~synthesis~

quintessence

Steve Jobs resignation as CEO of Apple has provoked questions - will Apple maintain their trajectory of success? What is their unique advantage?

Check out these three articles:

1. Ultrabook: Intel's $300 million plan to beat Apple at its own game
2. The New Apple Advantage
3. 10 Reasons Why iPhone 5 Doesn't Stand a Chance Against Motorola Droid Bionic

The first is Peter Bright’s quest ‘to find a 13" MacBook Air that isn't made by Apple.’ Sobering insight into a normal person's experience of buying a laptop from Dell, HP, or Lenovo.

Next John Gruber thinks Steve Jobs and Tim Cook are responsible for Apple’s success: “We’ll give Jobs the credit for the adjectives beautiful, elegant, innovative, and fun. We’ll give Cook the credit for the adjectives affordable, reliable, available, and profitable. Jobs designs them, Cook makes them and sells them.” Gruber feels that it is possible for Dell, HP, etc. to copy Steve, but they’ll never match the economies of scale that Cook achieved.

Finally, Elias Samuel delivers a detailed and apparently thorough assessment of the shortcomings of a phone that no-one has seen vs. a phone that few will use. It includes the Korean version of their teaser ad, here’s the English version. If you want to nerd out some more - here’s a comparison of three random Android phones - does a typical consumer really think this way?

From these articles, I concluded that Apple made it easier for us to buy; consolidated their product line and parts requirements to lower operating costs; and conceded the phone-nerd audience vs. normal consumers.

But this isn't really Apple's magic...

Have you seen Jobs' 2005 Stanford Commencement speech? He said one of the best things that happened to him was getting fired from Apple in 1985. It gave him the freedom to create NeXT (which Apple eventually bought), and Pixar, the most successful and creative animated film studio ever.

Steve Jobs is brilliant and a visionary, but there are many of those; what makes Jobs unique is his time at Pixar.

Two “behind the camera” roles in film-making are Producer and Director. Simplistically, the producer’s job is money, logistics, and marketing; the director’s is the story, the artists, and the ultimate experience.

I think John Lasseter (director, Chief Creative Officer, Pixar) is/was a HUGE influence on Jobs’ thinking about the essence of product development.

Great directors must:

• Interpret an intricate, complex and wide-ranging story and turn it into something that can be conveyed in ~90 minutes;
• Marshal talented, creative, and ego-filled actors to work together for one cause;
• Create a complete sensory (emotional, visual, auditory) experience;
• Make all the difficult editing choices that turn hours and hours of footage into a tight story that will not only entertain at the theater, but also in DVD.

The story is preeminent. Difficult tradeoffs will be made, forsaking interesting story lines, scenes, and special effects. The audience will be treated to a unique and powerful and memorable experience because these tough choices and decisions were made. The audience's job is also made easier because *they* don't have to do this hard work - they just have to enjoy its fruits.

Steve Jobs returned to Apple in 1997 as CEO, but he was really the Director.

He took over a company that lacked focus and was bleeding money. Jobs eliminated most of the product portfolio (Newton, Cyberdog, OpenDoc, etc.), keeping only what he believed was part of the "story," and he aligned every employee to a singular vision.

He defined the experience customers would enjoy. I can imagine him saying, “Forget computing or productivity or any of that crap! Apple will entertain. We are not a company that builds multi-purpose devices that offer flexibility and choice at a low price. Apple's job, our job is to elevate spirits, to amaze, to create pleasure in use and pride in ownership."

This is Apple’s magic - this obsessive and uncompromising desire to create pride, to elevate.

Will it survive Steve Jobs’ departure as CEO? Is there another Director in the wings who will have as strong a spine and be as unwavering?

I hope so.

Stay hungry, stay foolish, Apple.

clarity

"You've got mail" was in the vernacular 15 years ago, there was even a movie that used this now quaint Aol phrase. Such was Aol's strength and place in the market that they were able to strike the largest business deal to-date in buying Time Warner in 2000 for $182 billion. Aol's core business was (and still is) dial-up Internet access. They peaked in 2003 with 26.7 million subscribers; today that number is 3.85 million, with earnings of $1.02 billion (and $1.28 billion from advertising) in their last fiscal year. Both were 26% lower than the prior year, despite averaging 112 million visitors/month. Revenues have fallen by 25% for the last three quarters of this fiscal.

With desperation come bad decisions. Aol recently bought TechCrunch for $25m and then Huffington Post for $315 million in the belief that content is the light at the end of their tunnel.

On the same day I learned of the Huffington purchase, I read this fascinating survey whose title says it all: "Executives Say They're Pulled in Too Many Directions and That Their Company's Capabilities Don't Support Their Strategy." My gut response to these executives is: "then you're clearly not worthy, do us a favor and quit."

64% of these "executives" complained that they have too many conflicting priorities; 52% don't feel their strategy will lead to success; and a whopping 66% admit their organization does not have the capability to be successful.

To run an organization, you must have a clear vision; be relentless (dare I say - single-minded) in pursuing it; and you must have the capacity to ensure success. If you can't do these things, you are not a leader - you're at best a mid-level bureaucrat who needs a manual to figure out where the toilet is (and perhaps what to do while there).

In my last post I talked about how team trumps the individual, how success requires a cohesive team focused on the end goal and not individual glory. Executives bent on personal accomplishment to "rise" above their peers create random strategies and priorities aimed only at making them look good.

In the end, these organizations are doomed to fail, they favor spurious action over well-thought-out plans, they jump on random bandwagons, and they don't create a community with a common purpose, where people are valued and team success is rewarded.

What does this have to do with Aol? First:

1. Dial-up - what market segments use dial-up today? I’m guessing it's people who have decided they're too old to change, can't afford to change, or have no interest in change because it's not worth it to them.
2. Advertising - the fact that Aol's ad revenue is falling at exactly the same pace as their subscriber revenue means that most of their traffic comes from their subscribers, and they're doing nothing to hold on to, or expand either.
3. TechCrunch/Huffington Post - including DMG from the link in #1 above (a must read), you might not need all the fingers on one hand to count the number of TechCrunch (nerds) and Huffington (liberals) readers who prefer and use dial-up.
4. I'm willing to bet that Arianna Huffington only sold the Post because she's been promised the CEO-ship of Aol in the next 12-18 months.

Second – one of the most interesting demographics for advertisers is older people; now that baby boomers are retiring by the thousands every day, there’s a lot of $$ available to companies that have access to these very lucrative audiences. Aol's 112 million visitors/month are probably closer to this segment than any other, but have minimal overlap with either the nerds or the liberals.

If Aol has a core competency, it is in provisioning dial-up access and advertising to their subscriber base. Why not buy a cheap broadband ISP that they can use to convert (and maybe even grow) their subscriber base, and focus on delivering (vs. acquiring) content that is meaningful to the customers they already serve?

Tim Armstrong, their CEO was President of Google Americas (US & Canadian ad sales) prior to Aol; there is no doubt that he knows the Internet ad business and how to run a sales organization. He will leave Aol soon, having added M&A to his portfolio.

But sales (and M&A) by its very nature is not a team sport - for you to win, others must lose. Is Tim forging a path for Aol's success or his own?

team trumps

Jack Welch's Straight From The Gut is the management bible for many business leaders. Welch talks in the book about his 20-70-10 rule: no matter the company, 20% of employees are stars, 70% are adequate, and 10% need to be fired.

GE and others rightly put a lot of energy into hiring - the selection process is long, painstaking, and rigorous - in the hopes of recruiting the best. A good HR person will tell you that a successful team needs many different skills and experiences and personalities, and that the team's achievement is rarely based on any one person, but on the group's ability to achieve. Sadly, they fall short in advising you about how to hire this great team; instead they push only for superstars.

If you're only hiring one kind of "best," how do you then sustain success if you can only reward 20% of these ultra-ambitious "best" appropriately?

Many have adopted Welch's model; one company I know assumes that two out of ten are stars, and one is a dud. They have about 90,000 employees, which means 9,000 need to go; and with a fully burdened cost of $250k/year/employee, the 10%ers theoretically cost them $2.25 billion last year.

But this is a successful company, run by smart and capable people - I cannot believe that these 9,000 are truly that much of a drag. When "team success" is disincented in favor of individual success, we have a failure in leadership, not in employee quality. If the manager did a good job of recruiting and hiring, every member should be valued, not just the top 20%, and if there really is a 10%er, that is a critique of the manager more than the employee.

This might surprise you, but Welch, like most senior executives has a rather large ego (yes - it's true!). They achieved what they achieved because they are good at what they do and competitive as hell. The 20-70-10 model appeals to them and their egos. But once you grow beyond a sole-proprietorship, the team becomes more important than any one contributor - you could be the best chef in the world, but if the buyer bought crappy ingredients, or the servers are slacking off, or the cleaners aren't cleaning, your success is at risk irrespective of your talent.

This why Michael Jordan didn't win his championships until he had a great team around him, and why despite his enormous talent, LeBron James couldn't win a championship in Cleveland.

Short term success is possible in a climate where teammates must compete with each other, but pretty soon all these "great" and "ambitious" people realize that it's not worth it to claw at each other and they slack off. They re-prioritize their lives (remember "work-life balance"??), become less obsessed with work, and focus on their own lives. Now the gym memberships, vacations, long lunches, etc. become more important than shipping a product.

While the employees are getting healthier, the company is getting fatter; when teams perform poorly, output per unit declines, and more people are needed to achieve less.

With the right management approach, it is possible that that 90,000 person company could achieve the same revenues with 30,000 people. 60,000 X $250K = $15 billion incremental profit -- hmmm...

Measure and reward everyone based on how the team does; in most start-ups this happens naturally - their salaries are a small piece of the pie compared to the value of their stock options. The focus is on making the stock price rise, not on looking better than their peer. In large companies where the stock price is not rising as quickly, salary and bonus matter more - unless you reward people based on the team's performance, your message is "for you to succeed, your peer must fail." That's just wrong.

Prioritizing team success over individual success creates sustained and more efficient achievement.

Is this a management failure? A manager's job is to execute the wishes of their leadership. The leader's job is to orchestrate sustained success for their organization. Once you get to a certain size, managers are forced to be insipid sycophants.

The real 10%ers are leaders who can't transcend their own egos to prioritize the team over the individual.

goog-up

If money is the ONLY reason someone is working for you, do you really want them in any kind of role, much less a “mission-critical” one? Aren't they then really a vendor/ consultant vs. an FTE?

When you start a company, everyone is connected to the vision, shares the passion, and is there with you to create something great. When you're small enough and young enough, this common thread amongst all employees is intrinsic, and management is almost not necessary. As you grow, you must create the conditions that naturally attract those that must work with you, and repel those that shouldn't; your values and integrity must be intrinsic and permeate the whole company. This is the best of management.

I recently wrote about how I thought Google might implement a growth strategy that would be more in keeping with its original premise and the ethos of its founders. Over the last five years, they've grown more than seven (7) times in revenue, and their employee base has grown almost five (5) times to 23,000+.

Impressive! There is no arguing their success in advertising, email services, video provisioning and of course search, and there is no arguing their competence in these.

Sadly, success has a price (especially for American companies that wish to play in Europe, and eventually other regions); but it can be avoided. They have to be open to growing by becoming smaller, recognizing that spinning off little "Googlets" can enable both the organization and its people to progress and achieve; and they have to be committed to great management.

When Brin and Page (Google founders) wanted to hire a CEO, they needed someone who spoke their language, that had chewed the same dirt that they had; otherwise they wouldn't be able to relate to, or trust him. They found Eric Schmidt, a fellow-nerd. Of course there are other critical functions (HR, PR, facilities, etc.), but they were viewed by the nerd collective as "non-core," nothing more than corporate overhead, and there was less focus on hiring in these areas.

In some high-tech companies, HR/Operations, etc. are roles where executives are relegated (penalty box), or where "core" people are assigned because there are no other (real) senior openings. Since these roles are "different" and aren't valued (or understood), there is a tendency to not only not pay for, but mistrust really capable outsiders; so if at all, these roles are filled with inadequate leaders. You can't be cavalier about any management role.

Now we read that Google is struggling to retain their employees (ConnectCV, NY Times), and the risks of not caring about "non-core" things like effective management surface. I'm singling Google out, but this is true of most (all?) high-tech companies. When asked about their recent brain drain, Schmidt's response was "the company’s attrition rate for people it wished would stay has been constant for seven years."

My interpretation: "We think of our people as numbers and don't regard or value them as individuals with unique abilities, gifts and interests. Our numbers are consistent; we don't suck any more than we used to, and we don't see a need to change." What do you think that response says to the 23,000 people that stayed behind and still work for Google?

This answer was not crafted by anyone that cares about the people of Google, it was written by a PR person whose job is to spin a story and control the message. It speaks volumes that Schmidt was quoted saying this. Alas - most high-tech leaders blindly parrot PR/HR talking points.

If it were me: "Of course it hurts when people like Lars or Matthew leave - they are amazing and talented, and this is our loss. But I am excited about people like XXX and YYY who are doing fantastic things; and we just recruited ZZZ and QQQ who are brilliant and passionate, and already making a difference. Our strength is that no one person is Google; together all of us are Google. I wish Lars, Matthew and everyone else who has worked at Google the very best in their futures; we are proud of the fact that Google 'graduates' are sought after by other companies; it's a compliment to the great people who work at Google now, and we are honored that they chose to spend time here and make a difference with us."

A statement like this must be a genuine reflection of management's philosophy and approach. When senior executives companies so obviously feign knowledge of their own products and customers, or worse knowledge of their employees or interest in their well-being, it's time to short the company.

Google recently gave all 23,000 employees a 10% raise; from the NY Times article: "The motivation was, in part, the “war for talent,” Mr. Schmidt said. People who have other job offers have been persuaded to stay with seven-figure bonuses. Google says 80 percent of people who get a counteroffer stay put."

The interpretation is either "Doh! We suddenly realized you're underpaid!", or "When we learn that you're not happy, the only thing we can think to do is buy your loyalty." Neither is a message I want to share with current/future employees or investors. What kind of people does this say Google is recruiting? Those bent on creating profound impact, or those just looking to make a buck?

Goog-ups (high-tech screw-ups) happen when you grow to a certain size (when leaders no longer personally know all the employees), but because you're still "small" (~250 employees), you feel that it's "frivolous" to burn valuable FTEs on mere people management. Here is my corollary to the Mythical Man-Month - a well-run and well-managed company is much more sustainable and likely to succeed than one that is lean but un- or badly-managed.

Goog-ups only value "core" skills. Everything else isn't just overhead, it's commodity. Or in the old IBM parlance, plug-compatible - anyone can fill those roles, and they're utterly replaceable. A mature player sees and appreciates the whole chess or Go board, and plays the whole board, not just that one pawn or stone.

According to a Feb ‘09 survey, the top three reasons employees stay are: good relationship with co-workers; job security; and desirable commute. The top three reasons for leaving are inadequate compensation; inadequate professional development opportunity; and insufficient recognition. High tech compensation is already excellent, but rather than focusing on why people stay, and optimizing for that, most obsess only with why people leave. Addressing the latter is about sucking less. Addressing the former is about being the place people would work for free. Which would you prefer? Which is more sustainable?

A well-run company has the maturity to look at the whole board, and plays not just to win today, but to keep winning always.

unjust disparity

Bob Herbert wrote A Sin and a Shame in the NY Times, where he argues that over the last several years, corporations have used the "desperate times call for desperate measures" sentiment to lay people off, even when their economic situation didn't really require that dramatic a reduction in workforce.

The "surviving" employees feel they have to double down and work much, much harder to keep their jobs. The result is even more profitable corporations (profits up $572 billion, payrolls down $122 billion), whose cash positions have improved (now $1.84 trillion, a 27% increase from 2007) dramatically, and an employee base stressed to the limit.

Here's the real killer - from Q4-2007 to Q4-2009, real GDP fell by 2.5% while payroll fell by 6%. This is big.

Two questions:

1. Why is this bad? Is it wrong for corporations to be as lean as possible, to have their employees be as productive as possible, and of course to be as profitable as possible? Isn't this how we judge corporate performance?
   
2. How will this end? Will they relent, reduce profitability, hire back, and expect less? Will people grow to love the idea of being this productive and want to keep it going? Is people's ability to contribute at such a high level sustainable?

Nowhere are desperate times more felt than in the home. It's not as difficult for a company to lay someone off as it is for that person to actually be laid off. For the company it's simply a numeric exercise; for the employee it's about a roof over their head and food on the table. So how do the employees react?

Things don't suddenly hit the fan; there is a lead up that gets to the point when people, despite the risk, say "Enough." It is at this point that revolutions are born, that causes are formed, that the Man is made to pucker.

As the unjust disparity grows, the people's desire to hold on to the status quo shrinks to the point where what was once unthinkable becomes thinkable.

Unjust disparity is the gap between being controlled and being in control. [I just made this up, and I'm sure there are other more "official" terms for it, but this is mine. So there. :-)]

This is not about wealth vs. not-wealth - there is tolerance for this, especially now (with sports and music) that so many once-poor people have struck gold. It's about hitting some kind of personal limit. This is about a more fundamental, and intentionally-created inequity. I'm reminded of the first time I heard Meat Loaf sing I'd Do Anything For Love (But I Won't Do That) (my emphasis); coming from a man who called himself "Meat Loaf," that seemed like quite the repugnant thing.

To the two questions above, corporations must be successful it's what their shareholders expect; the issue is their ability to sustain it. What the leadership does to achieve that is the that that will damage organizations that choose corporate bulimia (purging employees) as an effective strategy.

Of course there are moments in business when extreme effort is required, but they are moments, not months, and they are not sustainable. Greed combined with corporate myopia will take the productivity peak achieved in crunch time and turn it into the worst kind of backlash. There is a progression:

1. Those that can't handle the stress begin to fall over or leave
2. Those that can handle the stress, but have a sense of moral purpose and the knowledge that they are employable (even in tough times) begin to leave
3. Future stars that are now forced to pick up the slack of the current top talent (#2)'s departure begin to leave (this is disaster)
4. It goes on...

Smart organizations are actively recruiting disaffected #2s, and one of their selling points is that they won't do that. They are also networking with #3s, knowing that they are much more fickle and open to change. This is not good for those that did do that.

Organizations where HR/Legal/PR rule, where there is a feeling of soullessness, and where management has no empathy or visceral understanding of how the employees feel, will suffer. Their management is so reliant on reports and analysis and McKinsey-type presentations, that they view their people as things, and have little or no sense of what's really going on, be it within their walls, or in the minds of their customers. Good leaders don't allow knowledge to be filtered; they most certainly want to be connected to their people and their customers. Those that claim that it's not possible to manage without the filters are the ones the Board needs to replace.

The unjust disparity is never more clear than when we choose the company over the individual. You can't sustain success when it comes before those that create it.

local heroes?

The US Department of Defense can't account for $8.7 billion out of the $9.1 billion intended to help rebuild Iraq. Bell, California city officials were forced to cut their salaries by 90% because they were found out (the worst offenders were the city manager ($787,000/yr) + assistant city manager ($376,000) + chief of police ($457,000/yr) were all forced to resign). Also in California, while spending for K-12 education rose 22% over five years (from $45.6 to $55.6 billion), actual classroom spending fell from 59% to 57.8% of the budget, and 38,000 school teachers have lost their jobs; California has a $20 billion deficit. Where is the money going?

There is profound inefficiency in the American education system - California alone has over 1,000 school districts. First - why are so many districts required? Surely one is enough? With 1,000 separate district organizations (each of which has an average $55m budget), surely there is waste, fraud and excess staffing? With 1,000 districts, surely a percentage of them have leaders that are abusing the system, and siphoning money away from students and teachers? With 1,000 districts, surely there would have been a way to fire 38,000 bureaucrats, retain 38,000 teachers, and give tens of thousands of students a better education?

"They" say that we should keep the Federal government small, and leave as much work as possible to the states and below. Most politicians will argue that this is the key to success, but where's the proof?

While local government is theoretically more in tune with local needs, the price you pay is significant. By definition, a decentralized model with redundancy at every level is actually more government not less. Look around the world today and you see a dearth of great leaders and great managers. The more distributed government is the more leaders and managers and honest people it needs; and let's face it, there just aren't enough of those to go around. The result - bad management, shortsighted thinking, poor budgeting, massive inefficiencies, wasted money, wasted time, wasted lives, wasted air...

When the system is this fragmented, it is also impossible to ensure accountability - imagine how big, how pervasive and how resistant to "influence" the oversight organization would have to be to police the whole country's fiefdoms? The theory that local elections serve as the "cops" is laughable - just look at the "wonderful people" that keep getting reelected in local and regional (and federal I suppose) elections). It's too easy to hide, and people are too disengaged to pay attention. In the end, elections are not the best way to do anything other than win a popularity or fear-based contest.

The 8.7 billion dollar throwaway by the DOD means this isn't just a local problem; there are massive failures at the Federal level as well (this is but one).

Is there a way to prevent fraud and abuse and just plain stupidity? No - being unscrupulous is part of human nature (or better said, trying to get away with something you know to be wrong is human nature); and you only have to look at the Darwin awards to know that there are a whole lot of less-than-bright people that grace this planet, and many of those seem to be drawn to politics.

The arguments against federalizing everything are many - too much distance from people and local issues, too much bureaucracy, too much excess spending, and my favorite with budgets that big, any screw-up is sure to just as gigantic (at least locally it's only hundreds of thousands of dollars or millions, and not billions).

I don't buy that. Saying that this alternative sucks less so let's do it is not the way government should work, and it's certainly not the way citizens should be served.

My first instinct was to say we should accredit government workers - they must be trained and pass an exam to be judged "Competent to Spend the People's Money" (or CSPM ;-)). But that's a non-starter - just look at the fact that 90+% of politicians are lawyers (who had to graduate from university and pass the Bar), and how incompetent they are.

I wrote something a few months ago that I think might have merit - I was talking about how we incent or mandate a balanced budget:

Quid pro quo. If we're punishing Congress for excessive spending, we should also reward them for good behavior. Every year that there is a budget surplus, all Federal employees will receive a bonus of X% (1 or 2%?) of the total surplus, divided equally (same percentage of salary). When they've also retired the gross deficit, the percentage should double. There should be no cap on this - the better they do, the better they do.

But how do we prevent fraud? Two things - first, if everyone's pay is dependent on a more efficient system, maybe that creates an incentive to play better. Second, if the number of agencies is reduced profoundly (reducing the 14,866 school districts to 50 + 1 (for Washington DC) for example), then maybe it's possible for the GAO to police all of them? And what if the GAO is also similarly incented to find bad behavior and eliminate it? For example - one incentive I might consider for the GAO is they're penalized if a behavior is reported in one year, and remains just as bad in the next, and they're rewarded if it improves (their bonus pool could increase by a percentage of the improvement).

It should be noted that there are a ton of federal organizations that do have a local presence, and are able to tune their efforts according to local needs - it's just a matter of policy.

The three steps to reduce bad behavior - consolidate so that fewer more qualified people are doing the work; create a pay structure that rewards fiscal responsibility and improved service for the citizens; and motivate the oversight organization so that it wins if the citizens win.

Sadly - the easier way to do it - trust the citizens to vote well - hasn't worked...

the matrix

In the movie, The Matrix is a simulation - a world constructed by an artificial intelligence that is powered by the energy of its human captives. The humans are deceived into believing that they live normal, contributing lives, all the while they're alone in pods having their energy leeched; until one of them - Neo - is freed by a band of underground revolutionaries that believe him to be the "One" (note the anagram) who will defeat the Matrix and free humanity.

In the real world, the earliest reference to the matrix I found was JR Galbraith in 1971. This matrix is an artifact of man, and was intended to help make organizations more efficient. The idea is simple - optimal performance lies in being functionally-integrated vs. vertically-integrated. The specialized teams (Sales, Marketing, Engineering, Design, Research, etc.) will provide their services across product lines, allowing the company to benefit from deep skills and experience by specialty, and the employees to benefit from clearer career paths and professional growth. Makes sense.

Matrix-managed organizations can be more effective and successful if the leaders are able to transcend their team and prioritize the company's success vs. their own. At the top, there are methods like balanced scorecards and dashboards to create an aggregated management view, but it can be difficult for a "line" executive to stand out, and demonstrate their value, ability, and achievement.

How are line executives evaluated? If the organization (like most companies) uses a zero-sum performance model, then the people are measured against each other, despite their work being very different (e.g. Sales is compared to Marketing, Engineering, Design and HR). Sales creates value in a very different way than Marketing, so if Sales exceeds their quota, and Marketing delivers outstanding campaigns, then which manager "wins"? Surely self-interest will prevail, and Sales will want to look better than Mrketing so that it is viewed and rewarded more favorably, which means that in addition to Sales creating value for the company, it has to do it in a way that also shows it to be more valuable than Marketing.

Smart managers will develop their own scorecards to showcase their value (define their own rules of success); if they're "really" smart, some of their metrics will try and take credit for others' success, and thereby increase their odds of a better performance review, and relatively greater recognition and reward.

If a matrixed organization by its nature creates competition between line executives, then why would the C-suite expect there to be cooperation between these competing teams? Look on Monster.com and you'll see a ton of job descriptions that specify the ability to "influence people without authority," or "operate effectively in a matrixed environment," or "work well in cross-team settings." These skills are in demand because managers recognize the value of talent that can get "sister" teams to support and contribute to their activities and success.

A second skill in demand (so much so that it often becomes a discrete role or even a discrete function) is "orchestration." These are the people that develop processes and systems (reports, performance management processes, etc.) that look across organizations to "formalize" horizontal perspective and oversight. In other words, their job is to build patches between the separate horizontal functions.

There is no doubt these skills are necessary and valuable; there is no doubt that specialization is a good thing - the better you are at something, the better you are at it. There is also no doubt that a well-run matrixed organization can be more efficient than the alternative. Why then is there so much angst/difficulty/stress about getting things done, being more agile, and being more responsive to the changing market in matrixed organizations? How do we make the matrix work?

I think it's simple, and the movie can teach us something. To prevail against the AI and win humanity's freedom, Neo and the resistance had to set aside local priorities and ego and work together towards the common purpose. Their measure of success was freedom for all people, and the price of failure was death (or re-absorption into the matrix). First, it was easy to keep score; and second and most critically, the penalty for failure and the rewards of success were shared equally by all participants. That's what kept them motivated, and what helped them persevere when things looked most dire.

Organizations (matrixed or otherwise) are more successful and stronger when everyone's success is based on the company's success; and the knowledge that if the company fails, everyone takes it on the chin. Everyone's success should be a function of the company's success, and everyone should similarly know what it's like to lose.

For example, we will all get a share (equal amount or percentage of salary) of "profits" when we succeed (no other bonus), and get no bonus when we fail. The rule should be applied universally and irrespective of whether you did all the work, but your colleague in the next cubicle did nothing but watch YouTube videos all day. This will put all sorts of positive pressure on the company and its people - to want everyone to be productive (and "help" or "encourage" those that aren't); to hire well (so critical); and of course to work across teams (I need to help Sales, and Marketing and Design so that the company is successful and that we in Engineering helped make us so).

In the end, it's not whether you work in a matrix (or The Matrix), but rather how you get compensated. A matrixed approach will not guarantee success, but the right measurement scheme will.

Shared vestedness begets participation, which begets teamwork, which begets shared success.

grow some

There are three reasons to have a meeting - to share information, create insight, or gain agreement.

How many meetings do you attend where there are too many people in the room, and the agenda's so crammed that you are certain never to get through it, plus you're immediately irked because the topic you're there for is last on the agenda and is sure to get postponed? Why do people create meetings like this? I suppose for the same reason that a dinner party host fears that the food will run out, or not enough people will show up.

I can understand that about the eating, but not the meeting. If the point is to share, create, or gain agreement, don't all of those things come before time-keeping? Saying "sorry, as interesting as this is, we have to cut it off so that we can get through the agenda and be finished on time" is an indication of failure.

We all know that when they buzz through the last few slides or points, what gets cut off or rushed is either the payoff of the presentation or the vital discussion afterward. We also know that by rushing or cutting things off, the real goal is rarely accomplished.

This last part is also when the nay-sayers get to debate the issue, resolve concerns, and become supporters; where those that didn't fully understand can see the whole picture; or where the presenter can really land their critical message; etc. Cutting that off is like missing the last 10 minutes of your favorite sporting event ('cause the TV station had to cut over to a soap opera), or if your Rear Window DVD breaks right when Grace Kelly is inside the bad guy's apartment, and he's about to walk in.

If I want to achieve "share," "create," or "gain agreement" - doesn't that matter? Doesn't that matter most? Forsaking actually effective meetings in favor of on-time, well-attended meetings is, well ...pointless.

What's wrong with having one objective, accomplishing it, and getting done early?

Large organizations send employees to trainings on running effective meetings/events. The classes teach you to plan the meeting/event, impose structure, send everyone a pre-read and the agenda, and account for every minute of the meeting.

So you embark on your meeting just as the course prescribes, with high hopes of a good outcome. Then someone questions a critical premise, key people don't show up, and yet a third (more senior than you) person wishes to discuss and debate an issue beyond the allotted time, and you kiss your happy ending goodbye.

I've met "executives" (especially in large, MBA-ridden corporations) who actually "evaluate" meetings! They will judge a meeting to be a poor execution that just happened to go well (got lucky) because there wasn't a crisp, clear agenda, with well-defined outcomes; the meeting was too open-ended; progress didn't occur in the "proper" way; and the organizer appeared inadequately "driven."

The ensuing email: "That a good outcome occurred is unfortunate given the failed execution of process. XXX's inability to orchestrate an effective meeting raises concerns about their competence as a manager, and their eligibility for our leadership program."

The failure is that the meeting has become an outcome unto itself; this is especially true in highly matrixed organizations, and is a classic example of micro-thinking. It contributes to a lack of agility, arrested decision-making, and profound inefficiency because so many meetings are required to actually get something done.

To be a great meeting convener, you need the maturity (understanding of human nature, patience, wisdom, confidence), combined with the cojones (confidence, wisdom, patience, understanding of human nature) to overcome the corporate training and overzealous MBA-types, and stand firm in the conviction that less is so much more than more.

Sadly, people who have developed this level of sensei-ness tend to avoid meetings altogether.

open accreditation services

Is learning is undergoing a transformation? From this article in the NY Times on the profusion of lectures available online, its implications on learning, and how that's changing the way students learn; to 21st Century Learning proponents, who claim that learning in this century is like no other, that students are actually different, and that institutions need to evolve their curriculum to match, you might think so.

I don't think the turn of a calendar's page changes the way the brain works, but what (if anything) is really different about education in this century?

It's not enough to say we have new technology today vs. yesterday, because yesterday they had new technology vs. the day before. It's not enough to say that we expect more from our students today than ever before (ibid).

What about this - could this be the century in which the business model of education changes? Is this the point where accreditation as we know it goes away? This isn't new in the history of learning, but it's something that hasn't happened in perhaps the last 150 years.

The mainstream public education system on this planet is authoritarian, discriminatory, built to make life easier for adults and regulators, and seemingly not even designed to make children great. The rules in most schools are all about what you CAN'T do. Oppression doesn't seem to be a good way to engage students and improve learning outcomes - does it?

How does the system become so authoritarian? Simple - they own the ticket to employment. I wrote recently about the tertiary education is becoming commoditized; I think things are getting even worse now. The most tangible benefit of staying in school and graduating is the piece of paper you get that says you attended, graduated, and are now employment-worthy.

If you have something hammer-like (the ticket), then it is easy to be lazy and use that hammer to assert power vs. truly engaging students - think of most country's border guards; they should be tourism advocates, but instead let their power get in the way. This is not universal, but it is pervasive.

Change in this case won't come from within. These days, more and more employers look beyond the accreditation to the person to assess whether they'd be a good hire. Ask any recruiter, hiring manager, employment consultant or counselor and they will confirm that where you went to school only helps if it's one of the top ten (or where the hiring manager went); otherwise it's more about the rest of you - who you are, what you've done, and how you did it that counts - take a look at your own resume - is education at the top or near the bottom?

Admittedly, most employers (today) won't let you in the door without the proper accreditation - that's still the first filter. But I believe this is changing. The number of "accreditation-free" people that get hired is growing rapidly, and the approach these hiring managers take and the quality of these hires will be the biggest determinant of the "value" of a formal education.

As these "alternate" candidates prove their worth in the market (likely at lower starting salaries as well), I think there will be a groundswell at both ends - hiring managers/recruiters becoming more open-minded, and students becoming more savvy.

Students are already skeptical about school; when the approach that these hiring managers use to select candidates becomes better known, it could begin to shape students' process for building a resume, the way they demonstrate knowledge, ability and experience, and the criticality of a diploma.

Imagine if you could describe your job-worthiness not in terms of a certificate, but as say a balanced scorecard, or as Seth put it, as your own quilt. It would not only be a huge help to hiring managers, but also allow much more of the candidate's broader value to be demonstrated.

Just as Open Education Resources (OER) is altering the nature of curriculum and teaching materials, I think we're about 10 years away from an Open Accreditation Service that enables students to score or quilt all of their achievements across the board.

The next revolution in learning then, is the outmoding of the existing business model. And as with the music, video, and print/TV advertising industries, education will try and hold on to the past, but at some point face reality, and focus on earning the opportunity to teach your child. I can't wait.

euphemasia

I haven't been blogging very much lately; I just haven't been in a mood to write. I wonder at times if this is it? Have I said all I have to say, and no more is left? I hope not. I have begun with a title and written this much - let's see what comes.

As a child, I wondered why it was wrong to call a fat person "fat" or call a short person "short." I wondered why we said "passed away" instead of "died," why it was better to say "enhanced coercive interrogation technique" than "torture," or a bunch of other such examples.

At that age it felt like lying. Now it seems to me that all of these words represent an act of dehumanization instead of the intended act of compassion. I am who I am - whether that's brown, white, thin, fat, dumb, smart, ugly or whatever. I am who I am.

When someone euphemizes me, they take something away from my self. An obvious and defining characteristic or aspect of me is suddenly made generic.

Is a fat person also heavy? Yes. But "heavy" is intended not to offend, though the meaning is the same. But if the meaning is the same, then how is it less-offensive to be considered heavy instead of fat? Haven't we just insulted this person by assuming they're too dumb to notice that "heavy" is equally as pejorative? Shouldn't we rather be truthful?

When we euphemize, we generalize, we profile, we stereotype, and we assume that all of "them" are one. Every member of this "xxx" group is now the same. We've erased their individuality, voice and power.

Euphemisms convert people into demographic variables. The individual is killed.

But we don't confine our euphemistic ways to individuals - politics and business are equally "blessed."

President Truman called Korean War a "Police Action" - he did this for political reasons - to make it seem smaller and less than it was. The soldiers and civilians that died couldn't tell the difference, they were just as dead irrespective of the President's spin. In this case, the goal was to dupe a nation and even other countries into thinking a thing was more benign that it was. There are many others: "revenue enhancements" instead of raising taxes, "collateral damage" instead of military screw-ups, etc. The political world is rife with them, and in the end, they all serve to perpetuate lies.

This happens in business too, examples include "right-sizing" or "volume-based involuntary reductions" instead of layoffs and firings, "market corrections" instead of stock market collapses, "earnings restatements" instead of accounting failures, etc. Here's one a hospital network used recently: "negative patient care outcome" instead of deaths - imagine being told that your parent or sibling or child were unfortunately a negative outcome.

When you read these in a document or hear them in a presentation, you don't really realize what's being said; it's not clear even whether it's a bad thing (I suppose that's the goal), and what ends up happening? Middle management will euphemize poor results, failures, screw-ups when talking to upper management so that they don't look bad, but then the leaders have incomplete (bad) information and the company can't make good decisions.

In every case - personal, political, or business, we euphemize to take the edge off, and in doing so, we sacrifice clarity, we sacrifice truth, and worst of all, we avoid facing reality.

Try stopping yourself from using euphemisms - they are so entrenched in our vocabulary, our behavior, our very thought processes that it's almost impossible to be truly truthful - whether to yourself or those around you.

We say that children can be really cruel because they are unfiltered - I prefer cruelty and facing reality to killing with kindness.

e pluribus unum

"Out of many, one" was the translated motto on the Seal of the United States of America. It is a brilliant phrase, and speaks to the one nation formed of first 13 and eventually 50 states, to the principle of democracy shared by all Americans, to the idea that so much more unites Americans than divides them, to the idea that in being one, we are greater.

This was so from 1776 to 1956, when Congress officially replaced it with the motto "In God We Trust." Just a little bit ironic, especially today that a conceptually pluralist society chose to embrace a monotheist declaration isn't it?

We are human (I suppose Congress-people are as well, but I could be wrong). We each have strengths and weaknesses (not sure they have many strengths). How we deal with them is what makes us more or makes us less; our response, our actions are the true measure of who we are.

In changing the motto, Congress chose to shift accountability, to pass the buck. When management faces their shortcomings, what do they do? I think most embrace Congress' proven skill at passing the buck.

My last post was about the mistake America is making in seeking to measure teachers based on student performance. The meta point was that merit pay doesn't work in most team settings; it pits members against each other, and measures them based on their relative achievement - your "success" requires others in your team to "fail."

Merit is the easiest way to pay people - it is not equitable, but is perceived to be. It does not create a true team, but most MBA and HR-types will argue that it does. There is no e pluribus unum-ness with merit, unless your interpretation is "I emerged from the hoard and am the one." It requires you to not care if the team wins or loses, just as long as you win. Here's the other thing - in normalizing performance, you also normalize roles.

By normalizing roles, contrary to Jim Collin's Good to Great, you don't try to get the right people on the bus, you try and get the same people on the bus. That might be OK for certain jobs, but it's not realistic for most work done today. Having a team filled with like-minded and similarly-abled employees isn't ideal in today's competitive and complex world. Is it any wonder that there is so little innovation and creativity in the workplace?

These same MBA and HR-types will argue that merit is also the way to manage the herd and weed out poor performers. Hmmm... recalling the Congressional buck-passers, isn't merit management's way of compensating for their own recruiting, hiring and management failures? If managers were effective, the right employees would have been hired, perform optimally, work together, and achieve greatness as a team. This is exaggerating to make a point, but it might still resonate for some of us.

Passing the buck isn't just about normalizing the workforce. It's also about trying to get by without making tough decisions or more appropriately, deferring tough decisions to others. Steve Lohr wrote an article in the NY Times last week about the economics of elitism where he reflects on Steve Jobs' rule over product development at Apple. Lohr says: "They are edited products that cut through complexity, by consciously leaving things out — not cramming every feature that came into an engineer’s head, an affliction known as “featuritis” that burdens so many technology products."

As engineers, rather than ex pauci plures (out of few many), they chose e pluribus unum - out of many minds and ideas and approaches, they would make rather than defer the difficult decisions; they would design based on the ideal, and not the compromise.

Matter, people, our very world tends towards entropy - it is easy to accede to chaos. The tougher path is to resolve to be one, to be a team, to make a choice.

simplicity

Have you noticed that the more America cares about something, the more she screws it up?

From education to healthcare to crime to terrorism to disaster relief to taxation to foreign policy to whatever; anything that the politicians get their paws on is sure to take a turn for the worse. Moreover, the longer they hold on to it, the more harm they do. The media doesn't help with it's hype-obsessed approach, but that's a separate story.

Education has been at the forefront of political debate for as long as I can remember, but this year 7,200 American students will drop out on every school day. Look at America's foreign policy history of "anointing" leaders (just in the Middle East: Saddam Hussein, Hamid Karzai, the Taliban, etc.); or how Hurricane Katrina was handled; or how many people in this country die of preventable diseases; or the "war" on drugs; or crime-prevention efforts that result in more crimes and more criminals in jail year on year.

The list is endless, as is the complexity of each of these programs. It seems that everything this country cares about must be huge, intricate, nuanced, and over-manned. If it isn't we don't care enough. If we don't throw enough money at it, we're not really committed. Therein lies the rub, the fallacy, and our failure.

What can be done to create a more productive system? Whatever it is, it's for sure not as simple as I'm about to make it. Or is it? Is that our problem? We like complexity? It's much easier to hide (or hide things) in a tree/bush/shrub/etc.-ridden forest than in a less-cluttered place like an empty parking lot. Ask people in the government and they will affirm that it's an incredibly complex and nuanced thing - this is why the 2008 Federal Budget numbered 2,200 pages.

Warren Buffet once said that "business schools reward difficult complex behavior more than simple behavior, but simple behavior is more effective." Most corporations and governments are rife with business school graduates. Maybe not such a good thing... We should not take this idea that complexity is good, inevitable, and to be cherished as truth or acceptable.

What if three things were to change:

1. Spend well - most budgets are funded based on LOBA (lower of budget or actual), which is fine when you have a ton of money and no accountability. It favors those who spend, not those who do. What if this changed - budgets are now zero-based (start from scratch), and funded based on outcomes. There will be multi-year projects that need to maintain funding, but they should be assessed based on what got done in the current year and whether it's time to increase, reduce, or cut the investment. The goal should be (for the 1st year) a budget that is 10% the size of the current one - 220 pages.
2. Rewarding completion - why don't things stop in government? So many projects (largely due to #1) go on and on and on, just because departments measure success based on funding; and cutting things admits a need for less money. We should reward good completion - it could be as simple as a bonus (to the government employees, not the contractors) for finishing a project on time, on budget, and closing up that shop. Those people should be first in line for the next cool thing to happen, because they got it done the last time. I'm not sure what the real goal should be, but my gut says 80% of programs 20 years or older should be cut, and 20% of programs younger than 20 years should be cut - every year.
3. Being accountable for less - this is big. I've never seen any successful project get done when it had more than three objectives. In fact, the most successful ones have just one. When you try and do everything for everyone, you end up doing nothing for anyone. We must only fund programs that have a clear, singular, time-limited objective. It's true that some things are not time-limited - defense or social security come to mind - and that's fine, they should be the exceptions. The goal should be for every project to have a clear, specific and timely outcome. If it doesn't, it doesn't get funded.

I know I've focused solely on money, but look at how things get done in government, it boils down to he who has the $$ has the power. Let's temper that power a bit...

content, bandwidth and lunch

Marshall McLuhan was right - the medium is the message.

In almost every case, those that thought content was king were proven wrong. From analog modems (remember baud rates?) to DSL to Cable to FIOS, people routinely (and happily) pay a premium for bandwidth,  but they absolutely hate to pay for content.

Think back to the days of the original Napster and Kazaa - if I had been one of those that used either service, my thought process was simple: "I hate paying for content, but I don't mind paying as much or more than $100/month for bandwidth." I may only download 50 songs in a month but I'm still going to be happy with my killer bandwidth vs. having paid $50 for music.

These days people actually pay for multiple sources of bandwidth - I have broadband at home, a data plan for my phone (and a voice plan) and then also pay for hot spots when the need arises. But I still dislike paying for content, I do use Pandora/Hulu, etc. and will buy content, though grudgingly.

Mark Cuban wrote brilliantly about the DVR vs. internet video. In it he talks about how in their typically narrow-minded (the only thing I know is a hammer so everything looks like a nail) mentality, media companies want cable companies to eliminate or cripple DVRs because they allow viewers to avoid commercials. This perspective is shared by most if not all content publishers. They're crazy!

You know others are progressively eating more of your lunch and yet all you want to do is hang on to the meager scraps you have now? Why?

Digitization has altered the equation for publishers - they had the corner on both the medium and the message, but now anyone can distribute content (we haven't even talked about bit torrent) and most people can publish without needing an "official" publisher.

From music to video to books, each publishing machine has attempted to preserve its original business in the hopes of extracting yet one more drop of revenue. But in trying to preserve history, they're losing sight of the future.

People are willing to pay for access, but content ...not so much. Content is less-valued - not just in publishing, but also pharmaceuticals with generics, with clothing and jewelry and knock-offs, etc.

Here's the thing - digitization increases profitability. Manufacturing costs drop dramatically (no physical bits), distribution costs drop dramatically (no bits, no inventory, no returns), cost of sales drops dramatically (eliminate the middle-man), and market size increases dramatically (direct to every customer on the planet, no retail constraints).

If you had all four of these factors beckoning you, why not go that way? Why not actively pursue tomorrow instead of trying to live in yesterday?

Because the greatest predictor of future failure is past success.

RIP guiding light

Nope - this is not about the TV show. Seth Godin wrote a post about making lists in business that prioritizes your goals in order to help you hone in on what's really important.

Building that list is not easy, and prioritizing it is even harder. In sales, if you had XXX additional resources (time, money, people, whatever), do you spend it on improving customer service to create lifelong customers; up-selling existing customers to grow revenue per customer; or as Seth put it, try to win game-changing deals? What's the right choice? This is why leaders get paid the big bucks.

Before Dell entered the computer business, what did the other manufacturers think about and prioritize? In all likelihood, the Compaqs, HPs, and IBMs of the world focused things like Six Sigma for process improvement. I'm willing to bet none said - "our customers deserve to get made-to-order vs. our generic models, let's rethink this." I bet there was even argument about offering a different colors or specs due to their impact on metrics, quality, cycle times, and throughput.

Why does it happen? Size matters - my theory: the farther away you get from the real intention of the organization, the less likely you are to contribute to it. It's true at the top, middle and bottom.

At the bottom, you're too close to the action and have to focus on your context and what you can control. At the top you're too far away; whatever insight you get is colored and filtered by your minions' interpretations; and worse, it's also shaped by your entrenchments - your past successes constrain your future opportunities. I'm convinced the latter is one of the greatest causes of decline in successful corporations. The middle is caught - they're too far away from the trenches to viscerally know what's going on, and too far away from top to really understand where the company's headed.

Let's face it in the business world, you don't succeed by raising your hand and asking the director "what is my motivation in this scene?" So what do you do? You control what you can, in the hopes that executing well in your microcosm will have positive effects on the world outside you. This might work in some instances, but it's not predictable, and you have to overcome the organization's natural (almost entropic) tendency to girth, which requires the ability and willingness to fight human nature.

When your small world becomes the whole world, you don't see context properly - motivation becomes about self-preservation and self-elevation vs. overall organizational success. You can be and feel righteous about your vision in your small world, you don't know if that micro-view really helps. As with the people on the factory floor at Compaq or HP or IBM, until someone (Dell) hits you on the head with it, you're mired.

Many parents in America know that they can't afford to send their children to university. Beth Breselli wrote an article yesterday at Rethinking Higher Education about Financial Aid Reform. In it she questions whether recent legislation aimed at making all student aid public will succeed or not. One of the benefits Beth cites is a simpler application form. But if we were really interested in this problem, why fix the process at all? The only reason to focus on this is because we're mired in the micro at the expense of the macro.

The problem is not who lends, who qualifies, or how the forms get filled out. The goal is to ensure every student who can attend university does so irrespective of financial situation. The easiest way to do this is to make university free (in Finland it is not just free, you actually get a stipend for being there). Assuming that's not possible (or at least the topic of another blog:-)), then start at the beginning of the process. when do parents (and students) eliminate university from consideration due to economics? I have no data to back this up, but I bet they explicitly do this during the freshman year of high school, and tacitly do it long before.

If I ran the government, I'd make it simple - once you declare your child as a dependent on your tax return, the IRS does an evaluation of your financial situation and tells you that your child(ren) are pre-qualified for financial assistance for university. There are no forms to fill out, here are the amounts and limits, don't worry - you're good - once the university accepts your child, we will automatically pay the amount based on their social security number. Every year, they update your status based on your current financial situation, if all other things are equal, you're still good. I bet many more parents would encourage their children, pay more attention to school, etc., and in the end, with minimal effort on either side, we achieve the goal and eliminate complexity, bureaucracy and cost.

Peter Drucker is in my opinion the single definitive voice in modern business thinking. I had a chance many years ago to spend some 1:1 time with him - it was the single greatest moment of my professional life. Our conversation was wonderful, wide-ranging, provocative and inspiring. This quote to the right should be the first and last words read at every meeting, planning session, review, etc. in the business world. We talked about this at length over lunch that day - business leaders need to understand the difference between management and leadership. Leadership is about subverting the natural tendency towards organizational entropy by making sure the list is correct and properly prioritized. Management is implementation.

Our guiding lights are waning. Why are most of our leaders now merely managers?

is free free?

How do you make money and still sell things for free?? Inquiring minds want to know!

I'm fascinated by these business models - one approach is to lower the price and make it up in volume (examples include SouthWest Airlines, Walmart, Costco, etc.). Google zeroed the price altogether by turning the end user into the product and the advertiser into the customer - this was the first real step towards free at scale. Now free is expected, and if you're not ad-funded, it makes it hard to turn a profit... or does it?

Seth Godin wrote about righteous indignation and avalanche opportunities this week, and Krishna asked sure free is for users, but what about publishers? All three blogs apply to business models, how you can optimize your opportunities, create scale (which requires very broad reach), and make money.

While Seth was talking about customer service in the first, I see a different kind of righteousness - "I deserve to get paid, and I'm damned if I let someone take my stuff for free!!" As Krishna argued, it costs money to sell stuff for free; it's easy to understand why people feel indignant about it. Read Seth's second post (avalanche), and you learn that your boss *really* pays attention when you can demonstrate significant reach, outcomes, growth, etc., and you begin to think - the only way for me to break through and get customers to pay attention is to sell it for free.

Do you have to overcome the mentality of expecting to get paid for what you value most? Surely its what the customer values that counts! Not everything has to be for free - people will pay for some things - but what?

If I were an artist you liked and were to offer you my music CD for free, would you begrudge me charging you $4.95 for shipping (even if it only cost $1.25 to ship)??

If I were a chef you liked and offered you appetizers for free provided you bought the main course, would you "buy" (even though you know the main dish prices include the other costs)?

If I were to give you a car for free but charge you $10/gallon for the special fuel it needed, would you "buy" the car (even though you know you'll end up paying for the car in the end)?

Is Free *really* Free?

We all *really* know that deals like this are not truly free, they're just packaging. At the end of the day, any of these organizations needs to earn money in order to pay its employees, cover operating costs, etc. We recognize and respect this because we hopefully do, and want to keep getting paid ourselves.

What about Google? When you happily use their service, you might do so because they're a great company, have a great product and try not to be evil; but have you thought about how economically successful they are? Google employs more than 19,000 employees, earns more than $20 billion/year and achieves more than $4 billion in net profits. These are amazing numbers!

Lots of people had to pay Google cash so that they could be so profitable. These same people had to get paid to be able to afford to pay Google, and you and I (end users) had to have paid them to start this process.

Free isn't free - it's just damned good marketing. Or in Google's case, a brilliant business strategy of turning the customer into the product and selling it to someone else.

Where is the next "avalanche"?? I'm thinking it has something to do with aspects of reCAPTCHA and massively multi-player games. These are both brilliant innovations that are just scratching the surface of new paradigms of commerce.

outcomes!

Have you noticed that in most big projects you're a part of, success is measured by solving symptoms instead of creating outcomes? Off the top of my head the best example of focusing on outcomes is President Kennedy's proclamation: "I believe that this nation should commit itself to achieving the goal, before this decade is out, of landing a man on the Moon and returning him safely to Earth."

JFK didn't talk about how it should be done, whether we'd use rockets or levitation, whether we needed bipartisan support, or anything else that reeked of symptoms. The outcome was clear, and while many thought it unattainable in 1961, the nation (and the world) held onto the goal and found a way to make it happen.

Seth Godin's post on positive thinking has a similar feel to it. We all suffer from NIH (Not Invented Here) syndrome, our natural reaction to someone else's ides is "why it won't work" vs. "let's give it a try!" This tendency creates barriers to outcomes that can become insurmountable, because for some reason, it's easier for us to believe in "no" than "yes." It's of course much easier to say why it won't work than participate and help create the outcome. Think of every "official opposition" in politics, and even why more candidates argue against their opponent than for their own ideas.

Health care in America is one example of this. Understandably, there is intense debate on this topic - it's complex, rife with vested interests, political rhetoric, and sadly, outright lies. The difference between health care and putting a man on the moon is that the former has been around for ages, affects everyone, and has a direct effect on each of our wallets. The latter had none of those constraints. These are all of course excuses for why we can't fix it...

What if President Obama's inaugural speech had said: "We will have universal health care in America while reducing overall costs before I complete my second term as President." (Note presumptive close on 2nd term;-))

The mandate does not require that we emulate European or Canadian systems, or that we will have a public option, or that we will cut this or increase that, or anything like that. As with JFK's mandate, the "how" is left up to the experts. The only constraints are what (universal health care), when (in 8 years), and how much (less than today).

Is it possible? I think so. What would this uniquely American health care system look like? I have no idea, Would there have to be compromises? Almost certainly. Does this country have a history of rising to the occasion? Yes.

I'm reminded of the scene from (ironically) Apollo 13 - see video to the right - where the NASA team had a problem to solve. The CO2 scrubbers on the ship were damaged. The team of engineers was essentially locked in a room, given exactly what the astronauts in space had at hand, and a deadline. Guess what as in the movie, they solved it in real life too.

Having no expertise in any aspect of health care (other than being a reluctant customer), I may have some ideas, but don't know enough about medications, insurance, HMO vs. private care, the role of physicians, nurses, etc. to respond intelligently. But I think if you put all these stakeholders in a room, lock the door and give them a deadline, we might get somewhere.

If I were in their shoes, I'd start with this: the system today succeeds when more people are sick than when less people are sick. Rather than figure out how to fix health care, why not look at what it takes to create a substantially healthier America??

the expressional

Have you noticed that when candidates are seeking office they are over-the-top communicative? Driven to capture every foot-candle of the limelight, they expound about everything, including how "expoundive" they'll be when in office. Even veteran candidates (incumbents) promise transparency when elected, realizing that the electorate is dumb enough to ignore their prior acts.

Once elected though, things change. The idea that some things are better left in the hands of a few and not to be entrusted to the general public suddenly resonates. For example, (thanks to Dana) the FAA doesn't trust the public with information about how frequently flocks of birds fly into and damage airplane engines! As someone who does travel by air, I am very interested in understanding all the risks associated with travel, and then want to make my own informed decision.

Even the current Obama administration (thanks to Andrew Rotherham), despite assurances to the contrary is taking to keeping data to themselves when convenient, as in the case of the effect of school vouchers in DC.

In both cases, it was determined for whatever reason that the public did not "need to know" certain findings, results or whatever. I can see that being reasonable in certain national security situations, where the government wishes to protect a source, not publicize the ability to decipher secret conversations, or disseminating critical research. But I don't see why it applies to mainstream, everyday information.

Once in office or a position of leadership, people have a propensity for not trusting the judgment of "the people," believing the issues too complex, the analysis too esoteric, the information too nuanced to be entrusted to "them." We know only too well how often corporate executives "fail" to disclose seemingly important information, to their customers, employees, investors, or all three.

Why?

I think it's laziness (and maybe faux control). When too much information is available you give up the ability to manage and craft the message, to tell the truth vs. the most convenient story. You may also expose aspects of yourself, your image and your organization that you believe need to be kept well subterranean.

But during the hiding process (and let's face it, we've all done this), we never think about the consequences of being found out. We never realize how much worse it is to keep secrets, but also how much worse things become once you are outed vs. if you had simply come clean in the first place. When you scale this to the level of a large corporation or a powerful politician, the impact of being outed is huge.

The Communications Revolution makes this even more likely - individually people get outed all the time with something as simple as being tagged in a Facebook picture, and then the fit hits the shan doesn't it!

When corporations get outed, the ramifications are much, much greater (more fits and bigger shans), and the process is much more complex. Why? Because large organizations don't have as effective a sense and response machine as an individual. It takes time, process and politics for inputs to bubble up to decision-making layers, and then time, process and politics for them to bubble back down to the actors.

In politics, it's maybe a bit more efficient (their organizations (politics vs. government) tend to be much more horizontal), but all-too-often, the wrong people are driving the decision-making. PR and pollsters tend to have a much stronger voice than they should; they distill information into bite-sized chunks that don't have complexity and nuance (by definition). It's so easy to obfuscate complexity this way, and spin the situation to the point where strategy and integrity are compromised for expediency.

One example of this is President Bush's strident and dire warnings about how close to disaster the economy was so that he could get Congress to urgently vote to approve TARP, but then once they did approve, he realized that his warnings also had the effect of immediately arresting the people's desire to spend, which actually caused a more accelerated slow-down, made TARP less effective, and maybe caused a worse economic decline.

When running for office, you're always out there, and facing the barrage head-on. When you're in power, you're cloistered, and maybe rely more on others for that finger on the pulse. Doing that makes you more likely to agree with spin artists, and make you believe that the public really doesn't need to know everything. Town hall meetings could be a good way to do this, but in then end, they're also about creating spin, and getting a message out. Sharing, listening and responding doesn't really happen. When you're in business, the more senior you get, the more you rely on intermediaries to connect you to reality. But they have a stake in biasing your experience to accommodate their agendas, and that compromises your view of reality. Just like town halls, executive customer or employee visits are crafted - you don't get the real truth.

In the end, the more open and transparent you are, the more likely you are to have a truer grasp of reality, and make a real differences in the most sustainable and efficient way possible.

house rules

You might have noticed that I am a big fan of Aaron Sorkin and in particular the West Wing. There's this other TV show I quite like - House M.D. I was thinking today about organizational theory, how one goes about building an outstanding team, and whether they thought about that at all when they created the premise for this program.

If you're not familiar with the show, House is a brilliant but acerbic diagnostician who can solve cases others can't. He has a team of three very talented doctors who work for him, act as his foil, and create the experience of one doctor for the patient because House doen't like patients. House does have responsibilities outside of pure diagnostics (clinic duty, people-management, etc.), but if he does what he's good at, his performance (or lack thereof) in the other areas is overlooked. This even (shockingly) applies to the fact that he's addicted to Vicodin because of a problem with his leg.

The administrator of the hospital recognizes that House is a phenom, tenacious, and narcissistic problem solver; and that he is abysmal at the other parts of being a doctor, and frankly a jerk. But she also knows that without him, her hospital is less.

So she built an organizational framework (House + 3 doctors, a legal defense fund ('cause let's face it, he needs it:-), etc.), in which he can operate effectively, and where his performance is measured differently vs. the other (typical) doctors in the hospital.

Why? Because in the end, House creates profound value for the hospital, and saves lives no-one else could. The impact and benefits outweigh the "cost" of the special treatment.

Now look at any large corporation. Like most school systems around the world, large companies are infected with HR and MBA "parameters" that herald standardized performance and benchmarking, and reward micro-successes that serve only to further the careers of HR/MBA drones and "typical" performers. Anyone who is atypical is managed out because they don't have the skills to navigate the gauntlet of girth; held back because "they just don't fit our model;" or skate by hardly ever revealing the wonderful potential they have to create profound value.

When a company is small enough, the leader has the strength, confidence, vision to recognize these unique performers, grasp their value to the organization, and construct a workplace that will let them achieve. All because s/he knows where they're going, recognizes that "mundane" is the fate of a business filled with "normal," and has the cojones to flaunt the HR/MBA guidelines because of her/his burning desire to achieve greatness.

Is it any wonder that most large organizations today are devoid of soul, and almost never make a real difference?

prodding the prodders

Education is a seemingly complex beast. Everyone knows it needs to be great, there's little argument on this point. Everyone knows that this is an investment with a sure return, there's also little argument on this point. America spends among the most per student in the world, yet student performance is declining there is no argument on this. Is it really that complex - everyone has these intricate views on how to affect change - are they right? Who (beside politicians and bloggers) complains the most about declining academic performance?

It's exactly the people that have caused this problem - our very own employers, colleges and universities! How? By valuing something that no longer has value.

The original business case for an education was simple - you needed one to earn a living. The nature of your living was largely determined by the person that taught you (the master taught the apprentice who worked beside the master and then eventually took over). As the world evolved, the path to employment shifted from proficiency in a craft to an accreditation of core skills. In America that's called a High School Diploma. It's important to note that the value of this "ticket" is not set by the primary/secondary school system, but rather the gatekeepers that guard a student's next steps - employers and post-secondary schools.

One of the reasons parents send their kids to school (and willingly pay the taxes) is because it is the one step that they believe will help their children create a better life, that education is the path towards prosperity. They believe this because it is how they got to where they are, or how they saw others get to where they wish their children to be. They also want their children to be best-equipped to survive and thrive no matter what life or the world throws at them.

Employers have decided a high school diploma is critical, and will prefer candidates that have one. Colleges and universities have decided to accept students based on their high school (plus related standardized test) performance and will rarely if ever take a candidate who doesn't have one.

But. Colleges and universities complain that they have to spend millions (if not billions) to remediate students because secondary schools are not adequately preparing them for tertiary schools. Employers say the same thing - that a significant percentage of high schools students are poorly prepared to enter the workforce. Together both bemoan that fact that even when students have some basic skills, they aren't able to function well in a team setting, deal with complexity and ambiguity, communicate effectively, etc.

ASIDE:

There are schools that can and do prepare their students for the real world, and their graduates are eagerly sought out.

My two favorites - High Tech High (HTH) and Seattle Girl's School (SGS) are among these. Ask Larry Rosenstock at HTH and he will tell you this - creating a great engineer or scientist absolutely doesn't imply that you must sublimate the arts and humanities. To the contrary - it requires that you treat students like one, let them behave like one, and compel them by how much fun it is to be one. To do that, you must immerse them in the sciences and the arts and the humanities - why - because that's what real people are. You accomplish this with an integrated, project-based approach to teaching, where students are committed, respected, engaged, and critical participants in the process. Ask Marja Brandon at SGS and she'll say the same thing.

Graduates of HTH or SGS are "ideal" for colleges, universities and employers alike - they will and do run after them. Their diplomas are not generic.

The change agent - just say "no":

I've argued in the past that we must federalize education, that students are the customer, that we measure the wrong things. I must amend one of these - students are not the customer - they are the fodder. The real customers are colleges, universities and employers. Sadly they are not using their power wisely or effectively.

What if the Chamber of Commerce and Association of American Colleges and Universities decided not to accept high school diplomas anymore? What if they only employed or accepted students from schools they felt did a great job of educating, and not from all schools? Would parents happily agree to fund schools via taxes knowing that it wasn't buying their children enough?

We could start with America's largest employers - the Federal Government (including Defense), Wal Mart and McDonalds. That's only three CEOs (well, two CEOs & a President) to convince.

What if they issued high schools a once-cyle (4 years - grades 9-12) ultimatum? If the incoming grade 9 class in the high school system was not transformed this year (9-10 in Y2, 9-11 in Y3, and 9-12 in Y4), they would cease to accept a high school diploma'ed candidates. This would create an automatic ripple effect to elementary and middle schools.

Faced with dramatic cuts in funding, would schools feel the impetus to change and follow a better path? Money is a powerful catalyst. Just look at how "open" to compromise and negotiations management, partners, dealers and unions alike were when faced with the reality of GM/Chrysler bankruptcy?

The education system is not feeling similar pressure right now. We need it to. Let's all rally the biggest employers in our countries, states and towns and have the leaders of those three or four organizations help us create the change we need.

performance anxiety

How will it go? Will all my hard work be appreciated? Was all that extra stuff I did noticed and appreciated? Was I better than the rest? How often might you ask yourself these questions in life ;-) ? How often might you ask yourself these questions at work? Many of us face these questions at least once a year, during our annual reviews.

There's a fantastic conversation between Gillian (an HR professional) and J.R. about employee performance management, what works, what doesn't and whether it makes a genuine difference to both the employee and the organization. It began with an assertion on my part that when organizations grow, they begin to hire people whose abilities and intent only create micro-outcomes. In and of themselves, these micro efforts might achieve (or indeed exceed) their individual objectives, but there's no assurance that they aggregate up to something meaningful for the business as a whole. Sometimes (perhaps too often) they can even detract from the mission. The micro-performers exist because there is supposedly a role for them to play in a big company. Convention dictates that one must have a lot of microbes (sorry) buzzing around doing all sorts of micro-work; it emerges when an organization gets to a certain size and starts believing that it needs microbes because it is now "big" and must have girth (only they call it "gravitas").

About four months ago, I suggested that there was a way for an organization to avoid girth/gravitas and reduce its microbe quotient by focusing on being great vs. growing bigger. But I conveniently ignored performance and compensation. This is of course the subject of many organizational behavior PhDs and I don't presume to know anything, so here goes :-).

Harvard Business Review recently talked about The 10 Most Common Failures of Bad Leaders - see adjacent table. First, wow! Who hired these rubes? Second, not sure about you, but it looks pretty consistent with the failings of non-leaders doesn't it? But since these are "leaders" the failings are even more severe, and in need of more urgent remediation (vs. the peons). So my first take is that this is a really big and hairy problem - it's not simple, it's not clear what the answers are, and it's also more likely that your management is fumbling and bumbling with this. First implication - scary!!  Second and more critical implication: it sucks to be you...

Performance management in smaller companies is simpler - "if the company does well, we all do well (and vice-versa)." It can also be easier to identify the strongest (and weakest) performers and do the right thing.

Some argue that compensating sales people must be done on a short-term revenue basis. I suppose that's true, but it really depends on the business. If there is value to be had from maintaining a customer relationship over time (not always the case) and creating a long term revenue stream for your company, then here's a way to reward those that do best by you and your customers over the long term. But what about the rest of the organization? How do we reconcile team output with individual recognition? Herein lies the apparent rub...

Some of the challenges include employee morale and output; recruiting ability; rewarding your best people and remediating (or culling) your worst; and recognizing that you need both leaders and workers and that both are critical to success.

Scary as this is for me, what about the model the US Armed Forces use? Their total compensation plan is completely laid out, transparent, and visible to everyone. You know exactly where you stand and what you can hope to accomplish either by level growth or tenure. There is also clarity about what you need to do to move from level to level, and the decision to stay at a given level because you happen to like what you do doesn't seem to have as big a stigma as it does in the private sector.

Now what if you combined this clarity with a bonus matrix based on percentage of salary by level (but not by tenure) that is tied to a published company-wide goal of performance. (Example - 20% of our year-over-year revenue growth will be allocated to bonuses" - we will all benefit from our mutual success - we're a team.) And what if there was no individual recognition model (other than promotion) whatsoever? The implication - those people that need individual recognition, and must be anointed with "superstar" status will leave because "they've outgrown you." Hmmm... is that so bad? How often is true and lasting value created by these people? How often do they end up compromising team chemistry?

Would you want to work for a company that was only measured on how the team did? It works for smaller organizations (which common wisdom says are the most efficient and effective and resilient part of our economy) - doesn't it?

I would.