Go Figure

As with law and medicine, management is a practice, not a religion.  Every situation is a unique opportunity.  Therefore, all relevant theories, methods and techniques must be considered to effectively plan, execute and control the making of effective decisions and the creation of desired value.

All managers please take note, the "benefit of value" and the "burden of cost" does not represent opposites in the functional spectrum of business; they are simply factors in an equation of short-term profit.  Real profits are the premiums paid by patrons for the performance of perceived promises.  Therefore, profits are a function of value alone, not cost.  Cost is the organizations speculative investment in its understanding of the consumers needs and its commitment to delivering the value it promised.

If it is true that great organizations under promise and over deliver.  Then it is equally true that great managers never manage profits by manipulating costs.

The Wisdom of Workers

Before I became a management consultant, I started my professional life as an electrician.  Developing from an apprentice to the level of journeyman in a little more than four years, I learned that craft unions are not the same as labor unions.  Craft unions add value by developing a balance of knowledge, skills and experiences of its members.  

Indeed there is a great deal management can learn from a little experience with a craft union.  For example, it is broadly accepted in the crafts and trades that a journeyman can do far more with old tools, than an apprentice can with the latest tools.  Most managers believe the opposite is true.

The relationship between management and workers has a long standing conflict that begins with the rationalization of slavery.  But times have changed.  Because workers bring knowledge, skill and experience to an organization, logically, the relationship with the organization must be that of a stakeholder providing a service partnership.

In 1995, both China and India, began investing in the development of the most powerful economic forces in history.  According to current IMF projections posted on Wikipedia, five short years from now, by 2017 the GDP for the world’s third largest economy, India,  will double; and the GDP for the second largest, China, will pass the United States as the world economic leader.  While this may seem extraordinary to some, it is not to those who study history.  In fact, it is the essence of what the United States did to come out of the Great Depression, win the Second World War and help rebuild the world economy following the war.  From the insights of famed author Malcolm Gladwell, we even know how to do it.  If we look close and we can begin to see a recurring cultural pattern – currently India and China have higher rates of capitalization on human potential than the United States.  That is a fancy way of saying they are developing their people.  It turns out, from small business to large nation, developing human capabilities is a must for entrepreneurial cultures, regardless of size.  However, if the culture has transitioned from entrepreneurial to bureaucratic, developing human capabilities is an economic burden on society.  True entrepreneurial cultures profit by adding value, bureaucratic cultures profit by cutting cost.  The powerful economic leverage of a capable value adding workforce is data that is often over looked by the bureaucracy of economic leaders.   Throughout history, economic leaders at the top do not focus on what is needed to get to the top or stay on top, they focus on the rewards from being on top.

There is another economic twist in the dichotomy of these two culture types.  For the sake of simplification, let’s convert our model of an economy from currency to calories.  Now let’s assume the average person needs 2,000 calories to survive each day.  If the average person only needs to work two hours a day produces 2,000 calories, as long as they remain able, they will survive without a problem.  However, if they wish to raise a family, they will need to produce extra calories for those who cannot produce their own calories.  So, a family of two parents and two children will need to produce 8,000 calories per day.  Some families will have more children and some may have none.  By pooling their capabilities, families discover that working together in teams they can produce 15,000 calories per worker.  So, in the name of survival, families join together to form social groups called clans.  It is safe to say the total economic output of any clan will be based on the number of able individuals that have developed the capabilities to produce calories and the capabilities to work in teams.  Individuals not capable of producing enough calories on their own are welcome to consume some of the excess calories produced.  As technology is introduced, we begin to see the power of tools (technology to enhance the human efforts) and machines (technology that replaces humans).  With tools, individuals can increase results by another 2,000 calories and teams increase their results by 5,000 calories.  A machine that consumes 2,000 calories and will produce 20,000 calories can be built to replace two productive individuals who will join the ranks of the unemployed population that draws on the excess calories produced by the clan.  As we add more and more machines, we send more people to live off the excess calories.  Humans are able to renew themselves developing and improving capabilities with new knowledge, skill and experience; machines are not.   Over time, as the machines age, they consume more and more calories, while producing less and less.

Today, in the United States, our cultural constraints limit our capitalization of human potential.  We manage our affairs by the subjective rules of accounting.  Therefore, we would rather invest in machines than in humans.  So we create social and economic constraints to education, training and opportunities to gain experience.  By restricting the development of individuals, we limit our collective their ability to contribute to the growth of the greater economy.  Because individuals with potential are not developed, they fail to become an economic benefit to the clan and are by default, condemned to be an economic burden to the clan.  For example, in the United States, women comprise more than 50% of the population and their contribution to the economy is hidden.  They represent the largest segment of the acting voting population, yet, they represent a small percentage of our government representation and our business management.  Yet, in a time of critical need, during World War II, it was a workforce of women that filled the economic void created when 16 million men left the workforce to fight in a two front war. 

As a fledgling nation we benefited from two very powerful forces, the new ideas generated by a vast cultural melting pot of immigrants and the growing development system of human potential.  As a culture, we are cutting off the flow both of those forces and becoming a closed culture.  If we are successful in converting to a closed system, cultural and economic entropy will continue.  The only way to reverse the process is to believe in collective development of human potential and economic capabilities.

The Wake-Up Call!

Throughout human history, the only economic force that has spanned the entire four million year spectrum of social development is labor – people working.  Labor has moved from tribes and clans, to various forms of slavery.  In less mature cultures it has evolved from a status of property, to that of resource.  In more mature cultures, labor is recognized as a stakeholder and partner.  The bottom-line, the oldest and most powerful economic force on this planet is not management, capital or technology; it is the combination of knowledge, skill and experience known as wisdom.  Within the next decade, China and India will pass the United States as the world’s economic leader.  These two economic powers will not accomplish this by inventing new technology; they will do this by investing in an education system that develops people.

A different kind of Viking leadership

Historically we have seen the work of great leaders – like Abraham Lincoln – who are inspired by a broad, macroscopic vision to do the right thing.  We have seen the work of great managers – like Alfred P. Sloan – who are driven by proven principles to do things right.  While either can impact the world, the ability to see the big picture or to be driven by proven principles is a function of an individual’s temperament.  Many individuals are happy with the preferences gifted them at birth.  Many practices evolved to these differences.  For example, by law, a manager must work within the constraints of a given organizational culture and purpose.  A leader tries to re-invent the law, the culture and the purpose.  Therefore, for a great leader to also become a great manager requires an amazing effort of human development and transformation.

For just a moment, let’s look at a big picture view of a subject that has plagued cultures since the beginning of humankind – slavery.  A slave is a human who has – by custom of culture – transitioned from a state of a person with rights into a permanent or temporary state of property to be owned by another person or entity.  When in a slave state, the results of all work and effort performed by the slave are considered the property of the slave owner.

Slaves could be held against their will from the time of their capture, purchase or birth, and deprived of the right to leave, the right to refuse to work, the right to perform certain acts or the right to demand compensation for their efforts.  Slavery was institutionally recognized by many societies; in more recent times slavery has been outlawed in most societies but continues through the practices of debt bondage, indentured servitude, serfdom, domestic servants kept in captivity, certain adoptions in which children are forced to work as slaves, child soldiers, and forced marriage.

It is important to know that slavery has been around for a very long time.  Long before the creation of money, slaves were individuals captured as the result of a conflict.  The vanquished people paid for the conflict through the labor of slavery.  Slavery has known no racial boundaries because it was an economic issue that produces discrimination.  From the beginning of humankind to this very day, slavery has grown because it was a byproduct of a cultural belief.  In the United States, from the advent of the industrial revolution and the birth of the factory system, our nation struggled with two facets of labor economics, slavery and employment.  Even free men, women and children worked 14 hour days, seven days a week.  Many American have no idea that our cultural attitude before the outlaw of slavery also recognized the relationship of employment as a property relationship.

The modern labor movement was born of the forces of economic slavery.  Economic slavery is a system under which the actions of labor and not the product of the labor are treated as property to be bought and sold.  The evidence of economic slavery can be found with people who are forced to work for substandard wages and compensation while their employer is earning fair market rates.

To understand the big picture relationship we must consider the ripple effect of the pre-American history of slavery and social evolution.  Many other cultures experienced the economic power of slaves.  For example, 780 AD marks the beginning of the Viking Age of colonization that lasted until the early 1100’s.  Following colonization, a process of social adaptation in the colonies begins a cultural transformation.  As the process of transformation reaches a level of maturity, the Nordic countries themselves begin to transform and as a result they begin to outlaw slavery.  First it was the Scandinavian colony of Iceland in 1117, followed by the Scandinavian countries of Denmark and Norway in 1274 and finally Sweden and Finland in 1335.

History repeats itself 400 years after the end of Viking Age of colonization in Europe, as Europeans began to colonize the aboriginal lands of the new world.  The European Age of colonization began in the 1500’s and lasted until the early 1900’s.  Then, 400 years after the Nordic countries outlawed slavery, the European countries began to outlaw slavery; France in 1794, Spain in 1811 and England 1834.  The United States, which socially represented many colonies of Europe, did not follow until 1865.  Partially as the result of colonizing the rest of the continent and finally as a result of a Civil War fought over the issue.

Parts of the discoveries in the Scandinavian transformation are the humanistic principles of cultures built on social-systems of pre-industrial age.  Parts of the discoveries in the main-land European transformation are the economic principles of cultures built on social-systems during the great monarch age.  The British and American transformations from slavery, also built on economic principles, were cultures built on technological-systems during the emergence of the factory age.

In cultures built on pre-industrial social-systems, economic profits are premiums paid for the performance of promises; in other words economic profits are a function of adding value, not opportunistic timing.  Humans add value through “techne” or knowledge, skill and experience.  Value added by the “techno” or technology is recognized more for “tool” value as an enhancement to human effort, rather than for “machine” value as a replacement for human effort.

With each economic crisis of a passing generation, each new generation carries forward the wisdom of experience.  Yes, from a macro perspective American culture is transforming.  We are opening to the realization that the concept of “united we stand, divided we fall” is not just a concept of rebellion, but a concept of social unification with economic ramifications.  The economic crisis of 2008 showed how much more we need to mature.  Sweden, a culture built of social-systems recovered from the event in six months.  Countries once colonized by Sweden are still struggling.

The big picture is shaped by major events over long periods of time and great leaders see those patterns.  The ability to plan and organize is not a function of great leaders; it is a function of great managers.  The progress of a nation, a culture and a people will require either teams comprised of great leaders and great managers working collaboratively; or it will require programs that help great managers develop leadership skills and great leaders develop management skills.

Women Know - Leadership is Only Part of the System

Michael Paul Ervick, MBA

“You don’t manage people.  You manage things.  You lead people.  We went overboard on the management and forgot about leadership.”

Navy Rear Admiral Grace Murray Hopper, 1986

The amazing wisdom of Grace Hopper is often lost in the misapplication of this quote.  It is the back story that provides the context that allows the audience to appreciate what she was sharing.  There are few individuals today that doubt the discovery, exploration and understanding of leadership is critical to the guidance and governance of groups.  This is true whether dealing with the endeavors of a family, a business or our planet.  In order to better understand such concepts, there is a very natural tendency of the general population to analyze by isolating and reducing the concepts.  Unfortunately, this process requires that we disconnect the concept from the context of the greater system; and it is here that our understanding begins to unravel.  With that said, history has demonstrated that to focus only on leadership in the context of collective endeavors is a dangerous mistake.

Since the early 1970’s there has been an abundance of quality literature published claiming leadership and management are two very different things.  In essence, leadership is about relationships and action; management is about responsibility and accountability.  Together they form our system of organizational guidance and governance.  The authority of a manager is given by law, and it is limited to the assets and resources.  The authority of a leader is given by followers, and it is limited by trust and respect.  Sacrifice one for the other and our system of guidance and governance fails.

While the practices of leadership are as old as humankind, the practices of management are relatively new.  Today, the rights and responsibilities of management are recognized and defined across the categories of commercial, corporate, agency, contract, and tort law.

The words and concepts of “managers” and “management” evolved from the much older word “manage”.  Manage is originally derived from Latin.  In fact, in Spain, Italy and France, the local version of manage still means to train or handle horses.  Originally the act of managing focused on using animals to get work done.  The transition of the term from animal work to human work evolved in two phases.  Slaves were considered property like animals, so it was common to manage slaves.  Managing craftsmen and artisans on the other-hand was not at all common.  That is because they developed their capabilities through apprenticeships in the guild system.  Once the apprenticeship was completed, workers became known as journeymen, which indicated they could travel and work without supervision or management.  It is not until the emergence of the English factory system that term and concept of managing workers emerges in its modern sense.

Since the end of the Civil War, the concept of management has been transformed by intense social forces.  Prior to this period, our nation struggled with slavery and employment; even free men, women and children worked 14 hour days, seven days a week.  Before the outlaw of slavery, our culture recognized the relationship of employment as a property relationship whether freeperson or slave.

With the end of slavery, our social system evolved rapidly on views of work, labor and family.  By the end of the Great Depression, our system of guidance and governance was the envy of the world, and Frank Abrams of Standard Oil was the poster-child for the power of “stakeholder” relationships.  As the Second World War ended, we were exporting the idea of balance between leadership and management through a program called “Training Within Industry”.

When the war was over, we found ourselves in a new role as a world leader; rebuilding the nations and cultures of friend and foe.  While teaching the combined principles of good management and leadership to the rest of the world, the American industrial system was inconsistently sacrificing the very same principles.  For eight decades following the Civil War, we learned that leadership was about doing the right thing, and unfortunately that interfered with goals of increasing capacity, economies of scale and lowering cost to feed and supply a world destroyed by war.  Because we stopped focusing on the discipline, competency, systems and people, from 1950 to 1970 the United States had diluted leadership training in the name of management training.  Almost overnight, management shifted from being “stakeholder” oriented to being “shareholder” oriented.

The imbalance between leadership and management sent the US economy on a journey of cultural destruction.  The stakeholder relationships between management and labor – 80 years in the making – were shattered in the name of short-term cost savings.  But labor was not the only stakeholder relationship sacrificed; relationships with suppliers, lenders and even customers all suffered in the name of lowering costs or increasing prices to find more profit for the bottom-line.

As a culture we failed to appreciate that management was a system built on a foundation of leadership.  After the Second World War, to strengthen our management system, we undermined the leadership foundation.  The imbalance of a nationwide system of guidance and governance is devastating.  No one knew this better than the software pioneer and Navy Rear Admiral Grace Murray Hopper quoted at the beginning of this paper; she understood that managers and leaders are different sides of the same coin.

By the end of the 1980’s, Jack Welch had proven Admiral Hopper to be right.  Following the success of his famous turn-around at General Electric, leadership development became very popular.  Now, more than 20 years after the business culture of America embraced the notion that we had fallen behind in our capabilities of developing leaders, we find another problem.  Between the years of 1990 and 1995, a wave of major organizations around the country began investing in leadership development.  Based on their culture of cost control, they assumed that GE replaced their investments in management development with programs in leadership development.  By trying to imitate GE, many organizations only compounded their problems.  They failed to realize that GE was actually trying to correct past mistakes by re-balancing by adding investments in leadership to the existing management development program.

As a result, today the average American managers know as much about the principles of management as their predecessors did in the 1920’s.  The lack of responsibility, accountability and authority of management for the performance of promises is a major issue in all organizations.  The tremendous tools of management, developed since the end of the Civil War, have been disregarded for the last 20 years.  The management processes of planning, organizing, directing, coordinating and controlling the assets and resources of the organization have been completely forgotten.  The management directives of purpose, mission and vision have all been reduced to meaningless window dressing.

When considering the current state of the world, our social and cultural evolution has come a long way.  The progress made by other nations following the Second World War can be linked to the fact that we taught the principles of TWI around the world.  As each nation embraced and adapted these principles to the strengths of their culture, we saw them in a whole new light.  We can see the breakthroughs from thought-leaders in Japan, Israel, Greece, Germany and Sweden, and all have demonstrated that in a system of guidance and governance, the role of leadership is necessary but not sufficient by itself.  Great leaders must also be great managers.

In the early 1980’s the United States was hit by a major wake-up call.  Three phenomena separated by thousands of miles totally shook the foundations of modern American business thought.  The first was airing of the documentary “If Japan Can, Why Can’t We?” about the recovery of post-war Japan, W. E. Deming and quality.  The second was the writing of the book “The Goal” about the idea of process improvement by an Israeli professor named Eliyahu Goldratt.  The third was the writing of the book “Moments of Truth” about the famous turn-around success of SAS airlines by Jan Carlzon.

Though very low profile, each event was so powerful that three schools of thought soon emerged.  The Asian School of thought offered concepts that became Six Sigma. Lean and Just In Time.  The Eastern School of thought produced the Theory of Constraints.  The Nordic School of thought produced the Information Technology Infrastructure Library (ITIL).  In the United States, the Asian School and the Eastern School of thought became very popular with the manufacturing sector; while the Nordic School became popular with computing and service sector.

Here we had what appeared to be three unrelated cultures giving birth to ideas that were international game changers all at the same time.  The Asian culture, oriented to discipline and honor developed a school of thought deeply rooted in competency and quality.  The Eastern culture, oriented to logical and independent thinking developed a school of thought deeply rooted in process and systems.  The Nordic culture, oriented to community and collaboration, developed a school of thought deeply rooted in relationships.

Though the schools of thought appear unique, many of the ideas found in these schools were from seeds planted in the post war recovery efforts led by the United States.  In an effort to help the world recover, we shared the secrets of our manufacturing success during the war.  The notion of practices moving between cultures and morphing is very common.  However, in this situation, this body of management secrets was developed in the United States between the end of slavery and the start of World War II by blending ideas from immigrants.

So imagine – during the latter half of the 1800’s and the first half of the 1900’s – the practices and ideas from around the world came together in one place, the United States.  Now add the pressure of a culture being transformed by the end of slavery, the end of child labor, the First World War, the great depression and the Second World War.  Then, take 80 years of refined management secrets and share them with the rest of the world, and at the same time abandoning each and every one of them.  Then, 60 years later, bring them back together into one body of management knowledge, three schools of thought, brought together to form an International School of thought.

In some areas, such as technological innovation, the United States leads the world.  Unfortunately, understanding people is not one of those areas.  Yes, it is true, the collective culture of the United States is not as mature socially as more established parts of the world.  The Nordic counties tend to lead in social maturity.  A look at history would support the trend.  

The Viking Age of colonization began in 780’s and lasted until the early 1100’s.  Following that period the Nordic countries began to outlaw slavery.  First it was Iceland in 1117, then Denmark and Norway in 1274 and finally Sweden and Finland in 1335.  400 years after the end of Viking Age of colonization in Europe, Europeans began to colonize.  The European Age of colonization began in the 1500’s and lasted until the early 1900’s.  Then, 400 years after the Nordic countries outlawed slavery, the European countries began to outlaw slavery; France in 1794, Spain in 1811 and England 1834.  The United States, which socially represented many colonies of Europe, did not follow until 1863, after a Civil War was fought over the issue.

The Nordic School of thought is breaking out as the new thought leaders of the western world.

Have you noticed that we know enough about the dynamics of weather systems, such as hurricanes, that we can predict their behavior?  Like hurricanes, we understand enough about the dynamics of human systems, such as individuals, that we can predict their behavior.  In fact we can even account for some of the variation in their behavior - just like the projected cone shaped path of a hurricane.

However, the accuracy of our predictions of the behavior of any given individual is dependent on that individual being isolated from external forces.  That’s because variation of behavior has two sources.  The variation that occurs in isolation, which is due to causes within the individual and is called common cause variation; and the variation that occurs with interaction with the outside world and is called special cause variation.  This part we cannot predict.  When a predictable individual interacts with another predictable individual, collectively they become unpredictable.

We have been studying and quickly learning about the dynamics of larger human systems commonly called groups and the ideologies that guide their behavior.  We have known for some time that personality greatly influences individuals in isolation and we now know that culture is what influences group behavior.  Like the personality of the individual, culture does not change from the outside in; it evolves from the inside out.  The transition and transformation of a human system is a response to changes in the environment.  In the cases of both personality and culture, if the environment is maintained by delusion, no change is perceived and no transition will begin.

I for one am amazed at what we as a nation don’t understand.  When we look at all the factors - inputs and variables that make up an economy, there is one factor that has remained constant throughout the history of humankind - labor.  There is only one element older than labor - land.  Without the element of labor, land will feed some.  With labor, land will feed all.  As a business activity, labor represents the techne of work, value added by the human.  Labor is older than technology, which represents the techno of work, value added by tools and machines.

Long before money ever existed, we traded the value of our labor; valued in terms of experience, skill and knowledge.  Take away labor and the value of land is little.  Labor has always been and will always be the heart of economics, not money.  The value stored in currency, metals and fuels are derived from labor.  Since we cannot eat gold or build a house of oil, without labor they lose their value.

We send workers home and export work to less developed nations to save money.  We send workers home and import workers because we stopped investing in our school system.  Without work, the people we sent home cannot afford to buy anything.  Reversing the patterns of the last 40 years is not easy, but it has been done before.

Happy Holidays

Is our issue really between Democrats and Republicans?  I know so many people on either side who really want to work together to solve the problems of this country.  Or is this more about the extremes of either side.  Lets look at the result.......   posted on About.Com

Possible Effects of the Fiscal Cliff

If the current laws slated for 2013 go into effect, the impact on the economy could be dramatic. While the combination of higher taxes and spending cuts would reduce the deficit by an estimated $560 billion, the CBO estimates that the policies set to go into effect would cut gross domestic product (GDP) by four percentage points in 2013, sending the economy into a recession (i.e., negative growth). At the same time, it predicts unemployment would rise by almost a full percentage point, with a loss of about two million jobs. A Wall St. Journal article from May 16, 2012 estimates the following impact in dollar terms: “In all, according to an analysis by J.P. Morgan economist Michael Feroli, $280 billion would be pulled out of the economy by the sun-setting of the Bush tax cuts; $125 million from the expiration of the Obama payroll-tax holiday; $40 million from the expiration of emergency unemployment benefits; and $98 billion from Budget Control Act spending cuts. In all, the tax increases and spending cuts make up about 3.5% of GDP, with the Bush tax cuts making up about half of that, according to the J.P. Morgan report.” Amid an already-fragile recovery and elevated unemployment, the economy is not in a position to avoid this type of shock.

Does life need to be managed?

The role of management as agent of the organization is critical in keeping the role of organization as a social and economic entity.  Management has one primary duty – decision making.  The elements of responsibility, authority and accountability are granted by the power of law, not ownership – ownership does not matter.  The processes and practices have been derived from two hundred years of practice.

The sole proprietor is not liable for the actions of the organization because they are the owner, but because the owner has been granted the power to be responsible for making the decisions.  The same is true for the partnership and the corporation.

To assume the role of a manager without having the knowledge or understanding of the responsibility, authority, accountability, practices or processes of management is like accepting an assignment as a surgeon after taking a first-aid course on the internet.

In time, all great managers discover the wisdom of profits.  Profits are the premiums paid for the performance of promises.  Real profits are not a function of predatory speculation or buying low and selling high.  Real profits of course are the result of adding value.  In fact, it is the same lesson we learned from the late great Viktor Frankl when he talks about success being like happiness.

For success, like happiness, cannot be pursued; it must ensue, and it only does so as the unintended side effect of one’s personal dedication to a cause greater than oneself or as the by-product of one’s surrender to a person other than oneself. Happiness must happen, and the same holds for success: you have to let it happen by not caring about it. I want you to listen to what your conscience commands you to do and go on to carry it out to the best of your knowledge. Then you will live to see that in the long-run--in the long-run, I say!--success will follow you precisely because you had forgotten to think about it.


"Theory" is how we think something should behave without external manipulation.
"Reality" is how we see something behave with external manipulation.
"Practice" is the study of controlling external manipulation.

Business Liberal

As many of my students know, I am a diehard business professional; therefore, I do not come by my more liberal opinions easily. For many of my students, my opinion of the Citizens United ruling by the United States Supreme Court in 2010 has been confusing. The ball is in my court to rectify this.


Our legal recognition of corporate entities as artificial persons, with the host of rights normally given to a natural person, dates back to 1816, and was based on the principles that management would be the decision making agent of the corporate entity. Management’s authority to make all decisions regarding the control of assets, on behalf of the corporation, is granted by the state government where the entity incorporates, not the shareholders. Shareholders consent applies to the control of equity, not assets.

For management, authority granted by the state comes with strings attached. These strings, known as RAA, can be defined as 1) responsibility as liability before the fact; 2) authority as the legal right to commit; and 3) accountability as liability after the fact. The relationship between the three is symbiotic. Effective delegation from state to management, from board to executive, from executive to front-line managers transfers the RAA as a package together. To manipulate the delegation by separating or limiting one element of this symbiotic relationship renders the others ineffective.

At the time the principles of corporate artificial personhood were developing, management had a long competent history. From the end of slavery in 1863 to the beginning of its involvement of World War II, the United States contributed most significantly to the establishment of management as a science and the breadth and depth of the current management body of knowledge.

Though there is little doubt that management is a professional practice as decisive as the practice of medicine and as complex as the practice of law. The business culture of the United States has failed to recognize and apply the same rigor demanded of medicine and law.

Our greatest management thinkers, including Drucker, Deming, Ackoff, Porter, Chandler, Senge, Argyris, etc. have presented differing perspectives of the same problem – the actions of a corporation are the actions of management – and the competency of management in general is growing dangerously thin. If we want corporations to be responsible and accountable, we must demand that our management be held to the same professional standards of rigor as our doctors and lawyers.

I had the good fortune to meet an amazing educator named Rita Mulcahy.  In her text, she published the results of a study that changed how I look at Organizational Change Management (OCM). 

She said, “When it comes to taking a professional certification exam, the most common reason individuals fail, is because they pick the answer that matches what they do it at work, not the professional standard."  

In other words, it is not mastering the tasks that are asked of you in the workplace, but mastering the generally accepted principles and practices of any given profession; and being able to apply them appropriately, that make the individual a certified professional.

At that moment, I realized that all the leading software manufacturers based the design of their applications on the same the generally accepted principles and practices.  So, more often than not, what really happens at work will be in conflict with the software.  It turned out to be true.  Over the years, as an OCM practitioner, I have learned to help clients adopt the generally accepted principles and practices of the profession, before they pick their software.

Is it me?

Or are the vast majority of managers working in the United States amazingly under qualified to fill the positions they hold.

Facilitating Change........

Looking at it purely from a legal perspective, when it comes to decisions, a manager will always be responsible (liable before the fact) and accountable (liable after the fact) for the decision.  That is the purpose of a manager; to make decisions.  Culture on the other hand could care less.  So, managers often look to a group for advice and even consensus, even though that does not dissolve either responsibility or accountability.  So building consensus with a group is an important process to master.  Real consensus is difficult because no matter how hard we try, individuals cannot support ideas they do not accept; and they cannot accept ideas they do not understand.  So an employee I know at the Boeing Company, Dr. Jennifer Sumner, developed a process known in as UAS.   I have used it and taught it for many years and have never experienced or been told of a single failure with the process.

First Seek Understanding.  After presenting an issue and a solution, test for understanding by asking all the group members to rate their understanding.  Have them place a post--it note on a scale drawn on a white board. The scale should run from 1 to 10, with 10 as complete understanding.  Notice if there are any mid-range or low numbers.  Find out what questions the person with a low number has.  Work through all the questions, providing simple answers.  Often, they are questions that will inform the whole group.  Test for understanding again until you are satisfied with the level of agreement.  If it turns out that a large group cannot move beyond mid scale, this issue is either too complex, the idea may be wrong, or the group maybe wrong.  It is important to know that individuals who cannot understand the issue or solution, should not be involved in the follow on steps.

Next Seek Acceptance. When it is time to move on and test the group’s general acceptance of the direction, repeat the ranking process with 10 indicating full acceptance of the direction.  This might mean there are bits with which the person disagrees, but that she or he is willing to accept the approach in order to move forward.

Finally Seek Support. Once you have decided to go forward with something, the questioning turns to support.  Support means full-hearted application of position, relationships, influence, resources, and time as needed, given one’s role in the solution necessary to get the job done. Too often, leadership groups agree to a solution and silently leave one person holding the effort.  Again, rate willingness to support from 1 to 10, with 10 meaning you will fully support the effort personally.

Each phase will surface concerns that if resolved properly help improve the quality of consensus and the effort to move forward.

Change agents are guardians, guides and facilitators.  They tend to see the concepts of change, transformation and transition as different terms.  Change is seen as a different state of existence – changing from day to night.  Those who manage change focus on leaving and arriving.  Progress is in the outcome.  Transformation is seen as the journey to different – living life.  Those who manage transformation focus on the plan.  Progress is in action, not result.  Transition is seen as the mental state of traveler – wisdom.  Those who manage transition focus on understanding, acceptance and support.  Progress is in the individual developing.

Organizational change management (OCM) is a framework for managing the effect of change such as new business processes, changes in organizational structure or cultural changes within an enterprise.  A systematic approach to OCM is beneficial when change requires people throughout an organization to learn new behaviors and skills. By formally setting expectations, employing tools to improve communication and proactively seeking ways to reduce misinformation, stakeholders are more likely to buy into a change initially and remain committed to the change throughout any discomfort associated with it.

While the transition effort can be reactive, post-change (after we buy the software) or proactive, pre-change (before we buy), the transition effort is necessary.  Organizations using post-change efforts tend to direct negative energy to the cause of change.  Organizations using pre-change efforts tend to avoid negative energy by developing buy-in and support in anticipation of the change.

The Service Oriented Organization

In our discussions there have been many questions regarding the concept of service oriented software.  A great deal of the confusion is rooted in our everyday notion of service.  In lay terms, services are often contrasted with products.  However, in business terms, products are things that are produced through a process, which means services are a technically a product, which is why in business, service is contrasted with goods.  The difference between the two is that goods are tangible services are intangible.  The easy way to remember the difference is a producer of goods “makes” something for you and a producer of services “does” something for you.  In either case, it is the benefit provided by goods and services that are consumed and valued.

Based on the notion that people do things for other people, you can begin to imagine that within most organizations, service relationships are all over the place.  For example, we could say that the human resource department provides staffing services to management.  This notion actually began to emerge right after World War II.  It formed a school of thought that became known as the Nordic School.  By the 1970’s the school of thought was extremely mature and the application of it was producing results.  In the late 1970’s this concept of service relationships was made globally famous by the dramatic turnaround of Scandinavian Airlines.  Quickly the idea expanded to the United Kingdom which developed the concept of managing IT as a service.  In the early 1980’s the practice of Information Technology Service Management (ITSM) was born and the associated standards were captured in the Information Technology Infrastructure Library (ITIL).  Today, ITIL is the global standard for managing IT.

It is important to remember, when the organizational service concept began as a chain of service roles, technology was not a factor, which means the first 40 years of evolution was dominated by processes and practices.  Service Oriented technology has emerged over the last 20 years.

In software engineering, a service-oriented architecture (SOA) is a set of principles and methodologies for designing and developing software in the form of interoperable services.  These services are well-defined business functionalities that are built as software components (discrete pieces of code and/or data structures) that can be reused for different purposes.  SOA design principles are used during the phases of systems development and integration.

SOA generally provides a way for consumers of services, such as web-based applications, to be aware of available SOA-based services.  For example, several disparate departments within a company may develop and deploy SOA services in different implementation languages; their respective clients will benefit from a well-defined interface to access them.  Extensible markup language (XML) is often used for interfacing with SOA services, though this is not required.  Java Script Object Notation (JSON) is also becoming increasingly common.

SOA defines how to integrate widely disparate applications for a Web-based environment and uses multiple implementation platforms.  Rather than defining an application programming interface (API), SOA defines the interface in terms of protocols and functionality.  An endpoint is the entry point for such a SOA implementation.

Service-orientation requires loose coupling of services with operating systems (OS) and other technologies that underlie applications.  SOA separates functions into distinct units, or services, which developers make accessible over a network in order to allow users to combine and reuse them in the production of applications.  These services and their corresponding consumers communicate with each other by passing data in a well-defined, shared format, or by coordinating an activity between two or more services.

SOA can be seen in a continuum, from older concepts of distributed computing and modular programming, through SOA, and on to current practices of web mash-ups, Software As A Service (SaaS), and cloud computing (which some see as the offspring of SOA).

Service oriented technology is nothing without people.  Today, service oriented organizations have the benefit of almost 70 years of evolving thought, proven processes, practices and technology.  We know that the heart of a service is a relationship, which means that people need to build and maintain them.  Which means the most important part of becoming a service oriented organizations is developing service oriented people and relationships.

During my graduate studies, I had a professor who helped me frame a new mental model of budgeting.  The basic idea – when thinking of budgeting as a management tool – is to think about a budget in the context of “predictive” accounting.  As a manager looks into their Chrystal ball of planning work, what expenses do they expect to incur and how should those expenses be recorded for accountability.  Then budget accordingly.

When budgets are used as controls, they are a management tool.  They serve as part of an agreement between two levels of management.  While all contracts are agreements, not all agreements are contracts, so you can’t take your fellow manager to a court of law.  However, what they do share is a meeting of the minds and a commitment.  Therefore, in determining the level of effective planning and budgeting, it is important to first recognize the RAA or Responsibility – before the fact; Authority – for the fact; and Accountability – after the fact.  Thus, trying to hold a first level manager accountable for a budget developed at a high level of management dissolves the symbiotic relationship of RAA and therefore entirely unproductive and intuitively unwise.

When budgets are used as constraints, and imposed by a higher level of management upon a lower level of management, the lower level manager should align expectations and plan out the work that can be accomplished within the budget.  This establishes a meeting of the minds and a commitment between managers.  Therefore, performance can be measured based on the agreement, and unplanned work items should be funded outside the budget.

You know that I intentionally work in two very different worlds.  As a consultant by day, I live in the business world, rich with the knowledge of practice and experience.  As a teacher by night, I live in the academic world, rich with the knowledge of theory and concepts.  I work in both worlds intentionally.  That is because a quick scan of opinions about theory and practice often finds these worlds in a philosophical conflict.  No doubt you have heard the old saying “Those who can – do; those who can’t – teach”.  This conflict arises because; for the most part we invest our beliefs in one world or the other.  Unfortunately, less than 30% of our population has attended at least one course from an institution of higher learning.  That means the majority of our population has not had the opportunity to explore and discover that we as individuals cannot really “understand” one without the other.

The late, great Dr. William Edwards Deming once wrote - "Rational prediction requires theory and builds knowledge through systematic revision and extension of theory based on comparison of prediction with observation.  It is an extension of application that discloses inadequacy of a theory, and need for revision, or even new theory.  Again, without theory, there is nothing to revise.  Without theory, experience has no meaning.  Without theory, one has no questions to ask.  Hence without theory, there is no learning."  In the most fundamental of truths, theory and practice are partners that form knowledge.  Without knowledge there is no learning.  Without learning there is no wisdom.  Without wisdom there is no progress.

Because of theory, we have evolving models of systems and their behavior; which includes weather systems, economic systems, and even organizational systems.  These models help us predict future behavior and therefore, outcomes.  As with the recent hurricanes, while what actually happens in a system may not happen exactly as predicted by the model or the theory, what does happen is very important.  Over time we learn to embrace the quote from Dr, Olaf Isachsen – “For whatever happens, all the conditions were present”.  That is because; a well developed theory often includes variation common within the system, but we cannot include variation from causes outside the system.  Even though there may be influence from the outside, we can analyze what happened and we can evaluate the quality of our theory and improve it.

We don’t intend to change the people – we try to change behavior.  If the behavior won’t change, then we change the people.- Unknown

First, culture comes from the word cultivate.  Culture is a group phenomenon produced by the cultivation of many personalities, which is an individual phenomenon.  The personality of an individual is comprised of many attributes such as attitudes, feelings, norms, values, ideas, beliefs, knowledge, tastes, style, etc.  A group which is comprised of two or more individuals, will come together to mix and blend attribute.  Just as personality drives the behavior of the individual, culture drives the behavior of the group.  So, group behavior is cultivation.  Not surprising, the products of the culture are the results of group behavior; these include shared attitudes, feelings, customs, norms, values, language, ideas, beliefs, knowledge, tastes, style, etc.

Second, it is important to understand that because culture guides the behavior of the group, just as personality guides the behavior of the individual, the greater force will always influence the lesser force.  Most individuals will behave one way inside the group and a very different way outside the group.  Individuals who transform themselves to comply with the behavioral norms of the group are followers.  Individuals who challenge the behavioral norms of the group are leaders.

Third, it is important to understand that every culture believes itself to be the center of the right world.  They believe other cultures are either less right or wrong.  Rationalizations help support these beliefs.  When a culture comes to believe itself to be less right, it will learn, self-direct and self-correct to be more right.  Right or wrong is a theoretical perspective commonly known as the truth.  It is important to grasp that humans do not believe in facts, they believe in truths.  Facts are used to support or challenge the truth.  Think in terms of children who believe in Santa and how much their behavior is influenced by that belief.  In the mind of the child, the truth of Santa is supported by the facts that gifts magically appear under a Christmas tree.  As a consultant, I investigate the facts in order to understand the truths that are held by the culture.

Everything has a purpose, even budgets.

The purpose of management is to act as the decision making agent of the organization as a legal entity.  This is not the same as leadership.  Management, the administration of decisions, has become a science; leadership, the administration of direction, is still an art.

Every day, managers in organizations make decisions that affect the performance of the organization.  When evaluated in hindsight, decisions can be good or bad.  However, over the last one hundred years, a science has evolved to evaluate decisions in foresight.  This science has greatly improved the effectiveness of decision making and the coordination of decisions across the enterprise.  Enter the concept of the “plan”, also known as a body of premade decisions.  A plan has two primary sections, the “action” plan and the “cost of action” plan, which is also known as the “budget”.  Budgets are usually for a specific period of time and expressed in a measure of currency.  The financial budgets should directly tie to the actions related to the work planned.

An organization that does not have a plan or budget will make far more bad decisions than good because managers lack a clear understanding of the cause and effect relationship between the goals of the organization and the work of the organization.

The science of management is not limited to planning and budgeting.  It also includes organizing to the plan and budget (resources); directing to the plan and budget (communication); coordinating to the plan and budget; and controlling to the plan and budget (monitor, evaluate, correct)

After fifteen years of experiments, it should be clear that effective organizational change management (OCM) is more than just training.  It should also be just as clear that it is not an afterthought.  A serious business transformation program will change technology, practices and processes.  These are three projects, with three different, yet interrelated outcomes.

The first effort by management is to determine the end result in terms of organizational capability.  For the last twenty five years, capability has been assessed over five progressive levels and across the three symbiotic elements of technology, practices and processes.  Effective capability is the level all three share.  So, we can ask, is the organization at level 5 maturity in its compliance with the generally accepted principles and practices of the profession?  If yes, are they at level 5 complying with the best practices of their industry?  If yes, then touch nothing.

However, if the answer is no to either question, examine the requirements of the next progressive level of capability.  Most organizations have technology that is far more robust than their practices or processes.  This means, most organizations should be looking at OCM long before they need to look at changing technology.  Unfortunately, most organizations still subscribe to the myth that new technology will force the organization to change.

How do you know if your organization is subscribing to the myth?  If the organization has had to customize state of the art software in order to support its processes and practices, then it is out of touch with the state of the art of processes and practices.

The Illusion of Profit………

There is an award winning radio program called This American Life that acts as a social mirror by broadcasting stories of everyday people. On January 14, 2011, there was an episode of the radio program titled Climate Changes. People Don’t. The broadcast dealt with the issue education under the strains of cultural bias and belief systems.

A fourteen year old named Erin Gustafson from Virginia listens to evidence presented by Dr. Roberta Johnson. Dr. Johnson is the Executive Director of the National Earth Science Teachers Association, she helps develop curricula on climate change. Dr. Johnson presents the latest scientific information available in an attempt to educate someone who has a very strong belief about the topic. Though Erin admits the evidence is strong, the influence of her belief system overcomes the cognitive dissonance by rationalizing the information is false.

This story touched me. For the last twenty five years, teaching has been a very big part of my life. I teach in a business program at a large university. Though I am not a PhD, I offer courses that blend academic and professional insight. I have been known for many years as the classroom preacher. In fact, “profit is a metric, not a mission” has been my mantra for more than 15 years. Even after listening to me for an entire quarter, many of my bright young students will try to manage profits.

To understand why students will listen to very powerful evidence and logic and then ignore it; I thought it was important to take the time to learn more about the behavior of people. Over the course of a decade I looked at psychology, personality and temperament and I learned that it is pretty generally accepted that we all have challenges when it comes to our perspectives.

Through a quirk of nature and no fault of their own, some of us tend to see the world through very narrow, but deep lenses. This is due to a cognitive ability to see the world as an assembly of properties or details. To an outside observer, it seems that some of us need to isolate or silo parts of our world in order to comprehend it. Individuals with this ability comprehend the world around them by analyzing to details of objects. When they see bottled water, they see a container made of plastic, not the ability to quench a thirst.

Though this depth of their perspective blesses them with the ability to see great rich detail, their brain is limited in what it can process and thus it will establish filters and sacrifice the natural ability to see relationships. The result is that they have a perspective that sees what is happening at that moment, in isolation, removed from all else. They are unable to make connections to what has happened in the past or what will likely happen tomorrow. Because their perspective is framed by a narrow band of time, which creates an illusion that what happens today is unrelated to what happened yesterday or what will happen tomorrow.

More than seventy percent of the population has stronger tendencies for data and detail. For that part of the population with the natural give of detailed analysis, profit is a point of data; a measure of now is the perfect guide. For many, the relationship between profit and customer satisfaction is either not important or not recognized. So, through the process of rationalizing, they disregard the notion that value is created by workers for customers; and instead they establish a system of belief structured around the notion that managers create value by cutting costs.

In the process, I did discover that my students did learn well, they do understand that profit is a metric, not a mission. However, in their minds, meeting the metric is what gets rewarded, not fulfilling the mission.

US Manufacturing 101

Mr. Scott Paul,

You write -

"What Ms. Romer needs to do is explain the phenomenon of Germany’s thriving industrial sector. Despite strong industrial unions, high wages ($48/hour in manufacturing vs. $32/hour in the U.S.), and thick regulations, Germany is able to keep its global share of manufacturing and exports steady while China rises and the U.S. falls."

The secrets that both Japan and Germany use today, are the same secrets that drove the US economy in the 1940's and 1950's. Back then we honored competence in labor and in management. An equally qualified fifth year journeyman produces five times the value of a first year apprentice, while earning only twice the wage.

It is the American short-term focus on cost, without consideration of value that has placed this nation in a myopic love affair with efficiency, while neglecting the competitive forces of effectiveness. Measure the competence of US manufacturing workers to the competence of their counter parts in Japan and Germany. Not only is there a gap, but you may also find that Toyota and Honda, just to name two, have been working hard to train US workers and eliminate it in their US facilities.

Craft unions have long developed the skills of workers in their professions. We don't need to destroy unions, we need to hold them accountable for the skill of the workforce they represent.

Clint Eastwood for President

I have been thinking about the wisdom in the Clint Eastwood super bowl commercial, which is now a political football. I can’t help but think that the best solutions meet the needs of the many. Extreme positions meet the wants of the few. We see these extremes every day.

There is a portion of the population that feels National Public Radio (NPR) gives out too much information. There is another portion that feels they don’t give out enough information.

There is a portion of the population that feels the future is best created from that which has been proven in the past. There is another portion that feels the future is best created from that which is possible and yet to be discovered.

There is a portion of the population that feels security is found in a strong military. There is another portion that feels security is found in social safety nets.

There is a portion of the population that feels the national rules we live by should be determined our religious beliefs. There is another portion that feels that our national rules should be determined by government.

There is a portion of the population that uses the fear of religious terrorism to stir the emotions of the community. There is another portion of the population that uses the fear of environmental terrorism to stir the emotions.

According to the authors of Getting to Yes, Roger Fisher and William L. Ury, these are positions, which in simple terms, are “what” we want, as opposed to an interest which is “why” we need it.

Without a dialog, we can’t get to the interests that drive the solutions. Without an open mind, we can’t have a dialog.

What do you get when a conservative marries a liberal? Ideas.

For all my friends, who agree that President Obama and his administration did not cause the current economic situation, yet feel he has not done enough to fix it. And we all agree our system of government is having a hard time working together. So I have an idea on how the President of the United States could get around the political barriers of congress.

First, he could follow in the steps of President Eisenhower, who used his role as commander and chief of the US military to refocus the military into a job creating machine. Eisenhower is the reason we have an interstate highway system.

All across this nation there are rural and tribal communities that need clinics, hospitals and medevac air facilities. In all those places we can find the need to build new roads and find a few existing roads that need to be repaired. I bet we can find a few bridges and tunnels as well. We have all seen schools that need to be repaired or replaced. Hell, there are still parts of the gulf coast that need to be rebuilt. There is need every where we look.

When I served, there were massive construction units in the Army and Navy, which should still be under the presidents command; and I believe all of the armed forces have supply and logistics units. So, don’t send those soldiers home when the war is over. First transfer FEMA into the military and then take all those soldiers, sailors, marines and airmen we want to let go and transfer them to a new unit for new skills. The kind of skills and experience that make a difference at home and can help them find a civilian job.

If I remember correctly, all of the armed forces have medical facilities that could be opened to elderly and poor American citizens who need care but can’t afford it. Don’t have enough facilities? Build some new ones. Not enough workers? Hire some veterans. Open the military colleges and universities up to anyone who has served their country. Don’t have enough space? Build some new ones. Not enough teachers? Hire some veterans.

When you think about this, it is a win-win bi-partisan solution - the Republicans want to double the size of the armed forces and the Democrats want a new and improved social safety net. Everybody wins.

After reading a book by I. Adizes, I was moved to blog again.

The American Business Life Cycle: On the Downside

Driven by possibilities, the birth of a new organization is surrounded in optimistic hope and visionary thinking. Any seasoned and successful entrepreneur will tell you that on the upside of the life cycle, the organization builds relationships with stakeholders – investors, employees, suppliers, bankers, customers, etc. Each relationship is built with a common mission, to create value in the goods or services provided by the new firm, and every stakeholder is investing blood, sweat, tears and capital – in “future equity”, not “current profits”.

During this phase of the life cycle, managers bring level six competencies and they operate in artisan mode, forming a culture of ad-hocracy. Each manager is free to use individual judgment, guided by shared principles. Governance is flexible to allow for discovery, mistakes and failures. Employees are also hired based on competency, as well as adaptability and responsiveness to the needs of the customer. Suppliers and investors join because they are thinking about long-term possibilities.

Maturity brings more balance and reward. As the organization progresses through the phases of the life cycle, the problems that need to be solved begin to change and therefore the culture begins to change. The focus shifts from vision to mission. Developing value gives way to harvesting value. The return on relationships fades and the sharp edge of responsiveness is dulled.

As the problems change, so does the people. Those who long for the romantic nature of the early days wander off to launch new ventures and start all over again. As the emphasis shifts from making a profit by managing value, to making a profit by managing costs we find we need a different kind of manager and a different kind of employee. The numbers of transactions trump the quality of relationships. Internal loyalty is more important than competence. Governance by rules replaces guidance by principles. A culture of unaccountable bureaucracy replaces ad-hocracy. Once the downward journey begins, there is little that can be done to reverse the downward death spiral.

Are You Learning as Fast as the World Is Changing? - Bill Taylor - Harvard Business Review http://ping.fm/Vy0Ed

The problems our nation faces today, such as education, are the result of decades of disconnected ideas and decisions; the product of a nation divided by political and economic philosophy. Are we really trying to solve them in space of a single administrative term? Do we think it is possible to design solutions that have continuity across generations, not just election cycles? Perhaps, but in my mind, this first requires a nation united on understanding the problem. Unfortunately, we don't share an understanding and that has made our problems even more complex – with decades of disconnected ideas and decisions.

From the beginning of its inception, we have struggled with the fact that corporations have neither bodies to be punished nor souls to be damned. A product of our emergence from the dark ages, the continued existence of corporations has been challenged since it began. Corporate charters formed the authority of the transportable governmental - power needed to discover and conquer an unknown world. Yes, corporations made perfect sense when the dominate reductionist perspective of the world was the isolated silos of activity. As Systems Thinking continues to expand, the weaknesses of our old thinking is exposed to the light of day. Evidence is pouring in with a proliferation of fresh, new, well thought out ideas such as the latest paper by L. Metcalf and S. Benn.

Donna M. Stringer, Ph.D., a pioneer in the movement to increase the worlds awareness to power of diversity and inclusion, will be honored by her industry in April. Thank you my dear friend for touching my life.

It may take a little while longer, but the traditional corporation may be on the road to extinction.

http://ping.fm/Vtvjt

Rising Share of Americans See Conflict Between Rich and Poor
http://ping.fm/1Pu4M

What would Thomas Jefferson say about the new book by Eric Liu and Nick Hanauer - The Gardens of Democracy? Have your say http://lnkd.in/AdG9Yy