Are you warming or others or burning them?

Photo by andrewmalone

In The Social Animal: The Hidden Sources of Love, Character, and Achievement by David Brooks, the author writes:

State power is like fire—warming when contained, fatal when it grows too large. In his view, government should not run people’s lives. That only weakens the responsibility and virtue of the citizens. But government could influence the setting in which lives are lived. Government could, to some extent, nurture settings that serve as nurseries for fraternal relationships. It could influence the spirit of the citizenry.

Reread it with the words “government” replaced by “management” and “citizens” replaced by “employees”:

Managerial power is like fire—warming when contained, fatal when it grows too large. In his view, management should not run people’s lives. That only weakens the responsibility and virtue of the employees. But management could influence the setting in which lives are lived. Management could, to some extent, nurture settings that serve as nurseries for fraternal relationships. It could influence the spirit of the employees.

I couldn’t have put it better. No to micro-management. Yes to creating environments that support relationships, human connection and practical wisdom. No to rules that are only mechanisms of control. Yes to boundaries that enable safe exploration and supports people where complete freedom and autonomy fails.

Simple but not simplistic. Hard to put into practice. It is much easier to try to control everything. It usually doesn’t work in the long-run.

Elad

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Experts and novices

Photo by Mai Le

Seth Godin has fascinating short post out today. He describes his own interpretation of The Dreyfus model of skill acquisition. His conclusions:

1. Don’t talk to all your employees, all your users or all your prospects the same way, because they’re not the same.

2. If you treat an expert like a novice, you’ll fail.

I love point number one because I extensively write about it myself (for a summary, see here). The notion of equality must be banished from places it is not needed at. As Godin hints – in the area of marketing – and of course, in the area of managing people. If treat everybody the same we get cogs in a machine. The answer should be found in the idea of Equifinality. There are a lot of ways to reach success.  If we treat everybody according to their uniqueness we create variety which is beneficial. In the past, management practices were built on mechanisms of control that were intended to deal with heterogeneity. Today, this heterogeneity is need ingredient in the creation of innovation. We don’t need to control it, we need to embrace it.

But point number two is not less powerful. As I mention in my no more rules presentation, the use of rules and lose of judgment and practical wisdom is a short-run gamble for productivity. In the long run, only self-thinking, experts how develop practical wisdom through trial and error could produce tangible innovative, human connecting results. When you treat somebody like a novice, you are sacrificing his or her future ability because you prevent him from developing the qualities you need the most.

Elad

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Making learning a priority

Photo by Daquella manera

A few days ago Ron Ashkenas wrote on HBR.org a post titled: Don’t Let Your Next Crisis Go to Waste. In it, Ashkenas claims that organizations should learn to harness the spirit and energy of a crisis to “normal” times:

The reality is that despite our best intentions, most people (and organizations) can’t sustain the energy of a crisis environment. If the challenges go on for too long they start to become routine. People who stay with it either get burnt out, cynical, or disheartened; and for those not involved on a day-to-day basis, the crisis fades into the background.

Ashkenas then goes on to suggest two steps that will allow organizations to harness the power of the crisis. One of them is post-crisis learning:

Organize a post-crisis learning clinic. Include the key people who were involved — from your team, other parts of your organization, and even outside parties. Take stock of what you learned: What was done differently? What new patterns or innovations were sparked by the crisis? And most importantly, what new ways of working — individually or collectively — should be continued?

While I am all for de-briefing, learning from mistakes and constantly questioning assumptions and practices, I find the argument a bit contradictory. If, as Ashkenas claims, post crisis, energy levels go down, how organizing “a post-crisis learning clinic” is supposed to leverage the energy and spirit created by the crisis?

I an interesting study, Harvard Professor Amy Edmondson or Harvard Business School, studied how medical teams in hospital adapted to a new system for conducting surgeries. One of the conclusions of this study, is that learning was much more effective in real-time than post-hoc. When the surgical team emerged themselves in a process of learning during the actual surgery, they were able to learn and improve for the next surgery more effectively than by doing a post-surgery learning clinic.

Crisis is the hardest time to focus on learning, improving and thinking about the future. But it turns out this is the best time to do it. Like all issues of strategy, becoming a learning and improving organization is about prioritizing. The hardest time to engage in learning – during the crisis – is the most effective time. It means you, as a manager, need to make some tough choices. If you ask me, improving the learning capabilities of your team or organizations is, in the long-run, much more important than the current crisis.

Elad

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Are public companies creating value or are they suffering from the law of diminishing marginal return

I have been thinking a lot lately about public companies. As someone who use to teach corporation and securities law, I take for granted the fact that the public company is the most efficient way:

  • For a company to raise capital.
  • For an investor to put his money in the hands of expert management that will ensure his investment grows by generating value.

The whole legal concept of public companies and the stock markets is that this tool will allow the free agents to create more value for society. And in theory, this is a great idea. If I have the money but not the ability to manage a company, I hire other people to manage my company and find a bunch of other people like me. The managers, who are experts in creating value, manage our assets, and we can profit from the value generation, by enlarging the business on one hand and by taking dividends on the other hand. This in turn creates value for the society as a whole.

But as always, there is a difference between theory and practice.

The problem is that the structure of public companies and the stock market creates the wrong incentives. Instead of investors looking for expert managers to ensure their investment grows by creating more value, the investors (directly or indirectly using all kinds of funds) are searching to make profits out of the volatility of the markets.  When you have 1,000$ (or less) invested in a company, you are not interested in the value generation or in drawing dividends, but in the impact on the value of the share, so you can sell it.

This in turn puts pressure on the management to perform for the short run and to take steps and risks that a company without these incentives would not have taken. It creates a culture of a race after growth and of ignorance to the cash at hand. The short run outlook does not allow companies to sustain their profits over time and thus, does not create value for their investors and the society. I think that from society’s outlook, the current structure of the markets endangers the goal for which society has created these markets in the first place.

What is interesting is that the bigger the market, the more diversified it is, the more people are in it, the worse this phenomenon gets. And our markets are getting bigger, because of the internet, globalization and capital in emerging markets.

I think that stock markets have a diminishing marginal return and we have crossed the point where they become less effective the bigger they get. Perhaps the near future will lead to a surge in the number of private companies.

From what I have seen in the last few months in the world and from the little I covered in my MBA, if I was the leader of a private company thinking to go public today, I would reconsider. Maybe try to raise money in different ways or from a small number of strategic investors, but avoid going public at any cost. That is the most responsible thing to do, as a manager and as responsible citizen of society.

Elad