The Consequences of a No-Sacrifices-Environment

Several recent news reports caught my eye, not as individual stories but as closely connected pieces of the same continuum:

1. Adam Davidson's November 20th "Skills Don't Pay theBills" piece in the NY Times Magazine highlighting the fact that despite high unemployment rates and advanced jobs training programs nearly 80 percent of manufacturers have jobs they can’t fill.
2. The tragic factory fire in Bangladesh that killed 112 workers, earning on average $43 per week apiece, and the leading consumer brands the garment factory was producing for.
3. Mixed reports on 2012 holiday season retail sales, where the one accepted fact seems to be deep discounting is the only true stimulus for making the cash registers ring, following a 0.2% decline in October consumer spending.
4. The Bureau of Economic Analysis' report showing record profits for US corporations in the 3rd quarter 2012.
5. Around the clock coverage of the looming fiscal cliff that pretty much says nothing because it sure doesn't seem as if there's been any progress in DC.

Business' truest measurement is profitability and if Q3 2012 produced record profits then executive management is doing its job, superbly.  In part we can attribute the nearly $72 billion increase in 3rd quarter profits to greater cost-efficiencies, but top-line revenue growth certainly had significant impact. But where cost management and sales/marketing might once have been opposing forces, the trends further convince me the lines between revenue generation and cost controls have not only blurred they have merged.

If consumers now value every product and service as little more than a commodity then companies have no option but to meet this demand by so reducing costs they can profit by winning the discount game.  Labor usually represents a substantial business cost and it is little wonder that manufacturers are finding it difficult to hire trained workers if they are paying less than a McDonald's shift manager earns, as Adam Davidson reported.  I have nothing but contempt for modern day sweatshops like the Bangladeshi factory, but racing to the bottom is inevitable when any industry is caught in commodity hell.

It's very easy to blame business and "heartless executives", and whenever there's an easy answer for anything I grow suspicious. Consider this:

The consumer is really the most accountable participant in this vicious cycle by making price the single largest success factor! The same person who laments stagnant wages, off-shoring and the overall shaky economy demands prices that are sure to perpetuate these conditions. 

Politicians are usually the best reflection of the era they serve in. As the Obama administration and congress continues its food fight over the massive problems we will face at midnight December 31st they seem no closer to resolving anything because they, too, want easy answers with no sacrifice on the most complex issues.

Leading the Art of Positive Change Outweighs Its Science

I spent the day with an extremely bright IT professional capable of creating the type of needed change his company is depending on him to produce. Throughout the day he kept proclaiming "I don't do politics" with equal doses of superiority, ferociousness and judgmental frustration. Perhaps not coincidentally, yesterday I was with a different equally talented IT leader who spent his day encouraging our mutual client to join him in a crusade against paper, chanting "I hate paper" to open and close every session (I'm convinced he tortures a Dwight Schrute voodoo doll each night before going to bed).

Any day now we will start seeing year-end features from all media outlets, and more than one is bound to pay its annual homage to the billions (or is it trillions?) companies waste each year on strategically sound IT initiatives that fail to produce expected returns.  To help get this ball rolling, I'd like to frame the subject through these two different professionals in two different settings trying to solve two different company problems. Especially because their attitudes are quite similar to most highly competent IT consultants and professionals I've worked with over the years, and I believe the experts represent the biggest hurdles for getting better universal ROI on technology projects.

I've previously debunked certain aspects of the cliched "people hate change" myth in this blog, but when ideas and ensuing transformation is managed by someone who arrogantly campaigns against politics as a critical change component, of course the people effected will resist with real hatred! These resisting masses will enlist managers at all levels because every good business leader recognizes humans are political animals that are best motivated to do the right things when they fully buy in-clinically as well as emotionally.  Equally, when a project leader sets his or her sights on the wrong objective, employees will quickly reject the direction and see it as a threat to their collective and individual security.

Eliminating paper is not a widely applicable business objective is, but creating greater cost efficiencies certainly is.  Every successful IT project I've ever been party to ultimately does eliminate paper, but as a by-product not as the goal.  Even if this consultant didn't mean it literally, it was received that way by the vast majority of the people he met with (I know, I had to undo the damage).  Nobody will get others to follow them if the audience believes the person in charge is attacking the wrong problem.

By way of a contrast, I will cite another IT leader that will also dominate the annual year in review features.  Of course, I'm talking about Apple, but not from the product design or consumer market standpoint.  Look around and you will see Apple products becoming a bigger part of the corporate landscape despite the aversion almost all CIO's, CTO's and their staffs have to bringing Apple into the workplace.  Apple's successful penetration of the corporate market is due to their going over the heads of the IT experts, appealing directly to users who ultimately insist on iPads for sales presentations, iPhones for marketing campaigns and the like.  Apple certainly seems to understand that the science of changing minds starts with the art of owning hearts and guts.  That's why they are a great corporation, not merely a great technology company.

The intentions, objectivity and execution of a successful organization

In today's mail I received a very lovely talking birthday card from the NY Jets, with a personal note from head coach Rex Ryan.  Of course my birthday was almost two weeks ago and the card arrived the day after Coach Ryan's team lost 49-19 to their fierce AFC East rival New England Patriots. The Jets have now lost their last 2 home games by a combined score of 79-28, both to fierce AFC East rivals.

The Jets are proud professionals; I have no doubt these Jets want to win every game and even if I pay an absurd price for Jets club seats and personal seat licences, sending me a birthday card is a very nice touch from an organization that clearly wants to do the right thing. But the utter consistency between the lousy play of an utterly undisciplined team and their sending birthday cards two weeks too late is reinforcement the NY Jets is still an organization that can't execute on anything.  At this juncture, I'm rather convinced that Matthew Broderick based his character Jimmy Winter on Jets owner Woody Johnson in the terrific Broadway musical "Nice Work if You Can Get It."

Under-performing companies tend to take operate much the same way the lost and wounded NY Jets do: breakdowns in every facet of the business conspire to keep them from achieving very much. Mediocrity becomes the norm, miscues are rationalized, management does more to justify why they have been victims of bad luck or bad economies rather than engaging the strenuous process that will really fix the apparent and growing structural problems.  Just as Rex Ryan continues to defend the embarrassingly horrible play of his poster boy QB Mark Sanchez, most managers in troubled companies strenuously defend their direct report employees guilty of their own on-the-job fumbles, interceptions and routine bad judgment.

Businesses are a collection of human beings and it is only natural that people who spend so much time together in the same workplace in their chosen field will develop close relationships with one another.  I'm always particularly wary of those proclaiming "we're so close and we so care about each other we're like a family!"--- because they are guaranteed to be the least objective of all.  Just as being a player's coach serves Rex Ryan well when he has talent that can win games, I can't fully blame management for failing to stop a company in decline when it is built on a culture of camaraderie.  Clearly, I'm not suggesting organizations should not foster positive working conditions, but when they are plagued by poor execution it becomes necessary to bring in professionals who do not carry the baggage of established relationships.

Without objectivity even the best intentions won't be sufficient. Bringing in external help to navigate through diminished performance is not a sign of weakness, in fact excellent executive teams recognize its importance.  My experience is only the strongest executives, those with the serious intentions of winning have the good sense to engage objective professionals to align intentions with objectivity that will drive desired results through superb execution on all levels.

Omnishambles

The Oxford English Dictionary set a new standard for yearly awards by naming "omnishambles"--defined as "a situation that has been comprehensively mismanaged, characterized by a string of blunders and miscalculations"--the 2012 Word of the Year by the BBC.

Last Tuesday, Mitt Romney was so convinced the national election would go his way he reportedly didn't even draft a concession speech. As a proven top flight executive, it defies logic that Governor Romney would be so unprepared regarding an outcome he could not control.  I have to attribute this miscalculation mostly to his staff that apparently didn't have a firm handle on electorate variables and realities to properly advise Mr Romney last week's outcome wasn't certain.

Mitt Romney is hardly the first last or only leader to get insufficient insights and direction from trusted staff. With alarming consistency across Corporate America, mid and senior managers filter and package information designed to either make themselves look good or to have their executive team feel good. The end result is always omnishambles.

Even during flush economic times successful businesses engage a series of problem solving exercises. Clearly, problems cannot be effectively solved if they are not fully evaluated. When facts are altered and factors shaded, even the best and brightest executive teams cannot make wise decisions. But the omnishambles cycle is not restricted to a activities below the C Suite.

We are all familiar with companies that run board meetings like they are dog and pony shows, designed to entertain and mollify board members instead of using these critical sessions to address serious issues and get the board's advice and counsel. More often than not these boards are comprised of mostly investors or others captive to the company's success so they accept what they are told, triggering even greater degrees of omnishambles.

Based on my professional experiences, I strongly believe the short-term mentality that has taken hold of Corporate America is omnishambles' primary culprit. The courage necessary to tackle difficult problems simply poses greater risk than it offers reward when companies are guided strictly by each moment. While true leaders don't neglect the short term they remain ever-mindful of longer-range implications and consequences

Given the inadequacy of true leadership in 2012, Oxford English Dictionary got it right! Omnishambles is the word of this year. And as always, true leaders will determine 2013's Oxford English Dictionary's word of the year.

Fundamentals Always Rule

Election week ended with a bang, bringing news very much in line with this year's vote to maintain the status quo.  JC Penney's Ron Johnson continued to reinvent retail, this time coming up with the outrageous new idea of offering coupons and discounts to get holiday shoppers in the door while David Petraeus reinvented Washington-sex-scandals-as-an-older-man-in-a-powerful-position, having an affair with a much younger woman.  But even these great stories weren't enough to turn our attention away from continued east coast hardships created by Superstorm Sandy.

Take these two NY-based companies that have both severely crippled by Sandy and the storm's aftermath: Both have suffered damage to their operations, both have had a difficult time getting gas for their vehicles, both serve customer bases equally impacted by Sandy, and both are in extremely competitive industries.  Both companies also have longstanding records of valuing employees, caring deeply about respective workforces. However, one of these companies has had a very strong 2012 ( "Company A") while the other ("Company B") has posted declining revenues and profits this year. I was very intrigued to hear how these companies made such vastly different decisions on how to handle rather substantial payroll for the days employees couldn't get to work due to the storm. Thus I believe is truly newsworthy as this difference illustrates real action that supports turning-around of the US economy.

After much discussion and deliberation, profitable Company A decided not to pay employees for days they didn't work, instead having workers take them as either vacation or personal days.  By contrast, the struggling Company B CEO made a snap decision to pay everyone for the lost days without even bothering to talk it through with his senior staff.  Seems like that CEO is a better executive to work for and his pro-employee stance is certain to better motivate the workforce, doesn't it?  Think again.

I marveled at Company A's careful examination of all the facts and possibilities before making such an enormous decision.  They fathomed that the price of raw materials, notably gas, would continue to rise and likely squeeze profit margins if even temporarily.  They also projected a spike in customer demand which would increase use of overtime hours, while further forecasting that many of their clients would pay slower than usual which might compromise cash flow.  Their conclusion was to base the decision on sound fundamentals: if their conservative views proved wrong they could then elect to distribute greater bonuses at year end and if they proved right they would not then be forced to take more drastic measures in reaction to full payroll days that weren't worked. 

Little wonder this company has been consistently profitable, weathering several recessions, post-/9/11 trauma and other challenges the business has faced in over 30 years of operation, never taking a layoff or forcing salary cuts on its workforce.  By working as a team, they also incorporated the best in managerial due process.

In his haste, Company B's CEO didn't consider any of these trailing issues.  How could he?  He didn't even bother to discuss it with staff.  Sure, all the employees getting paid for days they couldn't get to work for no fault of their own will be thrilled...at least in the moment.  But how long will that last? If they run into the same or even similar problems Company A's management team evaluated, you can bet Company B will face another round of austerity measures.  Indeed, it should not be surprising that since the broad economic downturn 4 years ago Company B has regularly eliminated jobs, imposed pay cuts and frozen hiring. 

Fundamentals aren't interesting enough to make news, especially because they are the anti-reinvention. But in the end, regardless of the endeavor, fundamentals always rule.  Perhaps this is why JC Penney has learned selling other company merchandise is not the same as selling proprietary technology in today's retail environment, why the incredibly qualified and talented head of the CIA can't stay in his job if he violated the trust of his family, and why Company A will continue to thrive as an excellent organization with a true commitment to its employees while Company B will likely join the scrap heap of businesses that failed in the not-too-distant-future.

Unfortunately, no surprises--we're all in this together.

With predictable regularity the business press can be counted on to run feature articles that "change is hard" and "most change management initiatives are very expensive and time consuming yet fail." These pieces are usually accompanied by tips for creating the right change environment so that the reader's company succeeds with its change management strategies.

In an election cycle that seemed to have started the day after John McCain conceded in 2008, after billions of dollars spent, and public opinion polls consistently showing politicians--of all stripes--are less popular than wicked storms on the east coast, the same population that doesn't successfully implement business change management programs voted to keep the governmental status quo.

The House of Representatives, Senate and Executive branches of government will look rather identical to the very group we overwhelmingly find distasteful. From my experience leading business transformation across a range of industries this, sadly, comes as no surprise.

The barrier keeping companies from realizing change management objectives is rarely a matter of sound process and subject matter expertise. Rather, it is the people and lack of purposeful determination to make an occasional sacrifice, grow, adapt and learn for the benefit of an organization (and, more importantly, an individual's career). When I initially assess a company, the vast majority of its time functional managers are certain their department runs superbly, but can point out shortcomings everywhere else in the organization. Senior executives and boards are usually right there with them, convinced they are brilliantly leading the business, only to be undermined by a lousy workforce, unfair (foreign) competition, or government.

Our public opinion polls might express strong desire to replace under performing politicians, but our votes say "my guy's great, yours is the problem." These are the same sentiments and actions I routinely see and fight through in the workplace. The same strategies and tactics I employ in business apply to voting and all other phases of life: It starts and ends with what you see in the mirror.

Shortly after Ohio was called for President Obama he tweeted, "We're all in this together." For the health of our nation and vibrancy of our economy, let's do more than hope this is more meaningful than "another Twinkie."

Undercover Boss, Visible Anarchy

I hadn't previously seen CBS' "Undercover Boss" until they aired an episode featuring someone I know and have done business with. Though it was an entertaining 60 minutes, some of it very funny and quite a bit highly emotional, I'm deeply troubled by this program's premise and message.

Executives most likely appear on the show to get publicity for their companies (as opposed to taking the time and effort to put on a disguise to learn about what's really going on), for what should be obvious reasons, and I do hope that's the case, but I have to believe this: What's troubling is the apparently great things that happen as a result of these close encounters between high ranking officials and lower level employees must unleash the laws of unintended consequences.

As a result of spending time with four rank-and-file employees, by the (new season premier) show's end, this CEO awarded three promotions, two salary increases, promised to review compensation structure for two entire departments, and awarded substantial bonuses to each of the four people he spent time with. Seems nice enough until you consider it all from an organizational perspective.

How many layers of management did this CEO bypass to make these major decisions?  How many direct report supervisors had their credibility shattered as a result of the CEO intervening?  Of course, the majority of staff didn't catch the lucky break of getting directly exposed to the CEO; does this make them less deserving of being awarded 5 and even 6 figure bonuses?  Going forward, can there be a true unity of command in an organization featured on "Undercover Boss" if employees know their CEO can and will override managerial decisions, or even policy?

In 1961 "How to Succeed in Business Without Really Trying" debuted on Broadway, telling the story of J. Pierrpont Finch's morally questionably rise from window washer to vice president. Certainly, everyone on "Undercover Boss" was far more committed to their jobs than Finch, but 50 plus years later the entertainment industry's view of corporate American seems to be roughly the same: "Who you know matters far more than what you know." Lucky breaks and style is more often than not more meaningful than substance and structure. In the highly transformative economic climate we live in, I can't think of a worse message to deliver than this.