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.