtor nation, dependent on China, Japan and Middle Eastern countries to carry our debt and allow us to continue paying social security and other benefits we expect from our government.
The regulatory system will be redesigned, whether we like it or not; whether we lead its redesign or have it imposed upon us. It is a paradigm shift that most Americans are not prepared for. John Mack, who has stood at the precipice and been forced to face the current reality, obviously is.
The Social Capital Deficit
Financial capital, the focus of so much media attention these days, is a result of, but does not produce, social capital. Our economic woes will not be solved until we come to understand the pillars upon which wealth rests.
Banks aren’t lending because of trust in one another. As a result, they aren’t lending to farmers, home owners, and others who need financial capital. Social capital is the strength of relationships, the willingness to act on trust. It is, what Francis Fukuyama define as “a set of informal values or norms shared among members of a group that permits cooperation among them. If members of the group come to expect that others will behave reliably and honestly, then they will come to trust one another. Trust is like a lubricant that makes the running of any group or organization more efficient.”
So, why don’t they trust one another? First, several of them have collapsed in recent weeks causing huge loses in other banks. But, more important, it is almost impossible to know what assets and liabilities are on their books because of investment vehicles that are almost impossible to analyze. This piece of British humor describes the problem as well as any intellectual dissertation: http://www.brasschecktv.com/page/187.html.
Next year (I assume nothing will happen until after the new congress and president are in office) congress must rewrite legislation governing all financial institutions to increase transparency. This has to includes limits on complexity of instruments. Then, they will be more trustworthy.
Rule governed/rule conforming behavior is more trustworthy than behavior that is based only on individual self-interest. It is why we have rules and referees on the football field. The age of “unfettered capitalism” is over. Let’s have capitalism that is transparent and governed by rules that create trustworthy behavior and healthy competition.
Social capital is not the result of simple good morals. It is the result of a system designed to elicit trustworthy behavior.
The Financial Crisis – Blaming the Person for Failures of the System
Every media outlet has been struggling to assign blame for current financial crisis. Obviously there was greed. There was incompetence. There was dishonesty. There was arrogance. And many other human failures. Politicians have been attacking “greed” by corporate executives. Once again we have discovered that people in high places are mortal souls, mere humans with all of their failings. But, can that be fixed? A good public hanging or two may be helpful, but it is not the cure.
I am once again reminded of W. Edwards Demings’ comment that 95% of quality problems are in the nature of the system and 95% of the time we blame the person and leave the system unchanged. The problem is in the nature of the system, not whether you are a democrat or a republican, spiritual or materialistic. If people don’t start to objectively and seriously analyze and change the system it is only a matter of time before the pattern repeats itself. You can be the most honest person in the world and still incompetent to change the system in a way that will produce better results.
I am disappointed that the presidential candidates have not helped the public understand the problem more clearly. It is simple. The free enterprise system is like sports. You have competitors on the playing field and they are free to compete. But, every sport has referees, lines on the field, a rule book, and the whistle blows immediately with violations of the rules. Take the referees off the field and you will soon have chaos, broken bones, and a demoralizing contest. A good system of rules does not destroy competition, it enhances competition.
The cause of the current crisis is first, a failure to enforce rules. Second, the current rule book was written to maintain orderly play on a landscape that has changed dramatically. The landscape of competition is now an electronic global playing field in which corporations morph from investment banks to banks, from hedge funds to who knows what, and invent new products with great sounding names and no warning labels as quickly as they can see an advantage in the rules.
So, without attempting to rewrite the rule book, how does the system need to change?
- All of our regulations governing the financial system are based on the nation state, and all financial institutions operate on a multi-national or global landscape. There are now serious proposals and serious discussion about global financial regulation. The recent coordinated global interest rate reduction is one more step in the emergence of the global economy and global governance. These steps would never be taken without a global economic crisis. The debate about “bailing out foreign banks”, which is being mischaracterized by some politicians to incite public anger, points to the problem of existing regulations and the reality of the global economy. Nationalism is an impediment to progress and dealing with the reality of the world as it is. National borders have become virtually meaningless when it comes to economic activity. There is no way that nation states, any of them, can regulate the global banking-economic system. There must be uniform global banking regulation that is transparent and provides no advantage to any one country.
- Complexity leads to error. The more complex a system or task the more likely that it will lead to errors. In manufacturing, the more you can simplify the production process, reducing steps in the process, quality is increased. Similarly, in the financial system, the process and instruments created were so complex that virtually no one understood what they were buying or selling. The financial markets should be regulated so that products that are properly labeled.
- Investment banks and hedge funds migrated their business models to do essentially what banks and mutual funds do but free of oversight and transparency. The root of the financial problem is neither in traditional banks, nor in mutual funds. Investment banking and hedge funds need to be regulated in exactly the same way as traditional banks and mutual funds.
- Virtually everyone today recognizes that our political system is corrupt. Both democrats and republicans were very heavily lobbied by Fannie Mae and Freddie Mac and that resulted in an expansion of their mandates. The intention of these institutions was good. The intention of the expansion was good – to provide more access to credit by less credit worthy individuals (poor and minorities). But, their activity was increasingly unsupervised and objectivity was lost. The system of lobbying by institutions that are regulated by our government has to change.
The success of the next president and congress will not be determined by their ability to recognize personal failings, but rather to redesign the system of rule governed behavior.
The Strategic Value Stream – How Organizations Create Wealth
The purpose of corporations is to create wealth… not only financial wealth for stockholders, but total wealth for society. When corporations build competence in their employees they are creating wealth. When they innovate they are creating wealth. When they build relationships across groups of people and countries they are creating wealth.
Wealth is not only money. In my New Capitalism book I define total wealth as including not only financial capital, but also social, spiritual, human and process or technology capital. These five forms of capital represent an holistic understanding of value. On an individual level, when you educate yourself, when you improve your physical health, when you develop a strong social network, you are creating personal wealth. You don’t create personal wealth by focusing your energies on money. You are more likely to create financial wealth by investing in your competencies, your values, your social relationships. Then, in an organic, or natural manner, these result in higher income and financial wealth.
The same is true in corporations. Corporations that just focus on money are likely to be bureaucratic, uncreative, lack strong values and the loyalty of their people. The money focused company is less likely to make money in the long term than the company that focuses on the whole value creation stream.
Every process can be defined as input-work process-output. The value creation stream follows this same flow. The stuff you need to start or build a company are all five forms of capital. The work processes, the things you do to transform input into higher value output include the core work process of the organization, the HR development systems, the information systems, etc. These are the nuts and bolts that get the work done. The outcomes of the value stream are an increase in all five forms of capital.
Strategic planning is most often focused on finances, increasing revenue and reducing costs, and then focusing on enhancing competitive market position. Nothing wrong with this. But, market position and financial success are the end of the line, the final result of enhancing human competence, improving brand equity and internal social capital, and innovations in technology or process. The new strategic planning must now focus on the entire value stream from input to output and all forms of capital.
Lean Organization Requires Alignment of Social and Technical Systems
Some years ago while speaking at one of Norman Bodek’s Productivity Conferences, Norman referred me to an article by UCLA professor Lou Davis. Norman thought that Lou Davis and I were talking about the same things, but from different perspectives.
(Norman and I have a lot in common. At about the same time we both sold our companies (his was Productivity Press, mine was Miller-Howard Consulting Group) and he went off to follow Budhist philosophy and I went off to find God on the oceans. Now we are both back at work and both with new books.)
The Lou Davis article was on Socio-Technical Systems (STS) design (I know the very name makes managers fall asleep!). The first self-managed team manufacturing plants, long preceding the arrival of the first Japanese transplants, were created using STS. Gains Topeka, the first of these plants served as a model, and Proctor & Gamble picked up the technique and converted every manufacturing plant using STS. They considered it such a competitive advantage that they would not allow visitors in their plants. Whole-system design (the term I prefer) is an up-to-date version of STS, incorporating our knowledge of lean.
At its heart, STS was a simple and under appreciated idea. Manufacturing plants (and offices) are designed primarily with the flow of materials, equipment, and safety in mind. They were not designed with the competence and motivation of people as a primary design criteria. The founders of STS (Fred Emery, Eric Trist) demonstrated you would get optimum performance if the plant was designed with both the technical and social systems in mind and was created in a way that aligned these systems.
The more experience one has with Lean manufacturing or organization, the more clear it is that lean is a system in which both human and technical systems have been aligned.
The following illustrates the social and technical systems that need to be designed and aligned to create a true lean culture in the organization. This diagram may not include everything, but it is a good start.

Getting to Lean – Whole System Design
Lean organizations are learning organizations, a culture, not a technique. How do you create that culture?
Some good number of years ago I received a call from Honda America Manufacturing. To my surprise, I learned that the first plant manager of the Marysville Plant bought my book American Spirit in the Tokyo Airport waiting to move to the United States and take up his duties. He read it on the plane and concluded that “if this is what Americans believe, we can succeed in the United States.” For a number of years it then served as the text for their course on the Honda Way, taught by the Executive Vice President, Scott Whitlock to all new managers.
I am not sure that my book reflected what Americans believed then, but this coincidence did give me the opportunity to visit Honda on several occasions and learn a good bit about how their system of work, management and organization worked. They were very frank in attributing much of their own system to the Toyota Production System. This system is now commonly referred to as Lean production, lean organization or lean culture.
The most important lesson of visiting Honda is that you cannot find the explanation for their excellence in any one technique. When I first visited there the U.S. was in a frenzy over Quality Circles and its devotees were certain that it was the key to Japanese success. They were wrong. Then statistical control charts were given great credit for Japanese success. Few could be found at Honda. A dozen other simplistic explanations have been given.
The truth is that Honda and Toyota are “whole-systems” and the sub-systems of the work flow, motivation and incentive systems, training systems, organization and management levels, improvement processes, and many other factors are all components of the “whole-system.” It is a culture and all cultures are complex.
At this same time my consultants and I were practicing socio-technical systems design, the method used to create the first self-managing team plants in the United States. We took this methodology and applied it to the design of organizational system that incorporated the lessons of Honda, Toyota, Federal Express, and other great companies.
I recently attempted to describe this process on one page, inspired by the Strategy Maps of Kaplan & Norton. This map includes the principles and of the New Capitalism in my recent book with the process of whole-system design.
I know that without a great deal of explanation it is likely not fully comprehensible. But, if you have a question about it, send an email or make a comment.

Shamu and Me
Shamu, husbands, children, inmates, managers and employees… all respond to reinforcement.
For the past couple of weeks the most emailed article on the New York Times has been Amy Sutherland’s “What Shamu Taught Me About a Happy Marriage” in which she shares her application of animal training, learned from watching Shamu’s trainers, to training of her husband to fetch and heal.
No one has reported how her husband feels about all the attention. We don’t know if he is barking wildly or just whimpering in the corner while he awaits a treat or tummy rub.
My daughter emailed me this article and it made me wonder whether she is aware of the degree to which she is a product of “Shamuism.”
Of course, this is all about elementary learning theory or behavior modification, positive reinforcement, behavior shaping, extinction, etc., all studied and promoted by B. F. Skinner and his followers. I began my career working in prisons and established the first token economy in a prison, a checking account system in which inmates “learned to earn”, paid for everything with prison money (points), including rent in one of four dormitories, a luxury, quality, standard, or efficiency dorm.
My wife and I used behavioral principles in raising our children, usually avoiding punishment and relying on positive reinforcement for desired behavior. It works.
After prison I went to work for Fran Tarkenton’s company, one of the pioneers in applying positive reinforcement, what we called “Behavior Management” to the work place.
As Amy Sutherland has discovered (I guess old lessons have to be relearned in new packaging every few years) the power of positive reinforcement has not been diminished as new theories have been promoted in recent years.
If you examin the world’s best companies, including Toyota and Honda, Dell and Intel, you will find that they have integrated behavior shaping, ing, and other techniques of positive reinforcement into their system. They don’t have “Behavior Management” programs that stand out as temporary and hyped efforts. Rather, they simply do a good job of recognizing and rewarding the behavior that leads to competitive success. That includes quality improvement, innovation, cost control, etc.
If you were going to design the ideal organizational system (my favorite frame of reference), part of that design, integrated with the other pieces of the whole-system, would be well thought out system of positive reinforcement. The ideal system would include a few basics of effective behavior modification:
1. It would not rely on one “schedule of reinforcement” but would include multiple schedules. It would include variable, as well as fixed interval schedules. Variable schedules result in stronger behavior that is more resistent to extinction.
2. It would include both tangible (money, for example) as well as social schedules of reinforcement.
3. It would not assume the ability to defer gratification over long periods and would, therefore provide immediate reinforcement, such as the awarding of points that could later be exchanged for a tangible reward.
4. It would be administrated consistently so all employees felt an opportunity for reinforcement.
5. It would follow the principle of “shaping” that calls for reinforcing successive approximations to a desired performance, and not hold out the reward for performance that many found impossible to reach.
“important” to the success of the organization.
But, perhaps most importantly, any system of positive reinforcement, or Shamuism, should not be a stand alone program that comes and goes. It should be part of the architecture of the whole-system of the organization.
(A commercial note: In my new book there is a chapter titled “When You Make Performance Matter – the Currency of Appreciation” in which I discuss this topic in more depth. )
Power and Influence 2006
Both governments and companies suffer under illusions of power… the intoxication of the material world and the dismissal of the power within the heart and mind.
Flash back to Vietnam. In 1966 I was getting bored. I was serving in the 513th US Army Intelligence Corp in Oberussel, Germany. Vietnam was beginning to happen. It was where the action was, the excitement, the focus of the news. So, at the age of twenty, I volunteered to go.
It is perhaps hard for most Americans today to recall the mindset of the times. The threat of global communism, the domino theory, the assumptions of power. We saw Vietnam as an incredibly small, backward country. We had all the aircraft carriers, missiles, a huge army fending off the Soviet Union and China. What did Vietnam have? Jungles. My office was in a building directly under the flight path into Tan Sanut Airfield, then the busiest airfield in the world, as three fighter jets, side-by-side took off and landed every minute. It was an incredible display of power.
Ho Chi Minh said “You will kill ten of my men for every one of yours I kill. But, it is you who will tire of it.” General Patton said “Every war is the same. Tools change, but war is the same. You defeat the soul of the enemy, man.” They both knew something about power.
We lost fifty-eight thousand men and it is probable that the Vietnamese lost ten times as many. Yet, they won and we lost.
We should have learned something about the nature of power. At its peak we had more than five hundred thousand soldiers in Vietnam. We built massive air fields and ports. None of it mattered.
Whether there is a valid parallel to what is happening today in the Middle East we can all speculate and I won’t debate it here. But, what is clear is that to the degree that we do not understand the realities of power, we will lose. We are fighting the wrong war. The great irony of Vietnam is that now we are investing in Vietnam and businesses view it as a new market, source of labor, economic opportunity. The Vietnamese want IPODs, blue jeans, and wireless Internet access. We lost the military war. We are winning the war of attraction. The soft-power war.
A couple of years ago Joseph S. Nye, the Dean of the Kennedy School of Government published Soft Power, a book that should have been read by more leaders in both business, but in particular, in government. Nye defined soft-power as “getting others to want the outcomes that you want” or, “the ability to shape the preferences of others.”
Soft power is the critical element of business success today. Money and muscle do not sell product, attract the best people, or produce breakthrough innovations. Nor do money and muscle win the hearts of Pakistani villagers, Afghan farmers, or Iraqi children. Neither does it win the affection of teenager digital download devotees or website surfers.
Another way of defining soft-power is social and spiritual capital. Just as one has money in the bank that may attract earning, social and spiritual capital attract the heart and mind, the affection, the loyalty, and trust of both the market and employees.
How many classes, meetings, seminars, have you been to on building social or spiritual capital, or soft-power? Most likely none! We are primitive in our understanding and skills at building these forms of capital. A hundred years from now both business and political historians will look back and ask, “what were they thinking?”
A National Strategy for Competitiveness
I want to be the moderator at the next Presidential candidate debates. There are a couple questions I would like to ask about their plans for creating national wealth.
In this age, the well-being and security of the country are not determined by the number of tanks or airplanes, but by the human capital, the spiritual wealth, the intellectual competence of our people, and by the degree to which people in other countries and cultures feel affection rather than alienation from us. The wealth of our country is not merely the measure of GDP or national debt. It can be measured by the five forms of capital described in previous posts on this blog.
So, I would like to judge our candidates by the quality of their thinking about the wealth of our country and how they will enhance it. OK, so now I am going to get to be the moderator of one of their debates. Here goes…
“Dear Candidate, given that the President is the Chief Executive of our government, and given that it is well accepted that CEOs should have a strategy for increasing the net value of that over which he or she is “Chief,†what is your overarching strategy for increasing the total wealth of our nation? I have a few follow-up questions after you provide an over-arching framework.â€
We can then assume response that has little to do with our question, but will surely touch on the three talking points, which the candidate’s polls have indicated are the hot buttons for their most important interest groups. It would be a shock if the question was answered with an actual strategic framework… but, we can hope.
“Thank you. I would now like to ask you about some of the specific aspects of your strategy. We know that democracy relies on internal sociability or what de Tocqueville called the “art of associating,†a characteristic that has proven to be a leading indicator of economic well-being. What is your understanding of the trend regarding this quality, and what would you do to improve this foundation of democracy and free enterprise?â€
“Well, that is an interesting approach. You have obviously given some thought to how you may influence the culture of our nation.â€
“This brings me to the issue of our external relations with the rest of the world. As you know, most corporate strategy includes a plan to improve the brand-equity, the market’s perception of the firm’s brand. As a nation, our ability to gain support on issues of security or trade, our ability to attract the best minds, or sell our products, is largely based on the degree to which we are trusted by the leaders and citizens of other countries. How would you go about improving the value of our nation’s brand?â€
Of course, our candidates would surely have given great consideration as to how they might improve both the internal and external social capital of the country and their answers would no doubt be illuminating. So we will now turn our attention to human capital.
“Madam Candidate, I would now like to ask about education and the competence of the American (insert your own country’s name) workforce. As I am sure you know, China is now graduating three times the number of engineers, more MBA’s, and the trend is similar in other countries. Given that our economy is built, as I am sure you agree, on the foundation of knowledge and technology, what is your strategy for ensuring that our country maintains its competitive advantage?â€
Well, you get the idea. Is it unreasonable to judge candidates by the quality of their thought, for the logic of their plans, to improve the well-being of our country? I think not. Is it unreasonable that the legislative branch attempt to assess the wealth of the country in a comprehensive manner and develop a plan to increase all forms of wealth? Again, I think it is not unreasonable.
The skeptic is likely to resist the idea of a national strategy to address the five forms of capital due to the absence of a clear and universally accepted system of measurement and accounting. I will suggest that this is a lame excuse for failing to seek to improve the very qualities upon which our future economic well-being and security depend. Can we accurately measure our military might relative to other countries in any reliable way? I would argue that we cannot. The number of bombs, planes, or missiles was not predictor of success in Vietnam and it is likely not a predictor of success in Iraq or elsewhere. We don’t know how to measure genuine military power. That has not stopped us from investing in military power. Why should it stop us from investing in social or human capital?
If I were President or King for a day, I would create an Institute of National Wealth Strategy (INWS, of course, it must have an acronym! Everything in Washington does.) I would charge the director of this new agency (it can be small in numbers and costs, by the way) with developing an index to measure each of the five forms of wealth, along with a strategic plan for the improvement of each. I would then charge each cabinet member with the task of defining his or her plans in light of the overall strategy to increase aggregate national wealth.
Does Spiritual Capital Exist?
For any concept to be useful in the practical, what will it do for me now, world of business, it must be defined in a way that is operational.
Few words are more fuzzy than spiritual or spirituality. The very concept seems to defy any concrete definition. Let me suggest that an ultimate defintion may be well beyond our capability, but developing a definition that is useful is not.
In some places spiritual capital is being equated with participation in formal religion. I find this unfortunate because my own experience does not lend credence to the idea that formal religion has any exclusive patent on spirituality; although for most, the discipline of formal religion is the training ground for spirituality. The Templeton Foundation is funding research and John Templeton has done an admirable job in his pioneering promotion of spirituality and its link to health, business and general well-bing.
Spirituality simply refers to our aspirations, our guidance, our connections not founded in the material world, but rather from some source, we regard as more noble. I think there are two key components of spirituality in the workplace that are of genuine value, assets, to the organization. The first is the degree to which members of the organization are committed to an ennobling purpose; and second, the degree to which shared values serve to guide ethical behavior.
A worthy purpose, the impulse to do something significant, to make a contribution to humanity, is the most fundamental form of motivation. Great leaders instill a sense of noble purpose in their followers and thereby create human energy.
Shared values, the discipline of adherence to a code of values within a group, is the basis of trust and sociability. Just as low-trust societies are economically handicapped, so to are low-trust companies.
To the degree that an organization can enable, support, or encourage a depth of personal morality and dedication to a noble purpose, it possesses spiritual capital.
Capitalism Lives, but…
Wealth will be achieved by the country, company, team, and individual able to create the currency of competition in the new capitalism. The measurement of wealth will not be by money alone, but the abundance of all five forms of capital.
Capital and capitalism need redefining. Capitalism is not only the private control of financial capital, it is also the private control of social capital, human capital, spiritual capital, and technology or process capital. What you own when you buy the stock of a company, is not merely the value reported on the balance sheet and income statement. If you knew that a corporation, with no current income, had just hired a team of scientists who had the capability to discover the cure for cancer, the financial statements would in no way reflect the value of that firm. The same is true of Pixar and almost every other firm whose value is in human talent and creativity. If you knew that the leaders of a company adhered to the highest ethical standards and were motivated by a worthy purpose that inspired the members of the organization to their highest possible efforts, the value of the firm would be greater than if the reverse were true. And, if you knew that the firm had instituted the most productive and effective sales, manufacturing and product development processes, you would know that the firm possessed an asset that might be deficient in another firm. True wealth, net asset value, is not measured by the financial balance sheet.

What I have attempted to do in my new book is to define what really matters in the process of wealth creation. Of course, it is easiest to measure cash flow, net income and the financial balance sheet. But, most often, this is not the root cause of either building great companies or their decline and defeat. Rather, it is much more likely in the success or failure of human, social or spiritual capital. Many companies that are gaining market share, such as Toyota and Honda, are doing so because of their superiority in process capital. If you have organized your production process according to “lean production” you have acquired an asset, the asset of process capital.
Many companies, particularly those that depend most on human performance, rely on social, human and spiritual capital. Examples of these types of capital and what you can do to develop them, will be the primary subject of future posts on this blog. It is also the focus of my soon to be published book.
Social capital has been the subject of investigation by the World Bank and the International Monetary Fund as factors in economic development. It is now well accepted that countries must develop in a balanced way, both socially and economically. No country that relegates half of its population, women, to menial roles and supresses free expression and science, can possibly develop economically to compete in the world market place.
Social Capital on a country level is generally considered to be the degree of trust, social networks, or what Francis Fukuyama calls “sociability” which defines the “radius of trust” prevelant in a culture. This, Fukuyama found to be a predictor of economic progress since all commerce is ultimately an act of trust or sociability. If it is true that the degree of sociability is related to economic progress, isn’t it also logical that the degree of internal sociability within a firm may be related to its ability to innovate, to solve problems, and to make effective decisions? I have attempted to define not only social capital, but human, spiritual, and technology or process capital within an organization (private or non-profit) and provide a roadmap to building these forms of soft-capital that are the necessary anticedents to financial capital.
Back from the Dead!
This poor blog has been too neglected in recent months and there is only one guilty party, me.
Now I promise to be better behaved. I have just finished a book, again, again… Yes I thought I was finished with this several times previously, but this time it is off to be published and should be available very soon.
For those who don’t know, this is about my fifth book (I say about because it all depends upon what you choose to count, training manuals, very short books, etc.). The title is Competing in the New Capitalism.

From the back cover:
This book is about the self-initiated, free enterprise transformation of capitalism into something better. Capitalism is transforming, not because of the external force of regulation, but because of the internal exertion of virtuous self-interest.
Today, every organization is struggling to create the new currency of competition. In the early days of capitalism, money mattered most. We have entered a new phase of capitalism and the rules have changed. To be a player in the tomorrow’s business, you will have to master the creation of five forms of capital or wealth: social, human, spiritual, financial and process or technology. These are the keys to competition. However, most organizations have not yet learned to manage these new forms of capital. This book is about creating the currency of competition in the new capitalism.
This new capital resides at three levels: the organization, team and individual. This book defines the most important disciplines that unify energy and effort toward common business strategy. These are the currencies, which build the bank account of each of the five forms of capital. The pursuit of all five forms of capital will define not only your organization’s success, but also that of your team, and your personal net worth.
Mr. Miller has redefined the nature of wealth and given us a roadmap to achieving it.
The workplace of today is different because of the competitive urge to produce innovative and high quality goods and services. Creativity and commitment are the fuel of commercial competition and they only come from people who are fully engaged. We, the business community, will transform capitalism again, not because of compliance to external regulation, but because we must, to compete.
Mr. Miller has brought unity to the concept of wealth. He has provided a roadmap for creating both personal wealth, effective teams, and an organization that creates not only economic value, but ennobles the human spirit.
Managementfirst Interview
And, here is a wonderful and helpful interview of……me! I think they did a good job.
http://www.managementfirst.com/management_styles/interviews/miller.php
Lessons from Katrina: 2
The preparations for and the handling of hurrican Katrina will be the subject of case studies in management workshops and courses for years to come. For anyone who was unconcerned about the quality of leadership and management in our government, this should cure their oblivious stupor. Folks died, children suffered trauma, and we all suffered through nights of the most hellish reality show ever aired on television as we watched in complete frustration as our officials didn’t “get it” and the stranded begged for help.
So, what is to be learned from this mismanagement crisis? Here are some random thoughts:
1. Process matters over structure. It is perfectly obvious that the current structure inhibits the process of responding to a crisis and delivering aid, security and medical resources rapidly to those in need. The primary reason for this is that there is no well defined process that cuts through all of the irrelevant structures (walls between agencies, city, state and federal government, etc.) and the aid can’t climb over the bureaucratic walls. When I help companies with my whole-system design process we begin by designing the actual work process, then we address structure with the question “what structure will optimize the ability of people to perform within the process?” Just as in a corporation, the customers don’t care about your structure, bureaucratic procedures, levels of management, blah, blah, blah! They only care that the process delivers the goods!
Someone, please, design the ideal process of responding to a crisis and then put a structure in place to facilitate that process.
2. Competence matters. Sounds silly. But, lets face it – every well functioning corporation knows that the job of manufacturing manager requires certain skills and the job of marketing manager requires others. It is the primary job of an executive to to put the right people in the right job. That is half the battle. The American people are responsible for the competence of our government, for voting for those, who demonstrate little awareness or concern that our agencies are led by people of both technical and managerial competence. Next time I vote, I want to vote for an executive who has demonstrated his or her ability to manage a large organization and that means appointing and attracting competent managers, developing strategy and holding people accountable for executing.
Or, is Mark Kleiman right in his posting that… “One of the most charming characters in Huckleberry Finn is the con artist pretending to the the lost Dauphin. At one point, he remarks: ‘Hain’t we got all the fools in town on our side? And ain’t that a big enough majority in any town?’ I’ve always considered that remark a depressing but fundamentally accurate insight into practical politics. But it turns out that His Majesty Looey the Seventeen wasn’t infallible, after all.”
3. When you need to make a change, do it quickly! The good news – the President did remove Michael Brown from command once it became clear that he was the wrong man for the job. Maybe a good lawyer, maybe a nice guy, maybe loyal – but a commander in crisis – NOT! Thankfully, he replaced him with someone, a Coast Guard Vice Admiral, who knows how to command.
4. Division kills, united energy and effort saves lives! I have just finished writing another book (yes, one more book!) and the title (my third title change) is One Force – The Essential Law of Leadership that Cuts Across Differences to Create the Irresistable Force of United Energy and Effort. All organizations, teams, business and governments succeed to the degree that they are able to create unity of energy and effort. Without giving a sales pitch on my book (which isn’t available anyway!) this whole case study is a good one to examine how united energy and effort wins and how divisions, fragmentation of effort, is destructive.
5. How about preventive maintenance? Anyone who has worked in a good manufacturing operation knows that every dollar spent in preventive maintenance pays dividends in less downtime, fewer defects and less waste. Neither the Congress nor the President were interested in the obvious preventive maintenance that was required to prevent flooding in New Orleans. The bill presented to Congress for improving the levees and restoring the wetlands that act as a barrier, was fourteen billion. No interest. This week Congress approved the Presidents fifty-one billion dollar emergency reconstruction request. No problem. Let’s get with it folks. It is a sign of intelligence to anticipate, to foresee consequences and act accordingly. We need a bit more intelligence in our decision making process.
6. Government matters. I am a business guy. I am an investor. I don’t like paying taxes either and I would love to have a small, yet effective government. But, over the recent past there has been an almost child like abhorence of government, an almost anarchist desire to “starve the beast” to destroy our very own government. I am for leaving in the hands of private industry and private initiative everything that can reasonably be accomplished by private hands. However, we need a strong and effective government. Anyone who is still living in the fantasy of anarchy or minimalist government should be condemned to the hell of watching the scenes from New Orleans on last weeks cable news shows over and and over and over again. Lets accept a sane level of government, impose budgetary discipline, and make government effective! It will save money and lives in the long run.That is neither liberal nor conservative – it is just common sense.
7. Empathy Matters. If you want folks to follow you, you must be able to convey genuine empathy for those same folks. In other words, if you don’t care about me, why should I follow you. We have all seen the Saturday Night Live parodies of Bill Clinton saying “I can feel your pain.” It gets a laugh. But consider the alternative… “I can’t feel and don’t really care about your pain.” That’s not funny! Whatever President Clinton’s other failures, he did have empathy and that empathy was appreciated by the people. The key to George Bush’s problem at the moment is that people feel, rightly or wrongly, that he doesn’t feel empathy for them. A good dissertation topic – How Presidents Convey Empathy.
8. And finally… this is not a political commentary. The lessons from Katrina cut across both political parties, local, state and Federal governments. The problems exposed by Katrina are ones that all of our politicians have contributed to. Now, it is up to the people to be sure that they get their priorities right. Of the people, by the people, and for the people… remember that?
Leadership Under Fire – Katrina’s Aftermath
It has never been truer that a crisis brings out the best and worst in people. On the one hand we have seen bureaucratic bumbling, rage and lawlessness. On the other hand we have seen absolute heroism, sacrifice and the massive outpouring of help in the true spirit of service. Calamities like Katrina strip us naked and reveal our true selves.
For those of us watching the events play out on television the most frustrating and heart wrenching time was when we had to watch as the ten thousand stranded at the Civic Center pleaded for help and we all knew, from Washington to Beijing to South Africa, that those victims of this tragedy were receiving no help, day after day, and babies and old women were dying on the spot. We watched as the head of FEMA halted relief efforts because of reports of gunshots – we watched as he was told by reporters of the conditions at the Civic Center and replied that “That’s not been reported to me, so I’m not going to comment. Until I actually get a report from my teams that say, “We have bodies located here or there,” I’m just not going to speculate.†The entire world knew what was going on, but he didn’t and didn’t have the capacity, for whatever reason, to react to the reports and send in help. How is it that a dozen reports and camera crews were able to get to the Civic Center to cover the story, but FEMA and the entire apparatus of the United States Government could not drop bottled water and MREs to the victims? This must be explained.
Those of us who have managed organizations for some period of time have all made mistakes when appointing managers to tasks. We do our best and then discover that they have the right or wrong capabilities for the job. And, we make changes when our mistakes are demonstrated by performance. We should also assess how it was that we made the mistake that we made so we don’t do it in the future.
Bloggers from the left and right are calling for Michael Brown to be fired, now! Michelle Malkin, normally supportive of this Administration said “He proved himself utterly clueless about the disaster unfolding in New Orleans. He claimed that the federal relief effort was “going relatively well” and that the security situation in New Orleans was “pretty darn good.” Andrew Sullivan, again, normally supportive, along with others have voiced agreement.
This is a clear case in which someone who is probably a good man was appointed to the wrong job. Michael Brown is a lawyer. He is not only a lawyer, he served as a bar examiner on ethics and professional responsibilities. There is no mention of him leading or managing any organization in his bio. Lawyers are trained and conditioned to be cautious, to be sure that every decision, piece of paper and procedure is “right†according to law and protocol. Avoiding errors, law suits or acting outside the law is to be avoided at all cost. That’s what lawyers are paid for.
Generals are trained in almost the opposite set of competencies. The United States military does a superb job of training its officers to be action oriented, to attack the source of fire, to not retreat or freeze in fear, to improvise on the spot and make use of whatever resources are available. Generals know how to take quick action under fire, to mobilize resources, to command order and respect. Even at lower levels, tank commanders, seargents leading platoons, are taught to improvise, to make decisions on the spot to react to an instantly changing battle scene and to save their men and destroy the enemy. In combat life and death are measured in split seconds.
It is obvious that the competencies needed at the time of crisis are those of a commanding general, and not those of cautious rule abiding lawyer. Michael Brown was appointed because he was a good and supportive friend of a powerful Republican lobbyist. I am not going to rant about political appointments. Go ahead, make political appointments! But, for heavens sake and for the sake of the victims of the next tragedy, at the same time appoint leaders who have the skill set, the capabilities, to do that job!
Broad Slicing the Organization (or Country!)
In his book Blink, Malcolm Gladwell used the term thin slicing to describe a focused intuitive knowledge that allowed an apparent unthinking judgment. There is another kind of judgment, another intuitive mental faculty that is even more important quality of leaders in today’s world. I will simply call it broad slicing, the ability to slice across an organization and see the connections, the need for solutions that deal, not with a very narrow area of knowledge, but with knowledge of the whole, knowledge that unifies effort. The behavior of great leaders is rarely that of thin slicing, it is much more commonly that of creating broad unifying effect, the ability to create broad slices that serve as mechanisms around which diverse groups and individuals can form unified effort. It is the unity of effort, as every great coach or general has understood, that wins in the competitive field.
It is broad slicing that is the glue that holds companies and societies together in a unified whole. The failure to recognize or create broad slices is one reason both companies and societies fall apart. Corporate strategy went through a period during which portfolio management was the preferred corporate strategy. This was the logical (or illogical) basis for conglomerates such as ITT under Harold Geneen who believed that there didn’t need to be any link between business units owned by a corporation other than financial. These corporations were, essentially, diversified mutual funds. It is generally accepted that this approach depleted shareholder value. The absence of broad slices resulted in division and disintegration. The added value of a conglomerate today, a multi-business unit corporation, is precisely in the sharing of core competencies or capabilities – some core technology or market that can add value across business units. Devotion to common markets or technologies are broad slices that give a reason for unified effort.
In the political world it is the difference between the liberation of Poland and the liberation of Yugoslovia, and possibly Iraq. The people of Poland were keenly aware of the broad slices that linked them as a people – language, religion, common history and culture. In Yugoslovia these unifying mechanisms operated in reverse and we know the result. Today we are witnessing the struggle to create broad slices across Iraq that can hold the three primary populations together in some form of unified whole. Any country must be held together by either authoritarian force (former Iraq, Soviet Union, etc.) or by the existence or creation of broad slices, common desires, interests, needs, philosophy or religion, that create an internal desire for affiliation.
Great leaders, from Alexander to George Washington, have had an intuitive, if not intellectual, understanding of the need to define and reinforce broad slices. George Washington, in his Farewell Address, as well as other Founding Fathers, spoke eloquently about the need to focus on unifying themes, rather than focusing on the divisive force of parties – “Let me now take a more comprehensive view, and warn you in the most solemn manner against the baneful effect of the Spirit of Party, generally.†“This spirit, unfortunately, is inseparable from our nature, having its root in the strongest passions of the human Mind. It exists under different shapes in all Governments, more or less stifled, controlled, or repressed; but, in those of the popular form it is seen in its greatest rankness and is truly their worst enemy.â€
What Washington recognized is that political parties tend to focus on narrow interests that have strong appeal to the emotions (gun control, abortion, etc.) and by that very process they will divide themselves from others whom they then demonize. This process is the process of division and disintegration, the root cause of the decline of all great cultures and the very process Washington feared enough to make the central theme in his closing remarks.
What are the broad slices that might serve as mechanisms of united effort in our country?
If the country were a business it would be focused on developing its core competencies as its primary source of competitive advantage and its productivity or efficiency.
What are the core competencies of our nation? This should be the subject of a healthy debate, just as it is in companies. One option is the following: we have succeeded in global competition because of our ability to develop new technologies and the entrepreneurial application of those technologies. That is our core competence and it is based on the quality of our education system and government support of research. (Yes… semi-conductors, the Internet, bio-technology and other key technologies are the result of government supported efforts!) This is not a “left†or “right†issue, it is an issue of the health and wealth of our nation. Which leader is focusing on the positive process of developing the mechanisms of wealth creation in this country, versus the defensive mindset of repelling enemies, some real and some imagined?
Alan Greenspan is rightly focused on productivity as a key sign of the health of our economy. However, he is focused primarily on labor productivity rather than the productivity of energy or capital. Making energy utilization more efficient is an obvious need, if not a crisis, that again is neither liberal nor conservative. General Electric has made the business of alternative energy and energy efficiency a primary corporate strategy. This is a broad slice through GE and the same unifying strategy can apply to the nation. We should be judging our leaders based on their ability to develop workable and thorough strategy for the productivity of all energy resources in our country.
Both the development of our core competencies and promotion of efficient use of resources could be broad slices upon which national leaders could unite energy and effort. Just as corporate leaders do well by focusing on the linking, unifying broad slices that result in competitive success, our political leaders would do well to focus less on the sources of division and more on the sources of common interest and affiliation. But, for this to happen the press and the American public need to be less obsessed by the distinctions between left and right, much of which is imaginary, and focus more on the very real nature of leadership that creates unity of energy and effort across a diverse culture.
Becoming Authentic – Understanding High Performance
Positive psychology is the study of why folks are happy and successful. Where traditional psychology studied mental illness, or negative deviation from what is viewed as normal behavior, positive psychology studies positive deviation from the norm. At least as much, if not more, can be learned by studying positive deviation, or why folks are just insanely happy or successful. Let’s face it – normal isn’t so hot! It certainly is not a goal to work toward.
Positive organizational scholarship is the study of positive psychology in organizations. Appreciative Inquiry is one set of techniques that has emerged from this scholarship.
In preparation for speaking at their annual sales conference, I have recently been studying the highest performing salesman (yes, they are all men) at Mack Truck. As a form of Appreciative Inquiry I have been “inquiring” into why the best of their eight hundred sales people consistently outperform the others. I have interviewed them regarding their habits, or the routine way they go about their work. So, why are they so good? The answer contradicts many of the sales techniques that are commonly taught in sales training. They don’t fit the mold.
What each of these folks are is authentic. They are entirely natural, comfortable in their own skin. None of them can describe their closing technique or how they keep score on their performance. But, they are all “truck guys”. They love trucks, they love Mack trucks. They genuinely care about their customers to the point of sometimes advising them NOT to buy trucks when the business need doesn’t justify it. And, they fit perfectly into the culture of their part of the country and their customers. There is no sense of hard sell, hard push, or any manic motivation to succeed. Rather, there is a sense of “flow”, the natural performance of a process that is so well practiced that it happens with little deliberation.
What does it mean to be authentic? It means to be yourself, to be whole, to be engaged in work that fulfills the need for developing your natural talents; the need for financial success; and the need to do something worthy. These are the three components, the three slices of bread, that when put together result in both financial success and personal happiness.
Authentic performance is achieving your potential, utilizing your natural talents and abilities, and in passionate pursuit of goals you believe to be worthy.
Each of these two elements are critical: 1) achieving your potential, your natural talents and abilities; b) passionate pursuit of goals you believe to be worthy.
Mack’s best salesman know themselves. Each of them are different in their style, pattern of communication or the specific tools they use. But, they are the same in that each recognized their own talents and utilized those talents. I was particularly impressed by one who acknowledged that he had a life long stuttering problem. You would think he wouldn’t go into sales. But, on the contrary, he had learned to speak in a slow and deliberate manner that controlled his stuttering and, he felt, conveyed a sincere listening and respect for the other person. He turned what could be a liability into an asset. That is knowing your own talents and abilities.
And, they all had a clear sense of purpose – both serving their families, their communities, and their customers. I am certain that the genuiness of these motivations among the dozen best salesman was far higher than among the norm.
Discovering and encouraging authentic performance is one of the next challenges for our organizations.
Changing the Culture: The Whole Loaf of Bread
Creating high performing cultures requires a new way of thinking that in many ways is very different from how we have pursued quality management or continuous improvement.
Most management problem-solving and improvement has focused on problems and the root-causes of those problems, analyzing the causes, and developing highly specific solutions. It is a view that begins with big things and narrows the focus to smaller and more specific things. This is the well established Newtonian thought process of reducing problems to ever more narrow explanations, the “atomization” of the problem to its root cause. We have learned to derive satisfaction from this reductionism, finding specific causes, measuring them, making specific changes, and watching the data improve. This has served us well. As a result we drive more reliable cars and every other manufactured product is delivered at both lower cost and greater reliability.
But, this approach, as essential as it is, has significant limits when it comes to changing the culture of an organization. Some solutions will not be found by atomizing the problem, but rather by looking upward and outward to the larger laws of the corporate comsos.
Whole-system thinking looks up and out to understand the macro-system and to dream about major system breakthroughs. It asks questions about the big systems and their nature. It looks at all the interrelationships of a complex system and seeks strategic changes in that system. Focused problem-solving can never address the complexity of a whole system. It requires a complete paradigm shift from traditional problem solving. In short, if you engaged in quality improvement problem-solving within a dictatorship, you might improve the efficiency of the police, administration, etc. However, you would still have a dictatorship because the transformation to democracy cannot be found in the detailed causes of specific problems. That transformation requires looking upward and outward to primary principles and the nature of the system. This upward and outward view is whole-system thinking and it is required to put the slices of bread back together. You can’t create a whole loaf by dissecting each slice.
Many corporations are examining the role of the corporate center – why are functions centralized or decentralized? The answer to this has a dramatic impact on the culture of an organization and the answer will not be found in the details of specific problems. Rather, it requires examining core principles and assumptions. It requires evaluating the strategic ideas behind the role of corporate or central staff groups. In short, it requires deep thinking about the nature of the system, the interrelationship of the parts of the corporation.
Learning this skill is one of the new frontiers of managing the culture.
Let’s Get Tough!
I know of no one who is arguing that the U.N. does not need reform or that we should not be a strong (tough) catalyst demanding reform at the U.N. Of course there is corruption and insanity in the membership on human rights and other commissions. No Democrat or Republican has said “leave the place alone, its fine!†The question is, or should be, what skills and style will facilitate the needed change.
Let’s be clear about one thing. The toughest managers at General Electric do not get away with abuse of their people. If you are going to be promoted in the most competitive (tough) corporation in this country, you MUST have good people skills, motivate your people, and treat them with dignity.
There seems to be complete confusion over being tough on competition, tough in getting a job done, and tough (read abusive) on the people around you. If you are going to succeed as a manager in the corporate world you have to build alliances, coalitions and create the unity of a strong team. You don’t get there by berating and humiliating subordinates or colleagues.
American’s are largely suffering under some delusion that an American U.N. Ambassador can go to New York and bully everyone into submission by being “tough.†Nonsense. Just as likely that the Ambassador from Kenya or Argentina will tell our Ambassador to kiss off. We have little or no “power†in the tough guy sense to command any other country to do our will. The way we will get reform or anything else done is by listening, creating good will, creating credibility that has largely been lost in the last few years, and by the power of intelligent persuasion. We seem to forget that the U.N. is a democracy. Representatives vote. And they have largely been voting against the U.S. because of our failure to persuade and because of our arrogant assumptions about our own power.
We need someone who is a good salesman, who can negotiate and create the bonds of unity. We will learn that sooner or later. If Mr. Bolton goes to New York, we may learn it quickly. And, perhaps this is the way we must learn.
Great Quotes
“A human being is part of a whole, called by us the Universe, a part limited in time and space. He experiences himself, his thoughts and feelings, as something separated from the rest a kind of optical delusion of his consciousness. This delusion is a kind of prison for us, restricting us to our personal desires and to affection for a few persons nearest us. Our task must be to free ourselves from this prison by widening our circles of compassion to embrace all living creatures and the whole of nature in its beauty.” Albert Einstein
“All the ills of mankind, all the tragic misfortunes that fill the history books, all the political blunders, all the failures of the great leaders have arisen merely from a lack of skill at dancing.” Moliere
“The leaders who work most effectively, it seems to me, never say ‘I’. And that’s not because they have trained themselves not to say ‘I’. They don’t think ‘I’. They think ‘we’; they think ‘team’. They understand their job to be to make the team function. They accept responsibility and don’t sidestep it, but ‘we’ gets the credit…. This is what creates trust, what enables you to get the task done.” Peter F. Drucker
“Sometimes I wonder whether the world is being run by smart people who are putting us on or by imbeciles who really mean it.” Mark Twain
The ONE Principle
Watching the painful gyrations of our government over the past few weeks, it convinces me that there is one most important leadership principle in this age. This is true not only for our government, but for our corporations, teams and families. And, it is not new. It only needs renewal.
The Bible, as well as every other Holy book of every great religion, sought to promote unity even if its followers failed to understand or act accordingly, as they usually did. “And Jesus knew their thoughts, and said unto them, Every kingdom divided against itself is brought to desolation; and every city or house divided against itself shall not stand.” (Mathew 12:25) And the Apostle Paul said: “If ye bite and devour one another, take heed that ye be not consumed one of another†(Gal.5:15). The primary mission of Mohammed was to unite the warring and fractious Arab tribes under the banner of One God. The subject of spiritual unity and the connection of all living things is a predominant theme of Buddhism and Hinduism as well. “He who experiences the unity of life sees his own Self in all beings, and all beings in his own Self, and looks on everything with an impartial eye,” Buddha is reported to have said.
In future posts I will explore the key characteristics that promote unity within the organization.
A Reflection on The Unity of Our Government
I hope the tragedy of the killing of the husband and mother of Judge Joan Lefkow in Chicago may bring some appreciation to the service provided by Federal Judges, and all Judges for that matter. (I wrote this before the murders in the Atlanta Fulton County Courthouse, which only strengthens my feelings further.)
Our three branches of government are all supposed to be co-equal. The President parades and pontificates every night on television. Members of Congress are on television promoting their bills and causes constantly. Judges, on the other hand, toil away in relative anonymity and are very often the subject of attack by the other two branches of government. How many times in the last few years have you heard politicians attacking those “unelected judges†who interpret the law. Of course it is their job to interpret the law and now and again we should be reminded that they are due some measure of respect for the daily judgments they must make, and the dangers the face in doing so, for our benefit. It is time for some appreciation of the unity of our three branches.
I am deep in the passion of re-writing my soon to be book. I have had a big breakthrough, a rather significant redirection of its focus. I won’t say the proposed title (it has not been sold to a publisher yet and they always change the title anyway) but the subtitle is something like “How to Create Unity of Effort and Energy in a Fractured World.†The subject of how companies and cultures build unity or disintegrate is much on my mind and it is central to the ability of either a company or culture to remain competitive.
The downfall of every civilization and corporation is not the work of an attack by external enemies, but internal disintegration and loss of will. Internal competitors, blind to their own deeds, raise the dagger and strike their own heart, thinking they are attacking their opponent but failing to realize that they are in the boat together, rapidly circling in a descending whirlpool of debate. The Bible, as well as every other Holy book of every great religion, sought to promote unity even if its followers failed to understand or act accordingly, as they usually did. “And Jesus knew their thoughts, and said unto them, Every kingdom divided against itself is brought to desolation; and every city or house divided against itself shall not stand.” And the Founder of the Bahá’i Faith said, “So powerful is the light of unity that it can illuminate the whole earth.â€
George Washington, in his great Farewell Address that should be read carefully by every citizen who loves his country, said “The Unity of Government which constitutes you one people is also now dear to you. It is justly so; for it is the main Pillar in the Edifice of your real independence, the support of your tranquility at home; your peace abroad; of your safety; your prosperity; of that very Liberty which you so highly prize.â€
Washington was extremely concerned about the divisions political parties would create, “Let me now take a more comprehensive view, and warn you in the most solemn manner against the baneful effect of the Spirit of Party, generally.†“One of the expedients of Party to acquire influence, within particular districts, is to misrepresent the opinions and aims of other Districts. You cannot shield yourselves too much from these misrepresentations. They tend to render Alien to each other those who ought to be bound together by fraternal affection.†And today it seems that the number one tactic of the parties is to do exactly that against which Washington warned, to misrepresent the opinion and aims of the other to acquire influence.
It is those who pride themselves in this spirit of party, and who are the most strident voices in misrepresenting the views of the other, who are the subversives and cancer among us. Let’s at least take the moment of this tragedy to recognize those public servants who rise above party, our judges, and serve the people with their courage and convictions.
Just a Few Fun Quotes
“To his dog, every man is Napoleon; hence the constant popularity of dogs” – Aldous Huxley
“How often we recall, with regret, that Napoleon once shot at a magazine editor and missed him and killed a publisher. But we remember with charity that his intentions were good.” – Mark Twain
“Even Napoleon had his Watergate.” Yogi Berra
“I know God will not give me anything I can’t handle. I just wish He didn’t trust me so much.” Mother Teresa
How We Talk Matters
Our national conversation is dominated by polarity politics – left or right, blue or red, liberal or conservative. Is this two dimensional linear view the way we should discuss problems?
A few years ago there was a popular management book by Joel Barker on “Paradigms†and paradigm shifts. It was a useful foray into our mental models and how they change over time. Mental models, which are often reflected in our language, can create either competitive advantage or disadvantage.
Consider the paradigm or mental model that must exist in the minds of young Muslim men educated in the madrasa schools run by clerics who have little or no education beyond their own Holy Book. Just as software conditions the processing of data, mental paradigms condition the processing of information in the human brain.
How are Americans trained to think? Do we assume our paradigms are the one and only “right” way to think about issues. What paradigms are making us economically competitive or damaging our position in the world? And, how does that affect behavior in the corporate world? The answers to those questions could fill a book, but a few quick thoughts.
It seems that every television news show has become “Crossfire†with someone on the left and someone on the right. Every issue is discussed with the assumption that there is a liberal view and a conservative view; a red state and blue state perspective. All you have to do is choose which your team is and you can root for someone to win the contest! It has become the national sport.
Are issues really defined by this bi-polar paradigm? Is there any other model that may more fully describe reality? Instead of a two dimensional, left-right paradigm, could reality be more multi-dimensional, perhaps up and down, as well as left and right? Is there a matrix of possible views, or even a three dimensional model? Is the solution to funding social security in the future, a future when on average people will be living to over a hundred, one defined simply by left or right? Is the fight against terrorism one that belongs to left or right? Is the growing deficit, an effective tax on our children, solved by simple left/right knee jerk solutions? I don’t think so.
Left and right, liberal and conservative, is not only an inadequate paradigm, it is mental laziness, simplistic thinking, and it can draw groups, even our nation, into false choices and bad decisions. On MSNBC today, on “Connected Coast-to-Coast†a talk show host, representing the “right†said to Ron Reagan “you on the left are all God hating…†Can anyone actually be so simple minded as to believe that everyone who considers them self liberal is “God hating?†It is not possible!
Unfortunately, political discourse today (and it is done on both sides) seeks to label the other side in the worst possible way. This is how the game is played. This process of irrational labeling should cause our citizens serious concern. Hitler labeled Jews as “verminâ€; during WWII the Japanese had similar labels for the Chinese; and we called our enemies “gooks†in Vietnam. The process of labeling makes it easier to hate, to kill an enemy or scapegoat. Why not kill “verminâ€? It happened in Bosnia and Rwanda. And with language that defines almost half the country as “God hating†this labeling is a danger to our culture, if not our democracy.
Perhaps instead of simply liberal/conservative there is a matrix with those who seek to divide others on the bottom; and those who seek to create unity on the top. Great leaders seek unity, not division. Alexander the Great made great efforts to unify Persian and Greeks by wearing Persian clothes and marrying 1000 inter-racial couples. George Washington was a unifier and feared the effect of political parties and the division they would cause. Leaders like Sloban Milosevic rose to power by creating fear in one half of the citizens against the other half. Ethnic cleansing and the death of tens of thousands followed.
Consider that the mental paradigm of division versus that of unity may be much more significant than that of right and left. The strength and survival of the United States may depend on expanding our paradigm possibilities beyond the simple minded linear dialogue that dominates our dialy landscape.
New products, new technologies, new management processes, the innovation that has been the fuel of the American economy, is founded on “out-of-the-box” thinking, the refusal to adhere to simple and traditional thought patterns. If the American economy is going to continue to thrive we must develop new generations of revolutionary thinkers who refuse to be hyptnotized the boringly repititious nightly debates. And if we can somehow get our political and media leaders to practice some pattern of conversation that breaks out of the restrictions of the current lef/right assumptions, we might just solve some of the pressing public policy issues facing this country.
Does Happiness Matter?
Authentic happiness conributes to business success
One of the best books of the past year is Authentic Happiness by Martin E.P. Seligman. Read it and be happy. In fact, it wouldn’t be a bad idea for every manager to buy it for his or her employees. It will pay off in performance.
When I first began consulting in manufacturing plants in the 1970’s management was dominated by, not just men, but by genuinely tough men – men’s men. To rise through the management ranks from the shop floor to senior management at J.P Stevens & Company, Cannon Mills or Millikan & Company, no wimps need apply.
When I was consulting with Continental Can Company, at which long battles between the company and the Steelworkers and Machinists Union had hardened everyone, to the point that managers glared at each other. Someone pointed out to me that the CCC managers had “gunslinger eyes†and they would sit around a table at lunch with their hands under the table, out of site, and then suddenly draw and point, getting someone by attacking what they had said. This may sound absurd now, but it was the norm of American manufacturing culture and it is one of the reasons for the decline of manufacturing in this country.
These were not happy places to work. I once interviewed a Vice President, the only woman member of a twelve person senior management team, and I asked her about the “glass ceiling†that might prevent women from rising to senior management. She immediately responded, much to my surprise, that there was no glass ceiling. She said women were promoted. But, when they got there, the environment was so anti-social, so unfriendly, that they couldn’t understand why anyone would want to be there, and they left.
In the past, the idea that we had any burden to create “happiness†at work would have been viewed as some socialistic absurdity. But now there is very good evidence, hard data, that suggests that people who are “authentically happy†perform better than those who are not. Authentic happiness is not simple pleasure. Eating ice cream brings pleasure, but sitting around all day eating ice cream does not make you authentically happy. It will soon make you miserable. Similarly, the data shows that an increase in income from $20,000 a year to $40,000 a year will make you happy because you may be able to afford a better home, care for your children, etc. But, does an increase in salary from one million to two million, or ten million, make you any happier? Very unlikely.
Martin Seligman is the founder of what is now called “Positive Psychologyâ€, essentially the study of mental and emotional wellness. He says that there are three domains of happiness, each of which can be measured.
The first is The Pleasant Life: which he says is “Having as much positive emotion as possible and learning the skills to amplify the intensity and duration of your pleasures. But the capacity for positive emotion turns out to have a genetic set range that is hard to push around: lottery winners and paraplegics revert to their usual level of good cheer or grumpiness within a year following the event that changed their lives.†In other words, there isn’t much you can do about your capacity for this type of positive emotion.
The second type is The Engaged Life: “Being “one with the music,†absorbed and immersed in your work, love, friendship and leisure. The central skill to have more engagement is to identify your signature strengths and virtues and re-craft your life to use them more often. By deploying your highest strengths and talents, you can have more intense absorption in more areas of your life.â€
Over the years, and this may sound a bit silly, I have believed that the work we have done in setting top-to-bottom systems of team management in which every employee takes ownership of his or her work processes, communicates with customers, plots data, and is empowered to make decisions, has made employees and managers happier. It just felt this way. And, this always went along with improvements in performance. Seligman’s work helps understand this connection between management systems, psychological engagement, and productive workplaces.
And the third is The Meaningful Life: Seligman says that this “Adds one more element, transcending the self, to the engaged life: The central skill is to identify your signature strengths and virtues and using them to belong to and to serve something that you believe is larger than you are.â€
There is good data suggesting that people who are religious, who have a strong set of values and beliefs, are happier than those who do not. Meaning matters. Purpose matters. Serving something that you believe is larger than yourself is the essence of all religion and is a cornerstone of the spiritual enterprise.
One of the most useful areas of research (if I were advising you management or psychology students) is how the processes, systems, and culture of organization can be structured to reinforce these three attributes of authentic happiness.
Visit Seligman’s website and take his happiness test. You will find it interesting.
Getting up-to-date…A brief, recent history of me
Just in case any of my former associates, clients, friends or enemies check in here and wonder what this guy has been up to… a brief report on the past six years.
More than six years ago, and I remember the moment it happened, I decided to sell my company, the Miller-Howard Consulting Group, and quit. The moment was in a Ramada Inn in Cleveland, on a December night, probably around the 16th or17th. I was there to do a talk, to heaven knows who, and I made my promised and ritualistic call home. Now, keep in mind that I had been in the consulting/speaking game for around twenty five years and I spent a lot, and I mean A LOT, of nights in lousy hotel rooms (not implying that this one was notably lousy).
The lightning bolt struck when I realized that my daughter, Natasha, who was to be married a week later, was spending her last night at home, ever. And, it was snowing in Cleveland. That was it. It only happens a few times in your life when you just know you have to do something; when you are confronted with life events in a way that demands that you sit up and take notice and do something different. Change! I thought I had enough money and knew my talks so well I had out of body experiences where I could hear the words coming out of my mouth, but my mind was somehow in a different place. That’s another clue!
At that moment I decided to sell my company and do something different. It took a couple years to pull it off, but Towers Perrin bought the firm. Jennifer Howard, my long time partner, and all of the consultants, merged into TP. I also became Principal of TP, but after six months of trying to fit in and make myself useful, I realized that I just could not fit into their culture. I was gone.
For the past six years I have used that incredibly uncomfortable phrase “I am semi-retired” to describe my status. I have split my time between play (sailing to Maine, Bermuda, etc.) and working with non-profit organizations. I have spent more time with AIESEC International than any other. AIESEC is a great organization, formed after WWII to promote international understanding. It is entirely student run. That statement requires some reflection. This organization of about thirty thousand students in 87 different countries has survived for more than fifty years without any professional, adult, management. Each year the local chapters on university campuses elect a leadership team, then a national leadership team is elected, and there is a once a year international conference at which they elect a new global President and leadership team. So, every year, a new group of young men and woman, in their early twenties, move to Rotterdam and provide coordination and leadership to this global organization. For the past five years I have been their “change management” consultant as they have redefined “The AIESEC Experience” as a life-long learning process and designed all the necessary processes, structures, systems, etc.
Every organization is unique and presents its own challenges. Needless to say, AIESEC was challenging, unique, and a lot of fun to work with. I won’t bore you with all of my other adventures, but they include serving on the board of small university in Switzerland, born of great ideas and dedication, but lacking any viable business model. I was drawn into a half time job (no pay!) in Switzerland, working to rescue this poor child. But, I am afraid the finances were beyond repair.
So, now a new chapter begins. I have had enough sailing, realized my wife is not going to sail to Tahiti with me, and spent enough time with non-profits. Now back to “real†work. I have just finished the draft of a book in search of a good title (it was The Discipline of Common Sense, but my agent has decided that doesn’t work).
My great ambition now is not to rebuild a consulting firm with offices, staff and consultants flying all over the place. I would much rather do the fun part …work directly with clients, assisting good people work their way through the process of improving their culture, their teams and their service to clients. That is the fun part.
Welcome to Management Meditations
A blog dedicated to creating commitment and collaboration at work
Since about 1969, from the time I began working as a counselor at Polk Youth Center, N. C. Department of Corrections, I have been focused on how human behavior responds to the nature of organizations and all of their systems and structures. From prisons to joining Fran Tarkenton’s mad house of training and consulting in textile mills of the South (1973), when we were focused on “catching someone doing something good today”; to forming my own firm (1983) and the creation of total team systems from top to bottom in client organizations; and to the development of a whole-system model of organization design, I have viewed my career as a journey of learning and discovery. Rather than become obsessed with one technique or theory, I have always sought to learn from the new in each and incorporate lessons into a unified process of improvement. In this blog I hope to share some of the things I have found to be important, to have high impact on the performance of individuals, teams and the organization.
What this blog will not be is a recitation of consultant speak. You can read my books or papers for all that. What I will do is comment on current lessons learned, books read, events in the news and attempt to share some perspective as they relate to organization performance.
Blogs can be boring. Many of them are largely self-indulgent rambling. I will try not to be rambling or self-indulgent.
I believe in dialogue, the creation of collective wisdom that emerges when differing views are inhaled, taken deep into the lungs, and then exhaled in a fusion of shared insight without regard to who owns the thought, whose report card will be credited. For that reason I welcome comments and they will be available for public view. Nothing would please me more than for this blog to be a place where compelling and even controversial ideas come together. As long as the general theme is considering how organizations impact performance, how the cultures of companies and public institutions are changing or need to be changed.




