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.

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. )

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.

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.”

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.

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.

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.

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.”

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.”

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.

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 “vermin”; 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 “vermin”? 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 pu