~synthesis~

Y-shmy

I've been reading a lot lately about people who are trying to figure out ways to connect with and engage the Gen Y demographic (I've been reading even more about "consultants" that are "available" to "help" with this). Managers and business leaders (certainly HR people) are worried about recruiting, creating effective working conditions, making them happy, etc. There is a projected shortfall of millions of teachers with more than 40% expected to retire in five years (other industries have similar data); Harvard Business Publishing posted an article on low-cost approaches to motivating employees.

I wasn't around then, but was this type of thing discussed (albeit not blogged or twittered) when the baby boomer generation was about to hit the workforce? Were employers at the time worried about how that generation would be recruited, create outcomes and be happy? Were they worried at that time about potential staffing shortfalls in some industry? I think so.

In the end, what happened to all the Gen-Hippies? Did they fundamentally alter the work environment or recruiting or employee morale?? Not so much.

If you're employed (like I am), there is only ONE reason you go to work every day. This one reason is universal to everyone who is employed - whether its is at Microsoft or GM or McDonalds or the White House. And we all know for a certainty that if this one thing stops, we stop working - no ifs ands or buts.

We work because they pay us.

I don't care whether you are Gen Hippie, Gen X, Gen Y, or Gen Purple - if you don't have money and want to earn some, a job is required, and money is conveyed in exchange for work done. That's the bottom line.

If I were "consulting" employers on how to lure any candidate (irrespective of demographic) to come work for me, I would offer this employee perspective:

We go to work because we're paid. We enjoy work because we care. We thrive in the workplace because you care.

If you have the cash flow to make payroll, the first is easy. The second is self-selection combined with a belief that good work is being done. It is about the purpose of the organization and how it is conveyed - a barista at your local coffee shop has purpose, as does the assembly line worker at an auto manufacturer, as does a software engineer at a high-tech firm. It boils down to having a clear link between the mission of the company and the actions of each employee; it boils down to clarity about each job and its contribution. If a company is well run, one of the signs is employees that care about what they do.

Seth Godin said you have to watch the money to gauge a person's belief in the work they do - that's a great "indicator" of genuineness. When you're a leader, you have to go further.

The third sentence is about management's authentic commitment to greatness. You can smell that a mile away, and you can absolutely tell when it's being faked. You know when it's proxied through HR practices, and you know when the "all-hands" communications sent out by the leader are crafted by HR and PR.

Authentic commitment to greatness requires leaders to care - it requires leaders to be transparent and accountable, and it requires absolute integrity.

If you need HR and predatory consultants to "help" you understand people - perhaps it's because you've stopped being one yourself.

anti ex parte party

What branch of the federal government has the highest level of integrity? Which would you trust more than the others?

The Executive and Legislative are infected with special interests, and motivated not by what's right, but by what's popular and what sells. The Judicial seems to be the most transparent and the one where outcomes and implications are most easily observed and measured.

The Supreme Court is generally at the back of the decision tree - they don't create, they interpret and to some degree, enforce. But they have a system that prioritizes integrity and peer review in a way that the other two don't.

Is it because judges were deemed to be less trustworthy and therefore had to have walls put around them? Is it self-imposed? Judicial is the also only branch that has a competence/experience/academic barrier to entry - the others are a free for all - anyone can apply - all you need is citizenship, access to money, and a gullible electorate (this last you get for free).

Is there a way to inject trustworthiness into Congress and the White House? I suppose the founders felt that the election process was the best policing agency for this, but let's face it - that hasn't really worked.

Judges are required to explain and document their analysis and rulings (unlike the White House or Congress).  Judges can only communicate (directly or indirectly) with any person or group that has a connection to a case if it's "on the record." Any communication that violates this is called ex parte.

Why can't we apply the same standards across all three branches? What if every conversation related to a bill/measure/whatever was required to be on the record and fully-disclosed to the public as a matter of law? For national security issues, the conversations should be documented and available after an appropriate period. No matter what the discussion, or with whom, everything must be part of the public record.

If I had an interest in a particular law or ruling, I'd want to be able to see the "paper trail" of influence for every Congressman or Senator that voted for or against it, or helped craft it; and I'd want to see it in roughly real time (i.e. within a day of the conversation). I'd also like to eliminate the statute of limitations for violations, if an elected official is found to have done something inappropriate even after they've left office, they're still liable and subject to judgment

In 1994 the Republican party drew up a Contract with America that made a series of commitments that would be kept if they won a Republican majority in the House. I thought that was a brilliant tactic and wonder if they might not do it again?

If I were running their party and facing a possible worst-case scenario with Sarah Palin, I would want to reestablish my party with all demographics, and unshackle myself from any one interest group. The heartland, religious right, tea party, or whatever are all important constituents, but to win I need them and more. The American politic isn't as parochial as it once was; you are a victim of being fractionalized (the Palin effect) if you allow any one person or community to define the essence of the party.

Like the Contract, I'd also want to define a new game and force the others to come to me, and play by my rules (straight from Sun Tzu's Art of War).  My opening gambit: "we are now the anti-ex parte party; all of our candidates have signed this pledge and we call on our opponents to share our commitment of integrity and accountability to the American people." It would be a way to jettison the anti-Cheney/Bush sentiment, the religious right leaning that has turned off many voters, and the Palin effect. It would also put the President and many Democratic leaders in a difficult position, because either way (take the pledge or not), they lose. Can't beat those odds.

But the best thing is it would bring a measure of integrity and accountability to Congress and the White House.

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.

fed-up?

Hello everyone and sorry for the two-week gap in posts - you gotta love vacation-time!

All levels (from municipal to federal) face tough, tough financial challenges; each layer is dealing with its own challenges and scrambling to survive. Even if one level finds balance, it is still subject to the whims of those around it. In California for example, the state's recent budget agreement requires the municipalities to "contribute" money to the state's coffers, so a resident of a city can get hit twice - first with a state-wide program cut, and then because the city's revenue stream is impeded, a potential (and potentially related) municipal cut as well; all of this with no aggregated consideration of that individual or organization's situation.

For example, an education program cut by the state could reduce an inner-city school's funding, and when combined with a separate municipal cut, could result in the school canceling specific programs, or closing its doors altogether.

Additionally, both the state and city leaderships are also aggressively pursuing federal funds to mitigate their failures, creating a dependency on yet another branch of government. In good times when taxes are flowing, this type of thing doesn't happen often enough to cause any wide-spread grief. But now, when things are pervasively bad, the impact is profound. What becomes glaringly clear is the extent to which every level of government is intertwined, and really one big morass instead of a set of "small" ones.

Small Government?

A lot of people (me included) believe in the idea that small government is better, that the Feds should delegate legislation, decision-making and authority as far down the chain as possible on the assumption that local issues are best dealt with by local governments; thereby keeping the Federal government small. But this has spawned a system where each of the levels runs elections, legislates, is responsible for collecting its own revenue, and forming and staffing its own organization(s), defining separate priorities, perpetuating more bureaucracy, etc. But the delineation of responsibilities between the layers isn't clear, things like education or health care or law enforcement all have multi-layered and often competing or conflicting agendas.

With all this layering and duplication and potentially conflicting actions, surely the last thing that's accomplished is a smaller government?

Wherever you may go

Let's start with something as simple and seemingly innocuous as marriage, which is bizarrely deemed to be a local issue. The opening of the Declaration of Independence states that, We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty, and the Pursuit of Happiness. With the Gettysburg Address, Lincoln posited the idea of a new nation, conceived in Liberty, and dedicated to the proposition that all men are created equal.; and whose closing demands that government of the people, by the people, for the people, shall not perish from the earth.

Whether gay, straight or otherwise, you are equal and have the right to be happy no matter what. Hmmm... How then does one state get to have one law about marriage, and the state right next door an altogether different law? What happened to the citizen in all of that? How is it consistent with the Declaration that a gay person is prevented from being equal and pursuing happiness in one state, but by literally crossing a street, they suddenly have rights?

And when it becomes an inter-state issue, courts and governments at all levels have to deal with the issues of marriage - because it's clear that in reality, no one level owns it.

Money changes everything

How about taxation and spending. Today every layer of government must find a way to raise funds from the citizenry. It is possible for you to be subjected to three or four taxes that are separately progressive and regressive, that create tremendous pain not only for you the tax payer, but also the collection system. The result is organizations at each level doing the same thing, not thinking about each other, and wasting money, due to the the inherent redundancy and inefficiency.

When it comes to spending priorities, one state might choose health care over education, because more of their voters are closer to retirement and in need of more care. Maybe this is reasonable, but in tough times, when they have to close schools because they can't get budgets balanced or borrow to cover shortfalls, what happens to the children of that state, and their future?

The disparity of student performance by state in the USA (as well as the disparity in curriculum goals, learning standards, etc.) is proof that American students are victims of district, state, and nation-wide discrimination. This can't be right, and it certainly doesn't save money when each city, district, or state makes their own decisions about closing schools, changing curricula, etc. In this the communications revolution era, it is stunningly naïve to think that education should be local vs. global.

In the end...

Why is "many governments" considered small government? Why not have one national government that assures every student the same educational opportunities; where everyone lives by the same laws; that we should all pay taxes, but that those taxes ought to be collected once, be progressive, and cover the needs of all the citizens, according to the laws of the land?

A valid argument against one big government is that there is nothing to temper its behavior - without a system of checks and balances, a government could turn authoritarian, no longer represent the will of the people, and potentially even harm them. No doubt this is a huge risk, and one that should be guarded against. But then I think about the Cheney/Bush presidency, and imagine if a second 911-like attack had occurred just after the 2008 Primaries, that Cheney might have declared a state of emergency and delayed or canceled the elections in the interest of national security... that doesn't seem implausible does it?

A second argument is that local issues can't be dealt with "federally" - exactly which issues fall into this category? And why can't a federal machine solve them?

I think a three (or more)-party political system reduces the Authoritarian risk. I think a purely federal government is a viable governing mechanism. It would be much more efficient, ensure that every citizen is equal, and not be subject to the sometimes idiotic whims of locally-elected "leaders."

risk shmisk

Accenture recently conducted a risk management survey of 260 CFOs from large companies in 21 nations that has (didn't think this was possible) increased my disappointment in corporations around the world. 85% of those surveyed said they are ineffective at considering risk, return and capital issues when making decisions. The same number said there is a lack of alignment between their company's strategy and appetite for risk, and 93% said it was really hard (whine, whimper) to align strategy to effective risk management.

C-Sense

How can you be a C-level officer, leading your corporation and yet be unable to effectively factor risk into decision-making? In good times, risk failures were compensated for by strong earnings, but now that either or both revenue and margins are shrinking, it's more difficult to hide or write off errors in judgment.

Theoretically, an executive achieves C-level status by being smarter than the average bear, having more foresight, vision and leadership skills than his or her peers, and the ability to skate to where the puck will be, and not where it is. If true, they should have recognized the following:

1. Good times creates bad habits
2. We're in the midst of a communication revolution
3. Tough times require focused investment

#1 - In good times, mistakes are forgiven/ignored because things are going so well that bad judgment is overlooked. But most critically, organizations forsake discipline in favor of expediency. Then when things change, the bad habits of the organization, which were compensated for with excess spending and often excess hiring, now surface unhidden, result in severe changes or layoffs, and are harder to fix because they're well, habits.

#2 - The stress caused by #1 creates internal and external disaffection/disloyalty, which makes people much more inclined to blog/Twitter/whatever their views and experiences. Malfeasance becomes very rapidly visible to the public, giving the company little or no time to sense, develop a strategy, and respond. In can we talk?, I wrote about transparency and immediacy being the offshoots of the communication revolution. This is either a huge risk or opportunity for most companies - the C-level "risk" executive leadership must account for this. Most don't.

#3 - If you have the means, the best time to invest is when times are tough. Whether that's acquisitions, new investments, or increased staffing, you are sure to get good (if not great) value for money, and be much more primed for growth when the market does turn. Choosing the best place to invest requires clarity of purpose - if the company's strategy is not clear, it's ability to evaluate and mitigate risk not solid, and it's leadership not focused, the resulting investments will likely accelerate poor performance and lead the company down.

C-Accountability

Chief X Officers (whether X = Executive, Financial, Marketing, Operations, etc.) get paid really well, this is because the expectations are commensurately high, and performance is expected and required. In addition to being a great sales tool for their services, the Accenture survey above is a confession by these C-levels that they don't know how to cope with change, or how to lead in these changing times.

At this level, they must own their actions, take responsibility for both their failures and those of everyone who works for them (the whole company). Shouldn't the 85% who said they didn't know what they were doing resign, so those who do can lead?

C-Response

From my can we talk? post: The industrial revolution created mechanical speed, the information revolution changed space (specifically, the distance between points in space), and the communication revolution changed time (sense and response time).

Thriving in this world requires discipline. If all C-executives in a company can't clearly (so that a 12-year-old can understand it) and consistently state:

1. Why they are in business
2. What makes their company special or unique
3. How they succeed
4. Where the company is heading

Then how likely is it that their employees are being guided properly? How likely is it that any management discipline exists, that the company's behavior and performance are predictable?

Ensuring this is step one for the CEO. Step two is to establish a discipline of two-way information flow so that all levels of the company know; and step three is to ensure that decisions get made, and are executed predictably and with accountability. Seems like management 101?

Think of Apple during Steve Jobs' current tenure. They don't always build the best product, not all of their products succeed, not all their customers are loyal and happy. But in the main, their business runs brilliantly; most customers are rabidly loyal; every employee has (from the outside anyway) a clear, consistent view of the all that is Apple; and you'd be hard-pressed to find an organization that had a better grasp of where the puck will be than Apple - both economically and product-wise.

If you took the 221 (of 260) companies representing the 85% of executives who admitted their inability to manage risk and created a fund that shorted their stocks, I wonder how it might do in the next 12-24 months vs. say Apple?

thirds

First, sorry for the lapse in writing - I've been in Japan since just after the fourth, and in Kyoto for the first time - what a wonderful city!

It is election season in Japan, and I learned some interesting things about their process. First, the election laws in Japan are old and quite arcane - according to the BBC and Newsweek, once an election starts, you may not create new websites or update existing ones; you can only distribute so many posters or leaflets to a very small percentage (less than 5%) of your constituency; there are many others. Second, there is no interest on the part of the politicians to change the system! The politicians (I should say incumbent politicians) want to make it as difficult as possible, to impede opponents/upstarts from gaining ground.

This surprised me: only 95% of Japanese in their 20s surf the web, and only a third of them vote. The Japanese think that makes sense: "Young people shouldn't be involved, ...because they're not serious enough or they don't have the education." What's more, most of the politicians are in their 70s like Senator McCain, and recognize that their online savvy isn't comparable to their grand children's. Again the incumbent party (LDP) is old, entrenched and knows that 79% of Internet users in Japan would vote for the DPJ, so they've impeded it.

We've had a great conversation on this blog about the viability of a third party in the American political system. There's a lot of theoretical argument against it, d.eris (here and on his blog) and Dale Shelton have both mentioned Duverger's Law, and the nature of the American politic which impedes a multi-party system.

But in Canada they've shown that multi-party systems can survive, often beginning regionally (for example the Bloc Québécois is a totally regional party, but still a national force, while the New Democratic Party began in Western Canada, but is now a fully-national party). Canada, like the US has a system where only one party or candidate can win in a given district, and yet critical mass can and has occurred; multiple parties are flourishing.

I think the American system has the same "mentality" as the Japanese LDP. It believes it's OK to disenfranchise whomever it wants to as long as the incumbents prevail (can you say "redistricting"?). Perhaps American politicians will take a lesson from the citizens of Iran, who have demonstrated that when they're pushed far enough, they will rise up and insist that their voices are heard.

Further to what I wrote in threeway anyone? - this is the first time in history that it is possibly to directly reach practically every voter in the United States - all you need is their mobile phone number. Moreover, because of the technology proficiency gap between the contemporaries of most of today's politicians and the 18-29 year-old demographic, it is fair to assume that the 18-29 year-olds are actually more reachable and more interconnected than any other demographic in history.

This convinces me that it is possible to organize a national party or at a minimum a strong regional party (both coasts + cities like Chicago, Austin, other university towns, etc.) that would dramatically alter the political landscape and balance of power in Congress. I don't think it'll take something as dramatic as recent events in Iran to create a groundswell, it might be much simpler - perhaps the next mortgage-the-future spending proposal by the President or Congress?

threeway anyone?

My last post about the Sovietization of America and the comments by J.R. and Erin got me to thinking about multi-party (vs. one or two-party) politics:

One-party politics is a sham. But it is also the closest thing to an ideal government provided you have the luxury of an integrity-filled, un-bribable, benevolent dictator. If you don't have that, it's a false democracy, and just plain sucks.

Two-party politics is by definition polarizing. There is no way for one to prevail over the other if they are so similar that it's hard to tell them apart. Each of the two parties has to stake out ground that is sufficiently different from the other that the constituents have a clear choice to make. Further, the issues need to be sufficiently provocative as to elicit powerful emotional responses from proponents of either view (ex. religion, security, abortion, etc.).

Another aspect you might not have thought about - two-party systems make it really easy for special interest groups to form and flourish. The parties themselves help because they've chosen opposing views on highly polarized issues. By promoting and advocating their views, they create a population that is violently for or against the issue, and the special interests get to prey on these people for funding and activism.

Two-party systems are shockingly divisive, you only have to look at the last presidential election to see proof of this. The combative and vitriolic tone was such that witless citizens actually began to believe the rhetoric, and suddenly the opposing leader became a terrorist or evil incarnate or worse. How sad, and how wrong.

Three-party politics can get very interesting. America saw a hint of this recently with Senator Liberman's defection from the Democratic party. Did you notice how much power he had all of a sudden? In a tight, often deadlocked Senate, he was a deciding vote, and hence actively courted by both parties. One person/party ended up wielding much more power was their due...

Now imagine if there were three parties in the US - D, R, and X. Say that D and R are the incumbents, and X was formed Nov 6, 2008 - just after the presidential election. X is centrist (fiscally conservative and socially liberal), and led and funded by the 18-29 year-old demographic [worth reading this article about shifting electoral tides]. It engages via non-traditional means (no TV advertising, purely e-focused, therefore requiring relatively little funding); it is led by university student activists and leaders, and new economy business leaders. Importantly, it hardly ever competes with either D or R for mind-share, since it doesn't go after traditional R&D issues, nor does it target traditional D&R strongholds (seniors, unions, religious groups, etc.).

In the mid-term elections, X is able to convert 45 D and 15 R seats, resulting in the following mix in the House: D:210, R:163, X:60. Since a majority vote = 218, neither party can win a vote without X, but either D+X or R+X (or D+R) can prevail.

In the end, all three parties will moderate their positions because none of the three can go it alone anymore. The more polarizing the proposition, the more likely it is to be discarded. Ideally, the three parties might also come together to pass anti-lobbying and campaign finance reforms.

Some of you might be thinking "what if it goes the other way" - imagine if instead of X, the new party that formed was G**2 (G-squared). Let's say G**2 stands for Guns and God. They splinter off of the existing R party and manage to get 40-50 candidates elected. Now you have an altogether different dynamic - R becomes the new X (it is socially moderate, and fiscally conservative); in most cases, D and R will work together, moderate their positions, and annex G**2. At some point, G**2 will become completely fractionalized.

Impact of Original D, R & X:

• Both R and D have to court X, but because X is centrist and doesn't care about all of R or D's issues, nor are they competing in R or D's strongholds, R & D will have to moderate their positions to even reach X.
• The special interests and lobbyists are thrown in a tizzy (technical term) - their ability to influence votes is diminished, and they are unable to affect change on issues X cares about by going to their traditional D or R representatives. Those guys simply don't have the votes to make change happen anymore, and X voters don't really spend money on this crap:-)!
• In 2012, if X has been effective, it will vie for 2-3 Senate seats and grow its House base by 4-6 seats. It will maintain its e-engagement model and continue to require minimal funding to reach its audience.

A three-party system would absolutely change the dynamic in American politics. Moreover, this is the perfect time for a well-organized X party for and by the 18-29 demographic to take hold and flourish.

What do you say? Would you vote for X?

adventures in babysitting

I was listening to The Watchmen on This American Life last weekend - it affirmed my conviction about the sad, sad state of American regulatory oversight. The show is about financial services regulators and attempts to find out "who's to blame for this mess." It determines that one regulator was most "in charge" of many of the companies that failed most miserably.

It reminds me of a post a few months ago questioning whether our government has any regulatory insight at all, and then one that pushes our government to own it's own decisions. Listening to "The Watchmen" brought all this back, identified a potential scapegoat, and I think pointed to the real culprit.

A Fateful Year

In 1989 the Federal Home Loan Bank Board (FHLBB) was abolished by President George H. Bush and replaced with the Federal Housing Finance Board (FHFB) and the Office of Thrift Supervision (OTS). The FHFB regulates the 12 Federal Home Loan Banks, and the OTS regulates the Thrifts (providers of home loans).

Among others, here are some recognizable names that are managed by the OTS: AIG, Countrywide, GE, Ameriprise, American Express, Washington Mutual, IndyMac, and ING. I'm sure you've read about these fine institutions often in the last few months.

Around that same time, Alan Greenspan successfully pressured Congress into not legislating derivatives; and finally 1989 is also the year the Glass-Steagall Act was repealed by Congress.

Missed Intentions

But these were only the beginning. When the FHLBB was abolished, rather than start from scratch, the Administration did the worst thing possible. They ignored why things happened, just assumed it wouldn't happen again, and did the bare minimum. They appointed a new leader and changed FHLBB's name OTS - they did NOTHING else.

The real culprits (as is often the case) are not the front organization (OTS), but rather our elected representatives, who naively assumed that once the crisis was over, going back to business as usual would magically fix everything.

I haven't seen any Senate hearings on their own failings??? Gluttons for punishment that they are, the citizenry keeps reelecting these same culprits over and over again :-(.

What about the regulators?

Here's something I didn't realize: they are funded by those they regulate. Implication - the more companies they regulate, the more money they get. This is horrible!

Worse, when the new leader for OTS came on board, his mission was to expand his pie, and to do that he went on what amounts to a recruiting spree. He was aided tremendously by the fact that financial services companies can choose their regulator if they "qualify." For example - AIG, having learned about OTS' value proposition ("we're really flexible and generous with our oversight"), purchased a small Thrift (worth a mere one tenth of one percent of AIG), and was then able to elect to be regulated by OTS! Worse still, it was in OTS' best interests to keep a hold of as many of the old Savings & Loans as possible, which meant the most lenient regulator was regulating the worst offenders!

Is it any wonder that all of this combined with the creativity and ingenuity of traders, and the "you're only as good as your last deal" performance/compensation mentality, that things turned out the way they did?

So...

Should there be an organization that monitors the monitors? I don't think so - adding management layers never works well. What can we do instead??

First, it's pretty clear that regulators must be independently funded (via tax dollars), and that they must never solicit business (no lobbying or recruiting members). The hard one though is performance expectations (if you are what you measure, then how do we measure them?). Regulators are most effective when they're harmoniously (working well with their "flock") invisible, with their ideal result being a smoothly running machine.

What about real babysitters? A wage is negotiated, and the sitter is paid at the end of the job, provided the house is intact, and the kids are unwounded and asleep. If the sitter is good, then s/he gets more gigs, and because they're now in demand, their fees go up as well.

So... I propose an accelerated pay scale based on continued good results. Say they get 90% of current salaries as base. For every year their community is issue-free, their salaries go up 10% (1st year = 99%). If it remains issue-free in Y2, it's another 10% to 109%, and so on - by year five they're at 145% of base. We  bump it up by another 5% after five years so that the Y6 increment is 15% - then by Y10 they're up to 291% of base <-- not bad! But if an issue arises, they're back to 90% and have to start over. This might seem generous, but wouldn't you want great people in these jobs? You also want to make the pain of failure relevant. Moreover, think of the cost to taxpayers of the failure we've just experienced. The motivation then is to keep getting paid really well and increasingly better, provided the house remains intact, and the kids are safely sleeping.

Will this have the desired effect? I welcome your ideas...

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.

fallacious panacea

The world of education is complex, nuanced, fraught with incumbency, and a worst-case scenario for its stakeholders because unlike say astrophysics, everyone feels justified in claiming domain expertise because they went to school or have kids who are now in school.

So when new ideas are proffered, it's very easy to jump on the bandwagon with conviction; be dismissive with conviction; or find effective ways to impede change with conviction. Sadly the last has the most "authority" and most resonant effect - the first two are just words.

I came across three readables this morning. First - Andrew Rotherham's pointer to the Moskowitz-Weingarten debate on Harlem charter schools vs. the AFT. Second, David Warlick's post on a response to this May 2007 article in the New York Times on the failure of 1:1 school laptop initiatives. Third - Mike Hourahine's post on how IT leaders can be an inhibitor to technology usage in education.

The debate was interesting, at issue is how a top-down union negotiating approach can lead to slow-downs at the school or class level, and provide a shield for teachers to be less accountable and have room to "just say no" to change. The union prefers the status quo, but did offer the olive branch of creating a special contract for charter schools, which I think might be really interesting, and a potential camel's nose under the tent opportunity.

The NY Times article damns 1:1 laptop initiatives in schools because they're seen to be ineffective (no differentiated learning outcomes), too expensive (initial and ongoing costs), and result only in bandwidth availability problems (excessive porn surfing). Jeff Utecht's response to this is a great read and enumerates some of the things that also occurred to me as I read the NY Times article.

Mike Hourahine (presently the CIO for Appleby College in Oakville, Ontario) advocates that trust and freedom don't result in widespread anarchy and prolific porn surfing in schools, and that CIOs should instead be much more open to change, know what their schools really need, and what teachers and students are really doing, vs. being the perpetual naysayer.

When something new is proposed for education, everyone has an opinion, most have a visceral reaction, and everyone feels compelled express themselves. But to Jeff's point, few if any take a strategic view, and in my view, apply discipline to the questions of what, why and how:

• What is our overarching mission? Achieve quantum improvement in learning outcomes for all students.
• Why will this help us get there sooner? It can allow broader access, and deeper and richer understanding and application of the concepts.
• How will we ensure success? By integrating this within learning, adapting the pedagogy, curriculum and assessments to account for this change, ensuring adequate teacher professional development and preparation time to make the change worthwhile, and adjusting our benchmarks accordingly.

The what/why/how is not specific to laptops, it is about any change (it could be new text books, a new cafeteria menu, new crossing guard uniforms, whatever). But if the system and its people are bent on preserving the status quo (which is why "why" is so critical), then no matter how great the potential is, any success is purely accidental.

Out of the gate, 1:1 laptops were burdened with high expectations and very little preparation. Given this, the best case outcome was simple mechanization (from slate to blackboard to whiteboard to PowerPoint), no change to learning, just a slight improvement in process. There was no alteration of curriculum, teaching or assessments to account for the laptops, it was just thrown into the schools.

Technology has the potential to cost-effectively allow more people access to compelling content in a form that is best suited to their learning style. I think those who push it away are doing it for the wrong reasons, just as those that advocate it without a plan are doing it for the wrong reasons.

But the big failure was even more critical - the addition of computers came with no specific expectation of improved performance for the school, teachers or students. We all know that we are what we measure, if you don't expect improvement and raise the bar, you will not see better results. If instead they said - "we are investing $X in equipment and process change, which is Y% of our school budget, and we expect Z% improvement in learning outcomes." Even if Z was a small number, people would have rallied around it and tried to achieve or exceed expectations.

We must involve students (the customer), learn how they interact with their world today, understand how they learn, what they like, and incorporate that in the teaching process. We should recognize that no tool is a panacea, that open-minded, passionate and creative teachers will trump any technology, and that no technology will overcome a closed, uncaring, and tired teacher. Finally, we should be prepared to adapt to new tools as students evolve, 'cause they will, and we should be prepared.

basest instincts

Might as well panic is Seth Godin's latest. I like it. Essentially, panic is the only sure impetus to creating real outcomes, or as he put it "panic is an acceptable substitute for forethought."

It is a management and leadership travesty how easily we overlook bad planning and lack of anticipation. We routinely forgive offenders that have the ability to freak out well, explode into frenetic activity, and come up with a plan overnight that should either have taken substantially more deliberate thinking, or been avoided altogether because people were keeping their eye on the ball and reacted ahead of catastrophe.

There is no shortage of examples - you only have to look at 90% of what the US Congress does to know this. Their "sudden" realization that the economy was in the dumper, and then the gun-held-to-everyone's-head reaction (TARP), is but one example. The FEMA non-response to Hurricane Katrina (something they knew was coming), and the panic and uncertainty last year with Gustav despite knowing how badly things went with Katrina is embarrassing. Even something as irrelevant Congress' random hearings on drugs in baseball should simply not be allowed to happen. Talk about panic gone bad.

In most cases, these knee-jerk reactions results in some action, certainly the perception of activity, but rarely well-thought-out, strategic approaches to complex problems that result in long-lasting solutions that make sense. The only thing you can be assured of is that a limelight-grabbing exercise will happen.

Panic-driven management is of course not limited to the public sector, it happens every day in the commercial world. Speaking from personal experience, I know of more than one "long-term corporate strategy" that panic-stricken leaders at my employer(s) authored overnight or over a weekend in response to a competitive act or even a worrying report from an industry analyst. In some cases, the ideas are good, but not "fully-baked," and end up "evolving" in the weeks that follow. The result is a more expensive strategy, as certain actions need to be undone or written-off and the ship's course needs to be tweaked so that it is aiming correctly.

In most cases though, the ideas suck, but because "we need something to present to the big boss in three hours," we put lipstick on the pig and go with it. The hope is that he is just as panicked, won't notice, and we get to live another day. In this case, the recovery cost is much higher because somehow in the post-meeting-survival euphoria, we forget how stupid the idea was, now believe our own spin, actually get the minions to go implement, blithely ignore their incredulous looks, and of course, declare victory.

Two characteristics are consistently present when you think of well-run organizations. First their strategies force others to react (i.e. they make or shape markets); and second even when things are done unto them, their effective responses make it seem as if they'd already anticipated that contingency, and had a plan that was ready to go.

Why aren't more companies like this? Why aren't more governments like this?

Simple - they're not paid to be and there is no "executive" motivation to be. Why pave the way when someone else can do the difficult, market-making work and you can follow along and ride their wake? Why bother building all those contingency plans or even do some game-theory analysis to figure out what might happen three-to-five years out when you will almost certainly be in a different job then and won't even care about this?

Cynical? Yes - but I bet if you look at the organization where you work, you will find some hints of this type of behavior. More than that, you will find that those who argue for better planning or analysis are laughed at and told to sit in the back of the room and let the action-oriented MBAs take over.

Here are three suggestions for how to avoid this (besides the obvious, which is to change human perception and expectation :-)):

Be smaller - you must sense, respond and adapt. Being smaller allows you to be most in tune with your environment and able to respond quickly.

Be more transparent - the more you expose and communicate as a leader, the more insightful, engaged and motivated your organization will be. Ivory towers are never a good thing. The out-behave manifesto must expand to include executive accessibility and transparency, so that the employees can rescue their bosses.

Create a community of committed supporters - this one is tougher. Companies like Apple, Ben & Jerry's and others have managed to do this really well - it's about creating fellow travelers that will ally with you and be as committed to your well-being as you are. I think it starts with being absolute and visible about your integrity; those that share your ideals will be there for you.

All three acts require concerted leadership and a willingness to stay with it. They don't require re-shaping human nature, or altering the what-have-you-done-for-me-lately market mentality. They are all possible, they are all practical, and they all exhibit what I believe is an organizational sense of what's right.

This is one way for us to transcend our basest instincts.

owning your decisions

achilles3 recently referenced a fascinating William Black interview by Bill Moyers. Black paints a scary picture of how close the relationships are between American regulators and the companies they regulate. It's often downright incestuous and painfully clear how much our regulators personally benefit when their "flock" succeeds.

Then thanks to Dana at Investorialist, I read this article about Ethisphere's list of the World's Most Ethical Companies of 2009. Turns out that many of the winners are actually members or sponsors of Ethisphere!  Hmmm.....

In both cases, the supposedly "pure" representatives of the people have personal goals that preempt their constituents' interests. I'm sure you can name other examples - another that popped into my mind is the linkage between personal oil interests among government leaders and our military incursions into the Middle East, but let's leave that for another day:).

Why are we not outraged about this? Why is there no gigantic public outcry about Black's accusations? Why are people not calling for the tarring and feathering of political leaders?? There's more widespread public angst about judging conspiracies in Olympic Figure Skating or Gymnastics than about elected and appointed officials enabling the abuse of $billions of public money! How is it that Bill Clinton's choice of where to "put" his penis while in the Oval Office caused global furor and even talk of impeachment, but his appointing Treasury/Fed/SEC Secretaries that caused millions of citizens' retirement funds to shrivel up (a whole new kind of shrinkage) received very little attention and almost no condemnation.

Is there a way to prevent these acts of impropriety? Can we create a situation where this is either not possible or at least managed? When faced with conundrums like this, my natural inclination is to consult Sun Tzu. Channeling him, I'm thinking "convert their strength to your advantage." Ah... Aikido...

Hmmm... what's "strength" to a politician? How have people successfully "convinced" them today? It boils down to one word, and despite Bill's ...best efforts, it's not "Monica" but maybe a very similar word?

Money (and people). But where should this intervention focus? With a problem this complex and  massive, the biggest contributor is the Rating Agencies. Organizations are campaigning to remove their liability shield, but I don't see the point. Fitch, Moody's or S&P don't have lawsuit-worthy money.

Every employee needs to be accountable for the rating decisions that these agencies make, so even if one person (or team) is bribed to fix a rating, there's a very good chance the rest of the org will catch it and prevent it, because of how they all get paid. Their compensation should be a guaranteed base salary (that's say 75% of current), plus a bonus pool containing an additional 50% of current. Bonuses should be paid based on the relative performance of instruments they've rated vs. other similarly-rated instruments.

In other words, if Moody's rates both a bond and a Mortgage-Backed Security "AAB," then they should each have a similar risk profile. There should be an allowable range of variance, but if they exceed that - say the MBS ends up creating returns that are consistent with a CCC-rated instrument, then their entire bonus pool is shrunk based on the losses they created.

There should be one pool for the entire payroll (from top to bottom - they're all in it together), and everyone's bonus should be affected, not just the person/department that rated that particular instrument. This encourages team behavior, and hopefully enables auto-corrections between groups in the agency to reduce risk.

This type of results-based compensation should also be applied to other organizations (including the banks) like the SEC, FAA, and others - it would result in a far more accountable workforce.

the out-behave manifesto

The concepts of integrity, transparency and accountability (ITA) are sprinkled throughout this blog. But they are just words, and can be used freely by anyone with no commitment to real action or outcomes.

I proffered the idea of out-behaving yesterday as way for companies to demonstrate their ethical chops with changed outcomes. How might it happen? Let's start with some truths:

1. You are what you measure. Measure the right things and you can provoke the right behavior.
2. The only reason you go to work is because you get paid. That is the one thing that if they stop doing, you stop going.
3. Stuff flows downhill. In any organization, whatever the leaders are measured on is what their people are measured on.

In the beginning of green, companies that chose to act did so knowing that while it was the right thing, costs would initially be higher than returns. They felt in their hearts and stomachs that green was a societal imperative, and that others would come around. They engaged the world on this basis, sacrificing the perception of being less-profitable for the reality of being more right. So too must the out-behave community act.

This could get really complicated, so let's start with one simple premise. Participants must demonstrate their "ITA-ness" by tying behavior to compensation, by believing that sustained success for any commercial venture is based on the sustained success of its customers, and paying their people accordingly. This is not to say that everyone gets the same pay, just that performance is measured as a blend of organizational and individual success, but biased to organizational success. Everyone must be committed to the higher purpose of sustained customer success.

Employment contracts (including for union-supported workforces) should be written this way. Everyone (management and workers alike) should be paid based on the ITA of sustained customer success. Sustainability can be achieved (as suggested here) by creating a compensation schemes that look at impact over time. This leads to longer employee tenure, and more critically the powerful idea that the customer needs to be better over time for the company to be better.

Tying compensation to corporate performance means that in good times, everyone benefits. In tough times, everyone feels the pinch. But the company is also helped because its people costs move with the times. Unlike companies today, where no matter how bad sales are, salaries don't change, and the company spirals more quickly as a result of ever-declining sales not being matched by some decline in costs. This model makes the ITA company that much more resilient.

The out-behave model might lead to lower salaries in hard times, but it's less likely to lead to the same amount of layoffs. If the market acts properly (this is a stretch), then prices would fall as well, so while you might be taking home less, you should still be able to afford to live (albeit more frugally), and know that your job is more than less secure. There are no guarantees. Instead you have greater risks (your salary is no longer predictable) but also greater rewards (you do well when we do well). Some employees won't like this and will vote with their feet.

While implementing ITA in a company should be top-down, the directory of ITA companies will be a grassroots artifact. It will grow organically, perhaps starting with Craig's List, blogs, twitters, Facebook, and general media buzz, and then coalesce into a structure that makes sense based on how people wish to consume it. It should be given the time to develop and proliferate naturally.

In the end, this first implementation of ITA is not radical as much as it is customer-success-centered. Can it be done today? Yes - look at any small business in the world. Large companies just need to think and act small to be successful.

the new green

Following on inspired minds that want to grow, and some feedback I received, here's a corporate viewpoint.

Maybe it's the optimist in me, but especially now when trust in corporations is so low, companies must not only assert a vision that is inspiring, but also make it a public mission to live up to, and be held to a standard of performance.

The green movement started this way. A few saw the light and began to behave in a new way. Green funds were created, VCs for green start-ups were formed, etc. When it began, most were skeptical. Cynics said that green was more expensive - organizations that were green would be less profitable; they/it would never succeed, it was just a fad.

Despite this and no major legislation (outside of emission controls), green continues to be a strong and powerful force. Our government is now investing in green; new companies are touting their commitment to green every day, hiring green "czars," moving into green(er) buildings; green-specific industries have sprung up; even students now more than ever use green and social responsibility as criteria by which to judge potential employers.

Green is a largely self-policed or socially-policed phenomenon based on the idea of good and environmentally-sensitive behavior. Can it be repeated?

Companies that step forward and demonstrate their integrity, transparency and accountability could be the ones where customers choose to shop, whose shares investors choose to buy, in whom people choose to believe.

Integrity, transparency and accountability (ITA) are not where a company will out-innovate or out-perform their competitors, but rather where a company out-behaves. This could also be where a company creates market advantage, where they can capitalize on the perception of mistrust and outshine the rest to be recognized as having a management ethos and discipline that can be trusted, that won't be rapacious, that will be open and honest and accountable. This could also be a really effective marketing strategy, one that results in (like Whole Foods) market and price advantage.

There will need to be a way to judge performance, and ensure actively good behavior. Could it, like green, be a more socially-driven vs. regulation-driven mechanism? I hope so.

My gut says companies that out-behave are more sustainable than those that don't. They are potentially better long-term investments because they are less likely to get caught out, but will be able to capitalize on the those that do, capturing market share, talent, etc. when the ill-behaved are outed (AIG, GM, Madoff, etc.). Imagine if there was an ITA-compliant directory of companies from which you could choose your insurance, banking, investment provider, or where you could buy your car, etc. Would you go there if you just found out that you'd been "Madoff'ed"?

They, like the tortoise, will get there in the end, perhaps with less flash than the hare, but with a stronger and more sustainable business.

It's different spin on inspiration and vision, one that could be table stakes for tomorrow's companies because society (and not necessarily regulation or law) wants and expects good behavior.

Willingly Misinformed

It snowed a whole lot here yesterday, which combined with this time of year and this article about the mortgage crisis in the New York Times put me in a reflective mood. Most interesting and telling - as recently as September 18 of this year, President Bush was unaware of the extent to which economic conditions had deteriorated, and had no idea how we got here!

Is this a freak occurrence or a pattern? Example situations (by no means comprehensive):

1. The events leading up to 9-11
2. The lack of preparation for Katrina
3. The performance of FEMA after Katrina
4. The lead-up to the Iraqi invasion
5. The military strategy for entering and exiting Iraq
6. The resulting oil crisis
7. Ethical failures in the White House, the Department of Justice (Gonzales), the Department of Defense (Veterans Hospitals, Boeing/Airbus tankers, etc.), to name just a few.
8. The financial crises
9. The reactions to the financial crises

But it's not just keeping an eye on the ball, it's also about situational hitting. What's your judgment of how this country has reacted to any of these issues? Here's my sense of the modus operandi:

1. Look only at the symptoms that jump out at you (WMD, one shoe bomb, liquids on planes, etc.)
2. Be blissfully naive about everything else, and use PR spin to get everyone to rally behind the one thing
3. Never forget to use fear, wield power (military might, financial might, etc.), think narrowly (to avoid the appearance of lying), and be thoughtlessly bold
4. Define the one thing as a matter of national security (or something like it), and force everyone to focus only on that
5. Once you've sold a plan of action, secured funding, abused enough rights and freedoms, and stroked all the egos, assume the problem will fix itself anyway, and we'll use PR to make us look good, like we worked feverishly and unwaveringly to do the right thing
6. If/when the narrow-minded strategy fails, we'll just use the next crisis to divert people's attention
7. Go back to #1

Then it occurred to me - how is this different from the way most American companies operate? Think of the Detroit Big Three. Think of the financial services sector. Think of the energy sector. Think of telecommunications, or entertainment, or education, or high tech, or whatever else.

Is this how America works? Surely not!

Maybe this is what happens when organizations (or societies, or whole countries) rise too quickly, get too accustomed to the idea that failure doesn't really happen, that winning today is critical, and that at the end of the day, PR and a good perception machine is all you need to make your case before an increasingly naive and ignorant public that blindly grasps at every straw.

Erasmus was right - "In the kingdom of the blind, the one-eyed man is king."  We, it seems have forsaken wisdom for instant gratification, experience for expediency, and chosen misinformation over integrity.

If America is the Hare of the world, who is the Tortoise? That's a tough one. Why? "Hare-mentality" prevails across most of the larger, "successful" countries in the world. Most societies (Eastern and Western) are thus infected.

There are smaller (much smaller) countries out there that seem to have found their center, are able to consistently make good decisions, and have a more nurturing society that cares for its citizenry first, and doesn't seem bent on beating anyone, or imposing themselves on any other country. But then again, they're not actually in competition with the Hare are they?

These  nations seem pretty centered on their place in the global economy, and aren't aspiring to unseat any other society or nation. They are very self-aware and self-critical when things don't go well; they recognize situations, accept blame and work together to resolve and move on. They compete for things and not against organizations or people.

Hmmm... is that the real lesson? If you deal with integrity, take accountability, and are transparent in your actions and their results, then sustained success is possible?

A thoughtful (if that's possible) reaction from the Hares of the world might be that deliberateness stifles creativity, quantum change, and significant outcomes. A fair point.

Is it possible to have the best of both worlds? Do we have any leaders that are that good?

Measure well

Seth Godin wrote today about how to live to fight another day. While our default is to question our customer's decision-making when the deal doesn't go our way, he argues that losing with grace gives you more chances to be invited back to the table. I agree.

So why is this not typical behavior? Simple - we are what we measure. Very few salespeople or sales organizations are measured on sustained performance (where "sustained" spans more than a quarter or a fiscal year). Therefore the sales team and each salesperson is goaled specifically on winning every deal, closing every opportunity, etc. Lifetime value means less than deal value.

I worked at IBM Canada in the early 90s. At a sales training class, the instructor argued that success is most dependent on the relationship you have with the customer. The measure of a great relationship is when your customer calls to tell you that he tried his best, but had to buy the competitor's product. However, he hopes that this doesn't tarnish your relationship in anyway! Wow!

This is one very clear reason for why IBM has been so consistently successful - they care so much about their customers, that their customers care just as much about them.

A purely commission-based sales force loses when they leave any money on the table. This is why they behave this way. You are what you measure.

So how does an organization measure sustained success? 

What if we made commissions the smallest part of the compensation package? What if the accelerators were based on the customers' success, our sustained performance over time, and customer satisfaction?

A very simplistic formula might look like this:

Compensation = [total revenue X 2% (sample base commission rate)] X [1 + customer's year-on-year revenue growth percentage] X [average attainment over the last three years from this account] X [three-year average customer satisfaction index]

Say the deal was worth $1mm, the customers' business had grown by 105%, the sales team had achieved 97%, 103% & 105% of quota the last three years, and their sat index was 90, 98 & 97%.

Then the sales person would receive: [$1mm x 2%] x [1 + 105%] X [ave (97, 103, 104)%] X [ave(90, 98, 97)%] = $20,000 X 205% X 104% X 95% = $40,508.

$20,000 turned into just over $40,000 based on the customer's success, sustained sales performance, and customer satisfaction.

Now imagine how the customer's view of the salesperson might change if they knew that commissions were based in large part on the customer's overall business success? Imagine how the salesperson's point of view would change?? The sales company benefits because their customers' loyalty will grow, which will result in lower costs of sales, higher margins, and more predictable revenues over time.

You are what you measure.

Edu-leadership

What is the right amount of money for a community to spend per student? How does one judge this? A number of studies [one, two, three, four] I looked at today that show contradictory information. Some say that the more you spend, the better the scores are, others say there is no correlation at all.

What's the right answer?

I wonder if we're asking the right question. Is it about the amount or is it about the composition of the investment and the mandate of those managing it? My gut says it's about the latter. My gut also says it's really about how we measure success and where accountability lies.

Today the decision-making rests in the hands of school districts, state and local politicians, heads of schools, and maybe parent-teacher organizations. The federal government also has a hand in this of course.

Three questions:

1. Who defines success?
   
2. Who judges whether success was achieved?
3. Who faces consequences of failure or gets credit for success?

Hmm... I'm not sure the answer to any of these questions is clear is it? Here are three more questions:

1. Who is the customer?
2. Who is the provider?
3. What mechanism is there for the customer to assert their market rights?

Perhaps the answers to these are more clear? Or are they? Is the customer the student, the taxpayer, or the federal government (who funds much of this on our behalf)? Is the provider the head of school, the school, the district, the teachers' union? Is there actually a clear flow of funds through which to assert market rights? Not clear, not clear, and no.

Going back to the first set of questions, you could say that all of society defines success, but this isn't practical, so it falls on legislators, but they'll come up with unfortunate programs like No Child Left Behind. Who judges success? Unclear. Who feels the consequences? Well that's interesting, as in the corporate world, it all flows downhill, so the lowest people on the ladder (teachers) feel the brunt of the pain; of course the students also feel it.

What to do? As with everything else, it's easier to find fault than fix things. From my experience in the corporate world, it almost always boils down to having one leader who has vision, strength, experience, but no ego. If this person is found, they will have the capacity to do what's hard (take a stand with conviction), and push for outcomes based on the best advice available. 

I believe we must know what the goal is and you are what you measure.

I wonder if we have it in us?

What's the Goal??

The education community is a-buzz. Everyone's up in arms about everything, from standardized testing, to unions, to compensation and incentives, to curriculum, to qualification, to public vs. charter or private, to reform, to whatever. It seems pretty clear that everyone has an opinion on what's wrong and great ideas on how to fix the system.

But in all of the content [Eduwonk Dan Brown @ Huffington, David Brooks, Eduwonk, Washington Post], I scanned on this topic in the last day, no-one's come up with a statement or definition or concept or suggestion for what success looks like.

This "Ready-Fire-Aim" approach isn't going to get anyone (least of all our children) anywhere. I'm reminded of Elton John's lyrics:

If we're all going somewhere let's get there soon
Oh this song's got no titles just words and a tune

This is what all this feels like - words and tunes, but no title - randomness.

My background is in Corporate America, and one thing I've learned in that world is that you can do a whole lot of intellectual masturbation, and while it might feel good, you're not getting things done. No outcome is created. And even if you do accidentally fall into an outcome, you have no capacity to judge whether it's good or bad!

What is the definition of success for education in America?

We all have a tendency to jump right into the solving part without first stating the outcome part. The definition of success should be simple, easy to understand, clearly measurable, and objective (i.e. the system can not be self-fulfilling).

I have written quite a bit about this, but think these two entries - You are what you measure and To boldly go where we MUST... capture the gist.

Scoping this to Kindergarten --> Grade 12 (K-12), I see the definition as:

1. 100% Student Success - measured by every child, irrespective of economic status, disability, gender, race, etc. successfully graduating.
   
2. Academic Capacity - measured by the graduates' performance in tertiary education.
   
3. Life Capacity - measured by the graduates' ability to be economically self-sustaining two years after graduation. 

In order. It is the job of the school to help every individual child who enters the system successfully complete their journey, not vice versa. The schools performance in teaching is judged by how its graduates perform in their next academic stage (university, college, etc.) compared to other schools. For those that don't choose an academic next stage, it is the schools job to prepare that student for success in the workforce, measured by their ability to earn a family wage. For more detail.
 
This is where the debate should begin.

Dubious Legacy

As the tenure of the current most powerful person on the planet comes to an end, many have reflected on his time in office, and contemplated ways to appropriately commemorate this unique period in American history.

On the assumption that "Dubya" was not one of those children left behind, or that it is his intention to learn how to read (or at least properly pronounce "nuclear") once he officially retires, we can assume that he will build a library (albeit with books that don't use more than two-syllable-words).

Here therefore is my suggestion for how the George W. Bush Presidential Library should be organized:

•  9-11
• Alienation of foreign governments and peoples
• Blatant disregard for human rights
  
• Culture of predatory fear
• Dick Cheney (see also "Evil Incarnate")
  
• Egregious abuse of Presidential powers
• FEMA
• Gonzales, Alberto
  
• Historic deficits and national debt
• Inflation, recession, foreclosure, bankruptcy 
• Judicial appointments
  
• Katrina
• Lies (see also "WMD" & Libby, Scooter)
  
• Massive and inept government
• Nucular (see also No Child Left Behind)
  
• Oil & Gas tax breaks
  
• Plame, Valerie
  
• Quail hunting with Dick
  
• Rampant executive and ministerial corruption
• Shameless flaunting of civil liberties
• Total social & global embarrassment 
• Undermining global warming prevention
  
• Victory declared in Iraq (2/5/03)
  
• Wars on everything and everyone
• Xenophobe
• Yucca Mountain nuclear dump
  
• Zealot - religious bigotry 

Mr. President, in the immortal words of Monty Python, "I fart in your general direction!"

Rating the Raters

I just saw this fascinating explanation of CDOs by Marketplace's senior editor, Paddy Hirsch. Until I saw this, I didn't realize that the poorly-rated elements of these instruments had become re-collateralized or maybe the better word is re-derivativized.

When a banker created the original security (S), s/he put together a package of mortgages and other debt that bear interest, and sold the package to investors, who purchased based on the risk they were seeking to undertake (let's call their choices: Saaa, Saa, Sbbb, Sbb, etc.). A second banker then created a derivative instrument (BS) based on (S), but instead of mortgages, this banker used the actual investments the first banker sold as the underlying asset.  What's more banker#2 used the higher-risk bits of Sx, so (BS) is based on a bunch of Sbbb, Sbb-type investments vs. any debt instruments,and vs. Saaa or Saa. 

With (S), people get paid in the following order (Saaa, Sss, Sbbb, etc.). The first people to get paid are (Saaa), but they get paid less as a percentage since they made a lower risk (and hence lower return) choice, but they get paid first. With (BS), the first people to get paid with (BS) are those that got paid last for (S).

Now here's the kicker. A rating agency rated BS investments as having the same risk profile as S!! Can you believe that??

Implication: people that bought BS got screwed.

How is it that the rating agencies have not been held accountable for this failure? Where is the Senate or House inquiry on these agencies' leaders?

It eludes me how simple accountability is abjectly ignored in our government.

When I wrote about this, I proposed a solution to the lending crisis. My idea was based on a purely market-economy-driven approach. I think if this approach were taken, while some of the Sx's and BSx's would have gotten a bit less money, most if not all of them would at least be paid for the simple reason that their interest payments would have resumed (albeit at a slightly lower level) very quickly. More critically, most homeowners would have been able to remain in their homes, continued to pay down their mortgages, and the banks and others in the financial system would have taken a bit of a hit but survived.

It's a simple idea, but it doesn't seem that simplicity is a preferred path.