EthixBizine Archives

July 2010	BP; Organizational Culture; Secret Ethics
June 2010	Turf Wars; The Big Short; Joy & Fun at Work
May 2010	PG&E Power?; In-n-Out Burger; Courage & Persistence
April 2010	Falsifying Invoices; Leading for Growth; Collaboration
March 2010	Soft on Toyota; Business Mensch; Integrity & Transparency
February 2010	Info Protection; 7 Habits; Mistake-Tolerant
January 2010	Move Your Money; Two years at HBS; Do the right Thing
December 2009	Passed Over; Score Takes Care of Itself; Freedom
November 2009	Hazardous Duty; Capitalism: A Love Story; Accountable & Responsible
October 2009	Medical Product Pricing; Shop Class as Soul Craft; Open & Teachable Culture
September 2009	Deductible Payoffs; The Fountainhead; Loyalty
August 2009	Harassment; High Integrity ; Single Payer; Multiple Provider
July 2009	Product Info; Mighty Fall; Nobody's Perfect
June 2009	Unethical Hiring; Reality Check; Business Vows
May 2009	Non-Compete; Hard Times; Good to Great to Garbage
April 2009	Non-Profit Cutbacks; Rope Lessons; Shop, Vote, Start
March 2009	Lay Off Warnings; Daily Meds; Give ot Take?
February 2009	Care vs. Profit? Start Art; Truthiness
January 2009	Greenwashed? Ethical Collapse; Financial Fairness
December 2008	Detroit Bailout? Toyota Culture; Keep Your Commitments
November 2008	Be My Guest? Hard Facts; Protecting Life
October 2008	What About Hank? Grameen Dream; Oil; Honor the Others
September 2008	Thieving Co-Worker; High Purpose Companies; Work & Rest
August 2008	Hiding Behind Complexity; Carey Way; Communicate
July 2008	Unethical Colleagues; Followership; People-Growing
June 2008	Ethical Layoffs? Bad Samaritans; Value & Respect Others: Rule One
May 2008	Does Ethics Pay? Adam Smith; Beyond Compliance
April 2008	Survival or Excellence? Making Globalization Work; Takers, Inventors, & Helpers
March 2008	Externalizing Costs; Green Gold; Culture
February 2008	Sleazoid Bosses; Wikinonomics; Wiki-Ethics?
January 2008	Fired Over Facebook; Team Dysfunctions; Team Requirements
December 2007	Opt In, Opt Out; Trader Joe's; Who Decides What's Right?
November 2007	Kickbacks; Triple Bottom Line; Compensation Ethics
October 2007	Workplace Romance; Endearing Firms; Ethics as A Team Thing
September 2007	Disinterested Bosses; Corporate Purpose; Damage Control

Organizational Culture and Leadership
by Edgar H. Schein  (3rd edition, Jossey-Bass, 2004)

As any of my readers, students, and colleagues know, I am a strong believer in the importance of corporate culture.  I believe that culture is more important than codes and training programs in determining ethical performance.  "Accidental" cultures . . . "misaligned cultures" . . . "toxic cultures" . . . these are the enemies of good business and good ethics.

There has been a significant rise in interest in corporate culture in recent years, partly (I believe) because of the failure of the "codes, dilemmas, and decision-making" focus of so much business ethics education --- and partly because of the positive emphasis on culture by business leaders and writers such as Lou Gerstner, Jim Collins, and Max DePree.   I have mixed feelings about a lot of the literature on corporate culture, however, because it doesn't seem deep or holistic enough.  It often focuses on one aspect of culture such as the office atmosphere or rituals or "invisible" thinking behind company behavior.  My own understanding of culture comes much more from reading in cultural anthropology and sociology (e.g., Malinowski, Durkheim, Weber).  I think we should study corporate culture much as Indiana Jones and his ilk would study a new people group. 
The one book that stands apart from all others on this topic is Edgar H. Schein's classic Organizational Culture and Leadership now in its third edition.  Schein gives us 400 pages of brilliant insight, drawing not just from the great sociologists and anthropologists but from social psychologists and organizational behavior experts.  He is now retired after a long and distinguished career as professor at MIT's Sloan School of Management.  Schein also worked extensively as a consultant with many companies and organizations over the years.  His book is well-written, thoroughly tested in the business trenches as well as the ivory towers.

Schein organizes his study in three sections.  First he defines organizational culture (and leadership).  In part two he goes into great detail unpacking the "dimensions of culture."  Finally, in part three, Schein turns to the leadership role in culture building and changing. 

Culture is to organizations what character is to individuals, Schein says.  Culture is about phenomena beneath the surface that constrain and guide behavior.  Leadership creates and changes culture but culture also affects and even defines leadership in organizations.  It is a critical reciprocal relationship.  Schein provides a great list of various categories used to describe culture;  immediately it is clear that he has a grasp of the field matched by few others.  Schein defines culture as "a pattern of shared basic assumptions that was learned by a group as it solved its problems of external adaption and internal integration" (p. 17).  He argues that there are three basic levels of corporate culture: (1) "artifacts" – by which he means not only physical infrastructure but organizational processes and policies, myths, rituals, and the "climate"; (2) "espoused beliefs and values" --- the core values list, etc.; (3) "basic assumptions" --- taken for granted beliefs, perceptions, thoughts, etc..   It is this last level that is decisive for Schein.
Schein does a great job of showing how charismatic founding leaders create shared culture as the young organization succeeds in managing its external and internal challenges by acting on one or another value or perspective.  Success breeds deeper commitment and cultural habit.  Schein shows how mission and vision get concretized in specific goals and strategies and drive cultural development by requiring and reinforcing certain habits of thought and action until those become taken-for-granted assumptions. 

Schein's discussion (Chapter 13) of "How Leaders Embed and Transmit Culture" is a superb account of how cultural values (assumptions) must be embedded, articulated, and reinforced in reward and compensation systems, role modeling, HR practices, budgeting, organizational design, physical space, rites and rituals, and formal statements of values and philosophy.  His discussions of how leadership can affect culture in young, mid-life, or mature organizations, and of the kinds of events and needs that can provoke cultural change, are uniformly insightful.  He gives lots of illustrations from different companies he has worked with.

My own view of culture is very close to that of Schein although I organize it a little differently.  I think of culture as having four levels: (1) physical infrastructure, (2) organizational infrastructure, (3) personnel, and (4) rituals and "informal" climate and style.  Each of these aspects of the culture are already embedded with values though often unexamined and in conflict.  I view the role of leadership as answering in a very proactive way these questions:  what is our mission and vision in this company (and can we create a succinct, helpful statement of that actual purpose)? What are the critical core values (habits, characteristics, traits, capabilities and inclinations, assumptions) that we need to have embedded at all four levels of our culture to enable the achievement of our mission and vision with excellence?  These values need to be identified, then communicated, then implemented concretely, then evaluated and measured.  That's what leaders do --- with the collegial expertise and ownership of their people. 
This review hardly does justice to the depth of Schein's exploration.  This is one of those books that I really believe will help any manager or leader to rise to a higher level of understanding and expertise.  If you don't study it during your MBA you should make it a priority to study soon afterwards.
---David W. Gill

Our Secret Company Ethics

One of the strangest phenomena I run into is companies that refuse to disclose anything about their ethics and values and their ethics training or reporting programs.  For many years I have assigned my MBA students to each do a brief "consulting report" on the ethics and values at a company of interest to them other than their own employer.  The point is to learn what to look for and how to assess the strengths and weaknesses of the overall "ethical health" of the organization. 

We look for six components and four processes. We do our research by exploring internal company literature and information, secondary/outside information about the company, and doing at least one brief in-person or telephone interview with an employee or manager. Most of the time, this information is abundant and easy to access.  The web sites are rich resources.  Employees can talk with no muzzles placed on them.  But every semester we run into a few surprises where companies stonewall all inquiries.

Google and Anheuser-Busch are two of the latest companies to blow off my MBA students who were doing a small research project on corporate ethics.  "That is confidential information," we are told.  Google, whose mission is "to organize the world's information and make it universally accessible and useful" somehow won't make its own ethics information accessible and useful.  What's there to hide Google?  Why won't you stand up and tell us what your ethical standards are and how you communicate and implement these standards in your company?  Why so secretive and paranoid?

We aren't talking about revealing your secret technology or recipe!  This is about your ethical guidelines and your training program! 

Pros and Cons
So what possible benefit is there to being so secretive about company ethics?  Well maybe you are afraid that if you announce a standard you might be held accountable for performing up to your standard?  I think I see the hand of the legal department here.  We need our legal advisors but they can't be allowed to drive the culture of the company.   But maybe there is a degree of self-protection to be gained through your secret ethics.  Pretty sad if that is the situation in our litigious era.

On the positive side for ethical transparency, let's remember that our ethical standards are (or ought to be or could be) our account of how to treat each other (and all of our stakeholders) in order to excel and to succeed in our mission and vision.  Holding up these standards for all to see will emphasize their importance and make it easier to measure performance against those standards.  We all know that a private/secret vow is not as strong as a publically-witnessed one.  An individual commitment is not as strong as a shared, team commitment.  So going on public record will help our company internally to see and follow our standards.

Second, remember that most businesses today are not self-contained silos.  We operate all the time with B2B relationships and alliances.  If we are trying to work with another company that has no idea of our ethical standards, or whether ethics even matters to us, trouble lies ahead.  It is vastly better for us to be public and on record about our ethics and values.  "If you want to do business with us, this is the way we operate."  So too with business to government relations around the world (hello Google):  much better to be clear, transparent, and on record from the very start about who you are as a company and what your core values and ethical standards are. 

And finally:  some of these secret ethics companies actually are (or seem to be) great places to work with (apparently) sound ethics and values.  So why don't you add to your positive impact on the marketplace and business world by sharing with others what you have learned?  The business world needs your good example.  We're not asking to see your program code -- or the recipe for your Oktoberfest brew --- just your approach to right and wrong and good and bad.  It's a little like airline safety.  My friend and former Boeing executive Al Erisman told me that Boeing and Airbus could be ferocious rivals and highly secretive about everything .. . . except safety.  On safety issues they shared fully with each other. This is a good analogy to the importance of ethics.  We need to share best practices and experiences freely with each other.  It benefits everyone.

So if you have any influence, lobby your company to be fully transparent about its ethics and values. Everybody wins, starting with the company itself.

-David W. Gill

© 2010 David W. Gill

Top ^

• Ask Dr. EthixBiz: Turf Wars
• EthixBiz Review: The Big Short
  
• Gill's Benchmark Ethics:Joy & Fun at Work

Turf Wars?

Dear Dr. EthixBiz:

My supervisor and I proposed a change to our team members which would shift some of my admin-related duties to the specialists in exchange for my helping the specialists with some of their responsibilities. Some of the specialists are experiencing large backlogs of work due to large volumes of work and not enough time to complete it. I proposed to my supervisor that I take a percentage (say 5 or 10%) of the backlog and help the specialists catch up during my low volume periods, and in return the specialists would do some of the traditional admin duties for themselves instead of relying on me.  She agreed to pilot this change.  

But when we presented the proposal to the group and asked for feedback at the next staff meeting the idea didn't sit well with the specialists.  One specialist remarked that it wasn't appropriate for higher level employees to do lower level work.  I suspected that kind of attitude existed.  

Do you agree agree that higher level/higher pay employees should be exempt from filing, copying, and go-phering tasks and that lower level/lower pay employees are the only appropriate means of getting those things accomplished?  I would like to think that we could view each other more equally in status and would be more willing to help each other.  So, how do you recommend that I approach this type of feedback at the next staff meeting?

-KG.

Dear KG:

The Southwest Airlines Way by Jody Hoffer Gittell is a thorough study of how Southwest Airlines beats all the competition, is profitable, and is always rated by its employees as a "best place to work" (and wins all customer awards as well).  How do they do it?  They emphasize teamwork and partnership.  Pilots will help walk through the cabin and pick up newspapers, flight attendants help ramp agents in a pinch, etc..  They choose to help each other rather than play the old "silo" and "turf" game that you describe.  SWA is the most highly unionized airline in the industry (85%) --- but they have a culture of "team" --- totally different than the old style at United Air, Ford Motors, etc, where unions and old guards defend their turf instead of beating the competition, helping each other, serving the customers (citizens) and owners (voters), and enjoying life. 

People need to be reassured that their jobs are not being threatened of course but I am with you.   It makes complete sense.  Your challenge is to figure out how best to sell the idea.  How can you ensure that what is in the best interests of the company is also in alignment with what is in the best interests of the employees. 

--Dr. EthixBiz

The Big Short: Inside the Doomsday Machine
by Michael Lewis
(W. W. Norton, 2010)

Michael Lewis is the Berkeley-based author of the recent football book made into a film, Blindside, and the earlier baseball book Moneyball about the Oakland A's business (and baseball) model.  Still earlier he wrote Liars' Poker about Wall Street in the 1980s and The New New Thing about Silicon Valley.  He is a superb researcher and writer.

The Big Short is Michael Lewis's telling of the story of the recent subprime lending, Wall Street financial meltdown that led to a gigantic government bailout of AIG and the big banks.  This is a very complicated story and my eyes glazed over once or twice, through no fault of Lewis's writing.  One of the key lessons here is that fraud as well as incompetence --- and then graver harm to multitudes --- were facilitated by creating and allowing an unmanageable complexity into the financial world.

Lewis tells the story with an unexpected focus on a few key individuals who saw the meltdown coming and bet on the collapse ("shorting" the market).  Steve Eisman, Michael Burry, Charlie Ledley . . . these guys (numbering maybe a dozen) were an unrelated set of brilliant and eccentric financial students and investors who saw that the subprime lending craze was vastly inflating profits but was a house of cards soon to come down.  They were brilliant guys, ready to take huge personal risks by investing everything they had and waiting for the crash.   Of course when the crash came their cash registers starting jingling and they are all megamillionaires today.

Lewis does as good a job as anyone I have read explaining how the banks got into the business of wildly handing out loans to almost anyone breathing, how these loans were doomed to default when their teaser rates reset at a higher level after the initial two or three years, and how the commissions on these transactions blinded the banks to common financial sense, to say nothing of minimal ethics.  The rating agencies like Moody's and Standard & Poor's were a combination of crooked and incompetent:  granting AAA ratings to unresearched garbage loans.  The insurance companies, above all AIG, were just plain stupid to take on all their liability for the doomed loans.

"A smaller number of people --- more than ten, fewer than twenty --- made a straightforward bet against the entire multi-trillion-dollar subprime mortgage market and, by extension, the global financial system. In and of itself it was a remarkable fact:  The catastrophe was foreseeable, yet only a handful noticed" (p. 105).  As for the banks, they "disdained the need for regulation in good times [but] insisted on being rescued by the government in bad times" (p. 210).  "What's strange and complicate about it, however, is that pretty much all the important people on both sides of the gamble left the table rich . . . The CEOs of every major Wall Street firm were also on the wrong side of the gamble.  All of them, without exception, either ran their public corporations into bankruptcy or were saved from bankruptcy by the United States government. They all got rich too.  What are the odds that people will make smart decisions about money if they don't need to make smart decisions --- if they can get rich making dumb decisions?  The incentives on Wall Street were all wrong;  they're still all wrong" (pp. 256-57).

For an interesting commentary on Lewis and his Big Short, I recommend the March 15 Huffington Post article by Janet Tavakoli (President, Tavakoli Structured Finance) entitled "Michael Lewis: Junior Salesgirlieman."  She is even stronger than Lewis in calling the financial breakdown a case of massive fraud.

There are a lot of takeaway questions and lessons from The Big Short and more generally from the economic crisis it describes.  Accountability is certainly lesson one:  if you are truly responsible for something of value, you should be compensated,  But if you fail in your responsibilities and produce failure and harm, you need to be held accountable and pay the price.  Lesson two: too big to fail is too big to exist.  Where it is an oil company or a financial institution, size matters.  If the organization is uncontrollably big, it should be cut down to a more manageable size (good for competition also!).  Lesson three: transparency.  Lesson four: reduce conflicts of interest.  Cut ties between ratings agencies and financial institutions, between business and politicians (including regulators).  The fact that Robert Rubin, Timothy Geithner, and other Wall Street insider types are the designated leaders of our financial reform is a very bad sign.

In brief, this is a very helpful book on a horrible story in world economic history.

---David W. Gill

Joyfulness & Fun:  The Tenth Trait of a Healthy Culture

Stay positive even in hard times.

Benchmark Ethics has taken ten months to describe ten basic characteristics --- "core values" --- of healthy corporate cultures.   Here are the first nine discussed in recent months:

1. Loyalty: Tenaciously preserve core mission & vision; hang in there with the team; no traitors
2. Openness & Humility:  Teachability from top to bottom of organization; no arrogant know-it-alls
3. Accountability & Responsibility: All individuals & teams stand up; no blaming, no excuses
4. Freedom:  Creative risk-taking encouraged; no micro-managing control freaks
5. Ethics & Excellence:  Insatiable hunger for both "doing the right thing" & "doing things right"
6. Mistake-tolerance: Learn and try again; avoid punitive, fearful, repressive reactions
7. Integrity & Transparency: Consistency of thought, talk, and walk; No hidden agendas, no evasions.
8. Collaboration & Integration: Bring people together...bring ideas together.
9. Courage and Persistence: Guts in the face of difficulty

The tenth trait is "joyfulness" (or "fun").  It's about staying positive even in hard times.

A healthy organizational culture doesn't stop with a grit-your-teeth, grim determination.   We must try hard to find some joy and laughter.  It may only the tenth on the list but I think this characteristic or core valued  needs to be here.

Legendary Herman Miller CEO Max DePree writes that "Joy is an essential ingredient of leadership. Leaders are obligated to provide it"  (Leadership is an Art  (1989), p. 133).  Work is often carried out in the sweat of our brow.  One of the synonyms of work is "toil."  Our work feels like that some times.  It is important to try to inject humor into the process and help our organizations find joy at work.

Dennis Bakke's management reflection on his years at AES, the energy company, is called Joy at Work.  AES had "fun" as one of its core values.  Bakke argues that "the key to joy at work is the personal freedom to take actions and make decisions using individual skills and talents" (2005), p. 65).   Fun results from an workplace where individuals are given the challenge and opportunity to be innovative, to use their creativity to make something good.  Give the workers some control.  Challenge them to use their freedom—and they will do so with great results for the company and finding joy for themselves. 

Whole Foods and Southwest Airlines are two other companies that have explicitly made "fun" one of their core values.  If you fly Southwest very often, you know how different the atmosphere is among the employees from the experience on most other airlines.  It goes back to founder Herb Keleher's personal insistence on its importance. 

The ancient Greek philosopher Aristotle has sometimes puzzled people studying his famous ethical writings because "humor" is in the middle of his list of virtues.  But experience teaches us that in the midst of difficult, stressful times we need to lighten up a bit.  A laugh can take the edge off of a tough time and make us refreshed and able to get back to the difficult decisions around us.

Our corporate culture needs to be balanced and whole --- and that means we need to be able to have some laughter and fun at the appropriate times.  Aristotle also is the one who said that every virtue is a mean between two extremes.  In the case of fun, one vice is being a grouch (not any fun);  the other vice is too much fun --- silliness, craziness, out of control.  The middle way is where we want to be.

-David W. Gill
© 2010 David W. Gill

Print Version

• Ask Dr. EthixBiz: PG&E Power?
• EthixBiz Review: In-n-Out Burger
  
• Gill's Benchmark Ethics:Courage & Persistence
  

PG&E Power?

Dear Dr. EthixBiz:

Multiple times every day now we are hearing messages all over the media that California Proposition 16 in the upcoming June election is necessary to protect the "taxpayer's right to vote" --- specifically by requiring a 2/3 vote for any municipality to break away from PG&E and form their own power company.  Apparently Marin County and San Francisco political leaders have taken steps to replace PG&E without the support of their electorates and PG&E is now standing up for freedom and democracy.  Do you agree with Proposition 16 and PG&E's campaign for our rights and freedoms?

-Manny

Dear Manny:

I'm afraid not.  I'll explain why but first let me say that I believe a lot of great, ethical people work for PG&E --- and some of PG&E's movements toward alternative, greener energy have been encouraging. Unfortunately the great people I know at PG&E do not get to set its agenda or values.

PG&E's campaign for Proposition 16 is one of the most unethical, cynical, deceptive actions I have ever seen.  It reminds me of George Orwell's famous novel 1984 which introduced the concepts of "doublethink" and "doublespeak."  PG&E calls proposition 16 the "taxpayers right to vote act."   But it is actually a highhanded attempt to limit taxpayers' rights.  If Prop 16 passes, 34% of a population can stop the 66% from replacing PG&E with a better, cleaner energy company.   And PG&E did not ask its customers for two-thirds approval to spend $35 million to pass this proposition (where do you think PG&E gets its money? They like to say otherwise but it is customers who ultimately fund PG&E's budget choices).  PG&E's leadership does not believe in that 2/3 majority guidance for itself; no, for them, a tiny management and board elite decides what's best for all the rest of us.  Totally hypocritical.

We already have elections of city councils and other public officials.  If we don't like what they do,  we vote them out of office (51% will do it).   Of course there is corruption and incompetence in our government and it would be great to avoid that.  But just because our elected governments are imperfect, should we hand more power to PG&E?  Is PG&E worthy of such trust so that it becomes almost impossible to replace?  No way pal.  PG&E is not worthy of trust and anything we can do to reduce its power and make it actually compete in free markets is a step in the right direction.  Proposition 16 is a move to entrench PG&E as an untouchable monopoly:  to give it socialist power --- but without commensurate accountability to the people. 

PG&E is spending $35 million to pass Proposition 16 to protect itself from free competitive markets.  Why didn't PG&E use the $35 million to reduce rates, improve customer service, and develop cleaner more sustainable energy sources?  Because PG&E's real mission seems to be to line its executive pockets with as much of your money as possible, not to provide clean, reliable power to the people.  PG&E has never earned the right to our trust (or our business):  their monopoly exists not because they are good but because of a failed political system that they manage to control. 

Why don't I trust PG&E? First, I am still outraged by their corruption, irresponsibility, and denial in the Erin Brockovich/pollution scandal a decade ago (which resulted in a $333 million dollar settlement to those injured by PG&E).  Second, the $84 million dollars in "retention bonuses" paid to 17 PG&E executives in 2004 as PG&E emerged from bankruptcy was an outrageous act of theft by PG&E leaders.  The CEO at the time took $17 million for himself (he was named by Business Week Magazine as one of the worst CEOs of 2003).  Third, the current PG&E CEO, a Goldman Sachs veteran (great preparation!) was the CFO at the heart of the retention bonus scandal and was rewarded by being named CEO in 2005. Is this the best PG&E could do?  Mr. CEO came into office announcing his commitment to high level Ten Commandments ethics. But somehow in his Orwellian mind "Thou shalt not steal" means "go ahead and take $10 million in compensation for 2009" (74% higher than the median compensation of large scale utility companies). You run a monopoly sir, not a competitive business.  You are not an executive genius; you are shooting fish in a barrel.  Your big bonuses are for exploiting people who have no choice whether to buy your stuff.  We should give this guy more power and entrench him in office?   Fourth, PG&E is installing its new "smart meters" at businesses and residences.  Have you noticed all the news stories about spikes in peoples' bills?  The smart meters not only put meter readers out of work, they extract more money from helpless customers.  These dumb meters were not fully and properly tested and we are pretty dumb to give more power to this kind of company.  Fifth, in 2006 PG&E spent $11 million to prevent Davis, Woodland, and West Sacramento from defecting to the Sacramento Municipal Utility District.  (Did they ask you about diverting those millions to this self-serving, anti-democratic  campaign?).  Now they are spending $35 million to make their chokehold policy state wide.  They can't depend on superior products and services to win their contracts or your loyalty so they spend vast amounts of money for what is nothing less than blatant, doublespeak propaganda. 

I would be happy to pay my gas and electric bill – even at a higher rate --- if I thought my payments were supporting (a) cleaner energy initiatives and (b) subsidies to keep the lights on for unemployed families and struggling small businesses in our recessionary times.  But I am not interested in giving ten cents, to say nothing of a two-thirds majority chokehold on communities, to the pitiful organization described in the previous paragraph.  NO on 16.  This is not a partisan issue.  I am neither a Republican nor a Democrat.

--Dr. EthixBiz

In-n-Out Burger: A Behind-the-Counter Look at the Fast-Food Chain that Breaks All the Rules

by Stacy Perman  (New York: Collins, 2009)

Stacy Perman is a serious and accomplished business writer whose work has appeared in such outlets as Time, Business Week, The Los Angeles Times, and The Wall Street journal.  Her new book In-n-Out Burger is a 345-page account of the history of an amazing business.  In-n-Out Burger was the only fast food company that earned the approval and praise of Eric Schlosser in his great book Fast Food Nation.

In-n-Out Burger has been a family-owned business ever since it was started by Harry and Esther Snyder in southern California in 1948.  It is now owned by the sole surviving heir, Lynsi Martinez, now in her late twenties.  Television journalist Huell Howser recently devoted a one-hour episode of his "Calfornia's Gold" (program #146; www.calgold.com) to In-n-Out Burger, a fascinating program that got some inside access to In-n-Out leadership.  Stacy Perman, however, was stonewalled by the secretive In-n-Out leadership and had to do all her research from outside the organization, without any cooperation from its leadership.  Despite this handicap, Perman did a thorough job of finding out the history and character of this business.  Her verdict on the business is very positive and it is sad that In-n-Out's leaders are so cautious, even paranoid, that they don't share more openly about what has made their company so great.  What's to lose?  Why not help other businesses learn from In-n-Out's great example?

Perman does a great job of piecing together the drama of the Snyder family over the past sixty years.  Harry and Esther Snyder had a simple approach to healthy food, hard work, accessibility to travelers, low prices, consistent ethics and values, and organic growth that preserves company culture.  As noted earlier by Eric Schlosser, In-n-Out uses only high quality, carefully chosen fresh ground beef (maintaining its own butchers and refrigeration facilities so that no frozen products are used), real, quality potatoes crafted into French fries in the store (not in a factory somewhere), and real ice cream and dairy in its milk shakes (not the artificial industrial ingredients requiring other fast food outfits to call their stuff simply "shakes" because there is no dairy in them!).  The quality of the food is the first distinguishing characteristic of In-n-Out.  This is not artificial industrial, mass production like you get from most of their competitors.

In-n-Out keeps the menu short and simple, and the prices low.   They invest very little in advertising – their customers are an army of advocates and publicists.  In-n-Out also is distinguished by the relatively high pay for their workers and managers at every level.  The restaurant workers don't start at minimum wage but a couple bucks higher.  Talk about happy, loyal workers:  just visit any In-n-Out and ask the people how they like working there.  Same for managers.  Good pay, good career prospects.  And from day one, In-n-Out has refused to give up control of its now more than 200 restaurants scattered across California and the Southwest.  Growth and expansion are slow and deliberate; quality and consistency are carefully maintained. 

Harry Snyder died in 1976 at age 63.   His 56-year old widow Esther was named secretary-treasurer, number two son Rich (age 24) was named president, and number one son Guy (age 25) was named executive vice-president.  Rich did not graduate from college but grew into the job and provided great leadership from 1976 until his own death in a plane crash in late 1993.  It was Rich who, with his mother, became a passionate Christian at Calvary Chapel, and began putting the Bible references on the bottom inside lip of the beverage cups.  Guy became President after Rich's death until his own death in 1999.  Guy's life revolved around drag racing and drugs and he was rarely able to contribute positively to the company over the years.  The one thing he did contribute was to produce the only grandchild of Harry and Esther, his daughter Lynsi who now owns the company.  It is not always clear how it happened but somehow Rich and his mother (who died in 2006) managed to instill a set of values and nurture a set of leaders that quietly, despite Guy's craziness and Lynsi's youth, have managed to keep In-n-Out on track with the same excellence over the past seventeen years since Rich's death.

In-n-Out is one of the great business stories of our time. In-n-Out fans are legion, from Hollywood and sports celebrities to great chefs like Thomas Keller of the French Laundry.  I love their ethics and values and how they treat customers and employees.  Stacy Perman has done us all a great favor by writing this intriguing account.

---David W. Gill

^Top

Courage & Persistence:  The Ninth Trait of a Healthy Culture

Guts in the face of difficulty.

Benchmark Ethics is taking ten months to describe ten basic characteristics --- "core values" --- of healthy corporate cultures.   Here are the first eight discussed in recent months:

1. Loyalty: Tenaciously preserve core mission & vision; hang in there with the team; no traitors
2. Openness & Humility:  Teachability from top to bottom of organization; no arrogant know-it-alls
3. Accountability & Responsibility: All individuals & teams stand up; no blaming, no excuses
4. Freedom:  Creative risk-taking encouraged; no micro-managing control freaks
5. Ethics & Excellence:  Insatiable hunger for both "doing the right thing" & "doing things right"
6. Mistake-tolerance: Learn and try again; avoid punitive, fearful, repressive reactions
7. Integrity & Transparency: Consistency of thought, talk, and walk; No hidden agendas, no evasions.
8. Collaboration & Integration: Bring people together...bring ideas together.

The ninth trait is courage.   "Persistence" and "guts" are other terms for this characteristic.  It is about hanging in there in tough times and circumstances.   As we are getting to the end of this "top ten" list, the point is to keep on with the preceding eight traits no matter what.  Even if the results are not what we would like --- yet --- keep on doing the right thing and building the mission-driven, value-embedded culture we have been describing.

We have to put courage and persistence on the list because the business playing field is not always level, or life fair.   Much of what we deal with in the marketplace, the global economy, or the environment is unfair --- or at least uncontrollable and unpredictable.  Who can predict natural disasters or epidemics or terrorism or war?  

Even without such large-scale forces, it is difficult to manage a workforce, adapt to change, and make wise decisions in a swirling global marketplace.  Problems and even defeats will come, sometimes wholly undeserved.  But healthy organizational cultures will be unintimidated and undeterred by these difficulties.  Courage, persistence, and "guts" means that they "keep on keeping on" despite the struggles, set-backs, and pain.  

Defining Business Courage

Our terms "guts" and "determination" are the kind of courage we are getting at.  For Plato and the ancient philosophers "courage" (sometimes translated as "bravery" or "fortitude") was one of the "cardinal virtues." Their term meant something like "readiness to fall in battle" (as opposed to fleeing the danger). 

I define courage as the ability --- and the inclination --- to do the right thing . . . even when you don't want to . . .  or you can't see an immediate benefit . . .  and it costs you something.

Plato's famous student Aristotle described courage as a "mean" between two undesirable extremes:  cowardice (too little "courage") and recklessness (too much "courage").  Courage does what is right---but in a wise and appropriate way, not in a blind, rash reaction.  This adds an important aspect to our understanding.

Business World Courage

What does this trait look like in practice?  First of all it shows itself when business leaders refuse to follow the crowd, even if the crowd is exuberant about the easy money flowing in.  Courage would be a banker refusing to hustle risky loans to naïve homebuyers or sell off excessively risky debt to ignorant investors.  Courage is going against the crowd in order to do the right thing.  Courage is an accountant (or CEO) refusing to paper over financial problems in the company.

Costco and In-n-Out show courage in the industry-leading wages they pay --- even when they could pay less with so much unemployment out there.  Courage is Costco and  Southwest executives choosing not to award themselves unfair, excessive, unseemly compensation packages like their competitor company executives.  Courage is In-n-Out Burger and Costco keeping prices reasonable for their customers, even though they could squeeze more out of customers and game them with bait-and-switch tactics. 

Courage is owning up to your mistakes publically, taking responsibility, apologizing and correcting the problem (Johnson & Johnson's Tylenol crisis).  Courage is speaking up to your boss --- or even blowing the whistle to the press --- when you see something wrong that could really hurt people (Sherron Watkins at Enron).

Cantor Fitzgerald demonstrated steady, indefatigable persistence after losing much of their business and workforce in the 9/11 attack on their World Trade Center building headquarters.  "Resilience" is now one of their stated core values.  Levi Straus lists --- and exhibits ---courage (one of its four core values) in its global textile business.  Ray Anderson of Interface carpeting has shown amazing courage in moving his company toward environmental responsibility. There are lots of other inspiring examples.

-David W. Gill
© 2010 David W. Gill

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Falsifying Invoices

Leading for Growth: How Umpqua Bank Got Cool and Created a Culture of Greatness

by Ray Davis with Alan Shrader  (Jossey-Bass, 2007)

Ray Davis took over as CEO of the regional South Umpqua Bank and its five branches in 1994 and grew it to $7 billion in assets and 120 branches ("stores") over the next decade.  The recognition and awards just keep coming:  2004 Ernst & Young Retail Entrepreneur of the Year, 2007 Fortune Magazine "100 Best Companies to Work For," one of the top twenty-five influential high finance leaders listed by US Banker magazine, etc..   Given the stench in the banking industry over the past decade as, blinded by greed, many of its leaders sold out their historic mission and values, it is nothing short of awe-inspiring to have a look at how it could be done.  Bank of America founder A. P. Giannini and legendary Citibank CEO Walter B. Wriston would roll over in their graves if they could see what has happened to the institutions they led.  But they would love Ray Davis!

Leading for Growth is Ray Davis's 2007 summary of lessons learned at Umpqua.  He divides his book into five parts.  In "Prerequisites for Relentless Growth" Davis describes how Umpqua figured out early that they were a "retail" business serving customers in "stores" --- not just "bankers in branches."  He sent his staff to customer service icons Nordstrom and Ritz Carlton to learn how to do it.  Attention to detail in making the retail banking stores great neighborhood hang-outs is an Umpqua trademark.  Getting the front line staff thinking "World's Greatest Bank" and giving them a mandate and freedom to make the customer number one  --- this is Umpqua.  Relentless, positive passion is what Davis exudes, and what he wants in his people.

Part Two is about the "Roles of a Leader."  Support, accountability, empowerment, clarity of vision, effective communication, explanation of all the key ideas and decisions,  and personal authenticity --- these are the virtues of a great leader, Umpqua-style.  Part Three is called "Master the Basics."  Here Davis talks about the importance of sweating the details, the small stuff.  He also picks up on Jim Collins's phrase "get the right people on the bus" when it comes to personnel matters.  His chapter on building a strong board of directors is excellent.  While I find Davis's discussion of ethics and values weak --- the reality of ethics and values at Umpqua is obviously strong.  Caution, though, Mr. Davis: build a robust ethics and values into your leadership training and your organizational/cultural systems if you want this thing to endure.

Part Four is all about "Marketing" --- the importance of brand, design, consumer preference, and customer service from associates (employees).  Davis and Umpqua are total aces at this stuff.  Part Five is about "Leading Your Culture."   It's about staying balanced, paying constant attention (building culture is like raising kids, he says), differentiating the non-negotiable heart of the culture and all the other aspects that may need to change, and maintaining the culture through mergers and acquisitions (Umpqua has grown a lot through acquisitions so he has a lot to contribute on this topic).

Every other page of Davis's book has some quotable insight.  Here is the kind of stuff you get: "If you want the best of the best, you've got to offer an exceptional workplace.  You've got to value the people you choose and let them know it at every opportunity.  You've got to empower them and provide opportunities for growth.  You've got to be fair.  You've got to build a culture that helps them thrive, that makes them eager to get to work every day" (p. 115).  So simple and seems so obvious.  But I know lots of big bank employees --- and they rarely express eagerness to get to work.  Relief to have a job maybe, but is that what builds great businesses?

Leading for Growth is a great little book:  it's not just about theory and ideas but an up-close account of a contemporary business success in an industry devastated by horrible leadership.

---David W. Gill

Collaboration & Integration:
The Eighth Trait of a Healthy Culture

Bring people together...bring ideas together.

Benchmark Ethics is taking ten months to describe ten basic characteristics --- "core values" --- of healthy corporate cultures.   Here are the first seven discussed in the past six months:

1. Loyalty: Tenaciously preserve core mission & vision; hang in there with the team; no traitors
2. Openness & Humility:  Teachability from top to bottom of organization; no arrogant know-it-alls
3. Accountability & Responsibility: All individuals & teams stand up; no blaming, no excuses
4. Freedom:  Creative risk-taking encouraged; no micro-managing control freaks
5. Ethics & Excellence:  Insatiable hunger for both "doing the right thing" & "doing things right"
6. Mistake-tolerance: Learn and try again; avoid punitive, fearful, repressive reactions
7. Integrity & Transparency: Consistency of thought, talk, and walk; No hidden agendas, no evasions.

Collaboration and integration in pursuit of excellence on a mission---that's what a company is all about.  Teams thrive when there is an inspiring mission, a passion for excellence and ethics (doing the right thing and doing it right), with an atmosphere of mistake-tolerance and a high degree of integrity.  

Integrating Ideas and Perspectives

The eighth trait has two sides to it, a people-side and an idea-side. 

On the idea side it is about integrating ideas into more holistic and powerful perspectives, bridging across traditional disciplinary boundaries with new thinking, drawing together the best ideas and practices from various fields.  Narrow, silo thinking is the vice to be avoided;  holistic, integrative thinking is the virtue.

I have heard more than one brilliant thinker today say that most of the really interesting problems and opportunities today lie at the intersections of what were thought to be separate fields;  e.g., biology and technology, play and work.

Organizations that get people together in cross-disciplinary groups --- for ethics training a much as for marketing or strategy or design --- will have an innovation edge over the traditional turf-guarding, silo types.

Bringing Individuals On to Teams

On the people side, companies are groups of people "co-laboring"—collaborating.  If we could do it better alone, why form a company?  If we are going to make the most of our opportunity, we need to put an emphasis on team play, not just on individual stardom.  Turf wars are deadly.  Integrating the best people into collaborative teams multiplies organizational strength. 

It's interesting that "collaborationist" used to refer to someone who cooperated with the invading enemy.  Collaborators were traitors.  In a strange way, this negative connotation points to something basic:  rather than regarding competitors (internally or externally) as enemies, it is often wise to find ways to work together.  Life and business are not a zero sum game.  Two businesses creating similar products (or two employees competing with each other) may actually have greater success by working together. 

Of course, competition is also part of human nature (and often produces better results than its absence).  And ego and other narrow interests often disrupt or destroy cooperation and community.  Collaboration is not an easy option but it is worth pursuing and making a value in our companies.  Wisdom, creativity, and innovation, are usually to be found in a diversity of voices collaborating around a common goal and task.   

Jody Hoffer Gittel's The Southwest Airlines Way: Using the Power of Relationships to Achieve High Performance (McGraw-Hill, 2003) is a superb demonstration of how collaboration can bring business value as well as workplace happiness.  At the Harris & Associates company, the fourth value, Respect," underlines the importance and value of each individual employee.  The fifth of their six values, however, is "teamwork."  The message is that no matter how great we are as individuals we can be even better collaborating together. 

On the idea side, Jon R. Katzenbach & Douglas K. Smith's The Wisdom of Teams (HarperBusiness, 1993) and now James Surowiecki's The Wisdom of Crowds (Anchor, 2004) make the case that thinking together in teams produces better results than individualism.

Stephen Covey's best seller The Seven Habits of Highly Effective People culminates with a great chapter on "Synergy."  That is the bottom line.

-David W. Gill
© 2010 David W. Gill.

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Business Mensch: Timeless Wisdom for Today's Entrepreneur

by Noah Alper  (Berkeley: Wolfeboro Press, 2009)

Would you believe that the first Noah's bagel shop opened just two blocks from my house in north Oakland in 1989?  There is still a shop a couple blocks away but I rarely go there now.  It feels like a franchise in a chain operation, with low skill, low talent, minimum wage kids donning plastic gloves to carefully parcel out the ingredients, making sure not to be too generous.  It's not their fault and it’s a lot better than many food chains but hardly the sensation it used to be.  A similar thing happened to Togo sandwiches. We Berkeley guys used to get off the freeway heading south just to hit Togo’s little shack next to San Jose State.  It was worth a detour.  Now that it is a big industrial chain, that memory is a distant one.  It’s not that Togo’s is bad --- but it is industrial fast food.

From a culinary standpoint, and from a neighborhood standpoint, no chain stores will ever deliver what an indigenous, locally-owned and operated, neighborhood business can deliver.  Today it is Bakesale Betty at the corner of Telegraph and 51st that (deservedly) has the lines running down the sidewalk every day.  Or Genova Deli in the same neighborhood:  still long lines and great service and food after decades.

But you can’t blame Noah Alper for selling out to Einstein Bros on February 2, 1996, for one hundred million dollars.  He had started Noah’s six and a half years earlier and grown it to 38 stores and one thousand employees.  And Noah Alper is no "one hit wonder":  he also founded the natural food chain Bread & Circus and sold that company to Whole Foods before the bagel business began.  Business Mensch  is Noah’s very personal, breezy, anecdotal, but wisdom- and insight-rich reflection of entrepreneurship, management, and values.

By "mensch" – a German and Yiddish term --- Noah means a "real character," a "businessman who is  competitive, insightful, resourceful, nimble, and driven"  but who "combines these qualities with an ethical backbone and has a ‘shine’ that is palpable" (p. 7).  Noah Alper was Jewish by ethnic and family background and cultural association but not particularly thoughtful or observant growing up or in his early business career.  But he says that "Noah’s Bagels was a home run in large part because it was a specifically Jewish business, with Jewish values, a Jewish identity, and a Jewish soul" (p. 6).  After the sale of Noah’s, at just about age fifty, Alper made a pilgrimage to Israel that further awakened his appreciation for the spiritual and ethical heart of Judaism.

Business Mensch’s chapters are organized around seven business and life principles: (1) have a little chutzpah --- be bold and willing to take risks; (2) discover yourself --- discover your own sense of purpose and be faithful to it; (3) go forth --- be active and engaged; (4) it takes a shetl (village)--- finding the right balance of independence and partnership/teaming with others; (5) the power of a mensch --- is in caring for others, not coldblooded authority; (6) come back stronger --- learn from failure and setbacks; (7) remember the Sabbath --- take time off, don’t be a workaholic. 

Business Mensch is full of quotations of Jewish (and other) terms, wise sayings, and common sense observations.  This collection of fresh terminology and insight is worth the price of the book by itself.  In addition, Noah provides many stories, vignettes, and anecdotes from his experiences, the losses as well as the wins.  This is the kind of little book (166 pages) you could buy multiple copies of for your leadership staff to read and then spend three hours discussing together how to apply the lessons in your own workplace.

---David W. Gill

Integrity & Transparency: 
The Seventh Trait of a Healthy Culture

Consistency of thought, talk, and walk; No hidden agendas, no evasions.

1. Loyalty: Tenaciously preserve core mission & vision; hang in there with the team; no traitors
2. Openness & Humility:  Teachability from top to bottom of organization; no arrogant know-it-alls
3. Accountability & Responsibility: All individuals & teams stand up; no blaming, no excuses
4. Freedom:  Creative risk-taking encouraged; no micro-managing control freaks
5. Ethics & Excellence:  Insatiable hunger for both "doing the right thing" & "doing things right"
6. Mistake-tolerance: Learn and try again; avoid punitive, fearful, repressive reactions

All of these six corporate cultural traits must be authentic and real if the organization is going to achieve its potential.  An organization or leadership that only pretends, Machiavelli-like,  to care about loyalty to the mission, teachability, accountability, freedom, excellence, and mistake-tolerance may sometimes succeed in the short term.  But longer term, such dishonesty and phoniness will come back to haunt the company. 

Business requires trust---and trust requires "trustworthiness."   It takes integrity to be worthy of trust.  Integrity is about the consistency of what is inside with what is outside, of what is thought, known, and believed with what is said and done.  Think about a couple cognate words:  the mathematical term "integer" refers to a "whole" number.   Racial "integration" is bringing the races into one harmonious whole.   So too, "integrity" is about one-ness, wholeness, harmonious consistency.

Integrity is sometimes used almost as a synonym for ethics itself.  It has a broad reach that includes all of our thought, speech, and action, just as the term "ethics" does.  It is very often the first core value on an organization’s list.   Here I have it late on the list where it reminds us that all of the foregoing must be held consistently if we are to achieve the ultimate mission of the organization.

The Payoff:  Strong Relationships, Simplicity, and Transparency

What’s integrity worth?  Relationships thrive on clarity, transparency, honesty, and reliable follow-through. They are destroyed --- in a moment --- by betrayal and inconsistency.  They take a long time to be rebuilt. 

Integrity also simplifies life:  if we live with integrity we are relieved from having always to be covering our tracks, maintaining a facade, or looking over our shoulder. 

Finally, integrity enables transparency.  Don Tapscott and David Ticoll’s The Naked Corporation argues that in our connected internet age, it has become almost impossible to hide anything.  Those e-mail memos that ridiculed someone will almost certainly come back to haunt their author.  What we do, say, and think is more likely than ever to come out in the open.  Therefore, the authors suggest, companies might as well embrace transparency, divulge their true reality, and live consistently with it.  Integrity is the virtue that makes transparency pay off. 

Leaders need to demonstrate an unshakeable integrity in their own person --- and then demand it of everyone else on the team.  We may not get arrested for our lack of integrity because we may be able to camouflage it for a period of time and it may not strictly speaking be illegal anyway.   But that lack of integrity is the soil in which actions take root that will indeed lead to real disaster in careers and companies.  The presence of integrity is the soil that facilitates growth and organizational excellence.

-David W. Gill
© 2010 David W. Gill.

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• Ask Dr. EthixBiz:Info Protection
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• Gill's Benchmark Ethics:Mistake-Tolerant

Info Protection

Dear Dr. EthixBiz:

In the line of work I am in, our employees have exposure to highly sensitive and highly confidential financial and legal information. This information is sent to our employees via hard copy mail, faxes, and emails.  We have data storage bins and shredders to ensure that this sensitive information will not be exposed outside of our offices. 

However, recently I was walking by the printer and noticed that a printout of a list of names with social security numbers was in the ordinary recycling bin.  Knowing which of my colleagues had been working on this file, I went over and dropped the list on his desk and reminded him gently that he should be careful with them.  He then really shocked me by saying that it was not a big deal, that the regular recycle bin was fine because the material didn’t not have any financial or legal material.  I told him that the paper had names and social security numbers, but he kept insisting that it was not a big deal.  After a few minutes of conversation he said that he would “try” to remember to put anything like that in the secure data recycling box, if it was not too full.

Was this as big a deal as I thought or was I being overly concerned?

-S.M.

Dear S.M.:

You were definitely right to be as concerned and persistent as you were. Thank you. Maybe that was my info! In our era such personal information is very vulnerable and must be carefully protected. Any company that does not protect its sensitive client information must be called on the carpet and vigorously prosecuted in any case of harm to the clients. It can be a horrible experience trying to regain your identity and security from acts of theft and breeches of security.

Your actions were right on, perfect. But it also is important in this case for you to alert management that some additional, clear, convincing, and repeated training on company policy is needed. Some kind of redundancy or better supervision is also important. Don’t just depend on one person to carry out these privacy protection policies --- make sure there is a second responsible person checking to oversee and make sure it all gets done properly and completely.

--Dr. EthixBiz

Mistake-Tolerance & Learning: The Sixth Trait of a Healthy Culture

Learn and try again; avoid punitive, fearful, repressive reactions

Benchmark Ethics is taking ten months to describe ten basic characteristics --- “core values” --- of healthy corporate cultures. The sixth characteristic or value is the habit and inclination to see mistakes as opportunities for learning and as the inevitable accompaniment of a “go-for-broke” culture of freedom and experimentation. If we can tolerate no mistakes, we will build a culture of fear and timidity.

An organization that aims high is not always going to achieve its ambitious goals. Mistakes will be made. Nobody bats 1000. If you step up to the plate you will strike out now and then. My friend Al Erisman tells me Wayne Gretsky once said “You miss on 100% of the shots you don’t attempt.” A sure way to kill off the ambitious attempt at greatness is to punish failure. Punishing honest mistakes stifles creativity. Have you ever noticed that on great sports teams a placekicker who misses is usually consoled and encouraged rather than screamed at by his teammates when he comes off the field? That a missed free throw isn’t followed by silent treatment from teammates or getting benched by the coach? Hand slaps and encouragement instead. Is that how it is in your organization? When your people make a mistake or strike out?

On the other hand, learning from mistakes encourages healthy experimentation and converts negatives into positives. There is a place for mercy and for generosity in business. As we noted earlier on this list, if we want people to step up and be accountable and responsible, we must not overreact and crush them. If we want them to aim high, they may come short and we must not crush them at that moment.

The basic principle of justice and fairness is proportionality: to each his/her due. Accountability and responsibility mean that people stand up and take what they deserve. But the passion for justice, ethics, and excellence must be qualified. If we take a larger view of the context in which business goals are pursued, an honest---but failed---effort at achieving something great should not be viewed in the same way as an effort that failed for lack of preparation or care. Some business leaders have told me that a mistake might be tolerated once, but repeating the same mistake twice is another story. Perhaps it is not a mistake but true negligence the second time around.

Certainly companies with an emphasis on research and new product development (e.g., pharmaceuticals, technology, entertainment) have to embrace this cultural trait. When bad things happen, part of the learning is to put safeguards and back-up systems in place the next time to minimize the impact if something starts to go awry. Such companies must learn to tolerate mistakes made in good faith efforts --- and turn those mistakes into learning experiences. The business payoff is a workforce without fear of trying things that are new or difficult, a workforce that learns from its mistakes rather than living in denial or blame or the likelihood of repeating them.

In philosophy and theology the quest for justice is important but if we get stuck only on justice and fairness, our world, our organization, and our relationships are paralyzed. What the good life and the good organization demand is justice tempered by mercy. Excellence really matters but ironically if we don’t handle the occasional lack of excellence well, we will never get to our goal.

-David W. Gill
© 2010 David W. Gill

Print Version

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Ahead of the Curve: Two Years at Harvard Business School

By Philip Delves Broughton (Penguin, 2008)

Philip Delves Broughton attended Harvard Business School for two years, from 2004 to 2006. What he has done since graduating with his MBA is a mix of journalism and modest entrepreneurship if I understand correctly from his web site (www.philipdelvesbroughton.com ). What he did before the MBA was be born in Bangladesh to Church of England missionaries, be raised in the UK and graduate from Oxford, and work as a journalist for ten years, including a nice gig as Paris bureau-chief for The Daily Telegraph.

Broughton was one of about 900 entering HBS MBA students in fall 2004 (out of 7000 or so applicants). Ahead of the Curve is a wonderfully-written account and interpretation of the experience. So many big business leaders (like Enron's Jeff Skilling) and even political leaders (like President George W. Bush) have been Harvard MBAs. Broughton had a wife, Margret, and, by the time he finished, two small children during the experience. The two years cost him about $175,000. In the big job search at the end, Broughton failed to connect in the usual HBS way with a high paying finance, technology, or business leadership position but he seems to believe the experience was worth it nonetheless.

Broughton gives great descriptions of the diverse international group of students in his class, most of them incredibly driven and ambitious. He describes the curriculum --- challenging financial material, case study methods throughout, first year core, foundational courses, second year elective specializations. His accounts of faculty member personalities, styles, and contributions are wonderful. I especially enjoyed reading about what he calls the "guru" --- strategy expert Michael Porter. Porter's course showed Broughton "that business was not the sole driver of a society and that it was possible to come out the other side, to have an MBA, to put competition at the center of one's beliefs, and yet not be a completely heartless scumbag" (p. 214).

It was interesting to get Broughton's take on the way the Myers-Briggs Temperament Analysis was used along with a personal development exercise called "My Reflected Best Self." Some insight accompanied by modest groaning, chafing, and skepticism.

Broughton's writing is sometimes pretty hilarious: "The company presentations on campus slid me into an even deeper funk. The low point was a presentation by a big publishing company from New York, led by a large woman in a blousy suit emblazoned with orange flowers. She had the complexion of a forty-a-day smoker and a sour smile, and spoke in such a stilted corporate way that I imagined her getting home each day and unleashing her frustration with a string of violent expletives and punches to the kitchen wall.

‘We are passionate about our work,' she said in a listless monotone. ‘Passion affects everything we do.' The fruits of this passion were laid out on a table before us: financial information, educational and business books, some of the most sleep-inducing magazine titles I had ever seen" (p. 211).

Broughton concludes with some personal reflections and recommendations on MBA education. Visit his web site to browse through his substantial collection of reviews in all the major publications. It's a great story about a great and influential institution --- but by no means the only or the best way to get a good MBA education.

---David W. Gill

• Ask Dr. EthixBiz: Passed Over for Promotion
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Passed Over for Promotion

Dear Dr. EthixBiz:

I've worked in my current department since 2005 as an assistant to 17 specialists.  The office is very busy and everyone, including myself, works very hard.  The only advancement opportunity in the department is to a Specialist position when one is vacated.  However, out of the last six advancement opportunities, neither the previous assistant nor myself were promoted.  The specialist position doesn't require experience so anyone with a general clerical background is eligible to apply.  The assistants, on the other hand, do gain quite a bit of technical experience working  alongside the specialists .  They receive excellent performance evaluations, which should give them a  competitive edge over the other applicants, not to mention the significant contribution the assistants make to the success of the team goals throughout the year.  

Unfortunately, the assistantshave not been selected for promotion; interview feedback indicates they lack minor characteristics  and someone else, less qualified, gets the job.  Additionally, the selected candidates were usually given short-term (four month) training opportunities just before the vacant specialist positions were announced, narrowly qualifying them for an interview  and the minimum standards for application for the position.  To add insult to injury, after the assistant trains and evaluates the candidate ‘s  progress during the four month assignment, the hiring manager selects the candidate using the evaluation submitted by the assistant!  Needless to say, the assistants become angry because their hard work has not been, nor likely will be, valued and rewarded.  On the surface the hiring manager may pre-select, but it's difficult to prove.

-KG

Dear KG -

I sympathize with your sense of the unfairness and injustice of it all. It sounds like these hiring decisions come down to a subjective judgment and the hiring manager is somehow blinded to the qualifications of experienced assistants. It is unfair and unethical to discriminate against the assistants in this case.

Complaining, protesting, and venting probably won't help much, unfortunately. One approach would be to (alone or with the other assistants) have a serious sit-down discussion with the hiring manager and any other powers-that-be and express (mildly) your frustration and concern and ask for explicit recommendations on how to strengthen your candidacy for the next round. Another tactic (more difficult) would be to push for some changes in the recruiting and hiring process itself to make it more transparent and fair. More extreme would be to gather evidence and facts and get a labor attorney to advocate your case. The ultimate act is to get your resume ready and be on the hunt for other employment.

What employers need to realize is that if they mess up on these hiring decisions they likely (a) hire less talented, less capable people than they might, (b) contribute to a negative atmosphere in the workplace, (c) could lose some good people, and (d) are exposed to lawsuits and reputational damage.

--Dr. EthixBiz

The Score Takes Care of Itself: My Philosophy of Leadership
Bill Walsh with Steve Jamison and Craig Walsh (Penguin/Portfolio, 2009)

Bill Walsh's 49er football teams with Joe Montana, Jerry Rice, and Ronnie Lott have always been my favorite of all time. Of course it was their on-the-field performance and success that was central to the attraction. But I also loved their off-field "class." And at all points Bill Walsh was the amazing leader – so smart, so calm, so balanced. The screaming maniacs and thugs owning, coaching, or playing for other teams got systematically dismantled by Coach Walsh and the 49ers. Walsh and his protégé/successor George Seifert won five Superbowls in a very short period of time. He was the John Wooden of pro football.

If I can share a personal note: I met Bill Walsh once at Stanford (thanks to my friend in Stanford Athletics, Ron Coverson) and had a great chat about business ethics. He liked my approach and agreed to read my book manuscript, give me some comments, and write a cover blurb. Unfortunately his cancer took a turn for the worse before he was able to finish the task. I had fantasized about a comment from him on my front cover but it was not to be.

Bill Walsh actually worked on his book on leadership over quite a few years, with some starts and stops along the way. His son Craig Walsh and writer Steve Jamison took his unfinished but substantial manuscript and edited it into the present volume.

"The Score Takes Care of Itself" --- what does that mean? Walsh talks incessantly about his "Standard of Performance" which is about how individuals and the organization operate. Walsh took over a team in total disarray with several losing seasons. His first year as coach the 49ers still had a terrible losing record but profound changes had been instituted that led to a Superbowl victory within a couple years and then to a consistently winning team. In business, the point is the same: build a quality operation and the results will come.

The Score Takes Care of Itself is divided into five parts, subdivided into sections one to five pages in length. In between the major sections are reflections on Walsh by Joe Montana, Randy Cross, John McVay, Mike White and others. Scattered throughout the book Walsh comments on Paul Brown, Al Davis, Mike Holmgren and other big football names. He shares interesting insights into Joe Montana, Steve Young, Jerry Rice, Eddie DeBartolo, and other people we 49er Faithful know well.

There is a kind of randomness to the book – it's more like reading multiple, valuable insights, than being confronted by a careful, logical argument. But Walsh's insights are great. I continually scribbled and underlined on every page. "The ability to help people around me self-actualize their goals underlines the single aspect of my abilities and the label that I value most --- teacher" (p. 3). "A leadership philosophy has as much to do with core values, principles, and ideals as with blocking, tackling, and passing. While I prized preparation, planning, precision, and poise, I also knew that organizational ethics were crucial to ultimate and ongoing success" (p. 15). Right on, Coach Walsh. Walsh believed in "respect within the organization for one another. I would tolerate no caste systems, no assumption of superiority by any coaches, players, or other personnel" (p. 19). These are just a few samples of the comments, definitions, and lists which appear throughout the book. It's all good.

Throughout The Score Takes Care of Itself Bill Walsh reveals a lot of his own feelings, the highs and lows he experienced, the mistakes he made as well as the successes he enjoyed. It all becomes not just illuminating but endearing and we feel his absence, struck down as he was by his illness. Even a Dallas Cowboy fan would enjoy and benefit from this book. That's how good it is.

—David W. Gill

Freedom: The Fourth Trait of a Healthy Culture
Creative risk-taking encouraged; no micro-managing control freaks

We are reflecting on corporate culture in these monthly Benchmark Ethics columns. What are the basic traits that make for an organization that will excel and be ethical at the same time? What characteristics and habits will enable the company to succeed in its mission and fulfill its vision? So far, we have reflected on the importance of (1) loyalty --- to the mission and to the team, (2) openness --- to ideas, people, and even criticism, and (3) accountability and responsibility.

Now, the fourth proposed trait is freedom. Organizational cultural freedom is fundamentally about managers and organizations giving up some control. It is about allowing opportunity for risk-taking, about giving employees space to innovate. Freedom, in this context, has to do with giving up, or at least sharing, control. Joe Caruso's The Power of Losing Control (Penguin/Gotham Books, 2003) understands how important this is in organizations.

Control Freaks & Micro-Managers

This is a tough assignment much of the time. Last month we reflected on "responsibility" --- part of which is the willingness to step up and be accountable for something. Leadership means taking charge in some way. It is about drawing people in, weaving them into the vision, putting them in places on the team where they will flourish, and holding them accountable. Holding back when an urgent task needs to be done, shying away from responsibility and challenge, inability to make a decision . . . these are not what leaders do.

But there is a vice here, a counterpart to the virtue of freedom. The vice is micro-management, "control-freakism." The problem is when we don't just take overall charge of a task and project --- we try to take charge of every little piece of that process. We have to have input on everything. Our idea has to decide everything. We watch constantly over others' shoulders and drive them nuts.

Can't we let things ferment or perk along without our constant hands-on direction?

Freedom, Trust, and Creativity

Control freaks kill trust in people and organizations. If we can't trust and let go, those under our control will shut down --- or flee at the first opportunity. How do you feel when you are under constant surveillance? How do you feel when you are not really trusted to have an idea or make a decision or represent the firm?

When we are trusted and set free most of us respond by being more loyal than ever. When we are distrusted and controlled we tend to pull away and resist. This seems hardwired in some way into human nature.

Of course, there is a degree of risk that comes with granting freedom, letting go, and trusting others. But if we make sure that our loyalty to the mission and the team is deep and intense (the first trait of a healthy culture) and if we build a culture of responsibility and accountability (the third trait) --- then we can embrace openness (the second trait) and freedom (the fourth trait).

We can't be healthy with an excessive, reckless risk-taking culture --- any more than with a stifling, fearful control-freak culture. The health lies in a culture of freedom---within appropriate limits, i.e., the mission and vision. However we use our freedom, it must align with the mission. Everything is not up for grabs; we stay anchored in loyalty to the core mission and to our team.

In the way they systematically urge employees to spend part of every week following their own creative intuitions, 3M has exemplified openness and freedom as well as any company. The old Hewlett-Packard with its flexible hours and other policies was also a culture of freedom in the sense we are using it here.

Business leaders will create healthier organizations if they will keep this value in their top ten list and actively live by it---disciplining themselves to not intervene immediately to straighten everyone and everything out. Give your people some space.

---David W. Gill

© 2009 David W. Gill.

• Ask Dr. EthixBiz: Hazardous Duty
• EthixBiz Review: Capitalism: A Love Story
• Gill's Benchmark Ethics: Accountable & Responsible
  
  

Hazardous Duty . . . and Pay?

Dear Dr. EthixBiz:

In 2005, with Hurricane Katrina headed for Louisiana, my company asked for volunteers willing to ride out the storm at the company's refinery in the St. Charles Parrish just outside New Orleans. The refinery would be completely shut down, but the idea was that our small group could provide some level of post-hurricane security and begin doing what they could to start to assess damage and try to marshal resources to clean-up, repair, and restart the plant. A small band of volunteers from across the plant's organization agreed to stay and created its camp in the most secure building on the site. After a very tense and stressful night, the group emerged unscathed to begin their post-storm assessments.

Although none of the employees publicly faulted the company for making the request, some employees stated that they would be unwilling to volunteer for such duty again. Was this a fair, responsible, and ethical request to make? Did the company exploit its position of power in the employer/employee relationship by making such a request? What responsibility does a company have when considering similar situations for assessing risk in its own and its employees' decisions?

-M

Dear M-

As you know there are lots of jobs in which physical danger goes with the territory: fire fighters, police, bomb squads, medical workers, and so on. There have been times when a military draft has been in place and participation in hazardous duty was not exactly voluntary. And we might also think of mine-workers or other dangerous jobs where the circumstances of life and education left little choice to individuals about whether to participate.

In your case, this was not part of your job description or expectation. But as long as your participation was informed (you knew the danger) and you had a choice to go or not, we are on the right track so far. The company should do all it can to make sure you are well-equipped and as safe as possible --- and it should compensate you somehow for your extra, dangerous duty. They should not place undue pressure on you to take this assignment (the CEO should send himself/herself first if need be) or fail to compensate you for what you have done. And, yes, this shouldn't take the company by surprise again: it should have a well-developed plan for such emergency circumstances and not have to make any surprise requests in the future. And bravo to you guys for stepping up to a dangerous and difficult task.

--Dr. EthixBiz

Capitalism: A Love Story
A film directed by Michael Moore (2009)

OK, this is not a book. It's my first film review. Next month I'll come back to a book (the late 49er Coach Bill Walsh's great new book on Leadership).

I confess up front that I like Michael Moore. I think he is a national treasure. I should say that I feel the same way about Pat Buchanan, for the same reasons. They both care deeply about the world we live in. They both have bold, sometimes crazy, often overstated, things to say, and they say them unafraid, to power. They have a sense of humor.

We don't watch Michael Moore or listen to Pat Buchanan to get a dispassionate, even handed, on-the-one-hand, on-the-other-hand analysis. They kick butt trying to wake us up to see what the emperor is wearing (or not).

Unfortunately, Michael Moore's latest film is unlikely to have much positive impact. His hard core fans will enjoy it. The know-nothing part of the opposition will not listen. The thoughtful part of the opposition, those who could actually have some impact on the problems against which he rages, will find it too easy to poke holes in and dismiss the overall case.

Moore revisits the devastation of Flint, Michigan, where he grew up and rails against the capitalist system; but he doesn't explain how Toyota's innovation and quality --- or American labor union intransigence --- play roles in that decline. He visits home owners getting evicted from their homes and a rip-off, corrupt for-profit youth detention center in Pennsylvania. But he doesn't explore the part played by bad consumer choices or give enough credit to the system for stopping the PA crooks.

I do break into an irrepressible smirk while watching this loveable big doofus in his baseball hat driving an armored car up to Goldman-Sachs and asking for our money back --- or wrapping "crime scene" yellow tape around the New York Stock Exchange building. And I do get ticked off by the "dead peasant" insurance practice of a company extracting a big payoff when a female employee dies of cancer. And I loved FDR's rarely seen speech calling for a worker/citizen bill of rights just before he died.

But like all thoughtful critics have responded to this film, we have to ask Michael Moore: "What's the alternative?" Moore says "democracy." He doesn't say "socialism" or "communism" --- there is no way that a ban on private property and enterprise and an economy run by central planning bureaus would be the answer. Democracy actually is the answer --- a democratic marketplace where people can vote with their dollars. Personally, I don't like any "isms" --- capitalism and socialism included; "isms" are ideologies, doctrines, that are often used to paint pictures of ideal systems. But we live in reality, not in a dream. What we need are pragmatic responses for our particular context. We need to be firm and clear about our values, but an ideology will get in the way.

It's not really "capitalism" that is the problem (since it only exists in our minds). It is a lack of personal responsibility, a lack of accountability to others whose lives we affect, sometimes a lack of freedom (whether suppressed by governments or monopolies), a lack of skills and education, a lack of transparency and information, a lack of a good work ethic, a lack of a sense of community and neighborhood, a lack of balance and an excess of unaccountable, concentrated power.

If our chaotic "capitalism" were all bad, how do we explain the greatness of companies like Southwest Airlines, Costco, In-n-Out Burgers, Patagonia, and Umpqua Bank, to name just a few. Much as I enjoy Michael Moore's act, if we really want change out there I think it has a much better chance of happening by highlighting the positive examples than by damning the bad ones.

—David W. Gill

Accountable & Responsible: The Third Trait of a Healthy Corporate Culture

Accountability & Responsibility
All individuals & teams stand up; no blaming, no excuses

We are reflecting on what makes for a healthy corporate/business culture. In September I argued that “Loyalty” was the first characteristic. What I meant was pit-bull tenacity in pursuit of the mission and vision of the company, its purpose for existing --- and constancy in our commitments to our team-members (rather than back-stabbing and betrayal). We noted that “loyalty” does not mean “unwillingness to let go of our old ways of doing business or our underperforming colleagues.”

In October we looked at “Openness, Teachability, and Humility” as the second characteristic. This follows from loyalty. Once you get your core commitments straight and strong, the counterpart is to build a culture that is radically open to new ideas, new people, and to criticism. Our security lies in the anchors to which we are loyal: purpose and team. Once that anchor is set, radical openness should follow. Arrogance --- thinking we know everything --- narrowness --- and fear of criticism will take down any organization.

The third characteristic is the combination of Accountability and Responsibility. This builds on the previous trait in that with openness comes a “need to learn” and even a “need for improvement or correction.” And wherever there is a need or a weakness, there is an opportunity for denial, blame, and excuses. A healthy culture is one where we accept personal responsibility and where we hold ourselves and each other accountable for our actions (including our weaknesses). A culture of irresponsibility breeds dissension and distrust among colleagues and customers and long-term disaster and loss for the company.

Responsibility literally means “answerability” or “accountability.” The responsible party is the one deserving praise or blame for what happens. A responsible person (or company) willingly accepts accountability, agrees to care for something, and can be counted upon to do what they say they will. A culture of responsibility and accountability must be based, in turn, on four things: knowledge, freedom, forgiveness, and relationship.

First, if we want people and organizations to accept responsibility, they must be given access to the knowledge required for wise decisions. That was implied in the previous characteristic about teachability. You can’t be held responsible for what you don’t or can’t know. Responsibility requires knowledge.

Second, holding people responsible without their having freedom to choose and to act is a sham and a farce—like a tyrant who hangs some poor souls, blaming them for the bad weather. If we ask for responsibility, we must give freedom and opportunity (the next trait on this list; come back in December).

Third, responsibility and accountability won’t work without forgiveness and a culture that learns from mistakes rather than punishing them. People will not admit fault, will not take responsibility if there is no forgiveness, no margin for error, no opportunity for growth. This trait also comes up later on this list.

Fourth, responsibility entails a “response” to someone: a meaningful set of relationships. We can be accountable to others because our lives and interests are interdependent and we know it and experience it is a positive way. We live and work with others who share the consequences of our failure as well as success. Accountability puts the emphasis on this relational context of responsibility. We hold each other accountable. No power or authority is safe without accountability; no accountability will produce responsibility unless the relationship is clear, fair, and constructive. This relational trait comes up eighth on this list.

It is not easy for most of us to swallow our pride and say “that was my fault” or “I’m going to need some help on this.” A culture of accountability and responsibility has to start at the top. Nobody is fooled by CEOs --- or anyone else --- pretending to be all and know all. A powerful cynicism spreads through such company cultures. So from the top down, let’s not just be humble and open but also accountable and responsible.

-David W. Gill

© 2009 David W. Gill

• Ask Dr. EthixBiz: Medical Product Pricing
• EthixBiz Review: Shop Class as Soul Craft
• Gill's Benchmark Ethics: Open & Teachable Culture
  

• Ask Dr. EthixBiz: Deductible Payoffs
• EthixBiz Review: The Fountainhead
• Gill's Benchmark Ethics: Loyalty

Deductible Sex Payoffs?

Dear Dr. EthixBiz:

While completing the financial statements of a client, to be used by the Partner of my firm to prepare that client's tax return, I noticed that one of the staff nurses received an unusual mid-year bonus that was roughly 100% of her regular pay.  The firm I worked for also cut payroll checks for the client, so I asked my peers about it because I was new to the firm and the client. It turned out that the nurse had requested a bonus from the doctor in exchange for not telling his wife that they were more than co-workers.  The client wanted to deduct the "expense" so my firm grossed up the check for payroll taxes, cut a check to the nurse for an even amount, and the doctor paid the employer portion of the payroll taxes.  The partner of the firm explained to me that it was "ok" because employee and employer payroll taxes were paid, the company was not publically held, and the client can pay his employees any amount he wants.   

- Lisa

Dear Lisa -

The first issue is whether paying off the nurse is (1) a legitimately deductible business expense or (2) an employee bonus for her performance (overtime services rendered?) or (3) a personal expenditure by the client rather than a business-related expense. Seems pretty clearly the last option. You have acted ethically and responsibly by raising the issue. Your boss has decided to help the client use his company books to cover up this personal transaction. Are there other partners in your firm who approved this activity or is your boss endangering his own partners by his choices here? If the leaders and owners of the client's firm and of your firm are ok with this approach, if your role is clearly defined as limited to completing financial statements and not participating further in the questionable use made of those statements, you may be ok to let it pass for now. But I would check with some respected, veteran accounting professionals to make sure you are in the clear legally and ethically.

—Dr. EthixBiz

The Fountainhead by Ayn Rand
Penguin, 1943. Xiii, 736 pages.

I am not drawn to reading novels but when I have indulged it has usually been Upton Sinclair, Charles Dickens, or others who have painted a bleak picture of corrupt business leaders. So I promised that during my summer 2009 vacation I would read something more business positive: the famous novel The Fountainhead, published in 1943 by Russian immigrant Ayn Rand (1905 – 1982). The Fountainhead is a kind of cult classic and has sold more than 6.5 million copies. It was made into a movie in 1949 starring Gary Cooper with Ayn Rand herself writing the screenplay.

The novel centers on an uncompromising young architect named Howard Roark. When we meet him in chapter one he has just been expelled by his university school of architecture for his refusal to respect the architectural traditions and canons of the field. Throughout the seven hundred pages, Roark is the self-assured, uncompromising, heroic, creative, individualist. He designs buildings in faithfulness to his own creative vision of what is appropriate to the location and proposed use. He is a modernist with no interest in imitation, tradition, or approval by others, including the leaders in his field. His critics and competitors are threatened and offended by his attitude as well as his genius.

Over against Roark are several other key personalities. Peter Keating is a contemporary who succeeds by constantly playing to the crowd without an original thought in his head and incapable of standing up to anybody around him. He secretly asks (and receives) some brilliant design help from Roark without acknowledging its source and engaging in betrayals of Roark whenever it suits his needs. Roark's response is more or less silent and arrogant lack of concern over what this wimp does or says. Ellsworth Toohey is a manipulative newspaper columnist who pursues his self-interest by using others but always with the rhetoric of community and concern for others and for tradition. Keating is a gutless wimp; Toohey is a conniving, self-aware rip-off artist. Gail Wynand is the up-from-poverty success story as publisher of a newspaper which bases its popularity on exploitative, sensationalist, or gossipy, yellow journalism. He actually comes to admire Roark and builds a friendship only to draw back from authentic individualism in the end, in order to save his business from going under.

The most interesting character, because most fluid and developmentally dynamic, is Dominique Francon, drawn to Roark but unable to freely construct a life with him until the very end of the book. You can't help but think that Ayn Rand is imagining herself as Dominique as she writes the book. All of Rand's characters come close to being almost cartoonish caricatures or oversimplified stereotypes. And yet she writes about them with such insight and purpose that we put up with the excesses.

The Fountainhead is a very philosophical book with extended monologues and dialogues about freedom, tradition, choice, and other deeply philosophical topics. For the most part the narrative moves along in an interesting way and the long philosophical passages do not derail the reader.

Rand's first twenty years or so were spent in Russia as the communists took over. Undoubtedly that negative experience of collectivism and its suppression of individual freedom gave Ayn Rand a lifelong foe. She did embrace the atheism and scientific rationalism of Marxism but not the political and economic ideology. Two quotations from Ayn Rand explain her core commitments: "I am not primarily an advocate of capitalism, but of egoism; and I am not primarily an advocate of egoism, but of reason. If one recognizes the supremacy of reason and applies it consistently, all the rest follows" (The Objectivist, Sept 1971). "The essence of Objectivism is the concept of man as a heroic being, with his own happiness as the moral purpose of his life, with productive achievement as his noblest activity, and reason as his only absolute."

Rand admired a great deal about Friedrich Nietzsche whose atheism and individualistic "will to power" have much in common with her heroic individualism; she did repudiate Nietzsche's post-modern irrationalism in the end, preferring to believe in a more universally accessible rationality and an objective reality. Rand dismisses "second-handers" — those who attempt to live through others, placing others above the self. She loathes all forms of altruism and notions of sacrifice for others.

Rand's message has some very positive value, in my opinion. People should not just play to the crowd, manipulate, and use others but boldly express their own gifts and visions in an authentic way. Entrepreneurship is unleashed by this book. But Rand's description and dismissal of concern for others and for tradition is very weak. She views concern for others as weakness but there is no reason that concern for others should deprive anyone of heroism or creativity. Human beings are herd animals and our welfare is bound up with that of others. Rand is right to reject the pathetic weakness and manipulation of Keating, Toohey, and Wynand. But they by no means represent what collaboration, teamwork, or care for others are really about. And as admirable as Roark may be, he is ultimately a very deformed and diminished individual who is incapable of constructive relationships with others.

Dominique ultimately comes across as a pretty pathetic, frequently cold, lost soul as well. Rand's world has no children, no love, no forgiveness, no celebration. It ends with Dominique high on a skyscraper construction project looking up admiringly at her angular, heroic, self-absorbed, uber-mensch outlined against the sky.

—David W. Gill

Loyalty: The First Trait of a Healthy Corporate Culture

Tenaciously preserve the core mission & vision; hang in there with the team; no traitors

While every company needs to work through its own distinctive understanding of the kind of corporate culture it needs if it hopes to excel and succeed in accomplishing its mission, the fact is that there are some common themes among many great organizations. How can this be? As human beings we do have some common characteristics as a species and it should be no surprise that alongside our vast diversity we find some commonalities.

So think of this essay and the nine more to come as a sort of working "hypothesis" about common traits of ethically healthy cultures. You can't simply copy or replicate these ten traits or core values for your organization; the process of identifying and embedding core values in your company must be customized for your context and setting. But these ideas may help you as your team works through its culture and core values project.

I want to propose that loyalty be at the top of the list of core values of ethically healthy corporate cultures. Loyalty is the capacity and the inclination to remain faithful and steadfast, the disposition to stay committed, to hang in there, to not "bail out" or disappear even when things are tough. It is not simplistic, unquestioning conservatism---thoughtlessly or fearfully clinging to traditional ways. Loyalty needs to be given to the right things---two things actually---to our core mission/vision and to our team.

Loyalty to the Mission and Vision

Jim Collins and Jerry Porras have presented a compelling case for the first aspect: loyalty to the mission. They call it "preserving the core" ( Built to Last: Successful Habits of Visionary Companies, 1994) Great, enduringly successful companies don't wonder what their purpose is and change fundamental direction from year to year. They are ferocious in staying anchored to their "core ideology." Stimulating creativity, innovation, and risk-taking without first and then simultaneously strengthening this core, they argue, is a recipe for disaster. Nikos Mourkogiannis's Purpose: The Starting Point of Great Companies (2006) and Richard R. Ellsworth's Leading With Purpose (2002) powerfully underscore this same message: it all begins with loyalty to the right mission, vision, and purpose.

How do we achieve a culture of loyalty to the mission and vision? On a general level, try to make sure that the company's mission aligns with the basic human drives (1) to create and innovate and (2) to help others and fix what is broken. If our company mission taps into these elemental human characteristics it will be much more likely to elicit loyalty and passion.

One a more specific level, be very clear about the company mission and vision and then make sure that there is an overlap or alignment between the company mission and that of our employees. Employees need to be screened and hired for mission compatibility. Be very clear about the company mission and vision from day one; ask questions to find out the mission and vision of a prospective employee. Make sure they have a broad overlap or don't make the hire.

Loyalty to the Team

Loyalty is also about personal relationships on the team. (See Dennis C. McCarthy, The Loyalty Link: How Loyal Employees Create Loyal Customers, 1997). Nothing will undermine good ethics and excellent business faster than back-stabbing and disloyalty among the team. We don't have to like everything about each other but we do need to build relational loyalty or we will be severely impaired.

It used to drive me crazy when my dean (back in the late 1980s) would threaten to quit my administration whenever things got tough for him. I see now that after the second episode I should have helped him pack and hit the road. His disloyalty---a deeply embedded character trait---was extremely destructive all the years he worked at that institution (despite his other stellar abilities). We can learn something from the priority the Army and Marines give to this value of loyalty. If you are expecting to be in combat, loyalty to mission and team are critical. Without it, we are just not going to be competitive. The SAS software firm (with a brilliant record of success and a 97% employee annual retention rate) and Southwest Airlines (profitable thirty-five years in a row, until the past year recession, the only major airline that knows how) are two shining examples of corporate cultures that stress the kind of loyalty I am talking about.

How do we build such team loyalty? Certainly we need to be careful about the kind of people we hire; make sure these are team players and not narcissistic individual egomaniacs. Align personal interests and rewards with team interests and rewards. Recognize and reward team loyalty whenever you see it if you want people to keep showing it. Intervene quickly and make the necessary changes when you see team breakdowns. Do not tolerate disloyalty and betrayal.

None of this means that we keep people on forever who are not performing or that we are blockheaded about re-tooling aspects of our mission and vision. This is one of the traits, the first one, but not the whole list. But we will be paralyzed and undone if we don't have some tenacity to our core mission and some loyalty to our team.

--David W. Gill

© 2009 David W. Gill.

• Ask Dr. EthixBiz: Sexual Harassment
• EthixBiz Review: Performance with High Integrity
• Gill's Benchmark Ethics: Single Payer, Multiple Provider: Health & Education

Sexual Harassment Responses

Dear Dr. EthixBiz:

Earlier in my career I worked for a residential real estate development company. My job in project management required me to visit many of our jobsites to assess work in process. Our projects were located throughout the western part of the US, and often required overnight trips. My manager, the VP of construction, also traveled at the same time to these locations for business reasons. And what seemed to start out as invitations to dinner or sharing rides to the jobsites out of professional courtesy and convenience (because we stayed in the same hotel or had similar schedules), turned into him making unwanted advances toward me. Initially I tried to politely ignore them but they became more overt. At this point I did directly and repeatedly refuse---even though he threatened me with poor performance reviews and even the loss of my job among other things. For unrelated reasons there were management changes, and he was subsequently laid off. But I had never reported the incidents during the time they occurred, or after he had left the company. I liked my job and wanted to keep it. I was young (and  naive), and at the time thought I should try to handle it myself. 

While my boss's behavior was obviously unethical, I have wondered since then if my not reporting it was also wrong. That is, was doing nothing 'official' also ethically wrong?

-Ann-Helen

Dear Dr. EthixBiz:

As a Sales Director I was meeting with one of my largest national accounts to review the upcoming contract year. In attendance at the meeting were the Vice Presidents of both respective companies, and several other Sales Directors from around the country. After the sales meeting, we all went out to dinner to celebrate the big deal we had finalized that afternoon. During dinner, the customer began drinking heavily, and started verbally and sexually harassing me (I happened to be the only female at the dinner). He crudely implied that the reason I was able to increase business with his company every year was not because I was intelligent and did a good job handling their account, but because I slept with his supply managers. I made a choice at the time not to speak up for myself, partly because I was embarrassed and did not want to cause a scene, and also because I did not want to jeopardize the relationship with what was our company's largest customer.

The Vice-President and several other of my male counterparts witnessed this but no one said anything to the out-of-line customer. Later my VP told me "It's a good thing you can take care of yourself!"  I am still troubled by what happened (and didn't happen) at this meeting.

-Anonymous

Dear Ann-Helen & Anonymous-

You would think that with all the mandatory sexual harassment training sessions that take place these days we would be beyond the scenarios you describe. Both of these perpetrators deserve to be fired for going way over the line. This is not "grey area" stuff but an outrageous assault. I admire both of you for your personal toughness and persistence --- as well as your business accomplishments which are obvious in each case --- but you are right to be dissatisfied with what happened.

Ann-Helen --- you should not have to relive the abuse you took, but your later reflections are on target I think: not reporting a harasser can leave others exposed to his continuing predatory behavior. Companies must make very clear their standards and expectations for respectful communication and behavior. They must create and publicize multiple, safe, reporting channels and encourage all their people to use them whenever those standards are violated. From the top on down, your company must insist on professional behavior as a condition for any employment, to say nothing of achieving management responsibility.

Anonymous --- your management colleagues need to be called on the carpet for failing to stand up to the creepy customer. They have no excuse and should be reprimanded and disciplined, perhaps even fired, for enabling without objection this verbal assault on you. It is a total outrage. They should have spoken up when the comments started. If they continued, they should have walked out with you and gone on to an even better restaurant to recover! The insolent representative of your customer company should be reported back to his management by your senior management (do they know what this guy is doing?).

Final note: companies (and individuals) need to set, communicate, and enforce clear boundaries on what is unacceptable speech and behavior. No question. But as long as companies only pursue a reactive, damage-control strategy (detect and punish), the disease will continue. This is why Dr. EthixBiz's crusade is always focused on "mission-control," proactive, holistic, culture-building strategies. Embed the core value of R-E-S-P-E-C-T at every level of the company culture, in all of its systems and processes, in all of its hiring, evaluation, compensation, and promotion. Get the wrong people off the bus. Put a model of respect in the driver's seat.

—Dr. EthixBiz
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• Ask Dr. EthixBiz: Disclose Product Origin Info?
• EthixBiz Review: How the Mighty Fall by Jim Collins
• Gill's Benchmark Ethics: Nobody's Perfect

Disclose Product Origin Info?

Dear Dr. EthixBiz:

I produce a pet toy (getpawpets.com ) in China at a fair trade certified factory with no child labor etc. I use an agent/middle man who has been working with the same factory for over 12 years now and I pay almost $3.00 extra per unit to make sure that the toys are made under safe circumstances, using safe practices, and are of high quality. Consumers, however, often do not differentiate between different products made in China, but quite simply assume that if it was made in China it is bad or dangerous. Because of this misconception I decided to put the agent/middle man's company name on the tag as the manufacturer rather than list the Chinese factory and say "made in China." The tags meet all legal requirements in all 50 states and contain no falsehoods. The factory's certification number and "CN" (which stands for China) is on the tag but it does not explicitly say "made in China." This was a dilemma for me but I thought long and hard about it and decided not to brand my product with the negative "made in China" association because I have taken all of the necessary steps to insure that the fears and problems associated with Chinese products do not apply to my product and so I should not have to suffer the consequences of products made in China that do have safely and ethics issues. Do you think I made the right choices here?

-Ian White

Dear Ian-

Actually I think you did just the right thing here. You are certainly respecting the intent of labeling laws in that you are protecting your customers from harm. And you are not violating the form of the law in any of the fifty states. It would be wrong if you formally complied with a law or regulation but evaded the purpose of that law. You have provided labeling information with the middle man's identity and the factory number and country code --- plenty for anyone who wants to investigate further. Finally, I assume that any of your customers could question you further and you could then give them the full story and both acknowledge the China factory origins and assure them of the product's safety. I don't see any reason why you should, in this case, invite unwarranted negative speculation about your product.

--Dr. EthixBiz

Dr. EthixBiz strongly recommends that all business managers and leaders commit to reading one book per month throughout their careers. New material, classics, novels, histories . . . read something that broadens and deepens your thinking.

How the Mighty Fall and Why Some Companies Never Give In by Jim Collins
New York: HarperCollins, 2009. 222 pages.

Jim Collins is the co-author (with Jerry Porras) of Built to Last (1994) and author of Good to Great (2001), two of the best-selling management books of the past fifteen years, and deservedly so. Both books were based on massive studies of high performing companies and their chief competitors in an attempt to identify the factors that made (and kept) them great. Collins promises a major new book on "what it takes to endure and prevail when the world around you spins out of control" (How the Mighty Fall, p. xiii).

However, Collins decided to explore why some of the great companies lauded in his two earlier books have fallen. Two prominent examples are Circuit City and Fannie Mae, both praised as Good to Great companies by Collins in 2001. Circuit City is bankrupt and dead. Fannie Mae (see my Benchmark Ethics from last month, June 2009) went from "Good to Great to Garbage." Many others on the list have had very rocky rides since starring in Collins's two books. What gives?

Collins partially succeeds in arguing "Why the fall of previously great companies does not negate prior research" (p. 4). But he only gets a C- on his explanation because one of the characteristics he highlights is "enduring greatness" . . . "built to last." Why didn't they endure? Why didn't they last? Obviously, Collins is missing something. But that doesn't mean his work is without value. I still find his insights extremely helpful – even if, like everything, they are flawed and incomplete. As I have often written and said, the critical flaw in Collins's thinking concerns his ambivalence about the content of a corporate mission and core values. He is spot on in showing how critical is this core ideology – but wrong to say it doesn't matter what the content of that ideology is. My argument is that the content must tap into the core, positive traits of what it means to be human (both individually and in community) --- creating good (useful and beautiful) things and fixing/healing/helping broken and bad things, to put it crudely and simply.

And of course, I agree with Collins that even the best organized and led organizations can get knocked down by market forces, political change, climate change, and other factors.

Collins takes a look at the damage strewn about in today's economy and identifies five stages of decline in the fall of the mighty: (1) hubris born of success (arrogance, entitlement), (2) undisciplined pursuit of more (overreaching, obsessed with growth), (3) denial of risk and peril (blaming, refusal to face facts), (4) grasping for salvation (panic, desperation, silver bullets and star CEO recruits), (5) capitulation to irrelevance or death. Collins closes with some hope stories: Anne Mulcahy's Xerox turnaround, Winston Churchill's rebirth as a leader, Lord Shackleton's amazing journey, IBM's recovery under Lou Gerstner, similar recoveries at Nucor and Nordstrom. These are some of the best pages in the book. Appendix 3 discusses Fannie Mae's fall through the five stages.

There is absolutely nothing original or startling about Collins's description of the five stages of failure. Every philosopher, theologian, and social analyst worth anything in human history could have (and usually has) written this analysis: first you get arrogant, then you overreach (especially for personal fame and gain), then you live in denial and surround yourself with sycophants and "yes-men," then you see the grim reaper looming ahead and lurch around grabbing for salvation and magic cures, then you die. But the fact that it is classic wisdom doesn't mean everybody knows it. They don't. So we can only welcome Collins's new book and hope it gets a wide reading.

—David W. Gill

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Nobody's Perfect , Nobody's All Bad, Therefore . . .

Nothing like MBA alumni to keep the old professor on his toes Four of them e-mailed me recently. Jocelyn Neudecker sent me the item last month about her company Pfizer's MAINTAIN program that helps newly unemployed Americans and financially needy families without prescription coverage continue to get their Pfizer medicine free of charge for up to 12 months or until they become insured, This month it was MBA Alison Cristando of Sanofi-Aventis who alerted me to Sanofi-Aventis's decision to donate one hundred million doses of vaccine against the pandemic H1N1 2009 virus to the World Health Organization. Bravo! I said last month, and I repeat this month.

The significance here is that I have reviewed some very serious and thoroughly-documented critiques of the pharmaceutical industry (e.g., Our Daily Meds by Melody Petersen and The Truth About the Drug Companies by Marcia Angell). The Merck and Johnson & Johnson-type benevolent pharma giants of the past (cf. Built to Last on Merck) seem to be long gone. We shudder to see that Roche has taken over Genentech, one of the bright spots on the horizon. But you've got to cheer what Pfizer and Sanofi-Aventis have done this past month.

Similarly, MBAs Elsie Wolfe and Lauren Woerner of Safeway notified me that their firm has been listed as one of the 99 most ethical companies of 2009 by Ethisphere which defines itself as "The World's Most Recognized Name in Business Ethics and Anti-Corruption." Oh? Their six criteria are: (1) corporate citizenship and responsibility (20%), (2) corporate governance (10%), (3) innovation that contributes to public well-being (15%), (4) industry leadership (5%), (5) executive leadership and tone from the top (15%), legal, regulatory, and reputation track record (20%), and (6) internal systems and ethics/compliance programs (15%). Important stuff and two cheers for Safeway on winning this recognition.

Safeway's past gaffs on executive compensation (vs. CEO performance as evaluated by executive compensation watchdog organizations), cleanliness of stores (reported on 20/20), injecting pink food coloring into salmon to make it look fresher, and labor relations have not put the company in a very ethical light. Recently and locally, Safeway's absolute refusal to yield to massive grass roots opposition to a monster mega-grocery store they want to impose on my own neighborhood is a shameful attempt at corporate bullying that doesn't have much hope of ending well. On the other hand, Safeway's HR practices regarding diversity, hiring the mentally disabled to bag groceries, etc., are exemplary by any standard. So we cheer Safeway's ethics award (and HR practices!).

American Apparel, Southwest, Whole Foods, Toyota

Let's be clear on this: even the ethically exemplary companies have their gaffs and failures. I love how American Apparel has shown that it is possible to manufacture and retail clothing in the USA and pay decent wages (well above the minimum) and health care benefits. American Apparel is an unbelievable success story in the face of massive textile industry job migrations to cheap labor markets around the world. And yet --- CEO Dov Charney has been subject to numerous sexual harassment complaints and lawsuits; wake up Dov! And this month American Apparel is on notice from US Immigration and Customs that 1800 of its 5000 workers in Los Angeles do not have the right work permits and, along with a $150,000 fine, this third of their workforce may need to be fired. Apparently all the workers presented documents but many were forgeries and fakes. Such a progressive, ethical guy in so many ways --- but how will CEO Charney and his company deal with these challenges and do the right thing?

And I'm a huge fan of Southwest Airlines: great customer service, marvelous place to work, great leadership from Herb Kelleher, Colleen Barrett, Gary Kelly and others (no compensation scandal and excess), exemplary relations with and among unions (SW is the most heavily unionized of all the airline companies). And profitable for 36 years in a row until this past year's economic tsunami that has blasted everyone. No other airline compares. And yet --- Southwest got called on the carpet in an embarrassing airplane inspection failure last year. Nobody's perfect.

Few companies are as intentionally ethical and responsible and idealistic as Whole Foods. One visit to their web site will show you how seriously they take it all. Exemplary leadership and compensation practices at the top by founder/CEO John Mackey --- until he messed it up by his juvenile game-playing under a pseudonym trying to blog down the reputation and value of Wild Oats, a healthy food market he wanted Whole Foods to take over. And as much as I admire Whole Foods, the Wild Oats takeover was not the first bully-move that cost consumers. Their takeover of Boston-based Fresh Fields replaced a much better grocery store chain with worse customer service and prices that warranted the "Whole Paycheck" or "Whole Foods Markup" jibes often heard. Anecdotally, I find that when I ask Whole Foods employees "how do you like working here?" I often get distinctly unenthusiastic responses if not griping. (By contrast, it is hard to find disgruntled employees of Southwest or In-n-Out Burgers to take a couple other examples).

And finally, the much-praised and admired Toyota company. Amazing quality, innovation, culture, cost structure, employee care, and success. Absolutely puts to shame the American Big Three along with Volvo, SAAB, Volkswagen and most other auto companies. And Toyota is manufacturing cars and trucks in the USA while Detroit is closing factories and manufacturing their mostly dreadful products overseas. Bad for customers, bad for American workers. And yet --- when congress was considering raising fuel economy standards a year or so ago, Toyota joined the Big Three in lobbying against better standards in order to continue making a few bucks from its bigger gas guzzlers. Nobody's perfect!

Nobody's Perfect, Nobody's All Bad, Therefore . . .

So what is the bottom line, the lesson, here?

First, let's not be paralyzed by cynicism, dismiss all improvement as hypocritical, or withhold our applause until we see perfection. When any company (or individual) does anything praiseworthy, let's lead a cheer. The good things that Safeway, Sanofi-Aventis, Pfizer, American Apparel and others have done are, in fact, good --- no matter what else is in their track record.

Second, we must be careful not to overly-demonize the "bad guys." Too easy, counter-productive, and simplistic. Better to criticize specific, verifiable actions and hold those responsible accountable. We must not be intimidated or bought off or silenced (hello some members of congress!) --- but over-the-top ranting only helps the ranter feel better; we need more constructive criticism and engagement.

Third, we must be careful not to give a free pass or take for granted the goodness and virtue of the exemplary companies. Look how Merck and Arthur Andersen lost it. There are no absolute guarantees that Toyota, In-n-Out, Costco, Southwest, Patagonia and their kind will continue to take the high road. These companies also need our vigilance and criticism along with our encouragement.

Fourth, and finally, all of this is a waste of time unless we end up looking at our own organizations and our own management style and ethics. We have very limited capacity to change Safeway or Pfizer or American Apparel or Exxon, unless we work there and have some clout. We can speak up and we can vote with our pocketbook, but not much else. But where we spend our time from hour to hour and day to day --- that's where we can make an impact for good ethics, for treating our colleagues, employees, customers, and other stakeholders with the respect and integrity they deserve.

-David W. Gill

© 2009 David W. Gill.

• Ask Dr. EthixBiz: Unethical Hiring
• EthixBiz Review: Reality Check by Guy Kawasaki
• Gill's Benchmark Ethics: Business Vows

Dear Dr. EthixBiz:

Our team was given the rare opportunity to interview and select our new manager.  The interviews were conducted during one of the busiest times of year but it was important to the team that we put a lot of effort into the process choosing the right candidate.  But when the interviews took place, one of the six candidates clearly had been fed the questions ahead of time by one of the members of our interview panel.  We did not share this with our existing boss because (a) we couldn't prove it and (b) we felt that our input would be reviewed fairly due to the integrity of our boss.  We were wrong. That candidate was hired even though they were recommended by only one of our seven interview panel members.

A ripple effect occurred from this hire.  First, the best candidate was not hired; we missed out on a much better fit. Second, our team now questions the integrity of our existing boss and division management. Third, in case of any future openings we won't waste our time if it's obvious that someone has already been chosen. The employees don't feel as if their voice really matters. Fourth, loyalty to management has been tarnished and work standards and performance are not as high as a year ago. 

-CM

Dear CM:

Obviously this process was not just managerially bungled but ethically wrong. It was bungled in that you didn't get the best person hired and the result of the process made the whole team worse in attitude, culture, and performance. But we can say it was not just stupid but unethical because it lacked honesty and integrity, it profoundly disrespected you guys on the interview team, and it betrayed management's fiduciary duty to make decisions in the best interests of company performance.

That part is easy to analyze. The hard part is how to repair the damage and to prevent future recurrence. Since the "wrong" candidate is now your new manager the situation is especially difficult. But anybody, including your new manager, should understand that "process" is important. The character of the "means" affects the quality of the "end." Call it misunderstandings and lack of clarity rather than outright corruption if you need to --- but work on reforming the future recruitment, interview, and hiring process to achieve clarity, objectivity, and consensus. Conflicts of interest and management assumptions and decisions should be disclosed if they want to avoid the outcome and ripple effect you described.

Can you (and a couple of your fellow interview team members) have an effective heart-to-heart conversation with the upper managers who asked you to serve on the interview team (and then went against your advice)? They need to understand how this was experienced and what the broader impact has been.

—Dr. EthixBiz

Reality Check by Guy Kawasaki
New York: Penguin/Portfolio, 2008. 478 pages.

Reality Check is Guy Kawasaki's ninth book. It is subtitled "The Irreverent Guide to Outsmarting, Outmanaging, and Outmarketing Your Competition." This huge book is intended to provide an "all-in-one guide for starting and operating great organizations." The book is divided into twelve parts: the reality of (1) starting, (2) raising money, (3) planning and executing, (4) innovating, (5) marketing, (6) selling and evangelizing, (7) communicating, (8) beguiling, (9) competing, (10) hiring and firing, (11) working, and (12) doing good. Each section is further divided into chapters, of which there are an amazing 94 total. Each chapter is further divided into pages of which there are 478 total. Each page is divided into paragraphs, and then into sentences …….

Guy often promotes the 10/20/30 rule of pitching ideas; the new rule is 10/20/30/478. Tons of lists and bullet points. Several interviews. Passion on every page. I sometimes felt exhausted just by Guy's energy and pace. A firehose of good info.

And that's the decider: this is, in fact, great information. One can argue with Guy at various points but such argument is always a fruitful exercise because Guy does have a point, an insight, an experience in every statement and assertion no matter how wild. Wrestle with his claims and insights as you go along.

Guy has lots of good ideas about communication, mostly along the lines of "cut the BS and fluff and keep it short, clear, simple, authentic, legible, and honest." About business leadership and entrepreneurship: have a great idea, concentrate more on making meaning than making money, work brilliantly and tirelessly and don't make excuses. He makes it real by applying all of this to how we e-mail, pitch things with power point slide support, approach investors, sell our products, etc.. In the end, what we have is 478 pages that were all worth the stuff written on them – no throwaway wasted paper despite the long odds for a book this big. And to find that in the end a trash-talking, manic, genius like Guy can say believably that meaning, helping others, true joy, and his wife and kids are what really matter – that's the compelling and convincing heart of the matter.

Bonus value of Reality Check: it is just the right size to pick up and slam to death any small rodents that happen to run across your desk late at night.

—David W. Gill

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Business Vows: Promising to Be Ethical

Twenty percent of Harvard's graduating MBAs this month (160 of 600) have created and signed a new "MBA Oath" that pledges them to use their managerial skills and opportunities to serve the greater good, act responsibly and ethically, and refrain from advancing their own narrow ambitions at the expense of others (NY Times,30 May 09). Apparently, Columbia Business School has required all of its business students for the past three years to pledge to an honor code: "As a lifelong member of the Columbia Business School community, I adhere to the principles of truth, integrity, and respect. I will not lie, cheat, or steal, or tolerate those who do."

Of course it is better to actually do it than talk it. Acting green is much better than "greenwashing," to use a contemporary example. We need to walk the talk. Talk, vows, and pledges don't guarantee behavior, as a long list of failed priests, spouses, politicians and other vow-makers demonstrate.

But silence is no good either. Who will stand up and speak up for truth and fairness? For respect and promise-keeping? For personal accountability and responsibility? Tough as it is, dangerous as it is, we desperately need men and women of character and guts who will stand up, speak up, and act up for what is right in business and the marketplace as much as in politics and other domains. So I love what these Harvard MBAs have done.

The Professional Tradition

What these Harvardites have done is tap into a 2500 year old tradition going back at least to the medical school of Hippocrates in 4 th or 5 th century BC Greece. All students trained by Hippocrates or his successors must make a sacred vow ("profess") before all the gods and goddesses and before each other to do no harm of any kind to their patients but rather serve their health with justice and to the best of one's ability and training. They must preserve confidentiality of patient information and communication, refrain from taking sexual advantage of vulnerable patients, never act outside of their training (e.g., doing surgery), and never act against life even if desperate patients asked for it. Google "Hippocratic Oath" to read the actual verbiage I have summarized here.

The point is that Hippocrates and his medical colleagues were providing their students with powerful, dangerous knowledge that could not only help but grievously hurt others. Therefore only students willing to take the vows and practice their skills within a clear community of moral responsibility were allowed this knowledge. If you just thought of medicine and health care as a path to making a personal fortune off desperate, vulnerable patients, you would never receive training to be a doctor. This same tradition was extended to law and religion: no education and credentialing unless you clearly committed yourself to the values and standards of the profession.

There were four basic characteristics of the professions as they developed in the centuries after Hippocrates:

First, higher education. Professionals acquired some advanced, specialized knowledge and training in their field. They possessed "dangerous" knowledge giving them the capability to seriously help or harm people. They were also expected to have as a prerequisite a broad, liberal, integrated education. The narrow specialty needed to be balanced by the texture of broad knowledge of history, literature, language, science, and so on. This is the historical root of what we call "general education" requirements in college curricula. Some of us continue to believe that this "GE" package is (or should be) the best and most important thing any graduate will study in college.

Second, a commitment to service. This was not mercenary, not commerce for commerce's sake. It was not about money but a career, a vocation, to serve others. Professions were about enablement, about meeting complex human needs. There was a prevailing altruism among professionals. Professionals were typically supported by "honoraria" -- not by fees for service. The "sock" hanging on the back of the doctoral hoods we professors wear at graduation ceremonies originated as a way for anonymous donations of support to be given to support professionals like judges so they would be blind to who gave them money.

Third, a pledge to high ethical standards. Professionals never were content to observe the minimal standards of the laws of their cities and nations. To be a credentialed professional meant voluntarily swearing to higher standards --- not migrating to the lowest common denominator. The laws of Athens or Macedonia were not sufficient for Hippocrates and the Oath his community created.

Fourth, practice within a professional association. Professionals carry out their service within a self-governing society of peers that exercises discipline, and assures both technical competence and ethical compliance. Governing themselves has often meant that state governments have granted such professions a good deal of autonomy. Lawyers could be disbarred, doctors could be banned from medical practice, clergy could be defrocked. Of course, when the professional associations lost their disciplinary focus, state regulatory agencies had to step in, ham-fisted or not.

Professions and Business Today

 We must not idealize the professions of the past of course: plenty of racism, sexism, and other forms of prejudice turned these professions into "old boy networks." And the high rhetoric and tradition was corrupted in various ways.

In our era a great deal of medicine, law, and religion has abandoned the professional ideals and traditions. Naked ambition, greed, and the exploitation and abuse of the weakest members of society is far too common. Sure there are exceptions but the practices of many professionals today are a disgraceful betrayal of trust. It's often about institutionalized exploitation, not just about individuals who make self-serving harmful choices.

Meanwhile many companies as well as business and technical specialties have moved closer to the professional tradition. When companies create and adopt mission statement and codes of ethics they are behaving like traditional professions. The American Society of Civil Engineers, the Certified Public Accountants, the American Marketing Association, and the Society of Human Resource Professionals are just a few examples of newer professions where a code of ethics and a professional association have been created. Fortunately or unfortunately, one doesn't have to be part of these professional communities to work in that area so there is little sanction on bad performance beyond the laws of the land.

Nevertheless, the modern professionalization of business is a good thing that we need to extend and improve, not reject or ridicule just because it is sometimes hypocritical or superficial --- and always imperfect.

Let's continue to challenge our professions, our companies, and our business schools as well, to articulate high standards to which we publically pledge ourselves and support each other and hold each other accountable.

The alternative is to migrate to the ethical-legal bottom and provoke the state into taking over just to try to protect its citizens. And that gets ugly even if it is essential. There is a better way we can take.

--David W. Gill

© 2009 David W. Gill.

Benchmark Ethics Print Version

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• Ask Dr. EthixBiz: Non-Compete Competitor
• EthixBiz Review: Hard Times by Charles Dickens
• Gill's Benchmark Ethics: Good to Great to Garbage

• Ask Dr. EthixBiz: Non-Profit Cutback Ethics
• EthixBiz Review: Don't Step on the Rope by Walt Wright
• Gill's Benchmark Ethics: Shop, Vote, Start
  

Dear Dr. EthixBiz:

While I liked your illustrations (in the March EthixBizine) about HP execs choosing to freeze salaries (across the board from top to bottom) versus the UCB president cutting headcount and raising tuition, I'm wondering if you can help me level out the apples and oranges comparisons of the nonprofit world. HP, as a for-profit enterprise, can simply wait until demand returns whereas in the nonprofit arena my organization with its endowment invested in the market, has incurred real losses ($millions and falling) and these won't return, nor will the losses incurred due to reductions in donor giving.

So are there ways to reduce expenses in an ethical fashion? We've already cut our operating budgets substantially but need an additional few million, which will tend to be the kinds of reductions that go out on two legs. Even if we reduce salaries across the board, if our endowment continues to plummet, we may not be able to avoid headcount reductions.  Then we'll be asking staff to accept reduced salaries along with increased workloads.  Part of my challenge is dealing with differing mentalities about what a full workload looks like.  It's fairly common for folks to expand the work to fill the day and lose perspective about what's mission-critical. 

-S

Dear S

I sympathize with what you are going through. I have been through similar financial/economic crises working with non-profits in 1988-90 and 2001-03. It is very painful. In the first instance my colleagues were not enough interested in shared sacrifice or radical change and the organization died four years after I left, with all its accumulated assets of the organization spent in vain on "business as usual." In 2001-03 my colleagues did sacrifice to the max but we still had to radically adjust our operations and expectations.

But I'm not so sure this is "apples and oranges." For-profits need investors; non-profits need donors; both need customers. I don't think your endowment is any more fated to disappear and not return than would be the case with a for-profit. All the problems you mention are true of for-profits as well as non-profits.

The core issue is "why do we exist?" And what kind of culture and core values will enable us to achieve that purpose with excellence so that clients/customers will want us, investors/donors will throw in with us, and we will be sustainable through good times and bad? Then find people who share deeply and passionately that mission and those values and will work together as a team to make it happen. It may well be that hard times require a leaner staff and more focused operation. But when we are as lean as we can go and still survive, shared sacrifice in hard times, shared fruits of success in good times, is the way to go. Those who don't want to operate like that should be the first to go.

—Dr. EthixBiz

Don't Step on the Rope! Reflections on Leadership, Relationships, and Teamwork by Walt Wright (Paternoster Press, 2005), 154 pages.

Walt Wright's book has been on my "must read" stack for a year or so. It was first published in 2005. It is not on the shelves at my local bookstore.  But, believe me, this is a great little book I would recommend to all my business friends and EthixBizine readers.Often the most learning and best insight come from common sense, life experience, and the angles of vision provided by metaphor and cross-disciplinary thinking. Wright's book is a great case in point:  he probes his decades of hiking and mountain-climbing for lessons on leadership and teams.  As a lifelong city boy reading this book I alternated between envy of Wright and his climbing buddies --- and shivering at the thought of all the cold, wet, and misery (I'd generally prefer to sweat and learn in my Gold's Gym and local jazz clubs). But even a city kid like me found this book a real page turner filled with insight.

Climbers rope themselves together to make their most dangerous and challenging climbs.  That way if someone starts to fall they are saved by the team to whom they are roped.  Lesson: take care of what links you together, the rope;  don't step on it, forget it, or think you can operate without it.  The rope symbolizes what binds the team together:  shared purpose, shared values. Diversity of gifts and abilities is great but it must not come at the expense of the critical shared purpose and values, the rope that unites the team.  Leadership is in service of the team and its shared vision and values.  Teams don't serve leaders so much as leaders serve teams.

Drawing on a gold mine of anecdotes and stories, mostly from Wright and company's own climbing experiences but with a few famous climbing stories about successes and disasters at Mt. Everest and elsewhere, Don't Step on the Rope comments and advises on unity and diversity, on responsibility, accountability, and trust.  Safety, humor, memory, food and family receive great discussions. Wright concludes with a magnificent discussion of how we should measure success . . . in mountain climbing --- and in organizational/team life. 

Ten chapters each end with a dozen or so provocative reflection/discussion questions. The sources cited in the text are, in my judgment, the best in the leadership/culture/team field today.  I know a little more about hiking and mountain climbing now and I am appropriately impressed by those who pursue it. But I really got fired up about leadership and team building by Don't Step on the Rope.  It is hard to imagine a better little book to use as the basis for a leadership retreat – or for your own personal growth.

—David W. Gill

Shop, Vote, Start: Responding to Today's Marketplace

"So how do you really feel about it?" Ever hear that sometimes droll, sometimes snide comment when you express a strong opinion?

I've always been a pretty passionate enthusiastic person. Mostly, by far, a very positive optimistic guy, a "possibility thinker." But what gets me going in the negative, denunciatory direction is when the strong harm the weak. I've always hated bullies. My only school boy fisticuffs were when I pounded a bully who was picking on a little person. Otherwise I saved my physical aggression for the sports field.

It's amazing to me how many people are cowed into submission by the powerful. Think about all the priests and pastors who, because of the rich sitting in their pews, hesitate to preach the biblical texts about the "love of money" and the "rich fool" who lives only to tear down his barns to build bigger ones and then admire himself in the mirror. Think about the editors and program directors who, fearing loss of advertising revenue, pull their punches. V-Ps and managers bite their tongues as their own bosses indulge their greed. Boards of directors (and regents) smile silently and acquiescently as the executives they are supposed to ride herd on take companies to the brink of disaster and loot the company treasuries. Personally, I could care less how much money an Arab sultan or venture capitalist or home run hitter or software entrepreneur or entertainer or business leader or gambler makes and accumulates.

The only thing that gets me going is when those profits come at the expense of others in a manifestly unfair and harmful way. I don't have to watch Oprah Winfrey or buy tickets to the baseball game or Madonna's latest CD. I don't have to invest with Berkshire Hathaway or use Microsoft products or fill up my car at an Exxon station. I don't have to make charitable donations to United Way if I don't like their way of operating. But I do have to pay taxes to support AIG, Fannie, Freddie, and GM bailouts. I do have to buy my gas and electricity and water from state-supported monopolies that have no competition. I do have to pay taxes to support a public school and university system, whether run well or poorly.

But how should we respond to bad, even corrupt, business and organizational practices. We feel so powerless. But there are at least three things we should all be doing.

Shop

First of all, no matter how small and ineffective it may seem, we must all "vote with our pocketbooks" as we used to say. In other words, stop shopping at businesses whose values and practices you do not support. Move your investments and bank accounts to an ethical, probably local or regional, bank. Don't give your banking business to Citibank and then complain about their leadership. Don't buy GM, Ford, or Chrysler cars if you don't approve of how they operate. Buy Toyota or some other brand. Shop at Costco not WalMart or Target if you prefer their culture and values. Fly Southwest not United, American, and Delta if you prefer their values. Eat at In-n-Out and boycott MacDonald's if you agree with Fast Food Nation. Patronize your local bookstore and produce stand, if you prefer what they stand for to the alternatives.

Yes, I've mentioned some of my preferred businesses but I am actually not trying to advertise for them. Honestly, if your values line up with Citibank more than with Wells Fargo or the Mechanics Bank, take your business to Citibank. That's my point. Don't just have opinions but put your money and business where your values are. Be self-conscious and pay a little extra to support the businesses you believe in.

Vote

Second, be politically thoughtful and active, especially at the local level. There are no perfect political platforms, parties, or positions. Politics has been called "the art of compromise" and so it often is. But just because it is compromised doesn't mean all politicians and positions are the same. There is a huge ideological division in our society today between those who feel that the chief purpose of government is to protect your freedom to serve your self-interest and those who want a government that protects the weak and the poor from harm, even if those of us with more, have to give a little bit more. You see this in the health care debate. Some argue that the supreme value is for me to be able to choose my preferred physician for me. That's the value that decides everything. The other side thinks that the supreme value is for all sick and injured people in our society to get at least a minimum of basic care. Once that basic level is achieved for everyone, we should be free to augment our personal health care, get those botox treatments, etc., to our heart's content. But first, every soul needs a guaranteed minimum level of care. The point here is this: don't just fume about these issues, vote on them. Don't complain if you don't vote or if you vote for someone who turns out to be a thieving bozo in office.

Locally, support movements to hold utility companies much more accountable. Lobby and vote to replace incompetent school boards and boards of regents with people who lead with your values. Vote for politicians who will represent the people as a whole and not just their donor base. Vote for politicians who will hold both government and business accountable. In my view, the most important action of government is often to combat and reduce the power of organizations. As we see every day now, the giant corporations were unleadable, unreformable, and now "too big to fail." That has got to change. Government needs to ensure that companies are manageable in size and scope. "Power corrupts…."

Start

The third strategy is the most important of all: start something better than we now have. Be an entrepreneur. Start, or help start, a new business or organization. Innovate better ways of doing things in your present company to the extent that is possible. In the ashes of our current disaster, just one thin layer up from the ashes of the Enron, WorldCom, Tyco, etc., disasters of seven or eight years ago, is opportunity. We need a huge flourishing of new businesses carried out in new ways. I believe the consuming public is ripe for plucking away from the corporate losers we are now "rescuing." This is the "turn your lemons into lemonade" or "light a candle instead of curse the darkness" approach. Don't just gripe about the crooks and losers, create some winners. This is the hour.

--David W. Gill

© 2009 David W. Gill

Print version

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• Ask Dr. EthixBiz: Lay Off Warnings
• EthixBiz Review: Daily Meds by Melody Petersen
• Gill's Benchmark Ethics: Give More Than Take: Rule Ten
  

Lay Off Warnings

What did you read this month? Dr. EthixBiz strongly urges all business managers and leaders commit to reading one book per month throughout their careers. New material, classics, novels, histories . . . read something that broadens and deepens your thinking.

Our Daily Meds by Melody Petersen (New York: Sarah Crichton Books, 2008), 432 pages.

Melody Petersen's Our Daily Meds is subtitled "How the Pharmaceutical Companies Transformed Themselves Into Slick Marketing Machines and Hooked the Nation on Prescription Drugs." Petersen's award-winning journalistic skills and long experience reporting on the industry prepared her to write what is a terrific, readable, infuriating account. The book is endorsed by Dr. Marcia Angell, the highly-respected former editor of the New England Journal of Medicine who herself authored a searing expose and indictment of big pharma in The Truth About the Drug Companies: How They Deceive Us and What to Do About It (Random House, 2004). Angell actually predicted five years ago that big pharma was in trouble and couldn't keep up its rapacious ways. Wrong. It's worse than ever, as Petersen shows in abundant detail.

There has never been a time when humans were free of quacks and charlatans hustling their potions on the gullible and ignorant. But until about 25 years ago, our best and best known pharmaceutical companies did seem to show good faith in their espoused mission of finding effective drugs and even cures for our diseases. Since about 1980 the tide has radically turned and the selling, marketing, and profiting from drugs is what occupies big pharma today.

We consumers are inundated with advertising from all sides in all media. Television drug advertising is astonishing in its quantity, its brash claims, and its celebrity polish. The percentage of penile-focused drugs alone would be a hoot if it wasn't also potentially dangerous. But the advertising has succeeded: Americans now spend more on drugs than on gasoline or fast food, twice as much as on either higher education or new automobiles, more than the combined total of drug purchases by the people of Japan, Germany, Italy, Spain, the UK, Australia, New Zealand, Canada, Mexico, Brazil and Argentina! Can you believe it? This is sick (is there a drug for it?).

The drug marketers have invented new diseases, labeling conditions that are actually the result of bad eating habits, poor exercise, life's tragedies, and squirrely youth, as diseased conditions for which a drug is needed (probably at great expense for the rest of your life). The average American used 12 prescriptions in 2006, up from 8 in 1994; older Americans now average 30 prescriptions per year! More than 100,000 Americans die each year from their prescription drugs, more than twice as many per day as from auto accidents, or diabetes or Alzheimer's disease.

About 10 percent of the price of most drugs covers the cost of the raw chemicals and manufacturing in your drugs. The other 90% is for marketing, administration, profits (highest of any industry usually), and "research" --- a vague category in which is buried huge outlays to pay doctors "consulting fees" to sign off on company-sponsored research, attend propaganda sessions in posh resorts, etc.. Huge amounts of money are channeled into lobbying and buying off both legislators and regulators and into legal teams to defend against lawsuits by the drug-injured and competition from generics, other countries, etc..

Very very few of the new drugs brought to market are truly innovative discoveries that come out of drug company research facilities and programs. Most new drugs are "me too" drugs (e.g., Viagra, Cialis, and others fighting for the erectile dysfunction market) with at most a few molecules difference; and if there is innovation and discovery it likely came from NIH or university laboratories who then license the marketing rights to the big pharma companies for a big fee. The marketing (not research) investments are huge and the quest is for "blockbuster" marketing successes which can bring billions of dollars in profits.

The problem is that these drugs are often not fully tested and their side effects are not known, especially over a large population, an extended period of time, or in combination with other drugs being taken. The approval bar is set so low that the merest improvement by comparison to a placebo can get a drug to market, sometimes even if a better or equal alternative already is available. One of the saddest aspects of this whole industry is the vastly increasing medication of our children. Basically, all the drug companies are guilty of these practices. You can't think of Merck anymore as though its great and noble "river blindness" story characterizes it; no Merck is now more appropriately thought of as the Vioxx company, an incredibly shameful episode for which people should be in prison. But it's not just Merck, it's Pfizer, Sanofi-Aventis, Bayer, Johnson & Johnson, Roche, GlaxoSmithKline, Novartis, etc.. It is an industry-wide phenomenon.

This book is a valuable read, first of all, as a case study in how losing your mission and vision is a recipe for disaster. Making big money, as a stand alone mission, is a deeply corrupting choice as this book shows.Second, having independent universities (not sold out to corporate agendas as is increasingly the case today), regulatory agencies, political leadership, academic journals, and news media is crucial to containing the threat of big pharma. And such independence will require a political will not yet evident. Third, as consumers, we must question our health care providers about their financial connections to pharma and factor that information into our choices and judgments. And we must resist the propaganda and focus on proactive health measures (diet, exercise, etc.), leaving drugs as the very last resort for extreme circumstances.

—David W. Gill

Give More Than Take: Rule Ten

My proposal for the tenth rule/principle of ethical business leadership is "Cultivate a positive and generous attitude." The corollary is "Never give in to negativity, greed, and envy. " (see the ExthixBizine archive at www.ethixbiz.com for the preceding nine). Another way to put it is "Be a giver more than a taker." "Give more than you take."

 This final principle has a lot to do with our attitude, our spirit. But attitude is the root of speech and action. A bad (or good) attitude is almost impossible to conceal or disguise. Even if it is mostly concealed, a bad attitude corrupts the person who harbors it. The basic issue addressed by this principle is whether we spend our lives and careers figuring out how to take what belongs to others . . . or how to be generous givers to others. Are we primarily consumers . . . or providers? Is it our personal (or company) mission simply to move people's money from their pockets into ours? Is that what we are all about? Or is our mission to provide others with excellent goods or services (in light of which, of course, they will be happy to write us a check)? That difference in attitude and purpose is, I believe, critical to good ethical leadership. A single-minded, unqualified mission to acquire control of ("take") what belongs to others is at the root of much of the evil and harm not only in business but in politics and human life in general.

The Society of Takers

Do we really want a simplistic "market fundamentalism" that urges everyone to pursue their own self-interest and rely on some "invisible hand" of the market to bring social benefit out of naked, unregulated self-interest? The historic result is Robber Baron and Mafioso economies, not peaceful, free societies. Adam Smith's Wealth of Nations must be read alongside his Theory of the Moral Sentiments to get a fuller picture. Without humanistic, ethical cultures, and without generous, positive leaders, we soon have predatory, survival of the fittest, barbarian societies and economies.

The ultimate form of unbridled self-interest is what people for centuries have called "greed." The late business ethicist Robert Solomon had this to say about it: "'Greed is good' is a contradiction. . . Greed (avarice) is an excess. It is like gluttony, an embarrassment . . . unbridled vulgarity. . . Greed is not vision. It is lack of
vision . . ." "Better to listen to what the Talmud says: 'The rich man is one who is satisfied with what he has'." "Contentment might not seem to be a virtue, especially in a world where ambitiousness is thought to be one, but there is real wisdom in knowing when enough is enough, not being greedy, and allowing oneself to simply be satisfied." (A Better Way to Think About Business (1999), pp. 27-29, 81).

We live in a consumer, taker society and it is not a pretty sight. Little wonder though, when you see how advertising, entertainment, and even half the political rhetoric out there seek to incite people's selfish, "taker" attitudes and actions --- and when far too many prominent business leaders are in the news as a result of their failures to rein in their greed and selfishness.

Giving, Not Taking, As Our Mission and Vision

The alternative to "takerdom" is to "get a life" with a mission and vision that are truly worthy of our humanity and dignity. I am convinced that there are two primary ways to look at it. The first is to use our powers, abilities, and resources to deliver creative, innovative, positive, useful, beautiful products and services to our world. I like HP's motto: "Invent." Instead of being addicted to money and to taking from others, let us focus on inventing, creating truly good things for others. Of course, people will pay! But don't focus on that so much. Keep your eye on the creativity/innovation ball, not on your personal financial scorecard. And it's not just about you or me. Most people, good people of talent, are drawn to want to work alongside and for us if freedom, creativity, and innovation are our mantras.

The second theme of givers (not takers) is "help somebody." Or "fix something broken." This is the counterpart to the "invent something good" theme. Here it is "fix something bad/broken." Find a cure (the old school, alas, mission of pharmaceutical companies)! Help us recover our lost data. Mediate and reconcile instead of litigate and destroy. Protect us from viruses. Help our impoverished community get up of the ground. Teach the illiterate to read. Purify the water supply. And so on. Again: people will pay if you provide this kind of remedial help. But don't focus on the pay; don't yield to the temptation to exploit the misery and desperation of hurting people. Keep your eye on the helping/fixing ball, not on your personal financial scorecard.

Ethical leaders and organizations are giving, much more than taking, forces in people's lives. They don't suck the life and resources out of continents, countries, communities, and customers. Ethical leaders give. When they leave, they leave things better than when they arrived.

Harris & Associates: A Giving Organization

Let me close with an example. Harris & Associates, a construction and project management firm based in the San Francisco Bay Area was founded in 1974 by Carl Harris and two "associates." When success began to come to the company Carl bought a personal vacation home in Hawaii – but invited his growing staff to vacation there for a week if they wished. What a generous guy! Fast forward to today when the company has nearly five hundred employees --- and some ten vacation homes in places like Lake Tahoe, Hawaii, Palm Springs, and so on. Let's see: ten vacation homes times 52 weeks equals 520 vacation weeks available to all of the 500 employees for just the cost of a Merry Maids clean-up after the visit. This generous practice is exactly in alignment with the mission of the company to "help clients, employees, and communities succeed through industry-leading consulting and management services." It's all about giving, not about taking. And it is a very profitable company; and people love to work there; and clients love to hire them.

Cultivating a giving (rather than taking) mission and attitude does not require monastic vows of poverty. It is about the pursuit of excellence in the company of human beings. It is the tenth principle of ethical leaders and organizations.

--David W. Gill

© 2009 David W. Gill.

• Ask Dr. EthixBiz: Patient Care vs. Clinic Profitability?
• EthixBiz Review: Art of the Start by Guy Kawasaki
• Gill's Benchmark Ethics: Tell the Truth: Rule Nine
  

What did you read this month? Dr. EthixBiz strongly urges all business managers and leaders commit to reading one book per month throughout their careers. New material, classics, novels, histories . . . read something that broadens and deepens your thinking.

The Art of the Start by Guy Kawasaki (Portfolio Press, 2004). 226 pages

Guy Kawasaki (www.guykawasaki.com) is managing director of Garage Technology Ventures, an early-stage venture capital firm, and a columnist for Entrepreneur Magazine. Previously, he was at Apple Computer, and is often referred to as the “evangelist” who sold their product to the world. He is the author of nine books including Reality Check, Rules for Revolutionaries, How to Drive Your Competition Crazy, Selling the Dream, and The Macintosh Way. He has a BA (Psychology) from Stanford and an MBA from UCLA. The Art of the Start (2004) is a “weapon of mass construction” according to its Kawasaki. “My goal was to provide the definitive guide for anyone starting anything. It builds upon my experience as an evangelist, entrepreneur, and most recently, as a venture capitalist who found, fixed, and funded startups.”

In the continuing chaos of the current economic recession/depression, with all the layoffs, cutbacks, and business failures, lots of us are going to have think hard about starting our own businesses, however small, however crazy the idea may be. There may be no alternative. But this dreadful time of limited hiring by existing companies may actually turn out to be a time of extraordinary creativity, innovation, and entrepreneurship. According to Plato, “Necessity is the mother of invention.” If we can just keep the wolves away from the door, I think this will turn out to be a great time for American business.

If you pick up just a couple books on entrepreneurship, one of them should be Guy Kawasaki’s Art of the Start. Kawasaki’s book is breezy and brisk in style and pace. Short, declarative, confident, bold assertions, one after another. Lots of bullet points, lists, and call-outs. Widely-spaced lines of type for a rapid, page-turning read. Each chapter starts with the GIST (“great ideas for starting things”) and ends with the FAQs (“frequently avoided questions”) plus a short list of recommended reading. There is so much superficial, platitudinous nonsense out there in this book format (loading down the leadership shelves at Barnes & Noble) that you better be pretty good to pull this off. Kawasaki is good, very good!

In Chapter One, Kawasaki begins with the “five most important things an entrepreneur must accomplish”: “make meaning, make mantra, get going, define the business model, and identify specific milestones, assumptions and tasks to keep the organization on track.” I totally agree with his view that “making meaning” is the “most powerful motivator there is” – not making money, power, or prestige. Meaning, Guy says, comes from “making the world a better place, increasing the quality of life, righting a terrible wrong, preventing the end of something good,” and so on. Totally agreed, though I simplify it in my writing and teaching to two great themes: “innovate/create/build something good, useful, beautiful” and/or “fix something wrong, help somebody hurting.”

But Guy then trashes the idea of mission statements (long, boring, forgettable, canned, etc.) in favor of developing a simple, catchy “mantra.” In my view, the mission ought to function like a mantra (or be rewritten if it is boring, long, forgettable); some (not all) of Guy’s mantra examples lack the focus and specificity a movement requires. Anyway, this is my only quibble in the whole book (enjoy this savage criticism). The critical thing is the real meaning and purpose underneath; on this we agree; the quibble is about how best to articulate it. But let’s move on. Get going, then define the business model, etc.. Great advice and ideas at every step.

The remaining chapters of The Art of the Start are about the arts of “positioning,” “pitching,” “writing a business plan,” bootstrapping,” “recruiting,” “raising capital,” “partnering,” “branding,” “rainmaking” (generating large quantities of business), and “being a mensch” (helping lots of people, doing what’s right (“ethics”----yeah!), and paying back society). Loads of great ideas and suggestions about everything from font sizes on presentation slides to company names (“avoid names that begin with x’s and z’s” he advises (I guess EthixBiz slips past this hurdle)), picking boards of directors, partnering with other businesses, and recruiting personnel.

For any individual or any group thinking of starting something, whether for-profit or non-profit, whether stand-alone or internally in a big company, The Art of the Start is a great, even essential, handbook.

—David W. Gill

Tell the Truth: Rule Nine

In my opinion the ninth rule/principle of ethical business leadership is “Communicate truthfully and constructively.” The flip side corollary is “Never mischaracterize people, products, services, or facts.”(see the EthixBizine archive at www.ethixbiz.com for the preceding eight).

As with the other basic principles on this list, this is not a random observation but part of a pattern. Principle/rule six was about protecting the individual’s life and health, the basic component without which nothing else matters; seven was about the human relational infrastructure of life: protecting relationships between people, the integrity of promises and commitments; eight was about the material infrastructure of existence – promoting and practicing fairness and justice; now number nine is about the “communications infrastructure” of life. Human life (and business) occurs in the context of language and communication. Protecting people from harm in this arena of existence is what rule nine is about.

Trust and Truthfulness

This ninth principle is about telling the truth to colleagues, customers, partners, investors, other stakeholders---- and telling the truth about people, products, finances, and services.

Lying and falsehood break down the trust that is essential to good business and leadership. Lies lead to ever more complex, time- and energy- consuming cover-ups. Truth is simpler. Lies and mischaracterizations can harm people’s health, relationships, finances, and reputation. Lies also corrupt and degrade the liar by making him/her live in contradiction with what they know to be true.

Telling the truth gets complex in the information age. Who “needs to know” this or that . . . and when is the appropriate time? Can too much information (“infoglut”) obfuscate rather than clarify and empower?

Sometimes of course, telling the truth can be as cruel as telling the lie, which is why the principle says not just to communicate truthfully but constructively. Sometimes silence and confidentiality are called for. Blurting out everything to everyone every time is not the meaning of rule nine.

Three Ways to Describe It

A great business leader. Legendary Herman Miller CEO Max DePree has written, “Access to pertinent information is essential to getting a job done. The right to know is basic. Moreover, it is better to err on the side of too much information than risk leaving someone in the dark. Information is power, but it is pointless power if hoarded. . . “ “We owe each other truth and courtesy” “To liberate people, communication must be based on logic, compassion, and sound reasoning” (Leadership is An Art (1989), pp. 91-95).

A great professional organization. The marketing and sales people are especially challenged in their communication practices. The American Marketing Association Code of Ethics emphasizes that “ Marketers shall uphold and advance the integrity, honor, and dignity of the marketing profession by . . . being honest in serving consumers, clients, employees, suppliers, distributors, and the public. . . . Participants in the marketing exchange process should be able to expect that . . . communications about offered products and services are not deceptive.”

A great company. Construction and project management firm, Harris & Associates’ Code devotes two basic principles and a number of elaborations to this topic which are worth quoting at length to illustrate how to approach this principle: “Never compromise on truthfulness and accuracy. Maintain clarity, consistency, and accuracy in all communications with clients, contractors, business partners, employees, governmental agencies, and the public. Never submit deceptive, incomplete, or inaccurate proposals, financial reports, or inspections. Do not over-promise on schedules, project outcomes, or personnel; disclose any contingencies and concerns. Correct mistakes, misstatements, and misleading communications immediately. Respect privacy and protect confidential and proprietary information. Protect the privacy of individuals and their records, whether Harris employees or not. Protect the confidentiality of the proprietary information, business plans, and communications of Harris and its clients and business partners. Do not accept or misappropriate any confidential information or proprietary data from a competitor company; respect always the rights of the rightful owners of information.”

We live in an era transformed radically by information and communications technologies. Some have argued that transparency is inevitable in this connected world; the truth will come out. I’m not so optimistic. History seems to show that truth and lies, right and wrong, are in a never-ending battle, simply modified and perhaps escalated but not resolved by new technologies. This communications practice area still needs the voluntarily-accepted guidance of our ninth principle.

--David W. Gill

© 2009 David W. Gill.

Print Version

• Ask Dr. EthixBiz: Detroit Bailout?
• EthixBiz Review: Toyota Culture: The Heart and Soul of the Toyota Way
• Gill's Benchmark Ethics: Keep Your Commitments: Rule Seven

Dear Dr. EthixBiz:

What are your thoughts on the "Bailout" proposal for the "Big 3" automakers?

--Mike R.

Dear Mike,

I'm glad you asked for "my thoughts" rather than "THE ANSWER" --- which I don't think exists. I don't think Ford, GM, Chrysler or any other company stands forever. Organizations come and go and these three may have served their time and now need to go. I loved my '56 Chevy but that was the last Detroit product that did the job for me. I would love to support American auto workers (some of my Toyotas have actually been manufactured in the USA) but every time I have to drive an American car as a rental I am reinforced in my preference for Toyota design, quality, and price, to say nothing of the 45 mpg I now get in my Prius.

What matters to me are the employees of the "Big Three" and of their distribution and supply chains. My preference is to reinforce the "safety net" under all of our citizens (not just auto industry workers), i.e., unemployment benefits, retraining/education funding, medicare for everyone (or something comparable), social security for retirement, maybe experiment with Milton Friedman's "negative income tax" idea for helping the poor --- in other words the minimum assistance necessary to carry on while looking for the next job.

These are extremely complicated and challenging issues, no doubt, but my preference is that we as a society (the wealthiest society in human history) choose to maintain a livable floor under our poorest fellow citizens and beyond that give them freedom and opportunity to make what they will of their lives. Raise my taxes another 1% if need be. I don't want anybody forced to live in a cardboard box under the freeway overpass. Bail out the poor and struggling directly; no bailouts for the rich and powerful (I am not at all against the rich. I am against helping the powerful and ignoring the weak. I am against lavishing money on the rich and relying on them to give the crumbs from their table to the poor).

Giving billions to mega-companies that have been mismanaged into a corner with no exit by overpaid, ethically-challenged, strategically-incompetent, whining supplicants jetting to Congress to try to loot a public treasury already drowning in red ink from the past eight years and more . . . this is a very bad idea (and a long sentence – but it must be said). This is just buying a few months delay of the inevitable. It is little different than buying dope for an addict. At the very least, if the billions are given/loaned, it should be on condition that the boards of directors and the upper executive leadership (not just the CEOs) are dismissed and replaced. An extreme bailout warrants extreme measures and conditions. There are thousands of brilliant, ethical, competent business leaders in America. Those running the Big Three are not in that talent pool.

But let's think more broadly about what is going on. Our society is facing several very serious challenges.
(1) depending on foreign oil turns out (often) to help fund weapons for regimes that terrorize their own people as well as other nations; (2) the more oil we use the greater the negative impacts on the planet and on people's health; (3) the high cost of gasoline has negative impacts on personal and business budgets; (4) the offshoring of manufacturing and other jobs often has benefits for prices and profits but usually comes at a significant cost to the domestic workforce.

All of that is by way of background for the argument that if the government really wants to help the auto industry in the USA, it would be better to stimulate it in a way that could address those challenges just listed. How? Not by giving money to the leaders of our pathetic Big Three. Rather, fund a vehicle purchase program (how about four years? i.e., enough time for a highly motivated big industry to significantly retool but not as a permanent entitlement program) that provides something close to zero interest vehicle loans of up to (say) $15k (no point in going higher---luxury car owners don't need this help) for purchase of vehicles (a) rated at a minimum 35 mpg (or shall we be bold and say 40 mpg?) for combined city/highway driving and (b) at least 80% of whose parts and assembly labor costs are verifiably being paid to American workers. Loan these funds at (say) 1% interest to banks that have not gotten in trouble or been bailed out; allow them to make auto loans to individual consumers at up to 3% interest within the conditions described above. What happens? Honest banks get some business; foreign oil merchants find demand and income radically reduced if not eliminated; the environment thanks us for emitting less toxins; customers cut their fuel costs in half; innovation is stimulated to create products for this reinforced market demand; and American jobs grow, whether the ownership of the company is American or not.

Toyota Culture: The Heart and Soul of the Toyota Way by Jeffrey K. Liker & Michael Hoseus (McGraw-Hill, 2008). 562 pages

Jeffrey Liker is Professor of Industrial and Operations Engineering at the University of Michigan and author or co-author of the The Toyota Way: Fourteen Management Principles from the World's Greatest Manufacturer (2004), The Toyota Way Fieldbook (2006), and Toyota Talent: Developing People the Toyota Way (2007). Co-author Michael Hoseus is Executive Director of Toyota's non-profit Center for Quality People and Organizations in Georgetown, Kentucky. Liker and Hoseus know Toyota inside-out and provide a massive, detailed, 562-page introduction to the Toyota culture.

In his earlier " Toyota Way," Liker summarized fourteen principles of Toyota within four categories: (a) philosophy: think long-term, (b) process: eliminate waste, (c) people: develop long-term relationships, and (d) problem-solving: continuous improvement and learning. Now in The Toyota Culture Liker and Hoseus dig down to describe the "DNA" of Toyota, the culture which enables the Toyota Way to happen. When other companies try to copy Toyota's lean production system, the results are often disappointing because they do not build a culture that supports and enables those practices.

In my MBA ethics courses I often point out that giving a person of weak or bad character a set of exemplary ethical principles is not going to help much. Character is basic; without character, the rules cannot be observed. So too in organizations, without the right culture, the practices and guidelines, no matter how excellent, will not and can not be carried out. " Toyota's culture is the key ingredient in Toyota's success as the global leader in operational excellence" (p. xxx).

Many studies of corporate culture have a "thin" definition of the subject. Liker and Hoseus have a much more robust and accurate perspective: "When confronted with a new culture, anthropologists start by simply observing how people live. They see many artifacts. They watch how people interact. . . . They listen to the people . . . and understand what this community believes and values." (p. 5). They see culture as having three levels: (1) artifacts and behavior (what we can see), (2) norms and values (what is articulated, said, heard), and (3) underlying assumptions (what is deeply believed and acted upon). Liker and Hoseus are miles ahead of most corporate culture analysts when it comes to basic research methodology.

Liker and Hoseus point out that the starting point of the Toyota culture and way is the purpose of the company: "It is certainly the case that Toyota as a company wants and needs to make a profit, but that is not the driving purpose of the company. Rather, Toyota leaders will tell you the company exists to satisfy customers, contribute to society, contribute to the economy, and achieve long-term prosperity for all employees and partners" (pp. 52-53). The Georgetown-based Toyota Motor Manufacturing Kentucky (TMMK) says "Our vision is to be a company respected worldwide for producing the highest quality vehicles at the lowest cost in a safe environment" (p. 373). The long term philosophy, mission, and vision of Toyota drive the culture. What kind of culture will help Toyota achieve this vision and mission?

Liker and Hoseus unpack the Toyota culture as a "human systems model" which has three aspects. First is the "people" of Toyota. How does Toyota attract, develop, engage, and inspire its workforce and leadership? A chapter is devoted to each of those activities (attract, develop, engage, inspire). It's about building a "quality people value stream" with deeply-shared purpose and values. Toyota wants long term employees who are all lifelong learners and problem solvers.

The second aspect of the culture they call "people supporting processes." Chapters are devoted to work groups and teams, the workplace itself (clean and safe), communication channels and practices (meetings, two-way, formal, informal, visual communication), and leadership (servant leadership, challenge, kaizen, genchi genbutsu, respect, teamwork).

The third aspect of the culture is what the authors call "organizational-supporting processes." Chapters are addressed to tools and strategies for stable, secure employment, fair and consistent HR practices and policies, promotion policies (slow, deliberate), and hoshin-kanri (policy deployment, setting measurable objectives for individual, team, and company performance).

Liker and Hoseus close with three chapters of examples from Toyota's Lexus and Scion experiences and some good advice on how business leaders might transfer some insights from the Toyota Way and Culture into their own organizations.

The overall framework of the cultural analysis in this book is very sound and insightful. The wealth of detailed illustration of Toyota's systems and practices is a great gift. One of the virtues of this study is its realism about differences in local and national context ( Japan, USA, Kentucky, etc.). Toyota has some non-negotiable core values but fully supports flexibility and adaptation for local conditions.

It was not planned that Detroit's "Big Three" be near bankruptcy, begging for mercy from congress, at the very time this book hit the top of my reading list. But these recent events only highlight the importance of the topic: what is different about Toyota? Toyota is (and will be) suffering from the overall economic downturn; there is no escape. But Toyota will not be on life support like GM, Ford, and Chrysler. More favorable labor costs are only a tiny part of the reason why Toyota is better off. The difference is quality products, outstanding leadership, an inspiring purpose, and a value-embedded culture. It all goes together.

—David W. Gill

Keep Your Commitments

My proposal for the seventh rule/principle of ethical business leadership is "Keep commitments and agreements in a trustworthy, reliable manner." Stated negatively, the corollary is"Never betray your relational commitments or undermine those made by others." (see the ExthixBizine archive at www.ethixbiz.com for the preceding six).

This is not just some random idea plucked out of a hat. It is grounded in an understanding of the fundamental nature of human life. It is based on a view of people: Humans are not just individual physical beings whose bodies need protection (the point of Rule Six) but relational, social beings whose commitments and agreements also need protection (the point of Rule Seven this month). Reliable, trustworthy covenants and commitments are essential in every sector of life: business, family, friendship, community, and politics.

Keep Your Own Word

The first, direct way we practice the seventh principle is to deliver on both the letter and spirit of our own promises, commitments, contracts, and hand-shakes. It is to show loyalty and fidelity to people counting on us, inside or outside our business.

"My word is my bond." "Our handshake is as solid as any formal contract could ever be." It is that kind of sentiment we are looking for here. The word "integrity" really suggests an "integration" and harmony between what we say today and what we say tomorrow, what we say and what we do, what we think and feel inside and how we speak and act outside. It is about consistency and personal alignment.

Harris & Associates states it this way in their company code of ethics: "Fulfill commitments, contracts, agreements, and promises. . . . Follow through completely and reliably on agreements made with clients, business partners, and fellow employees."

If we practice this kind of reliability, integrity, and commitment as business people and professionals our reputation will make a way for us. Doors will open. Relationships and networks will want us included. Employment and business-to-business partnerships will gain in strength as well as agility. With such integrity and commitment, we won't need to be so paranoid and give so much time and money to our attorneys to create protective legal agreements.

Without such integrity and commitment, trust disappears. Cynicism, caution, wariness, and reticence enter the picture. It is just common sense that business growth --- and one's personal career trajectory --- will suffer if we can't be trusted to keep our commitments and promises. Of course it is the smallest blip on the radar screen but I quit flying United Airlines because of the way the overpaid CEO led the company to default on pension commitments to its flight attendants. Sell off some of your assets, sir, and stand by your promises. Don't betray your pension commitments to your employees and penalize them (and, of course, taxpayers) for your failure to build cash reserves for the hard times (like Southwest Airlines has done for more than three decades --- you could have done this Mr. Tilton).

Protect Other People's Commitments

The second application of the principle is to protect --- never undermine or attack --- other people's important covenants and relationships, inside or outside the workplace. One obvious interpersonal aspect of this application is to respect people's marriages and romantic relationships and not exploit possible opportunities in the work environment (including business trips and after hours activities) to attempt to lure colleagues away from their commitments into inappropriate relationships with us. Abusing our power and position by pressuring others in this way is profoundly unethical.

The same thing is true in regard to competitor employees and to many business-to-business relationships. Be careful not to poach or tamper with employees from other employers unless it is clear that everyone is in a true free agent position. We want to nurture open market competition but not predatory behavior that tries to induce others to violate commitments they have made to others.

© 2008 David W. Gill.

Top

• Ask Dr. EthixBiz: Be My Guest?
• EthixBiz Review: Hard Facts, Dangerous Half-Truths, & Total Nonsense by Jeffrey Pfeffer & Robert I. Sutton
• Gill's Benchmark Ethics: Protect Life & Health
  

Be My Guest?

Dear Dr. EthixBiz:

A contractor in my department was not extended a full-time employment offer at my company after his contract ended. He was very disappointed, but accepted the decision. Two days before he left, he gave me a pricey gift certificate to one of the best restaurants in San Francisco (Boulevards). After I received it, not realizing what it was until I went back to my desk and opened the envelope, I knew I couldn't accept it because (1) it was extravagant and probably violated my company's gift policy and (2) I didn't want him to spend so much money on me without having another income stream coming for him and his family. He refused to accept the gift certificate back so we compromised by going to lunch together with another colleague at Boulevards on his last day. We all enjoyed the lunch, each other's company, and I was immensely relieved. Even if my company would have been ok with the $ amount, I would still feel bad - especially since I heard that he had never eaten there before! Do you think I did the right thing?

-Susun

Dear Susun,

Just to be clear, in the end the lunch was not just a gift to you personally from him but a shared experience --- for (now) three of you at the restaurant. That seems like a great resolution to me. In situations like this it is essential to follow company policy on gifts and disclose/report these events to your boss or HR or the compliance office, as appropriate. The deeper ethical concerns have to do with a possible conflict of interest. Could the gift unduly influence you or compromise your judgment on a decision to re-hire this contractor? Avoiding that possibility -- or even the appearance of such a possibility -- is the wise thing to do. You ended the episode on a warm and positive note without the financial and influence questions.

One other comment: you have no clear obligation to worry about his personal and family finances but the fact that you do see (and care about) your colleagues as whole people with lives beyond the workplace is a very admirable thing. Most great leaders and effective managers share the kind of people-valuing sensitivity you displayed. Bravo Susun.

—Dr. EthixBiz

Dr. EthixBiz strongly recommends that all business managers and leaders commit to reading one book per month throughout their careers. New material, classics, novels, histories . . . read something that broadens and deepens your thinking.

Hard Facts, Dangerous Half-Truths, & Total Nonsense by Jeffrey Pfeffer & Robert I. Sutton (Harvard Business Press, 2006). 276 pages

Jeffrey Pfeffer and Robert Sutton are both professors at Stanford University. They also co-authored The Knowing-Doing Gap in 2000. Hard Facts, Dangerous Half-Truths,and Total Nonsense is subtitled "Profiting From Evidence-Based Management." Taking their cue from the rise of "evidence-based medicine," Pfeffer and Sutton offer a sobering, wise, caution to today’s business leaders and managers: don’t just buy into the "latest thing," or turn your thinking over to a consultant to do for you, or let your pet theories and ideas get in the way of the facts and the evidence.

All too often business leaders grab on to fads and theories without enough critical thinking. Sometimes we fall victim to total nonsense. Sometimes the mistake is to elevate a partial truth into a global theory and strategy. "Reengineering the corporation" may have had some helpful insights but the evidence is that it failed in most cases. Jack Welch’s forced ranking of employees (and culling the bottom ten per cent) does not always work. Even the widely lauded business studies In Search of Excellence, Built to Last, and Good to Great receive some critical cautionary (and convincing) comment in Hard Facts.

Pfeffer and Sutton devote extended attention to six dangerous half-truths in particular: (1) Work is fundamentally different and separable from the rest of life. (2) The best organizations succeed by hiring the best people (and eliminating many of the rest). (3) Financial incentives most reliably drive company performance. (4) Strategy is the critical focus in business success. (5) Change is essential. (6) Great leaders control the directions of their companies. With each topic, Pfeffer and Sutton provide a careful, nuanced examination of the complexity of the reality. Thus, strategy is important but team quality and implementation excellence can be as important or more so. Hiring good people is great but training the existing staff and creating systems and environments for success are just as important. Beware of turning something half true into a global philosophy.

Some of the most influential theories are based on skewed data. A correlation of two factors is presented as a causation. Contrary data are ignored or suppressed. What Pfeffer and Sutton argue for is a more critical, careful analysis. Ask for the evidence. Run experiments to test out an approach before committing the company on a grand scale. Be suspicious of ideas that are presented as "breakthrough" or "new" (most great ideas are old and classic). "Celebrate and develop collective brilliance, not lone geniuses or gurus." Always try to see both sides to claims and proposals: virtues/drawbacks, upside/downside.

Evidence-based management is not just a set of techniques, the authors conclude, but a perspective, a way of thinking. In many respects Hard Facts is basically a call to common sense, basic logic, and attention to history. It is an important message, made convincing by the abundant evidence they provide.

—David W. Gill

^Top

• Ask Dr. EthixBiz: What About Hank?
• EthixBiz Review: The Price of A Dream by David Bornstein; Oil! by Upton Sinclair
• Gill's Benchmark Ethics: Honor the Others: Rule Five

What About Hank?

Dear Dr. EthixBiz:

With the massive failures on Wall Street this past month, I am wondering if the recently retired CEOs of failed institutions like AIG (Hank Greenburg), Citigroup (Sandy Weill), and Fannie Mae (Franklin Raines), to take only three examples, might be called on the carpet? And how about the Senate Banking Committee and the SEC? Weren't they supposed to be watching out for us before a financial catastrophe could happen?

-Frank H. (& many others in similar words)

Dear Frank & friends,

Dr. EthixBiz is with you on this. The first principle of professional ethics, going all the way back to the Hippocratic Oath, is "do no harm." All of our ethical principles are ultimately about protecting people (and planet) from harm (physical, financial, reputational, relational, etc.). If someone builds a cosmetically beautiful but weak and dangerous house, then sells it to you without adequate disclosure and warning of its weakness and risk, takes your money and runs, and the house falls down on you . . . what do you think basic justice and fairness call for?

If the building inspectors all gave that house a "pass" with a lazy, inadequate inspection . . . what do you think basic justice and fairness call for? If the realtor sets up and facilitates the sale with eyes only on his/her sales commission and doesn't protect you from harm . . . what do you think basic justice and fairness call for? And of course if the buyer recklessly, thoughtlessly enters such a contract . . . what is their "just desert"? Caveat emptor is the old Latin phrase, "let the buyer beware." So the buyers of subprime mortgages and the investors in the related financial markets have some responsibility also.

But moral responsibility is partly a function of power. Those with more power have more responsibility. It is morally repugnant for the powerful on Wall Street or in DC now to be blaming the victim, blaming the poor, blaming the Community Reinvestment Act, etc.. Everybody has some responsibility, including the customer; but the powerful who invented these products and markets, and who knew or should have known that these products were uncontrollable and potentially disastrous, bear the greatest responsibility. The corporate malefactors who invented and/or promoted these toxic products should be subpoenaed to testify before Congress and explain how these products were used in their own corporate houses. This may eventually lead to criminal charges if for no other reason than these "leaders" did not carry out their fiduciary responsibilities to their shareholders, let alone the others in our economy who have paid the price as the houses started imploding. The regulators who were asleep at the wheel should be turned out of office. The fund managers who we trusted should watch as we move our investments to someone capable of taking better care of our savings.

Unfortunately, the guilty are unlikely to pay because they and their long time friends still control the system as a whole. What can we do? As citizens we can try to hold our representatives more accountable with our votes and communications. As customers and investors we can move our business to those who deserve it. And as business leaders we can reject the scam-artist tactics and irresponsible misleadership we have seen in favor of the way of treating our co-workers, customers, and business partners with respect and fairness and building our own businesses with pride and excellence. We all have to choose: what is my life, my career, my legacy going to be?

—Dr. EthixBiz

The Price of A Dream by David Bornstein; Oil! by Upton Sinclair

David Bornstein is a writer based in New York City. The Price of a Dream was based mostly on extensive visits to Bangladesh in 1992 and 1994. The prize-winning book was published in a paperback edition with a new preface in 2005. In 2004 Bornstein published his second book, How to Change the World: Social Entrepreneurs and the Power of New Ideas.

The Price of a Dream is the story of the Grameen Bank in Bangladesh, the pioneer in micro-credit and micro-enterprise: small loans to very poor people to enable them to create small businesses and build modest houses to live in. The great driver of this project was Muhammad Yunus, the founder of the Grameen Bank, and winner of the 2006 Nobel Peace Prize. Yunus, a native of Bangladesh, was educated at Chittagong College, Dhaka University, and Vanderbilt University (Ph.D., Economics, 1971).

In 1972 Yunus became head of the economics department of Chittagong University. In 1976 he loaned $27 out of his own pocket to a group of stool makers in a village and saw how this little loan enabled them to succeed.

Bornstein's book describes the basic ideas, gives a lot of statistics and details, and provides some analysis. However, the main value of his book is in its narrative which presents the voices and stories of those involved on the ground. Their struggles and successes (and failures and frustrations) are presented and speak for themselves.

The big economic development projects sponsored by the USA and other countries are often generous and well-meaning. However, their scale is such that the very poor are often left out almost entirely. The approach is patronizing and one-directional. The Grameen approach ("grameen" means "village") is to use small loans as a way of enabling the very poor to use their own creativity to climb out of poverty. The Grameen process evolved toward making the loans almost entirely to women because they were poorer than their men and also more likely to invest their earnings in home and family (what this says about the state of manhood is not a pretty message). An applicant for a loan must be part of a group of five who sign on to take responsibility for each other's debts. Loan recipients must attend regular Grameen meetings—for education as well as support and accountability. Loan recipients pay interest at relatively high rates but the small overall scale keeps the process affordable. The bank reinvests the profits in more loans to more people. The Grameen Bank by 2005 had invested more than 3.8 billion dollars in 2.4 million families in rural Bangladesh: quite a business success even apart from the social impact.

The Grameen Bank of Bangladesh has inspired similar micro-credit programs in more than 100 other countries, including the USA. It is about for-profit business, not charity, but at the lowest, most basic level. Many of us who have been parents have tried to train our children from a young age by giving them little jobs that challenge their work ethic and reward them. And we all know how in our own lives and careers we have thrived and grown when given responsibility, freedom, and the minimum resources to get started---not just a patronizing hand-out.

In a time when so many of our biggest financial leaders exploit their power and position to wheel and deal for their own personal aggrandizement alone, it is incredibly refreshing to read about a great business leader who created a for-profit business to empower and help his banking customers. There are opportunities all around us, in all business sectors. What are we going to do with those opportunities? Is it all about "me"? Could it be about "we"?

Oil! by Upton Sinclair (Penguin Books, 1927, 2007)

Generally speaking, I don't read novels. There are so many great biographies and histories still to read, why do I want to read a fictitious story? But my friends tell me I also need some fiction in my literary diet so once a year or so I try to pay my dues, so to speak.

Upton Sinclair (1878-1968) was one of those crusading novelists and journalists called "muckrakers" by President Theodore Roosevelt a century ago. Sinclair's most famous novel was called The Jungle---a fictional expose of the meatpacking industry in Chicago. The uproar caused by this novel (1906) contributed to the passage of the U.S. Pure Food and Drug Act and the Meat Inspection Act.

Oil! was published in 1927. It is a 500-page saga of a father and son, J. Arnold Ross, Sr. and Jr. over a fifteen or twenty year time period. Jr., known as "Bunny," accompanies his doting father to business meetings and deals as the early oil industry is developed in southern California. The father is a basically nice guy but builds his oil empire through business practices of questionable ethics and fairness (but "everybody's doing it"), cash under the table, deceiving people into selling land where oil is suspected, buying political influence at the highest levels (Harding's scandals were in the news for Sinclair). Bunny grows up as the beneficiary of this wealth and influence and is expected to take over the empire. However, personal friendships with the (radicalized, working class) children of some of those whose land Dad acquires, the influence of a radical professor at his university (sounded like USC to me), a growing realization of the superficiality of the lives of the privileged he hangs out with, and the injustice and suffering inflicted on the poor ---- all of this leads Bunny toward a break with his father's chosen life and career and value system.

Oil! is a very good if not quite great story. The characters are interesting and well developed. The story is believable. The message is complex enough to be worthwhile pondering. And all of this leads to a final comment that the film There Will Be Blood with Daniel Day-Lewis, though it claims to be inspired by or based on Sinclair's Oil!, doesn't hold a candle to the novel.

—David W. Gill

Honor the Others

My proposal for the fifth rule/principle of ethical business leadership is "Always treat people's ‘significant others' with honor and respect." The corollary is "Never ignore or disrespect the families and friends of others." (see the ExthixBizine archive at www.ethixbiz.com for the preceding four).

It is easy and straightforward to confine our concern to the employee or business partner standing in front of us, with whom we have a specific contract. But very few, if any, people are without relationships to "significant others" who mean much to them: parents, partners, children, house-mates, friends.

The Industrial Revolution of the 19 th century took a lot of our human labor away from the home and into the factory. Think of this in terms of a prototypical nuclear family: A separation was made between the work life and domestic life, often diminishing the father's family/parenting involvement and the mother's vocational/work opportunities (the one with the larger muscle masses had to go to the factory, the one with the nutritional abilities had to stay with the babies). In more traditional home-based businesses, the whole family was involved in the family farm, the bakery, etc., as well as in the domestic family affairs. The legacy of sending one parent off to a workplace, and leaving one home, was then further modified by an economy that made it necessary for both parents to go to (different) workplaces and left the children in the charge of various professionals. Not just factory labor, of course, but many business careers require people to leave home, often commute great distances, and work in some common location. And while my illustration is for the "nuclear family" the same trends affected all people and social bonds.

But we remain social creatures with both a need and a right to associate with our families, friends, and "significant others." Perhaps even more in an era of frequent job change and growing mobility, these "outside" relationships are what keep us going as healthy human beings.

The fifth principle of highly-ethical leaders and organizations is to treat those significant others with respect. How you treat those "others" affects how people feel about you and the company. Wayne Alderson, based on his experience as President of the Pittron steel company and then as a consultant and advisor to many other businesses, has written "One of the foremost ways for an organization to show respect for its employees is to recognize and respect each employee's family. An employee is nearly always connected to others---a spouse, parents, children, roommates" (Theory R Management (1994), p. 100).

How do we practice this management principle? Part of it is the little, day-to-day things of showing interest in the lives and relationships of our people. Take a look at the family and friend photos in the cubicle. Ask about someone you heard was ill---or graduating from school.

Part of it is a policy matter---promoting sensitive and supportive family leave and emergency leave policies. Welcoming friends and family to tour the workplace at appropriate times, or to participate in some company social events, can also support this principle of ethical management.

Finally, a skillful, creative deployment of technologies for telecommuting and working at home may be one of our best options to overcome the challenges of being with our family, children, and others who need us (and whom we need)---while pulling our weight on the team at work. It is ironic that industrial machines and technologies drove the process of collectivizing labor in buildings away from home---and now, coming full circle, newer technologies may be the enablers for rebuilding those relationships that were once ruptured.

--David W. Gill

© 2008 David W. Gill.

Print Version

• Ask Dr. EthixBiz: The Thieving Co-Worker
• EthixBiz Review: High Purpose Company by Christine Arena
• Gill's Benchmark Ethics: Promote & Enable Good Work & Rest: Rule Four
  

• Ask Dr. EthixBiz: The Thieving Co-Worker
• EthixBiz Review: High Purpose Company by Christine Arena
• Gill's Benchmark Ethics: Promote & Enable Good Work & Rest: Rule Four

Dear Dr. EthixBiz:

As a professional in the finance industry, I am constantly presented with scenarios which could be considered ethical dilemmas. Because our industry is strictly regulated, our firm puts a strong emphasis on business ethics, and I have a strong personal commitment to industry ethical and regulatory standards, I have never been tempted to profit off of a scenario that I would have considered unethical.

Nevertheless, I have witnessed actions by others that would be considered extremely unethical. On an almost daily basis, I witness questionable trading by other firms which are probably in clear violation of ethical and regulatory standards. Firms and brokers constantly misrepresent and mis-price financial transactions in order to facilitate trade executions and garner commissions. More often than not, in the derivatives marketplace, these financial transactions are far too complex for regulators to track and comprehend. Therefore, this continuous unethical behavior goes unnoticed and unpunished.

Most of the parties involved in these transactions are too short-sighted to realize that in the long term these actions will ultimately cost them far more in legal fees and lost business than the profits they receive in the short term. But is waiting for the long term repercussions all we can do?

—RW

Dear RW:

Good to hear that you personally are standing strong and that your firm emphasizes full compliance and sound ethics. Keep it up! Give us something to cheer about.

Obviously, if you have hard evidence of illegal activity at a competitor firm (or your own) you are morally (and probably legally) obligated to blow the whistle rather than cover it up. Talk with the leadership at your own firm about what steps to take.

It is troubling that there are "financial transactions . . . far too complex for regulators to track and comprehend." If what we need is more and better-trained regulators and watchdogs then we as a society and business community had better find, fund, and train them to prevent harm to investors. If what we need is better transparency and accountability in these markets, we'd better improve the technology, processes, and reporting requirements so that becomes reality.

But if a significant part of the problem remains scale and complexity, my argument would be that limits and protocols need to be set that prohibit unmanageable products. Think about automobile safety: we do not allow production, sale, and licensing of vehicles that cannot be road tested and proven to be controllable, drivable, and safe. Why should we allow the creation and sale of any financial "vehicles" and processes that prove to be uncontrollable and dangerous.

As the old adage goes, "Govern yourself, or be governed." If banks and investment houses do not themselves take the initiative to operate in a constructive, ethical way and set high standards for their industry, you can bet it is only a matter of time before some draconian, ham-fisted regulatory crack down will come out of our legislatures. The people are left with no other choice.

—Dr. EthixBiz