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Streamline Training & Documentation: April 2009
Streamline Training & Documentation
Thursday, April 30, 2009
Update on Islamic Banking
As a follow-on to an earlier post discussing Islamic banking, I'd mention a helpful article by Jeremy Harding published today by the London Review of Books.
In "The Money that Prays," Harding explains in accessible terms the issues that sharia restrictions on banking raise, and how they are addressed both by Islamic banks and by some conventional banks that have begun to offer sharia-compliant produts. He also talks about sharia-compliant insurance and the distinction to be drawn between engaging in lending and engaging in trade, the former being problematic for Muslims, and the latter not (to the extent it is not entangled with lending activity).
A key point is that banks following Islamic principles have been relatively insulated from the current turmoil in the world's financial markets.
M&A Activities of Companies Based in Developing Countries
The literature on economic development gives considerable attention to the means of technology transfer between developed and developing counries. There is an instructive case study of one such mechanism in the May issue of the Harvard Business Review.
Nirmalya Kumar, a professor of marketing at the London Business School, writes about how the India aluminum company Hindalco has used cross-border acquisitions to obtain competencies, technology, and knowledge it needs in order to carry out its strategy of becoming a strong global enterprise, manufacturing both basic and value-added products. This competency-driven rationale for acquisitions is a distinct contrast to the synergies-and-cost-reduction rationale that generally lies behind acquisitions made by companies based in developed countries.
Kumar lays out an eight-year timeline of what he calls the "M&A competency stairway" that Hindalco has gradually climbed in order to build the "industry-related skills and M&A techniques" it needed to pursue ever more challenging acquisition targets. The stairway has five steps so far:
Starting small, Hindalco acquired two Indian companies, Indal and Annapurna Foils, in 2000. Competencies gained:
How to bid for, negotiate with, and integrate companies in India
How to manage a large customer-focused, value-added products business
How to turn around a small Indian company (Annapurna) in receivership
In 2003, Hindalco acquired the Nifty and Mount Gordon mines in Australia. Competencies gained:
How to take over, turn around, and operate companies in a developed market
How to list companies on a stock exchange abroad and manage investor relations
In 2005, Hindalco acquired the St. Anne Nackawic Pulp Mill in Canada. Competencies gained:
How to manage a global supply chain as a a buyer and a seller
How to manage price fluctuations and foreign exchange risks across countries
In 2006, Hindalco acquired Minacs Worldwide in Canada. Competencies gained:
How to acquire assimilate, and delist a company in North America
How to manage a large, HR-intensive multinational operation
Finally, in 2007, Hindalco acquired Novelis North America, a company more than twice its size. Kumar acknowledges that the jury is out on how this latest acquisition will fare, both because it is so recent and because of the current depressed market conditions that Hindalco, along with everyone else in the aluminum industry, is coping with. In any case, it seems safe to say, as Kumar does, that Hindalco could not have tackled such a large acquisition without the competencies built through previous, smaller-scale acquisitions.
Kumar offers this summary of Hindalco's M&A strategy:
Making aluminum at competitive prices requires economics of scale, process skills, and cheap raw materials. Selling value-added aluminum products demands attention to quality, service, and brands; product development skills; and a knack for forging customer relationships — capabilities that Hindalco didn't possess [prior to 2000]. To learn them, it decided to acquire the leading downstream companies: Indal in India and Novelis overseas. The objective was to gain new competencies — not to get big fast or to reduce costs.
Note that, because the rationale is building competency, acquisition programs like that of Hindalco do not involve wholesale replacement of the management of acquired companies. Also, they have a long-term focus, as opposed to a focus on realizing profits quickly through cost-cutting.
A number of previous posts (see, e.g., here) have looked at social entrepreneurship and other types of efforts to assist people in developing countries with raising their incomes, getting their children into school, and otherwise improving their lives. In this post I'd like to highlight the tool for evaluating the impacts of such efforts that Ted London and colleagues at the University of Michigan have developed. London is the director of the Base of the Pyramid (BoP) Initiative of the William Davidson Institute at UMich, where he also teaches at the business school.
London's Base of the Pyramid [BoP] Impact Assessment Framework looks at three types of direct impacts:
Economic impacts, e.g., changes in participant incomes, debt levels, vulnerability to economic or household shocks; changes in community infrastructure.
Impacts on capabilities, e.g., changes in access to training and education, clean water, and medical care; changes in people's sense of self-esteem; changes in aspirations for further personal and family advancements.
Impacts on relationships, e.g., changes access to networks, changes in reputation and/or social status, altered household roles and relationships, improvements in gender equity in the community, changes in environmental quality.
These impacts are assessed for three groups of people:
Local buyers of the venture's products and services
Local sellers of the venture's products and services
Local communities which the venture affects
The idea is to arrive at a "systematic and holistic approach to assessing and enhancing the performance of BoP ventures." You can see the tool itself in the sidebar on p. 108 of the article. There are examples of implementation of the tool on pp. 110 and 112.
Implementing the tool is a two-step process:
Strategic analysis of how project activies can (or will) alleviate poverty.
Use of the strategic analysis to develop short-term and long-term indicators of actual performance. The idea is to home in on what is working, what is not working, and what opportunities exist for further increasing the value created for local participants and communities, the sponsoring organization, potential partners, and funding sources.
With regard to implementation, London argues:
The process isn't as complicated or expensive as one might think. It involves identifying and collecting baseline as well as post-intervention data on the local buyers, sellers, and communities most affected by the venture's activities, and, whenever possible, on a comparable unaffected group to better account for what would have happened had the venture never launched. The assessment team will have to design data collection approaches that will yield the most useful information, focusing on the "biggest magnitude" and "most likely to occur" indicators revealed by the analysis.
With the comprehensive information generated from the analysis and monitoring, the sponsoring organization can determine if any changes are needed in its business model in order to realize potential increases in positive impacts while further mitigating negative impacts.
Do not be deceived by the title given an interview with J. Richard Hackman, a professor of of social and organizational psychology at Harvard, that appears in the May issue of the Harvard Business Review. "Why Teams Don't Work" is really about why some teams don't work, and about the five conditions that must be in place in order to maximize the probability that your teams will work.
According to Hackman, those five conditions are:
"Teams must be real," by which Hackman means that it must be clear who exactly is on the team and who is not.
"Teams need a compelling direction," i.e., their mission and purpose must be clear. Seems obvious, and it is, but that doesn't mean that you can't find plenty of instances in which different team members have different views of what the team is and should be doing. Leadership in getting everybody pointed in the same direction is essential.
"Teams need enabling structures," which means well-designed tasks, an appropriate number and mix of members, and clear behavior norms that are enforced.
"Teams need a supportive organization," which means reward, HR, and information systems that facilitate the teams' work.
"Teams need expert coaching." This is not to be confused with expert individual coaching of team members. The coaching teams require focuses on team processes, "especially at the beginning, midpoint, and end of a team project."
As the concluding question of the interview, Hackman is asked, "Given the difficulty of making teams work, should we be rethinking their importance in organizations?"
His answer is "perhaps." He goes on to talk about an example I don't find convincing, namely the idea that having a group of people working on a house will actually mean a slower job, or even an incomplete job, than if the project were handled by a single person. (Or perhaps by the standard model of a general contractor who deploys individual tradespeople, as needed. It's not clear from the text what alternative to the group approach you are supposed to imagine.) What does make sense to me is Hackman's observation that
There are many cases where collaboration, particularly in truly creative endeavors, is a hindrance rather than a help. The challenge for a leader, then, is to find a balance between individual autonomy and collective action. Either extreme is bad, though we are generally more aware of the downside of individualism in organizations, and we forget that teams can be just as destructive by being so strong and controlling that individual voices and contributions and learning are lost.
Hackman then comments on the problem of the Abilene Paradox, though he doesn't call it by that name, and reiterates another of his key points, namely that fulfilling the essential function of dissent in team discussions can be a serious danger to one's career.
I recommend reading Hackman's astute, research-based comments in their entirety. Just don't be surprised that he is not actually saying in some sweeping fashion that "teams don't work."
This afternoon I went to Northampton's Academy of Music to see a preview of Episode 3 of the PBS series on Native Americans, "We Shall Remain."
I've managed to miss the first two episodes, though I plan to watch them online as soon as time permits. Episode 1, "After the Mayflower," deals with the Pilgrims and the Wampanoags, while Episode 2 looks at "Tecumseh's Vision." When the time for Episode 3, "Trail of Tears," rolled around, I was determined to find my way to the Academy because I had so enjoyed my experience with the Audubon preview I attended there about two years ago.
I found "Trail of Tears" both informative and confusing. I left the theater with a considerably more detailed understanding of the story of "Indian removal" (aka ethnic cleansing) from the eastern part of the country to the "Indian Territory" in what is now eastern Oklahoma. However, not everything was clear. Confusion arose from the way the story of presented. Not only did the producers and director resort to reenactment of events from a period which naturally lacks authentic film footage, but they also used a rather choppy editing technique, insufficiently bolstered by narration of the facts of the story.
I know I was not the only one who had a problem grasping some of the basic details because in the Q&A following the screening, executive producer Sharon Grimberg was asked some very basic questions, such as, "Where did the Trail of Tears end?" (Ans: eastern Oklahoma. Didn't you see the map of the route we showed you?) and "Were Major Ridge and the other two people who were murdered done in by fellow Cherokees?" (Ans: Yes. That's what we reenacted for you in those assassination scenes.)
I imagine that writing a script which would not raise hackles (or, at least, not many hackles) in one quarter or another was a ticklish process. The "Trail of Tears" story is inherently controversial because the Cherokees at its center were in a no-win situation. They could try to stay on their land and end up being forced off (the scenario for the majority of those living in the Southeast), or they could give up their land and move voluntarily to the Indian Territory. There is no way of proving that one or the other of the two factions that formed — the National Party and the Treaty Party, respectively — was right, while the other was wrong.
I hasten to add that the vast majority of the Cherokees signed a petition to Congress asking that the Treaty of Echota signed by leaders of the minority Treaty Party be voided. This suggests that, on democratic grounds, the National Party was representing what the bulk of the Cherokee people wanted. On the other hand, the petition was futile, so the Treaty side could still argue that, on pragmatic grounds, they were making a hard, but ultimately sensible choice.
John Ross, Principal Chief of the Cherokees, 1828-1860, and head of the National Party, which opposed the Treaty Party headed by Major Ridge, et al.. (Wikipedia)
PBS has developed excellent teaching guides for school use. The guide for "Trail of Tears" is here. A National Park Service teaching guide for the Trail of Tears National Historic Trail is here.
One of the short pieces at the front of the May issue of the Harvard Business Review describes how the International Finance Corporation (IFC), an arm of the World Bank that undertakes private-sector investment and provides technical assistance in developing countries, is using a knowlege transfer program called "SmartLessons" for internal dissemination of best practices and lessons learned from various IFC projects.
Importantly, the narratives published by the IFC in their SmartLessons write-ups are by no means entirely free-form. Rather, as you can see in examples concerning reform of company inspections in Tajikistan and establishing corporate governance codes in countries of the Middle East and North Africa (pdf), there is a structure to the narratives that makes it easy for the reader to understand project goals, rationales, processes, and responses to challenges. The lessons learned are explained with reference to the specific experiences that suggest that these lessons are indeed principles that can be productively emulated in comparable circumstances in subsequent projects.
For example, Lesson 1 (of six) from the Tajikistan project is "You need strong credibility if you want key players to listen to you." The commentary on this lesson reads as follows:
In Tajikistan, infrastructure or rural development projects often appear far more urgent than advisory projects. It was crucial for IFC to position itself as a credible actor, first through the high quality of the Business Environment survey conducted in 2003, and then through constant responsiveness to government's needs. The Project reacted swiftly to requests, and provided ample review of international practice. Also, it was essential for the Project to combine readiness for confrontation, and for engagement:
Confrontation — No compromise on the message. Survey results were hard on the government; intense "discussion" ensued, but in the end all key players agreed that the results were valid and had to be acted upon.
Engagement — The Project did not just provide advice, but argued for it. It also worked with governmental partners directly on legal drafting, instead of just providing them with reports.
Note that the writing style here is plain English, a key point. I'd also mention that as one reads through the whole set of six lessons learned, they parallel quite closesly the principles for community problem-solving advocated by Xavier de Souza Briggs, as discussed in a previous post.
The Cambridge-based advertising agency PJA has drawn up a scorecard (pdf) for its business development efforts that can serve as a model for other agencies and as a discussion-starter for companies in any industry that want to systematically improve their approach to bringing in new customers.
The scorecard has five sections:
The Plan
Positioning
The Pipeline
The Pitch
Perception/Reputation
Within each section are three or four items to be used in assessing the current quality of business development efforts. For example, the items in the Positioning section are:
We have a positioning statement
A majority of agency staffers can summarize agency positioning
Our positioning deliberately excludes market categories or capabilities that are not areas of strength
The assessment is on a scale of 1 to 5:
1 "Not on your life" 2 "We have some work to do" 3 "I'd give us a solid 'C' " 4 "Pretty damned sure" 5 "Absolutely"
Obviously, you can adopt your own labels for the rating scale if the cutesy agency lingo doesn't appeal.
Yesterday's Washington Post had an article about the inauguration of the World Digital Library (WDL), on online archive of primary sources being continuously expanded under the sponsorship of UNESCO.1
As explained at the WDL website, the mission of the WDL is to make "available on the Internet, free of charge and in multilingual format, significant primary materials from countries and cultures around the world." The principal objectives of this endeavor include expanding "the volume and variety of cultural content on the Internet," providing "resources for educators, scholars, and general audiences," and building capacity in partner institutions (generally, libraries and archives) "to narrow the digital divide within and between countries."2
The image below is just one example of what you will find at the WDL, which currently has upwards of 1200 items.
"Basic and Advanced Flying School for Negro Air Corps Cadets, Tuskegee, Alabama... In the Center is Capt. Roy F. Morse, Air Corps. He is Teaching the Cadets How to Send and Receive Code." (World Digital Library)
When you visit the page on which this image is displayed, you can see the care with which the archivists have assigned categorized tags ("consistent metadata") to assist visitors in finding the image when searching using various filters, such as location, time period, topic, type of item (book, photo, musical score, etc.), and home institution.
__________ 1 The WDL website is hosted at the US Library of Congress. The plan is to establish mirror sites elsewhere in the world in due course. (Note that the Library of Congress maintains an analogous program of digitized primary materials relating to the United States — the National Digital Library Program — which you can read about here.)
2 The languages in which navigation tools and item descriptions are available are Arabic, Chinese, English, French, Portuguese, Russian, and Spanish. The plan is to add more languages over time, but doing so is at a lower level of priority than "increasing the volume and diversity of content from and about all countries in all languages and building digital capacity in developing countries."
As a follow-on to the post of a few days ago in which I complained about an unilluminating set of "business secrets" purveyed by a spiritually oriented guru, I'd like to call attention to a welcome contrast that appeared at bnet.com today.
As best I can judge from how he presents himself on his website, Sims Wyeth, a consultant specializing in oral communications, is a straightforward type. Straightforward is a style I find particularly effective in an advisor trying to help people with the specifics of skill development.
In "Five Ways to Speak Like Obama," Wyeth does a fine job of explaining practices Barack Obama follows that he (Wyeth) believes are appropriate for all public speaking by businesspeople. The practices are:
Talk about the audience's concerns.
Keep it simple, i.e., make sure you have a clear core message, and support your messsage with a limited number of details selected to resonate with your audience.
Anticipate what your audience is thinking (something I find myself recommending frequently, and not just for speaking, but also for writing).
Learn to pause. (Watch good actors — they generally don't rush through their lines.)
Master the body language of leadership. You should aim to "communicate the right mix of calm and assertiveness." Rehearse in order to project this mix in a natural way.
Clearly, simply stating the recommended practices doesn't accomplish much beyond reminding people of what most have heard before. I highly recommend reading Wyeth's commentary on each practice to get the full benefit of what he has to offer.
(As a side note, I'd mention that Wyeth's article elicited comments that included some responding to the content of his recommendations, and many from people unhappy about commendation of a politician of whom they disapprove. This is an example of the unfortunate difficulty trainers have in citing controversial public figures to illustrate points the trainers are trying to bring to life as clearly and memorably as possible.)
For a straightforward approach to allowing employees scope for exercising their intelligence and creative talents, while controlling risks associated with empowerment, you can look to the "levers of control" framework put forward by Robert Simons, a professor at Harvard Business School.
Simons recommends adopting four types of control system so that employees can "initiate process improvements and new ways of responding to customers' needs — but in a controlled way." The four types of control system are:
Diagnostic control systems — The traditional approach of checking performance against plan by monitoring critical performance outcomes, such as sales and profits.
Belief systems — Communication of your company's core values and its mission in a way that inspires employees' commitment and motivates them to "search for new ways of creating value." Simons notes, "In the absence of clearly articulated core values, [employees] are often forced to make assumptions about what constitutes acceptable behavior in the many different, unpredictable circumstances they encounter."
Boundary systems — Ground rules for operations, and limits on the types of opportunities that employees are allowed to pursue. Simons argues that empowerment only works if you refrain from making lots of rules about what employees must do, and instead specify what they may not do. For instance, departures from ethical behavior should be clearly verboten. A company will probably also want to specify types of business it does not want to get involved in (perhaps because of lack of needed competencies), and/or types of customers it does not care to serve. Simons argues, "Boundary systems are especially critical in those businesses in which a reputation built on trust is a key competitive asset."
Interactive control systems — The "formal information systems that managers use to involve themselves regularly and personally in the decisions of subordinates." In practice, this means regular face-to-face discussion between senior managers and subordinates to assess emerging information and new ideas that may or may not indicate a need to revamp the company's strategy and action plans. Managers are looking to "identify specific vulnerabilities, opportunities, and the source of any problems that require proactive responses." The sorts of questions to explore are What has changed since our last forecast? Why? What are we going to do about it?
Note that the combination of belief systems and boundary systems effectively define the domain within which employees are encouraged to actively seek profitable innovations.
All of these papers are beautifully organized and written. I want to home in on the last of the five because it happens to be the one that I think is of broadest value to people looking to strengthen their professional skills.
In just forty pages, Briggs presents a thorough review of the principles of effective negotiation, with due attention to the complexities associated with such issues of multi-party participation and use of facilitators in the process.
As a sample of the guidance Briggs offers, I'll call out what he has to say about establishing effective working relations, a subject that has especially broad application in the business world.
Briggs describes five traits that generally characterize effective working relationships. Quoting Briggs directly, these traits are:
Forward-looking. Change is expected, even anticipated. The parties involved make room for their relationship to grow. They look ahead to anticipate shocks and opportunities in the environment that might affect the outcomes they care about — and thus the relationship.
Committed and resilient. They withstand pressure, in part through willingness and capacity to “see things through” before resorting to “hardball.” The parties avoid making major assumptions about each others’ intentions. Effective communication is key, and this means more than sending signals clearly. It also includes active listening — listening to understand, summarizing what they say and checking with them to be sure you have understood.
Fair — i.e., perceived as fair by both sides. The relationship reflects a balanced allocation of benefits and rewards, meets the parties’ criteria — whatever defines value — over time, even if short-term costs and benefits are uneven here and there.
Trust-based and forgiving — but provocable. Charles Sabel and other students of cooperation recommend “studied trust” in which the parties make it easy for each other to monitor compliance with commitments made. Beyond having a practical value, supporting such mechanisms signals a willingness to do what you say. And Robert Axelrod says parties can apply a tit-for-tat rule to infractions, being “provocable but forgiving.” Abuses will not be tolerated, but parties will extend each other the benefit of the doubt and will be willing to forgive, at least within certain limits.1
Realistic. Agreed-upon expectations are reasonable and, where possible, adjustable. In a rush to agree, parties will not insist on or agree to things that cannot be delivered, based on best-available information and standards.
A final note: Briggs's "strategy tools" are like chapters in a book — fine for self-study. Just be sure to test yourself for comprehension and retention as you go along.2
__________ 1 Charles Sabel, "Studied Trust: Building New Forms of Cooperation in a Volatile Economy," in Frank Pyke and Werner Sengenberger (eds), Industrial Districts and Local Economic Regeneration (Geneva: International Institute for Labour Studies, 1992), pp. 215-250.
2 For additional self-study materials Briggs has assembled to help people involved in community development, you can visit the Working Smarter in Community Development site based in the MIT Department of Urban Studies + Planning.
Xavier de Souza Briggs on "Getting Things Implemented"
If you want a compact, rich introduction to the issues organizations must manage in order to devise and implement strategies that produce valuable outcomes, you will be well-served by working through the materials Xavier de Souza Briggs put together for a week-long course he delivered this January, just before taking a two-year leave from his MIT faculty appointment in urban studies and planning, to become Associate Director for General Government Programs at the US Office of Management and Budget.
Creating public value, and The craft of political management (negotiation and coalition building)
Basic questions that need to be addressed: "What is worth implementing [What produces value?] and why? How does one go from concept to capacity and then 'production'? ... How to get things done responsibly and ethically when decisions cannot simply be imposed, downward and in a straightforward way, in a hierarchy?" Briggs emphasizes, "We want to be able to distinguish strong ideas, weakly implemented from bad ideas. These distinctions are often not easy to make — but are hugely important for the support we can build for good ideas."
Developing and changing organizational strategy
Here Briggs is talking about devising the means for accomplishing the organization's agreed mission. "The overall [strategic] challenge (and opportunity) is a powerful alignment: Lining up the value-creating idea with what the environment will support and what the organization (or team or alliance) is actually capable of producing." A key lesson: "There's no substitute for organized capacity, beyond any charismatic, smart, or otherwise talented individual."
Strategic collaboration (partnerships and alliances), and Performance management
Some key lessons about collaboration: "Effective collaboration often demands that implementers play a wide variety of roles well (strategic, operational, mobilization-focused, etc.)." "Collaboratives evolve through stages, navigated jointly: agreeing on a problem, developing strategy, implementing ('co-producing' change)." "Collaboratives can have wider ripple effects (political participation, policy reform, etc.)."
The key lesson about performance management: "Systems of performance measures and rules and incentives coupled with them ('management') should align with broader strategies."
Core elements of operating capacity: organizational structure (e.g., by function, by customer segment), operational processes (mapped so as to highlight, e.g., bottlenecks), human resources
Key lessons: Organizational restructuring "invites resistance, requires political capital, proof of concept, supportive coalitions, etc." "Strategic human resource management addresses flows ([employee] entry, development, exit) and targets (motivation, reward, performance)."
Thinking like an implementer, and Leadership (especially, leading change)
A key lesson: An effective implementer recognizes implementation issues (e.g., lack of funding, lack of operating capacity, opportunities for delivering more value, etc.) and develops skill in generating strategic options for addressing the issues.
Some core leadership concepts: exercising leadership vs. exercising authority; technical challenges (well-defined problems with known solutions) vs. adaptive challenges (fuzzy problems, unknown solutions); leadership styles; the need for a repertoire of various elements of emotional intelligence. Exercising leadership "is particularly important for motivating adaptation and risk taking, and thus deep change, in how implementation systems work."
Please note that the above outline greatly condenses and simplifies what Briggs teaches. To get a fuller account of the principles he espouses, you can download pdf files of his lecture notes and study questions here. Briggs's materials are a model of accessibility and practical expertise, structured in a way that requires students to think about the assigned readings (including a number of case studies) in critical fashion.
Each section of the course (generally, two sections per session) ends with a summary of take-away lessons. For example the first lesson from the first session is that "having a goal is not the same as having a clear, actionable value proposition." A related lesson is that "Effective implementers must often help to define ends (value propositions), not just political or operational means."
The course concluded with a take-home exam which, in keeping with the rest of Briggs's materials, places the emphasis squarely on critical thinking and intelligent application of the concepts covered in the class ("value creation, political management, organizational strategy, collaboration, performance management, organizational design and process redesign, human resource management"). Briggs emphasizes quality, not quantity, in students' responses to the seven "word problems" he sets, as you can see by reading through his instructions for the exam and the sample solutions he provides (pdf files).
I read "Business Secrets of the Trappists," a four-part essay Forbes.com published April 14-17, with the idea that it might really reveal some valuable insights of a novel sort.
No such luck. The author, August Turak, "an entrepreneur, consultant, writer and speaker who divides his time between New York City and his farm in North Carolina," cites these seven gems of wisdom gleaned from time spent at Mepkin Abbey, a Trappist monastery in South Carolina:
Have a worthy mission, and help employees make the connection between day-to-day decisions and mission accomplishment.
Focus selflessly on the mission, i.e., cultivate an organizational culture in which employees are motivated to pursue mission accomplishment, as opposed to giving priority to individual interests and engaging in turf battles.
Commit to excellence.
Maintain the high ethical standards.
Have faith that following your principles will result in a successful business through good times and bad — because your approach to doing business is such that all parties (your organization, your clients, your suppliers) benefit.
Build relations of trust with others. By consistently putting the organizational mission and the interests of others ahead of your own, you make yourself more persuasive in internal discussions and external negotiations.
Have a specified method (e.g., the Rule of St. Benedict) for putting your principles consistently into practice. Give focused attention to ensuring employees embrace the values and attitudes necessary for long-term success in accomplishing the organizational mission.
It is unfortunate that Turak, like all too many business writers, places great weight on platitudes and on analogies that beg the question of how exactly to apply the principles being canonized. (As just one example of the problem with Turak's analogizing of secular business to that of Mepkin Abbey, I'd mention that the monks follow a rule of silence, something quite at odds with the way a secular business operates.)
Please understand that I am in no way quarreling with the monks' style of living and working, nor with their manner of bearing witness to the values Turak describes. My concern is that Turak hasn't accomplished much by endorsing widely accepted values. What's needed is to do the additional work of investigating how to effectively put these values into practice in particular secular situations.
This is where the case method, combined with complementary quantitative research, actually contributes to knowledge of effective management practice. In particular, I would argue that the "Have faith" principle (#5) is one that requires detailed elucidation in order to be useful to a business firm faced with the need to turn an adequate profit in order to remain viable.
Donald Sull Makes the Case for Management by Commitment
Donald Sull, who teaches management at the London Business School, has long been a proponent of what he calls management by commitment.
As Sull explains in a brief interview posted at BNET.com on March 4, management by commitment involves looking "at an organization as a network of overlapping, continually evolving promises that people make to each other to get things done."1
Sull contrasts management by commitment to two alternatives:
Use of hierarchical power
"This tends to create silos: the hierarchy is very up and down and doesn't work well for work that requires cooperation across different units or functions. It's pretty slow as well; it takes a long time for information to get up the structure and for orders to find their way down."
Management by standardized processes
"This is hugely helpful — it allows you to squeeze out excess resources and continuously improve on what you do. But here we also have limitations, probably the biggest one being that standardization gets in the way of innovation."
For situations that do not lend themselves to standardization, Sull argues that management by commitment allows needed flexibility. Management by commitment also has a natural place in situations in which you need cooperation from someone over whom you have no authority.
Based on research he and his colleague Charles Spinosa have done, Sull cites five characteristics of effective management by commitment:
The commitments are public and they are tracked publicly.
The commitments are active, as opposed to being casual or pro forma.
The commitments are voluntary. The person from whom a commitment is sought can make a counteroffer, or even say no if what's being requested is something the individual really isn't able to take on.
The commitments are explicit, i.e., it is clear which individuals are committing to what objectives and tasks.
The commitments are motivating. People need to care about what they are being asked to do, so that they are willing to carry on when inevitable obstacles crop up. This requires clarifying the importance of, and the rationale for, the actions people are signing up for.
Note: In a longer interview published in 2007 that is well worth reading, Sull explains in more detail how management by commitment helps with strategy execution.
__________ 1 A brief follow-up BNET.com interview with Sull, citing specific examples of use of management by commitment, is here.
About two years ago, I wrote a post commenting on a book presenting the story of a remarkable health worker in Mali named Monique Dembele. Monique and the Mango Rains, by Kris Holloway, captures not only Dembele's spirit and accomplishments, but also offers a vivid picture of Mali, a country that has been relatively successful in its development efforts, despite a difficult climate and high prevalence of HIV/AIDS.
For someone interested in knowing more of what's happening in Mali, another encouraging account can be found in the story of Teriya Bugu, a village on the Bani River.
Teriya Bugu — "Friendship House" in the Bambara language — started on the path to its current status as a model farm and ecotourism site back in the 1960s, when a French priest named Bernard Vespieren struck up a friendship with a local fisherman, and eventually decided to focus his development assistance efforts on this particular spot.
As indicated in the video below (narrated in French, Mali's official language), Teriya Bugu takes well-earned pride in its orchards, field crops, kitchen garden, honey, animal husbandry, forestry (over forty species of trees, with an emphasis on eucalyptus), use of renewable energy (solar, wind, and biofuels), and its tourist facilities (guest accommodations, restaurant, conference center for up to one hundred people, museum, zoo, boating, swimming, fishing, birdwatching, and other leisure activities). There are also a school, a dispensary, a library, and a cooperative store.
The ethic that underlies the day-to-day work and the ongoing improvements in Teriya Bugu is one of sustainable and equitable development. It is in this sense that Teriya Bugu qualifies as a model village, a term typically used to characterize Teriya Bugu in published reports.
To mark the third anniversary — the Leather Anniversary — of the Streamline blog, I suggest a virtual visit to the Walsall Leather Museum.
An image from the "Four-in-Hand" catalogue of R.E. Thacker, 1905, showing military saddlery, including pistol wallets, a pistol holster, a valise, etc. (Walsall Leather Museum)
Walsall, a town in Staffordshire eleven miles northwest of Birmingham, has been the center of leather manufacture in England for over 200 years. A fascinating timeline compiled by the Leather Museum is here (pdf).
For Holy Saturday, a performance of the Miserere (Psalm 51) by Gregorio Allegri. The choir is Les Chanteurs du Lycée from Liceo Franco Mexicano in Mexico City, under the direction of Cristina Stevens.
The Latin text:
Miserere mei, Deus, secundum magnam misericordiam tuam.
Et secundum multitudinem miserationum tuarum, dele iniquitatem mean.
Amplius lava me ab iniquitate mea: et a peccato meo munda me.
Quoniam iniquitatem mean ego cognosco: et peccatum meum contra me est semper.
Tibi soli peccavi et malum, coram te feci: ut justificeris in sermonibus tuis, et vincas cum judicaris.
Ecce enim in iniquitatibus conceptus sum : et in peccatis concepit me mater mea.
Ecce enim veritatem dilexisti : incerta et occula sapientiae tuae manifestasti mihi.
Asperges me hyssopo, et mundabor : lavabis me, et super nivem dealbabor.
Auditui meo dabis gaudium et laetitiam, et exsultabunt ossa humiliata.
Averte faciem tuam a peccatis meis : et omnes iniquitates meas dele.
Cor mundum crea in me, Deus : et spiritum rectum innova in visceribus meis.
Ne projicias me a facie tua : et spiritum sanctum tuum ne auferas a me.
Redde mihi laetitiam salutaris tui : et spiritu principali confirma me.
Docebo iniquos vias tuas : et impii ad te convertentur.
Libera me de sanguinibus, Deus, Deus salutis meae : et exsultabit lingua mea justitiam tuam.
Domine, labia mea aperies : et os meum annuntiabit laudem tuan.
Quoniam si voluisses sacrificium, dedissem utique : holocaustis non dedectaberis.
Sacrificium Deo spiritus contribulatus : cor contritum et humiliatum, Deus, non despicies.
Benigne fac, Domine, in bona voluntate tua Sion : ut ædificentur muri Jerusalem.
Tunc acceptabis sacrificium justitiae, oblationes et holocausta: tunc imiponent super altare tuum vitulos.
The King James version:
1 Have mercy upon me, O God, according to thy loving-kindness: according unto the multitude of thy tender mercies blot out my transgressions.
2 Wash me thoroughly from mine iniquity, and cleanse me from my sin.
3 For I acknowledge my transgressions: and my sin is ever before me.
4 Against thee, thee only, have I sinned, and done this evil in thy sight: that thou mightest be justified when thou speakest, and be clear when thou judgest.
5 Behold, I was shapen in iniquity; and in sin did my mother conceive me.
6 Behold, thou desirest truth in the inward parts: and in the hidden part thou shalt make me to know wisdom.
7 Purge me with hyssop, and I shall be clean: wash me, and I shall be whiter than snow.
8 Make me to hear joy and gladness; that the bones which thou hast broken may rejoice.
9 Hide thy face from my sins, and blot out all mine iniquities.
10 Create in me a clean heart, O God; and renew a right spirit within me.
11 Cast me not away from thy presence; and take not thy Holy Spirit from me.
12 Restore unto me the joy of thy salvation; and uphold me with thy free Spirit.
13 Then will I teach transgressors thy ways; and sinners shall be converted unto thee.
14 Deliver me from bloodguiltiness, O God, thou God of my salvation: and my tongue shall sing aloud of thy righteousness.
15 O Lord, open thou my lips; and my mouth shall show forth thy praise.
16 For thou desirest not sacrifice; else would I give it: thou delightest not in burnt offering.
17 The sacrifices of God are a broken spirit: a broken and a contrite heart, O God, thou wilt not despise.
18 Do good in thy good pleasure unto Zion: build thou the walls of Jerusalem.
19 Then shalt thou be pleased with the sacrifices of righteousness, with burnt offering and whole burnt offering: then shall they offer bullocks upon thine altar.
For Holy Thursday, a beautiful rendition of "Panis Angelicus" posted at YouTube with no credits ...
Latin text:
Panis angelicus fit panis hominum; Dat panis caelicus figuris terminum: O res mirabilis! manducat Dominum Pauper, servus, et humilis. Te trina Deitas unaque poscimus: Sic nos tu visita, sicut te colimus; Per tuas semitas duc nos quo tendimus, Ad lucem quam inhabitas. Amen.
Translation:
Bread of Angels, made the bread of men; The Bread of heaven puts an end to all symbols: A thing wonderful! The Lord becomes our food: poor, a servant, and humble. We beseech Thee, Godhead One in Three That Thou wilt visit us, as we worship Thee, lead us through Thy ways, We who wish to reach the light in which Thou dwellest. Amen.
As a follow-on to my earlier post on competitive analysis, I'd like to call attention to a helpful article on "How to Make Sense of Weak Signals" in the Spring 2009 issue of the MIT Sloan Management Review.
This article by Paul Schoemaker, research director of the Mack Center for Technological Innovation, and George Day, a professor of marketing at the Wharton School, covers a broader range than just the task of scoping out the competition. Schoemaker and Day describe a straightforward way of attending to and responding to weak signals of all sorts that are relevant to one's business, as omens either of emerging opportunities or of looming threats.
A weak signal is defined as a
seemingly random or disconnected piece of information that at first appears to be background noise but can be recognized as part of a significant pattern by viewing it through a different frame or connecting it with other pieces of information.
Schoemaker and Day divide the process of making effective use of weak signals into three phases:
Actively scan for weak signals. Three strategies to consider:
Tap local intelligence, i.e., information distributed among various individual locations in which the organization has a presence.
Leverage extended networks, i.e., networks encompassing partners, suppliers, customers, etc.
Mobilize search parties, i.e., task forces set up to monitor specific areas of interest.
Amplify interesting weak signals to help in deciding what they mean. Three strategies to consider:
Test multiple hypotheses. E.g., you might want to use red teams (MSWord) "to collect and synthesize information to prove that the current plan is wrong and needs to be changed."
Canvass the collective wisdom of your organization. E.g., you might want to try a prediction market.
Develop diverse scenarios. "Scenario planning systematizes the hunt for weak signals that may foreshadow fundamental shifts in the marketplace and society at large ..."
Probe further, clarify, and act. Three strategies to consider:
Seek new information to "confront reality," i.e., you need to recognize developments that make planning and executing an effective response imperative.
Encourage constructive conflict "to ascertain and interpret the facts as they are."
Trust seasoned intuition. "It takes many years of experience, with good feedback, to develop reliable intuition. But once it has been honed, intuitive hunches should be viewed as valuable inputs, along with more analytical ones, for the judgment process."
Schoemaker and Day conclude by reiterating the point with which they begin their article: "The major problem [in monitoring and responding to weak signals] is that managers are insufficiently aware of cognitive and emotional biases that can cloud their judgment when interpreting weak signals."
Elizabeth Warren on the US Treasury's TARP Strategy
An earlier post called attention to Elizabeth Warren's video talk on modernizing financial regulation. As a follow-on, below is the video released today in which Warren, in her capacity as chair of the Congressional Oversight Panel monitoring the Treasury's Troubled Asset Relief Program (TARP), introduces the panel's April report, titled "Assessing Treasury's Strategy: Six Months of TARP."
In the video, Warren talks about the pros and cons of three approaches to dealing with bank failures — liquidation, receivership, and subsidization. She also explains the four criteria by which the panel is judging the Treasury's performance in using TARP funds to restore stability to the banking sector — transparency in the presentation of bank accounting statements, assertiveness (decisiveness) in addressing failing institutions, accountability of bank management, and clarity concerning what the government is doing and why.
Having had the unsettling experience of working with a strategic planner at a large company who had a remarkably unenterprising approach to competitive analysis, I was glad to see the helpful advice Kevin Coyne and John Horn offer in an article published in the April issue of the Harvard Business Review.
Based on their experience at McKinsey (Coyne is an alum now teaching at Emory University's Goizueta Business School, Horn is a consultant at McKinsey's Washington DC office), and on a survey of some 1,825 senior executives at a cross-section of companies, Coyne and Horn offer a practical approach to competitive analysis that requires careful thought, but is not onerous in terms of the amount of information that needs to be gathered and processed.
Specifically, Coyne and Horn address the issue of how to go about taking account of likely competitor reactions to a "major initiative." A major initiative was defined in their survey as a move at the strategic level, i.e., a move "with 'the potential to significantly affect' the [survey] respondent's view of her company's competitive position." Two types of initiative were considered: a product or service innovation, and a change in pricing.
The Coyne-Horn approach involves answering three questions concerning a major initiative:
Will the competitor(s) react at all? Coyne and Horn found that 17% of their respondents answered No when asked if they had responded to a competitor's most recent major initiative.1
Your answer to this question will be Yes only if you answer Yes to all four of the following subquestions. If any of the answers is No, you are done; you don't need to proceed to questions 2 and 3.
Will your rival see your action? Coyne and Horne found that only 23% of the managers they surveyed learned about a competitor's new product or service early enough to respond prior to the market launch. Only 12% learned about a price change in time to take pre-emptive action.
Will the competitor feel threatened? Coyne and Horn suggest that if the competitor can stay on plan in the face of your initiative, they very possibly will keep on doing what they're doing rather than adjusting to the new state of play.
Will mounting a response be a priority? Coyne and Horn point out that the competitor may be disinclined to shift its attention from its current activities to react to your move.
Can your rival overcome organizational inertia? Coyne and Horn suggest that if substantial changes in strategy and/or established processes would be needed to mount a response, the competitor may very end up ignoring your move (at least until the pain resulting from the changed market situation compels a response).
What options will the competitor actively consider? Coyne and Horn found that only 25% of companies that examine ways of responding to a competitor's major initiative consider more than three options. Also, the options considered tend to be "the most obvious ones: matching a price change or introducing a me-too product."
Which option will the competitor most likely choose? Coyne and Horn argue that, as a rule, the competitor will choose the option "that is most effective (according to his analytic technique) within the constraints of his trade-off between short-term and long-term pain."
To apply this rule, you need to consider two subquestions:
How many moves ahead does your competitor look? Coyne and Horn found that "fewer than 10% of the managers surveyed looked at more than one round of response by more than one competitor."
What metrics does the competitor use? Coyne and Horn suggest deriving an answer to this questions by asking the related question, "What measure would have led my competitor to his recent decisions?" They caution that any "long-term" metrics (e.g., "long-term" market share) be evaluated in light of the fact that only 15% of companies look more than 4 years out when assessing the likely "long-term" costs and benefits of options under consideration.
Once you've arrived at your answer to Question 3, you're ready to
mimic your adversary's decision-making process by applying his metrics and analytic techniques (including the rounds of competition) to the options you think he will look at in order to see which one (or ones) seems best.
To carry out this final step in the competitive analysis, you need to attain an understanding of
the patterns the CEO or relevant executives have displayed in prior decisions ... Talk to people who have worked with those executives and learn about the units they have led. Look at the history of the competitor's other units as well.
The Coyne-Horn approach is practical and doable because it focuses "on understanding how a competitor actually behaves rather than on the theory of how everyone should behave." The above summary outlines what you'll find in the article, but reading the whole piece is highly recommended.
__________ 1 Coyne and Horn emphasize that there is significant variation in competitor behavior across locations and industries. Therefore, the average responses reported in the article are suggestive but are not represented as applying precisely to any particular location or industry.
On March 9, Fortune published an online interview with Paul Osterman, a professor at MIT's Sloan School of Management, that outlines Osterman's views concerning the status and roles of middle managers in today's environment of frequent corporate restructuring.
... middle managers like their work. They're what I call craft workers: they're very loyal to the tasks they do, they get a lot of enjoyment out of it, and they're loyal to their work group, but what they have lost is loyalty to their larger employer, and there are a set of reasons for that. One reason is they perceive top management as having feathered their own nest, been greedy, and a lot of the management that I've talked to made comments to that effect, and it really does have an impact on their attitudes. Secondly, they perceive that the organization has reduced its commitment to them. That is to say, although most of them won't lose their jobs, some of them will, so the sense of reciprocity is diminished. And then thirdly, it's harder and harder for middle managers to climb the ladder because there are fewer rungs in the ladder and because companies are more willing to bring in outsiders if they want to.
Osterman's recommendations for managing middle managers center on fairness in sharing gains and losses (e.g., those arising from the current difficult economic conditions), and providing middle managers with "a sense of achievement and accomplishment in other ways, moving people around horizontally or laterally, finding ways for people to augment their skills, broadening out jobs so that people have a sense of movement in their careers."
Customer Segmentation via MaxDiff and Latent Class Analysis
Since I'm currently working with colleagues on a product designed to assist outsource companies in doing a good job of satisfying the firms with which they contract, a short piece on identifying customer preferences in the April issue of the Harvard Business Review caught my eye.
Eric Almquist, a partner at Bain & Company, and Jason Lee, a manager in Bain's Customer Insights Group, describe the Maximum Difference technique for homing in on the relative importance to customers of different aspects of the customer experience a vendor delivers (or that the vendor is considering delivering, in the case of products and services under development).
As Almquist and Lee explain, the MaxDiff technique was developed by Jordan Louviere, currently a professor at the University of Technology Sydney. The technique forces customers to discriminate among product attributes, as opposed to rating them all as more or less equally desirable or undesirable.
There are three basic steps to MaxDiff:
List the product/service attributes whose relative utility to customers you are investigating.
Present respondents with sets (one at a time) of three to six attributes, asking them to select which atribute in each set they prefer most and which least. The sets of attributes are not mutually exclusive, i.e., any given attribute appears as often as necessary in different mixed groupings to allow inference of the attributes' relative utility to the customers surveyed.
Note that the MaxDiff technique is valid in cross-cultural studies because it does not use a rating scale (Likert scale). Thus, the issue of people in some countries tending to choose higher ratings on average than people in other counries does not arise.
Using statistical analysis, the details of which I won't attempt to describe, draw up a list of the attributes ranked according to the customers' responses.
A likely follow-on, which Almquist and Lee only touch on in their piece, is identifying customer segments that reflect different patterns of preferences. For guidance on segmentation, you can turn to Latent Class Analysis (LCA), described in a 2003 technical paper published by Sawtooth Software, a company in Washington State that develops software that marketers can use for interviewing and data analysis. The classes identified — in this context, customer segments — are "latent" because they are not directly observed. Instead, statistical analysis is used to infer the characteristics of classes within the population under study.
Once the classes have been defined, one can determine to which class any particular individual is most likely to belong by looking at the individual's characteristics.
The paper concludes with a well-presented example of combined use of MaxDiff and LCA by a multinational company that wanted "to identify key leverage points for new product design and marketing messaging."
The Air Force defines MECs as"the higher-order individual, team, and inter-team competencies that a fully prepared pilot, crew or flight requires for successful mission completion under adverse conditions in a non-permissive environment [hostile situation]."
For air-to-air combat, the seven MECs are:
Organize forces to enable combat employment
Detect factor groups [suspicious entities] in area of responsibility
Intercept and target factor groups
Engage-employ ordnance and deny enemy ordnance
Do assessment/reconstitute-initiate follow-on actions
Remain oriented to force requirements
Recognize trigger events that require a shift in the mission phase
In order to develop these air-to-air MECs, the Air Force designs training that bolsters specific types of knowledge and specific skills:
Air-to-Air Knowledge Requirements Communication standards Commit criteria Engage criteria Follow-on options Formation Friendly capabilities Mission objectives Package composition (aircraft involved in mission) Phase of mission Rules of engagement Threat capabilities Time restrictions
Air-to-Air Skill Requirements Adapts to changes in environment Adapts to friendly changes Adapts to threat changes Anticipates problems Builds picture Controls intercept geometry Develops new options Executes merge game plan Executes short range game plan Interprets sensor output Listens Maintains formation Makes assessment Manages mission timing Manages stress Multi-tasks Prioritizes communications Radar mechanization Rebuilds picture Reforms Selects tactic Sorts information Sorts targets Speaks clearly Switchology (which switch to flip when)
Subject matter experts are surveyed to identify "critical experiences," i.e., "developmental events in the training of a warfighter, necessary either to learn or practice a particular Knowledge/Skill under operational-like conditions." The experiences (see below) are then incorporated into training scenarios.
Air-to-Air Experiences Restricted weapons load Limited fuel remaining Operating area restrictions Restrictions to visibility Visual illusions Marginal/minimal cloud clearance Daytime employment Dusk employment Night employment Mountainous terrain G-induced physical limitations Degraded communications Degraded navigation Degraded weapons employment Battle damage Supersonic employment Full range of adversary air threat/mix Full range of adversary ground threat/mix Operations with friendly IADs [integrated air defense systems] Operations with own and friendly ECM [electronic countermeasures] Operations against threat with chaff/flares [Chaff is strips of metal film released to confuse and reflect signals from radar-guided weapons.] Operations with friendly use of chaff/flares Operations against communications jam/spoofing Operations against adversary ECM Rules of engagement limitations and restrictions Fatigue/time on task Task saturation Limited time to act/react to situation Radar search responsibilities Targeting and sorting responsibilities Air refueling Live weapons employment Simulated weapons employment Various initial conditions Emergency procedures Formation responsibilities Lost mutual support Dynamic retasking/scramble operations Various employment altitudes 1:1 force ratio 1:2 force ratio 1:3+ force ratio OCA escort missions OCA sweep missions ["Offensive counter air" is suppression of an enemy's military air power by destroying or disabling the aircraft on the ground and/or destroying or crippling the runways and other infrastructure necessary to operate them.(from Wikipedia)] Employment with various packages
The aim of the MEC-based syllabus development is to make training as efficient at possible by designing focused scenarios that maximize competency development for a given amount of training effort.
When tested, this approach achieved good results: "experienced warfighters made dramatic improvements in their ability to 'kill and survive' in just four days, through the focused development of their Knowledge and Skills which was facilitated by a well-designed syllabus."
In an earlier post, I discussed the Implicit Association Test (IAT), developed by Mahzarin Banaji, a professor of ethics in the psychology department at Harvard, and Anthony Greenwald, a psychology professor at the University of Washington. The test is used to assess the types and degree of unconscious bias a person may have. The most frequently used version of the test assesses unconscious bias against blacks.
It’s also worth noting that the IAT presents race in an extremely stylized way. The test flashes images of faces deliberately cropped so as to exclude hairlines, chins, and cheekbones. The rules instruct the subject to look at the faces for only an instant before pressing the appropriate key. It’s rare that we encounter actual people in such circumstances: divorced from social context; bereft of the telling nuances of grooming, attire, and demeanor that guide us in social encounters. … Of course, the test’s authors would insist that this is the point: the faces are cropped so as to isolate race as the sole variable. It’s the point, but it’s also the problem. Real people aren’t walking avatars of their racial identity. Real people have a lot of other relevant characteristics as well, so associative bias may often be outweighed by other individual characteristics.
And on a personal level, there’s something invasive and uncharitable about the IAT, which evaluates us based on our most primal and unguarded impulses rather than on those improved and refined by conscious effort. The truest self is not necessarily the unguarded self. Just as an author deserves to be judged on his carefully edited final manuscript and not on a surreptitiously obtained first draft, so too perhaps critics should wait for the finished product — outward behavior — rather than seek access to the unedited, unconscious mind. As Banaji and Greenwald are careful to point out, people can overcome implicit biases through deliberate effort. [The Race Card, pp. 192-193]
You can watch an hourlong video of Prof. Ford talking about his book here.
