The Necessity Of Mandatory Execution

-THE NECESSITY OF MANDATORY EXECUTION-

An increasingly frequent enterprise performance roadblock is that of individual leaders and/or leadership teams unable to get things done on a timely basis.  Analyses are completed, meetings occur, decisions are either avoided or delayed, lists of things waiting to be done lengthen, and results remain constant.

One Midwest USA CEO during our initial meeting on this subject told us several months ago, “I am wondering where the balls are in our ball game”.

This organizational tendency is generally not self-correcting and nearly always has its Genesis in lack of execution on the part of one or several senior and middle executives.   And its result tends significantly to be excess headcount that feeds the cancer of metastatic human capital ineffectiveness.  Said another way, diminishing human capital productivity is the primary outcome of lacking execution by leaders… and almost always, nothing else.

This form of organizational failure is usually evidenced by increasing numbers of decision, operational and/or financial result deadlines being missed. Inevitably, as this pattern continues for 2 to 4 months the cause of these failures becomes wrongfully as having no connection to the leader(s).  In fact, the cause is nearly always what we call “self-contradictory” leaders.

These self-contradictory leaders are usually the individuals who:

◊ are supposedly busy all or nearly all of the time.
◊ when they travel for business, their outgoing voicemail messages say something similar to, “I will have limited access to voicemail and email, so please contact blah-ba-dee-blah for assistance”, while forgetting about their company paid smartphone on their waste.
◊ operate on a late or absent basis under most or all circumstances.
◊ tend significantly to hire and promote “B’s and C’s” instead of “A’s”.
◊ frequently postpone or change discussion and meeting commitments.
◊ are very frequently unwilling to return or at least acknowledge communications on the day any such communication is received.

The role of leaders at any organizational level is to see everything, while doing everything they say they are going to do when they say they are going to do it. For instance, if a leader has a seat on Air France Flight #85 leaving for Paris from San Francisco out of Gate 34 at 9:05 PM, and arrives at the correct gate at 9:10 PM, it is no more and no less of a damaging failure than not meeting a business response or result requirement and deadline.  Inevitably he or she loses money, misses an opportunity, and/or messes other people up.

When you are able as a leader to see everything, you are also able to see around corners with great accuracy. And on the other side of this particular corner is organizational inefficiency and increased variable costs either created or enabled by the leader who should have learned something important from their failure to board Air France Flight #85.

Some of our most effective solutions to this burgeoning enterprise performance and execution roadblock are:

◊ Include deadline compliance within executive and management reward systems, summing to 15% to 25% of target and actual incentive payouts.
◊ Fully utilize network calendars and define starting and ending times of all calendar items as being mandatory.  Be late for and non-responsive to nothing.
◊ Begin and end discussions and meetings precisely on time without regard to who is scheduled to participate but is mistakenly absent.  When meetings are scheduled to end, everyone should depart to execute other commitments, including occasionally the commitment to end meetings quickly.  And if any meeting should start late, everyone should still depart at the time indicated on their calendar. Meetings that run late cause organizations to run even later.
◊ Quit the nonsense of meetings when all that is necessary is a decision within one’s authority followed by communication of that decision.
◊ Never use an unexpected challenge as an excuse.  Unexpected challenges can nearly always be added to one’s calendar for a time 5 minutes to 5 days from now.  The only challenges that should change anything are those involving someone either in a hospital or a funeral home.
◊ Operating at the “beck and call” of any person proves that person to be both subservient and lower level.  If one is paid less than $40,000 per year and has no employees reporting to them, that is okay.
◊ When surprises happen today, spend less time on each item now waiting to be dealt with.  15-minute conversations can nearly always become 3-minute conversations for the rest of the day.
◊ When another individual fails to execute on a timely basis never do that part of their job for them, and assume no responsibility for their failure.
◊ Respond to every telephone message and every email by the end of that day or by the next morning.  And require that all those you interface with do the same.  Non-responsiveness is always directly correlated with lack of execution.
◊ Remember that the only opportunity for learning more is when one’s list of things to do is continually either shortened or eliminated. And also, that the only competitive advantage that your enterprise has that costs it nothing happens to be speed.

Nobody ever followed an undependable person anywhere.  And just as a rooster crowing does not cause the sun to rise, being busy and failing to execute does not contribute to enterprise performance and success.

All content ©2017, Leadership Strategies LLC.  www.peopleresults.com
All rights reserved under U. S. and international law.

Executive Hiring…Improving Their Return On Your Investment

-EXECUTIVE HIRING…IMPROVING THEIR RETURN ON YOUR INVESTMENT-

Our last article, “Ensuring That Your Performance And Reward Systems Do Not Do Compensatory Damage”, engendered a great deal of interest and a large number of readers asked us to specifically touch upon our experience and recommendations in the area of executive hiring and compensation. As a result, some thoughts are outlined below. During the last eighteen months executive turnover has become higher than it ever has been in history, throughout nearly all developed nations. For our purposes, “executive” is defined as employees with base compensation in excess of $150,000 or its equivalent.

2000 was the best year in history for executive search firms in the United States, the United Kingdom, Europe and Latin America, and 2001 showed little abatement. According to our contacts in the U.S. and international executive search communities approximately 50% of that activity has resulted from voluntary executive departures, approximately 30% of that activity has resulted from involuntary executive departures, and approximately 20% of that activity has resulted from newly established executive positions. At the same time senior executive total compensation has, in general terms, climbed substantially in comparison to other employee populations. From a business perspective, despite varying opinions on the subject, that is neither good nor bad. It has, however, contributed to the likelihood of executive departures as the economy turns around.

Quality Leadership

Company performance is more heavily impacted by the quality of leadership throughout a company than it ever will be by how much “underpaid” or “overpaid” its leaders are. Whether an executive is “underpaid” or “overpaid” is in no way tied to the quality of his or her leadership skills. Paying a leader an excess amount will not make him or her a more effective leader, or improve the financial and competitive results of the organization. Additionally, in all cases where executive and employee compensation is directly tied to organizational results, “underpaid” or “overpaid” is immaterial because the pay is directly caused by the organization’s results. Concerns about excess executive pay seem to occur largely within organizations where pay is not tied directly to traceable organizational results specifically created by the executive, exclusive of the broad market.

The best leaders, those who create or enable positive results most effectively, do so without excess concern about how much they are paid. They have other things on their mind and that will become more evident as you continue reading this article. Coincidentally, we have found that they also spend more time concerned about how effectively their team is being rewarded and whether that reward system is supporting the business results that the leader envisions. That concern, specifically, is what creates reward system alignment within organizations. It is also much of what makes successful organizations effective.

Compensation Preference

From a psychological standpoint, money tends to be an exclusive interest for those who are consumed by it. Said another way, those who are consumed by money tend to be quite disinterested in most or all other interests, to the detriment of the organization. We say that because money is inanimate. Organizational results occur because of animate relationships and interactions, the most important of which is that which occurs with and among customers and employees. If the picture is emerging in your mind that excess personal focus on compensation results in diminished animate relationship skills and hence, leadership abilities, you are correct. More important, we have found the following to be true after nearly four years of research:

The degree to which an executive’s total compensation is directly, proportionally and immutably tied to all expected organizational results (revenue, profitability, return on investment, customer retention, market share, shareholder value, customer acquisition and retention, employee opinions and productivity, earnings per share, EVA, etc.) is directly proportional to organizational results and inversely proportional to leadership shortcomings and executive turnover, whether voluntary or involuntary. Largely or completely ineffective executives and leaders have no interest in being paid according to the entirety of the first eight lines of this paragraph. The best executives, those who contribute the most while enabling the greatest level of organizational performance, demand to be paid according to the first eight lines of this paragraph. Those who do not demand so are simply not the most effective executives available for your organization.  One of the first questions most of our clients ask executives being considered for employment with their organizations is, “Could you give me very specific details of how you feel you should be compensated?”  To our clients, that is a pass/fail question.

We have summarily raised the subject of compensation within this article because it tends to have a monumental effect on the capability set that executives bring to the table. The compensation requests of your candidates for executive positions largely indicate their capacities as effective leaders. Some of the other attributes of the executives who will contribute the most to your organization, when you are looking to hire them, tend to be:

They are driven to compete exclusively against current and future direct and indirect competitors of your organization. Under no circumstances do they engender or allow internal competition for recognition, rewards, trips, or special treatment. There is no east region versus west region. The entire team vents all competitive force externally.

  • They never allow “busy-ness” to derail or slow forward progress. In their mind, being “busy” is a sign of inefficiency. They also believe that “now” precludes “never”.
  • Their cellular telephone bills are excessively low because they have mastered the skill of delegation and because they build relationships through many other more effective means.
  • They dress like the people with whom they are interacting so that interaction can, in fact, occur.
  • They spend substantial time “in the trenches” and “out in the field” in order to retain an informed operationally focused strategic mindset.
  • They are more interested in the organization’s goals and rewards other than stock options than they are in the stock options themselves.
  • They have an acute ability to see through and correct the political endeavors of their direct reports and the direct reports to those individuals.
  • They laugh and smile a great deal and that is much of what draws people to them as “followers.”
  • They are equally outstanding at both strategy development and tactical implementation. The best strategies are those that are derived by people with implementation abilities. Executives who are very good at implementation tend to be exceptionally good at creating human alignment and eliminating human conflict during both strategy determination and implementation.
  • They have no intention of immediately “bringing in their own team” after being hired because they clearly understand that leadership means having the ability to lead and quickly develop, with very positive results, at least 90% of any employee population they inherit regardless of the population’s shortcomings.  They NEVER bring other employees and executives with them from their former employer within 6 months of taking a new executive position.
  • They embrace the fact that their new company is entirely different from their prior organization.  As a result, they resist all urges to bring anything from their old organization (staff, philosophies, cultures, etc.) with them into their new organization.
  • They tend to display no narcissistic tendencies whatsoever.
  • They answer their own telephone frequently, proving that they prefer not to construct communication and relationship barriers.
  • They take all steps necessary to remove “politics” from the workplace, thus engendering a culture whereby performance and contribution alone control individual success.

Assuming your total compensation offer to them is competitive and reflects their prior results, proven capabilities and expected contribution, they spend no time whatsoever attempting to negotiate individual compensation program attributes (number of vacation weeks, target incentive, travel benefits, company car model, stock options, base salary, spousal benefits, etc.). Individuals who attempt to endlessly negotiate individual compensation package attributes tend to lack strategic foresight while being internally focused instead of organizationally focused.

Conclusion

The key challenge is for your organization to have the best possible leaders. Each of the above thirteen points is very easy to assess during the selection and hiring process, with 100% accuracy. By utilizing these guidelines along with reference and background checks, psychometric assessments and multiple interviews when hiring executives, many of our large and smaller clients have found that their organizational results and executive contributions have, not coincidentally, improved both dramatically and immediately.

 

Because one of our areas of specialty is leadership team member selection and executive search, please Contact us or call us at 480-467-0344 and we would be pleased to clarify any of the above points.

Ensuring That Your Reward And Performance Management Systems Do Not Create Compensatory Damage

-ENSURING YOUR REWARD SYSTEMS DO NO “COMPENSATORY DAMAGE”-

A universal and expensive challenge for each and every business around the globe is that of compensating employees for their efforts. This challenge is more complex in the United States than in most other countries due to the convergence of federal, state and local laws and because of the presence of many pay methods within U.S. business. Unfortunately, many organizations pay their employees only for their “efforts” rather than for their “results”. More importantly, the most effective guiding principle of compensation. . .that organizational results are much more important than individual results. . .is not currently evidenced at any level within the compensation systems of the vast majority of organizations.

“Compensatory damage” has hugely detrimental effects to the financial performance of the organization. It results in significantly reduced human productivity, increased human conflict within the organization, perceptions of internal unfairness, disconnection from customers, excess variable costs, and diminished financial performance. It has a tendency to go unnoticed, however, during periods of increased revenue and/or profitability and is easily temporarily overshadowed by macroeconomic forces.

Symptoms of Compensatory Damage

Some of the easiest ways to tell whether “compensatory damage” is occurring within an organization are through the following symptoms, among others:

  • Performance management and appraisal systems in use are heavily or exclusively subjective in design instead of objective in design.
  • Single-rater feedback (boss to subordinate) is the methodology of performance appraisal instead of multi-rater feedback.
  • Performance management systems in use are not specifically designed for the market or industry within which the organization operates.
  • Variable pay is absent at any of the employment levels within the organization. In other words employees’ pay is not directly tied, in any way, to organizational or team performance and results.
  • The organization is heavily influenced by union(s), cost of living allowances, or across-the-board compensation adjustments.
  • There is more than a 230% variance in total compensation between any management or executive employees who work closely together, or between any non-management employees who work closely together, with or without a reporting relationship. An example of this is the difference between a flight attendant’s compensation ($33,000) and a pilot’s compensation ($245,000), a 742% variance, or the difference between a company President’s compensation ($280,000) and a company Chairman’s compensation ($725,000), a 259% variance.
  • There are more than two differing reward system factors between any employees who work closely together, with or without a reporting relationship. An example of this is the case where one employee receives a base salary, company vehicle, cash incentive, stock options and an annual trip to Hawaii, and the other employee receives a base salary and cash incentive only.
  • Base wage or salary labor market competitive position philosophies vary within the organization according to level or function.
  • Certain employees are paid on a single dimension “incremental” basis while other employees, at any level are paid a base wage or salary only. The most common occurrence of this situation is when an organization pays incentives to sales people based exclusively on transaction amounts (commission) while not paying incentives to other employees for their activities or results.
  • There are exceptionally large (greater than one times base salary) cash value awards provided to certain employees, based on “assumptive” performance and results relationships, while other employees receive no awards under the same system. The most common “assumptive” rewards are stock options and discretionary incentives.

Whenever the above situations exist within an organization, the organization’s financial performance is being negatively affected in significant ways. This is not to say that there cannot be significant differences within an organization as to how much various contributors are rewarded. There should, in fact, be significant differences based on performance and immutable contribution to results. However, if reward systems within a given organization are universal and remarkably similar in structure (not necessarily in amount) that organization will consistently outperform other organizations that are committed to inefficient reward systems and organizational misalignment.

Our concept of stranded, or wasted, compensation is a natural by-product of the above situations. So is limited organizational productivity and performance.

Our Recommendations
The following are some of our recommendations as to what enterprises must do to avoid these dilemmas:

  • Closely evaluate and and improve the means with which external candidates for employment and internal candidates for promotion are selected.  If optimal candidates are selected in all cases, the challenges outlined in this article will be minimized.
  • Ensure that your compensation systems are universally designed to directly impact organizational results with each and every employee. Ensure that the linkage between reward system and results is not “assumptive”.
  • Evaluate your performance management and appraisal system to ensure that it is largely or exclusively objectively focused.
  • Ensure that your performance management and appraisal systems make optimal use of multi-rater feedback.
  • Implement a well designed, preferably simple, variable pay system that ties all employee efforts together (executive through front line).
  • Promote and hire only employees who enthusiastically embrace the concept that pay is related to how they and the company perform, rather than separate from it.
  • Never utilize any incentive that is assumed or designed to be discretionary. Connect all payouts to definitively measured organizational results.
  • Drastically minimize or eliminate rewards based exclusively on individual, versus team or organizational, performance.
  • Ensure that at least 51% of all variable pay payouts within the entire organization are derived from results that current customers and prospective customers have noticed.
  • If yours is a publicly held organization, honestly evaluate your stock based reward systems for “stranded compensation” (see our Performance and Reward Systems web site page for further information). The most effective stock based reward systems, through their design, will differentially drive performance during a bear market even more effectively than during a bull market. Bear markets and bull markets will occur, on a cyclical basis, for as long as public markets exist. The key is to have internal reward systems in place that will actually drive organizational performance well beyond market performance, whether bear or bull.

Because some of our areas of specialty are organizational productivity, financial performance, and compensation/performance management system design, please Contact us to subscribe to our web article notification list or call us at 480-467-0344 and we would be pleased to discuss, clarify or expand on any of the above points.

An Experiential Perspective On Business Ethics In The United States

-AN EXPERIENTIAL PERSPECTIVE ON BUSINESS ETHICS IN THE UNITED STATES-

With globalization of world economies, business practices throughout the world are becoming more uniform.  Business ethics, however, are globalizing at a much slower pace. The recent events related to EnronWorldComK-MartTycoGlobal CrossingCutter and BuckImClone and other U.S. organizations have replayed memories from the 1970’s and 1980’s such as Bank of Boston, Ivan Boesky, Charles Keating, Guinness, Robert Maxwell, Toshiba and Deutshe Bank.  This we know:  near term, it is very likely that another U.S. technology company and another U.S. retailer will collapse as the result of the ethical misguidance of their executives and boards of directors.

With globalization of world economies, business practices throughout the world are becoming more uniform.  Business ethics, however, are globalizing at a much slower pace. The recent events related to EnronWorldComK-MartTycoGlobal CrossingCutter and BuckImClone and other U.S. organizations have replayed memories from the 1970’s and 1980’s such as Bank of Boston, Ivan Boesky, Charles Keating, Guinness, Robert Maxwell, Toshiba and Deutshe Bank.  This we know:  near term, it is very likely that another U.S. technology company and another U.S. retailer will collapse as the result of the ethical misguidance of their executives and boards of directors.

We are familiar with a Fortune 50 company that has made it a practice to utilize corporate jets to retrieve lobsters from the fishing docks in Bar Harbor, Maine for four corporate executives.  The trips have had only the purpose of lobster transportation at $4,300 per aircraft operating hour during repeated eight hour round trips.  We are familiar with a large organization whose financial performance has been nearly exclusively driven by “cookie jar” funding derived from its public offerings instead of by its operations, while improper and non-disclosed payments have been made to several senior executives through the company’s accounting and payroll systems.  We are familiar with an organization that records revenue on the date of purchase order execution while certain company executives receive exceedingly large vendor kickbacks.  We are familiar with a company that repeatedly records revenue by shipping products to warehouses operated by that company, with no currently known purchaser or further destination for those products.

Those examples provide only a sampling of the violations that have recently occurred and/or are currently occurring through the use of special purpose entities, engineered balance sheets, fraud, veiled embezzlement, purposeful violation of S.E.C. and I.R.S. regulations, and other means.  None of those organizations are clients of Leadership Strategies and while the vast majority of organizations are led in an ethical manner or within one standard deviation of it, the generally narcissistic philosophies and behaviors of some organizational leaders and their counselors and consultants are fascinatingly troubling.

White Collar Crime On The Rise

The most important reason why there appears to be so much white collar crime in the United States is that there are so many more laws regulating business in the United States to be broken.  Additionally, journalists, investors and U.S. citizens may be more consumed by the subject of business ethics in the United States because there is more misconduct to worry about than in other economies.

Sixty-five percent of the individuals convicted of securities law violations in the 1980’s received jail sentences, some very lengthy.  In 1978, executives spent more time in jail for price fixing than in all of the nearly 100 years since the passage of the Sherman Antitrust Act.  Yet EnronWorldComK-MartTyco, Global CrossingCutter and BuckImClone and other corporate disintegration’s have occurred during the last year alone as a direct result of executive incompetence, dishonesty or inattention.  That statement simply reflects the fact that it is not possible, in WorldCom’s case for instance, to mistakenly classify $3.9 billion of operating expenses as capital expenses without corrupt motivation.

Many of our senior executive and board clients have found that it is monumentally easier and in nearly all cases financially beneficial to themselves and to their shareholders to run their companies in a manner, using the words of several board members with whom we work, “where full disclosure of all material facts either is not or would not be embarrassing or painful”.

People do not eat while scuba diving because the conditions surrounding them while diving do not allow it, making such activity both mentally and physically impossible.  Because the participants expect those conditions while diving there is no discomfort connected with those environmental requirements.  Individuals who must eat do not dive at the same time.  The individuals who have been doing the organizational equivalent of feasting on lobster while diving have done so because they and possibly their boards and/or major shareholders have not established the conditions under which the feast could never have occurred.  We propose and many of our clients have found that it is in fact painlessly simple to establish the leadership, systemic and environmental conditions under which unethical, illegal and dubious activities are simply NOT ABLE TO OCCUR within organizations.

Some Solutions That Work

While the solutions to current challenges within given organizations vary considerably, below for your consideration are several of the most universally beneficial and simple steps that you and your organization may take toward elimination of the market, reputational, financial, and criminal risks related to these corporate governance and ethical issues:

    1. Americans more than any other people tend to consider their own personal ethical rules and standards, however inappropriate, to be universally accepted. As a result, it is crucial to establish a code that definitively and clearly creates a shared and mandated understanding of the nature and scope of the company’s responsibilities as well as for the individuals employed there. Executives and employees who violate the code should be terminated rapidly, without recourse and with no parachute.
    2. Executive and management base and variable compensation must be driven by local or regional market data and directly traceable contribution to the company’s results by the incumbent.  Our research over the years has shown clearly that those individuals who are most prone to ethical and legal transgressions are those who are also overpaid in comparison to the market and to what they are contributing in directly measurable ways to the employer and its shareholders.  There tends to be a direct relationship between excess pay and the likelihood of ethical misdeeds, and all compensation in excess of what a person would earn if self-employed must be rationalized by the organization.
    3. Employment contracts should be written or edited to provide for termination without exit compensation in situations where false or misleading operating or financial information is created or in cases where actions taken by individuals are intended by them, or have the result of, creating personal gain at the possible or probable expense of any or all other stakeholders.  Individuals who are unwilling to have their employment contracts edited for this purpose are most likely the same individuals who have taken inappropriate actions in the past or will do so in the future.  There is no legitimate reason for any person to not agree with contractual changes intended to ensure ethical and defensible behavior on their part and on the part of the company.
    4. Eliminate any vendor rebates or kickbacks, without regard to what they are called within your organization or whether they have been “standard” within your industry or not.  Our research shows clearly that rebates by any name lead to unjustified compensation and excess inventory.  They also clearly result in other forms of rebates or kickbacks to individuals within your company, nearly all of which are unethical and/or illegal.  Negotiate a lower landed cost from vendors, without rebates or kickbacks.  If the vendor refuses, simply find another vendor.  Additionally, no executive or purchasing staff member in your organization should receive any form of kickback from suppliers for what they purchase from those suppliers with your organization’s funds, whether those kickbacks are provided directly by vendors or through your company’s payroll.  We are familiar with one company whereby their inventory, consisting heavily of distressed items, recently exceeded half their annualized revenue largely due to vendor kickbacks to executives referred to internally as “incentives”.
    5. Allow no person, including the senior-most individuals, to “remove themselves from day-to-day responsibility” within your company until they no longer receive a paycheck from the company.  Our research shows clearly that ethical degradation begins at approximately the same time as when senior individual(s) become less active with the company “day-to-day”. Working and retiring are mutually exclusive events and no person at any level within your organization should be without substantial “day-to-day responsibility” until they actually do retire or depart.  The efficiency and productivity of any organization is heavily reflective of the degree to which those at and near the top of that organization hold significant “day-to-day responsibility” with the same behavioral work ethic required of other staff members.
    6. If your public accounting firm has recently hired any or many former Andersen associates or partners, actively consider changing to a firm that has not done so, while remembering that it has been reported that Andersen charged Enron $68 million in 2001 for services now determined to be of little or no value.  Your organization deserves both competent and ethical assistance from its accounting, audit, law and consulting firms.   Individuals from Andersen have now scattered far and wide and it would be prudent for you to ensure that they scatter in directions other than within your organization or within organizations servicing your organization.
    7. Closely evaluate your board and committee membership, ensure that board members individually spend meaningful time within company locations at least twice per year, and terminate board members who have missed more than one board meeting or board commitment during any one year.
    8. Choose executives very systematically while formally assessing their ethical and compliance values and behaviors.  Develop a selection methodology that includes a valid structured evaluation system having the effect of eliminating all risk of hiring, promoting or retaining unethical and/or non-compliant individuals. Establish an understanding with all executives that, aside from their ability to do their job, their job is no different than any other job.  Remain rather conservative in the areas of executive perquisites and required executive behaviors.  When an executive becomes pompous or disconnected from the reality of your business and its markets (these events tend to occur simultaneously) ensure that both the pompous and disconnected tendencies are rapidly eliminated.
    9. Eliminate much of the insular tendency toward falsely assuming that same-industry experience adds to the capability set of managers and executives hired and employed by your company.  All industries and companies are in the business of performing financially while serving customers through human and capital assets.  All industries are largely similar, and one of the largest reasons why companies do not change purposefully and fittingly with their markets is because they do not modify the types of individuals they are hiring, promoting and retaining.  Markets change at approximately three times the pace of insular organizations and our research indicates clearly that insularity creates fertile ground for market disconnection, personal malfeasance and organizational failure.
    10. Consider changing your accounting and legal firms every four years and only utilize firms that will not charge extra in order to “learn your business”.  If the firm is qualified, their associates will know slightly in excess of 85% of everything that is to be known about your industry and business.  Monitor firm billings exceedingly closely and pay no provider on an hourly basis.  When you do not pay on an hourly basis, the professional services firm becomes motivated to eliminate issues and challenges quickly.  When you hire a professional services firm, “do the math” to determine how ethical the firm is with regard to its fees.
    11. Maintain active involvement with and immediate responsiveness to local communities and media publications such as newspapers and business publications.  Openly communicate internally and externally about all business activities that are not competitively confidential.  The tendency by organizations to be secretive and non-responsive with regard to their internal constituencies and external surroundings tends to be directly proportional to the occurrence of repetitive ethical and legal violations.
    12. If yours is an organization whereby certain senior executives have in any manner coordinated what may be or are known to be inappropriate activities with board members or major shareholders, rapidly develop a disclosure and remediation plan among the involved groups in order to fully rectify the situation retroactively and prospectively so that corrections may occur on internal terms to the greatest degree possible.

As indicated above, the complexity of your challenges may vary greatly when compared with other organizations.  The above list is merely intended to serve as a starting point for the improved financial performance of your company while concurrently eliminating much financial, legal and market risk.  Some or all of the above steps, and others, are being taken within several of our public organization clients with remarkable financial and organizational efficiency results.

Conclusion

Many of our clients have found that “ethics” is the wing nut that most beneficially holds the organization together.  It has become clearly evident during the last year what happens when that wing nut either does not exist or is not tightened properly.  If that is not enough of a reason to pursue ethical remediation, if necessary within your organization, consider this: The percentage of lower and middle level employees who know, are affected by, and talk openly about ethical and legal errors above them is exceedingly high.

Because one of our areas of specialty is Corporate Governance and financial performance, please visit the “Corporate Governance Solutions” section of our web site, Contact us or call us at 480-467-0344 and we would be pleased to discuss, clarify or expand on any of the above points.

Proven Leadership Strategies During Challenging Economic Times

-PROVEN LEADERSHIP STRATEGIES DURING CHALLENGING TIMES-

We have been in plenty of doors within almost every business sector and industry and have observed that not many organizational leaders have a strategy or plan for the near term, let alone the long term.
There are many factors as to why, including fear of the unknown, the desire to just leave well enough alone, the thought that the early indications of a financial rebound are simply an aberration are all contributing to the malaise that currently exists in American business.

But as many of us know, the United States has survived and rebounded from 10 recessions between 1948 and 2002 and all indications are that this one will be no different. So what are business leaders to do? What’s the plan?

Although every company is different and not all solutions fit every organization, the following strategies are tried and true and should be part of every organization’s plan moving forward:

1. Ensure that you have a strategic plan for your organization and don’t be afraid of tweaking it as necessary based on updated information or changing market conditions. The idea of developing and following a 1 to 3 year plan without making necessary revisions based on new information or changing trends at best can be likened to operating blind and at worst could be business suicide.

2. Commit to never returning to your past when it comes to headcount and human capital overhead. The days of old which included multiple layers of executives with extremely high base salaries supplemented by exorbitant perks and incentives are a thing of the past, thankfully. Companies are doing much more with much less, which should prove to strategic leadership that the days of entitlement are dead and gone!

3. Ensure that you have the right talent in the right jobs within your organization. Now more than ever, it is extremely important that you have your human capital talent performing duties that are a match to their skills and abilities. One very positive result of the economic downturn has been the identification of those individuals who cannot keep up because they lack the skills, abilities and/or motivation to perform their job duties. If you have not already done so, now is the time to identify those individuals, assess whether they still fit within the organization and take appropriate action.

4. Know what the market is paying and adjust wages accordingly. Although money is not the only reason why your key people stay with your organization, it is a key reason and will play a part in whether they stay with you once the economy is in full swing again. The war for talent is real and you don’t want to be in a losing battle with your competition, because you did not react quickly enough to the changing marketplace.

5. Finally, embrace the role of the strategic leader of your organization. Although you don’t have all of the answers and your crystal ball is no better than other leaders in similar roles, don’t be afraid to seek out assistance from professionals who can provide you with insights and strategies that you may not have considered. The number of organizational leaders who have sought us out for the purpose of executive mentoring is at an all time high for our organization and the feedback that we are receiving from our mentees is that they cannot put a dollar amount on the value they and their organizations have received from this process.

Remember, your team is looking to you to set the course and drive the direction of the organization. Now is a critical time to provide the kind of leadership necessary to see your organization through these difficult times. Ignoring the challenges or hoping they will fix themselves is never the answer. The five recommendations above are a good starting point and don’t be afraid to utilize your leadership team, this is a great opportunity for them to be involved and contribute strategically to the organization and its success.

For assistance with these or any other challenges that you or your organization may be facing, please contact us at 480-467-0344.

Busyness…Its Impact On Your Organization

 

Introduction

Worker productivity is higher than it has ever been as companies have tightened their financial belts over the last 18 to 24 months. Individuals have been, and continue to perform their duties as well as the duties of others, as positions have been eliminated and not replaced. From a financial perspective, the good news is that labor cost as a percentage of the organization’s top-line is generally much lower than it has ever been. The bad news is that we may have provided individuals with an excuse for not being immediately responsive internally and externally and not taking timely action based on busyness.

What Busyness May Be Costing Your Organization.

Busyness takes multiple forms within organizations and can result in internal and external turmoil and frustration, erosion of the organization’s competitive edge and a loss of market share.

One form is an utter failure to be responsive to telephone calls, emails and written correspondence due to busyness. Recently, I contacted an individual whose outgoing voicemail message stated that she would be attending a conference for an entire week and would not be responding to telephone messages or emails until she returned. In an age where everyone is wired to the hilt with cell phones, Blackberry’s and laptop computers, I found it amazing that anyone who was away attending a conference would choose not to be responsive for an entire week. I use the word “choose” because it is truly a choice not to be responsive, when in reality, there would have been ample time and opportunity to be responsive, while enjoying the conference. I proceeded to leave the individual a message on a topic of great urgency to her and received a call back one week after she returned from the conference. When the call was finally returned, the reason given for the delayed response was busyness. We always say that rapid responsiveness is a competitive advantage that costs you and your organization nothing. Those organizations that are rapidly responsive to both their internal and external customers/clients find their rapid responsiveness to be recognized, remembered and appropriately rewarded.

Another form of busyness that is invading organizations is the failure to take timely action, which can cost an organization greatly. An organization that we are familiar with recently identified a need to quickly develop and execute a new commission incentive plan for their sales force. The organization was in jeopardy of losing many of their key sales people because they were being recruited away by a competitor with offerings of higher sales commissions. A very thorough and detailed commission plan was developed based specifically on the organization’s needs and desires, making them extremely competitive. As a result of multiple reviews and committee meetings, which resulted in only very minor plan revisions, eight weeks elapsed between the time the plan was finalized and eventually rolled out. The good news for this particular organization was that the plan was very competitive and well received by participants. The bad news was that the lack of forward motion resulted in multiple weeks of delay in which three top performers departed. Delays can be extremely costly as in the above example and there seems to be a willingness by some leaders to accept these delays. Delays based on a personal preference to have one more review or gather additional information must be eliminated. To be competitive, organizations must adopt an “enough is enough” philosophy and commit to getting things out the door. This philosophy is simple, but will pay immediate and sustained dividends to the organization.

Solutions That Cost You And Your Organization Nothing!

Some of the best solutions often cost the organization nothing and are simple to implement. To rid your organization of the busyness that may actually be holding it back from greatness, try implementing some or all of the following:
1. Require that all telephone calls and emails are replied to within 24 hours of receipt, no matter where the individual may be or what the individual may be doing. In our current electronic age, there is no excuse for not being immediately responsive.
2. Eliminate all unnecessary meetings and require that all necessary meetings start and end on time and have an agenda that was circulated to all participants at least 24 hours prior to the meeting. Cancel meetings that are not necessary and only involve key decision makers who can impact the outcome of the meeting. Do not allow individuals to invite multiple layers of support people to attend the meeting. Instead, require that they have the answers themselves rather than diverting the question to someone on their team.
3. Institute one day each week as a “no meeting day,” enabling your management team to manage by “walking around” and engaging the workforce.
4. Foster decisiveness within your team by instituting an “enough is enough” rule that states that one more test, or one more committee meeting that will not provide new information is not allowed. This will rid your organization of “paralysis analysis” while causing it to be much more competitive in the marketplace.
5. Do not allow busyness to be an excuse for not keeping commitments or getting things done. Deal directly with those individuals or departments that are constantly too busy to get things done.
6. Set the example by “doing what you said you were going to do, when you said you were going to do it!”

Conclusion

The U.S. economy is firmly in a turnaround and all indicators are good for financial growth and increased productivity. Now is the time to make sure that you and your leadership team is firmly committed and ready to take their performance and the performance of their team members to the next level.

Because one of our areas of specialty is organizational effectiveness and financial performance, please contact us through the Contact Us button on the left of your screen or call us at 480-467-0344 and we would be pleased to clarify any of the above points.

Kevin Grindle is a Leadership Strategies, LLC partner and has over 20 years of operations and human resources management experience. Some of Kevin’s primary areas of specialty are organizational design/effectiveness, employee relations, executive search, training and development, coaching and mentoring, career transition, total reward system design, human asset analysis, mergers and acquisitions, employee assessments and human capital retention. Kevin can be reached directly at 480-467-0344 or by email mailto:kgrindle@peopleresults.com.

Don’t Get “Cooked In The Squat!”

-DON’T GET “COOKED IN THE SQUAT”-

World-renowned motivational speaker Zig Ziglar in his book See You At The Top relates a story from his childhood growing up in Yazoo City Mississippi in which his neighbor’s cook, Maude, made biscuits. Ziglar remembers one occasion when Maude brought out a pan of biscuits that were no thicker than a silver dollar, he asked her what had happened to the biscuits and she replied that “the biscuits squatted to rise, but they just got cooked in the squat.”

Over the last eighteen to twenty-four months many organizations have experienced less than stellar financial results, corruption and fraud at the highest levels, downsizing and rightsizing in an attempt to make the organization profitable, and overall unrest and fear of what the future may hold. The good news is that many indications show that the economy is starting to turn and that organizations are starting to experience positive results, which leads to an expectation for a robust 2004.

Unfortunately, as we work with companies both small and large within every industry and business sector, we still see organizations that are “squatting to rise,” and if they don’t make some adjustments quickly prior to the economy’s complete recovery, they may find themselves “cooked in the squat.” This article will outline 8 action steps based on our observations and experience that if implemented, will enable organizations like those biscuits, to rise rather than being “cooked in the squat.”

Action Item 8 – Revamp Your Hiring Processes…

Many organizations still source, recruit and hire the way they did back in the 1970’s. Unfortunately, that approach did not work well then and it certainly doesn’t work now. The old practice of only hiring within the same industry and going through a long and laborious interview process over several days or weeks, then requiring unanimous agreement internally, only to pass on candidates without further contact does not and will not work. Job seekers are much more educated and polished then ever before, they know the questions you will ask and how they will answer them prior to the interview. Polished candidates can and will become what they think you and/or the company wants them to be and they can adjust as needed. The only way to eliminate bad hires is to stop them at the front door, and a proper hiring process can do this for your organization.

Recommended Solution: To get to the “real” individual behind the façade, progressive companies are utilizing Psychometric Assessments as part of their hiring process that utilize Job Match Technology along with behavioral interviews, reference and background checks.

Action Item 7 – Reduce The Number and Frequency of Meetings Immediately…

Meetings have taken on a life of their own and have become one of, if not the biggest time wasters for American businesses. We are aware of one company that holds meetings in which the entire executive group is invited and it is expected that each executive bring from 2 to 4 of their direct reports in the event they are asked a tough question they must defer to one of their subordinates. As a result of this wrongful approach, meetings often involve from 25 to 50 people whose time would be much better spent focusing on their areas of responsibilities. Individuals who we have talked with tell us that they know intuitively that this approach is wrongful, but they are fearful that if they do not attend, there will be a perception at the highest levels that they don’t care or worse, that they are no longer influential and that their opinion and involvement is not necessary.

Recommended Solution: Only hold meetings that have a direct customer affect. Meetings that do not affect the customer or the bottom-line of the organization should not take place. Immediately reduce meetings by 20% and only involve those individuals whose input and participation are necessary to make rapid decisions. Set one day per week in which no meeting will take place and watch your organization’s productivity increase!

Action Item 6 – Do Not Stand For Indecision…

Indecision is a cancer in American business. We have contact with individuals and organizations that appear to be caught in a malaise of indecision. When questioned as to why this malaise exist, fear of making a mistake and the lack of decisiveness at levels above the individual are the reasons that are most often given. The perceived need to “run it by Rizzo, or bounce it by Boomer” is negatively affecting how organizations make decisions and is in many cases are costing those organizations dearly in employee trust and morale, as well as financial results. Organizations tend to rush to get things done up to a point and then the malaise and resulting stall begins. We often see this with organizations who fail to schedule activities 14 days in advance, allowing them to take advantage of airline discounts when bringing people in from out-of-town. It has become acceptable not to make timely decisions while paying 40% to 75% more in airfares and accommodations.

Recommended Solution: Hire, train and reward people who are decisive and who have a proven track record of making good decisions. Ensure that all decisions have a time limit and that any person who cannot make good decisions rapidly or by the agreed upon deadline will no longer be allowed to delay or participate in decisions, while the organization moves forward without their input.

Action Item 5 – Set The Ethical Tone…

With the recent headlines regarding Tyco, Global Crossing, Qwest and Martha Stewart, business ethics and corporate governance have been thrust upon businesses forcing them to recognize and address the issue. Unfortunately, some organizations have reacted by charging their human resources function to quickly “pull together” a training program while requiring all hands to attend and signoff on an acknowledgement that they will act and perform their duties ethically. In addition, companies have developed elaborate statements and policies regarding the organization’s commitment to behaving ethically which is then posted on walls and within waiting areas throughout the company. The problem with this approach is that for ethics to work within any organization, it must start with the example that is set at the highest level within the organization. The “do as I say, not as I do” mentality does not work with regard to corporate governance. If the CEO is taking unnecessary risks with shareholder’s investments for personal gain, it is impossible to successfully mandate ethical compliance by others.

Recommended Solution: Ethics and corporate governance compliance and success do not work if they are merely additional programs or a plaque that appears at the entrance of the company. To be real and meaningful, ethics must be a way of doing business from the top to the bottom of the organization, without one exception. Ethical behavior must be seen and practiced as a competitive advantage for the organization overall.

Action Item 4 – Address Substandard Performance Immediately…

Problematic organizations often have at their root problematic employees. Some organizations put up with substandard performance with the hope that the individual might improve, or that they may be transferred to another department or better yet to another division, or that the individual might on their own make a decision to leave. Many leaders and managers state that they are afraid to take immediate and definitive action on individuals with performance problems for fear of agency charges or wrongful termination litigation. The real root of the problem is the leader or manager’s fear of having to confront substandard performance and as a result, they would rather not deal with it in hopes that it will take care of itself. What often results is prolonged or increased poor performance and the perception of observers that the supervisor or company allows substandard performance to exist while not taking action. In some instances, this lack of action frequently results in loss of trust and confidence in leadership on the part of outstanding performers and in the worst case, turnover.

Recommended Solution: Take decisive and timely action on all substandard performance to ensure that the individual has been given the opportunity to improve and that a defensive paper trail has been established. Once the decision has been made to remove a substandard performer, it needs to take place quickly and professionally without a trail of destruction.

Action Item 3– Do Not Allow Internal Competition…

Internal competition is often used as an incentive to create excitement and interest with the ultimate goal being increased sales and profits to the organization. Many of these competitions involve exotic trips if region 1 beats region 2, for example, and throughout the contest period reports tracking how each is doing in comparison to the other are posted with bragging rights changing from week to week. Although more products may be sold and dollars dropped to the bottom-line during the contest period, some real long-term problems can result from internal competition. One problem is what we refer to as the silo effect whereby individuals, districts, and regions lose site of what is good for the company as a whole and begin to focus only on what is good for their silo. Another downside of these types of internal competition is that they can promote cheating and dishonesty by individuals whose ethics were never questioned in the past. Good people can become very bad people when internal competition becomes their primary focus and personal winning becomes their only goal.

Recommended Solution: We support competition as long as that competition is focused externally instead of internally. Organizations are much more effective and results are much greater when teams work together to beat external competitors rather than their co-workers. Incentives in the form of bonuses based on bottom-line improvement eliminate many of the problems that are caused by internal competition.

Action Item 2 – Reward The Right Things…

Many organizations make the mistake of knowingly or unknowingly rewarding the wrong types of activities. We are aware of one organization that rewards its buyers for purchasing distressed inventory that sits in warehouses never to be sold, so that the organization can receive six figure kickbacks from vendors that are then posted to their financial statements in some cases. Beyond the legal and ethical implications of this practice, the message that this activity sends to rest of the organization regarding how the business should be run is devastating.

Recommended Solution: Reward systems must be structured in such a way as to reward rightful behavior. Rewarding behavior that has a negative impact to the financial success of the organization cannot be allowed to happen. Reward systems that we develop always have a direct connection to the organization’s bottom-line results and reward employees who contribute to the organization’s short and long-term success.

Action Item 1 – Get Ahead of The Wave…

Because we have been in a “buyer’s market” in the recruitment arena for the last 18 to 24 months, many organizations have had the luxury of having more resumes to review than ever before and as a result have perhaps become lulled into thinking that they can treat job applicants poorly during the employment process. In addition, due to the large number of layoffs that have taken place within some organizations in an effort to shrink themselves to profitability, many employees who were not affected by layoffs have been biding their time to jump ship. We have been predicting since June and have begun to see evidence that the resumes of many top performers within organizations have begun to hit the street. Recent research indicates that from 40% to 72% of individuals either have submitted their resume for consideration to one or multiple companies or are preparing to make their resume available to companies for which they have interest. We do not say this to scare organizations, but rather to give companies advanced warning of what is to come.

Recommended Solution: Re-recruit your top performers. If you do not have a succession planning process in place, quickly develop and implement one that will start the process of identifying your bench, thus enabling top performers to begin to develop toward their next internal opportunity. At the same time, you should identify current bench strength and replacements for fallout that might occur near term, while enabling your organization to see where gaps in staffing and talent might exist requiring outside recruitment efforts.

Conclusion

Recent events and financial results have convinced us that the economy is turning around. The purpose of this article is to assist organizations that desire assistance to get ahead of the impending wave and to ensure that just like those biscuits, they don’t get “cooked in the squat.”

Because one of our areas of specialty is organizational effectiveness and financial performance, please contact us through the Contact Us button on the left of your screen or call us at 480-467-0344 and we would be pleased to clarify any of the above points.

The Ethic of “The Organizational Good”: Is Doing The Right Thing Enough?

-THE ETHIC OF THE ORGANIZATIONAL GOOD…IS DOING THE RIGHT THING ENOUGH?-

An organization whose members are acculturated to behave morally according to specified principles practices “the organizational good.” “The organizational good” is the soul of an organization and as such, it shouldn’t change. If the Board of Directors, CEO and senior management reinforce ethical principles by modeling them, an organization can thrive; if not the organization may become ethically bankrupt. It is the premise of this article that the increasingly common errant behavior of some organizations and their CEOs today is the result of their failure to practice the ethic of “the organizational good.” Several writers have described how the common good has been replaced by an ethic of individual rights where everyone does what they consider to be the right thing.  The decline of collective responsibility and civic engagement, and the rise of individual accountability are evidenced in the avoidance of trust and commitment, and the involvement in cynicism and apathy.

The common good raises the anté for everyone. Everyone doing the right thing raises the anté for oneself. The sociologist, M.P. Baumgartner, found a disturbing unwillingness of people to make moral claims on one another. Most people did not feel it was their place to express their convictions when someone did something that was wrong. Alan Wolfe found, in a recent survey of moral attitudes in eight communities in the U.S., that when a moral decision had to be made most people looked to themselves, at their own interests, needs, and inclinations. Those surveyed acknowledged the traditional values of honesty, loyalty, self-restraint, and forgiveness, but they were determined to decide for themselves what those values meant.

Today it is not important whether a decision or behavior is good or bad, or even whether it is legal or illegal, but what each individual considers to be the right thing to do. As a result there are many victims who are pointing the finger of blame for wrongdoing at other people or circumstances. Protecting one’s personal good has become more important than promoting the common good.

Organizations are caught up in the effects of the societal collapse of the common good. A majority of the members of organizations in contemporary society are guided by the ethic of “what’s in it for me.” Carried to the extreme this would mean chaos in organizations. Everyone would do what they wanted to do. While organizations reflect the values and beliefs of larger society, they have unique cultures of their own. Many organizations have strong traditions and cultures, which are centered, around a common good, and some are determined to keep it so. These organizations believe that the ultimate measuring stick of success is not producing numbers or dollars alone, but adherence to such virtues as honesty, integrity, trust, loyalty, and giving back to the community, while providing quality service and products.

The premise of this article is that the increasingly common errant behavior of some organizations and their CEO’s today is because they do not practice the ethic of “the organizational good.” Rather, organizations and their leaders who engage in illegal and immoral acts do so, often with the complicity of their Boards of Directors, to enhance their self-interests and flippantly and sometimes arrogantly, dismiss their egregious behavior by stating, “everyone is doing it.”

The Ethic of “The Organizational Good”

An organization that practices “the organizational good” is one in which members are acculturated to behave morally according to specified principles. Various boards and CEOs may have different ideas of what these principles imply. Some CEOs doubt whether they can fully practice honesty, for example, and stay in business because they do not expect that their competitors will be honest. Other CEOs grow their business around principles of honesty and ethical behavior. Despite differences in their missions, organizations are moral agents. Organizations frame their mission statements, pledges to clients, and commitment to affirmative action, and hang them in their waiting rooms, but the morality of an organization is best seen in the behavior of the people who belong to it. An organization’s good is what it is in practice. An organization’s good is the fingerprint the organization wants to leave with the public. The locus of “good” in an organization involves standards of excellence, continuous improvement, and consistency in adherence to rules by everyone in the organization, how people perform their job, telling the truth, how people are treated, and the values underlying the organization’s bottom line.

J. Collier, in his article entitled “Theorizing the Ethical Organization” has expressed the essence of “the organizational good” – “good practice produces not only good products, but over time it also produces good people” “The organizational good” is the soul of an organization; it shouldn’t change. Boards, CEOs and management teams can reinforce “the good”, or destroy it.

“The organizational good” is composed of four major interacting components. First, the leadership of an organization must be people of character. Second, the leadership of the organization is responsible for a clear statement of the organization’s virtues and its bottom line. Third, members observe and model leaders who walk their talk. Fourth, all members of the organization are behaviorally accountable for meeting the criteria of “the organizational good.” No organization is ethically perfect; therefore it is an assumption of “the organizational good” that everyone in the organization can improve. The bottom line in the functioning of “the organizational good” is behavioral accountability along with other aspects of performance. This means that leaders and managers cannot soft pedal or be defensive about confronting behavioral accountability if the organization is to be what it says it is.

Results of a survey of Fortune 1000 industrial and service organizations showed that, while the majority of corporations had adopted ethics policies, there was a wide range in how these policies were implemented and supported by management. The vast majority of the companies were committed to a low cost, symbolic side of ethics management. Ethics management was usually delegated to Human Resources. Other studies have found that ethical issues are discussed more with fellow employees than with managers. How to communicate ethical values remains a serious and unresolved issue for most organizations. If the principles underlying “the organizational good” are not modeled at the top, and are not discussed and emphasized throughout the rank and file, they will not be believed and followed.

How Do Exemplary Leaders and Managers Behave?

Top managers in public and private organizations are those who promote and maintain an ethical work climate. An ethical work climate is defined as one of openness, respect, and dialogue. Exemplary leaders are those engaged in “moral processes” such as doing the right thing in the course of daily work, telling the truth, treating others fairly and discouraging prejudice. It was not only what these leaders did on a daily basis, but how they did it. “The organizational good” is a continuous process of practicing the basic rules of human conduct. These administrators were also actively and visibly involved in “moral projects” such as recruiting underrepresented minorities and women, supporting ethics training for all employees (including themselves), and seeking out and eliminating corruption. Where organizational leaders clearly practiced “the organizational good,” a positive culture permeated the entire organization.

Exemplary leaders maintain congruence between what they say they will do and what they actually do. This is the real test of “the organizational good.” Behavioral congruence should exist throughout an organization if what people do meshes with what the organization stands for. “The organizational good” is embedded in the organizational structure. Consistencies and discrepancies between what is said and done is noticed in organizations. When discrepancies occur, the virtues and bottom line of the organization are questioned. For example, why are some people rewarded for behavior that is ignored or sanctioned for others? Criteria for following “the organizational good” must be fair to all members of an organization. If the CEO exempts himself from following these criteria, he or she signals to everyone in the organization that “the organizational good” is merely public language. Perhaps the best example is that CEO’s across the country continue to give themselves exorbitant salary increases (in 2002 the median annual salary for CEO’s rose to $13.4 million) while they are laying off employees to cope with decreases in production and stock value.

Communicating Character

Organizational good is about character. There are fewer difficulties in modeling character than in teaching it. Boards of Directors hire CEO’s who will: 1) carry out their wishes or directives (depending on the degree of autonomy of the board), and 2) model the principles the organization stands for. Usually the CEO is accountable for numbers, that is, profitability, expanding market share and keeping stockholders happy. It is human nature that we tend to look for our qualities in others. Perhaps this is why, in hiring CEO’s, boards often overlook or minimize character flaws. As the late Senator Daniel Patrick Moynihan said, “We are getting used to a lot of behavior that is not good for us.”

Aaron Feuerstein, the CEO of Malden Mills, a Massachusetts textile manufacturer who values employees and risks profits on their behalf showed his character in 1995 when, just before Christmas, his factory burned down. He pledged to keep paying all 3,000 of his employees while he rebuilt the factory rather than relocate it. Four months after the fire, with more than 70 percent of his employees back on the job the company has exceeded its pre-fire levels of production with $100 million in sales. The new factory has incorporated more energy-efficient manufacturing processes, day lighting and air handling systems, and the development of an upholstery fabric that is fully recyclable.

Sam Walton had a simple dream of giving people high value, low prices, and a warm welcome. Today, Wal-Mart Stores, Inc. employs more than 1.2 million associates worldwide. The company has more than 4,000 stores internationally. It also has expanded online. Customers return to Wal-Mart for more than the prices and selection. It is also because of the people who work there. Prompt, friendly service is a serious matter. This commitment to people means that Wal-Mart takes its responsibilities as a corporate neighbor seriously. Local Wal-Mart stores underwrite college scholarships, raise funds for children’s hospitals, participate in recycling and has a “Green Coordinator” that makes each store environmentally responsible, and sponsors a community matching grant program.

Walton built a culture on the simple principle of making the customer No. 1. He had a charm and charisma that made people feel welcome and important. He asked associates to make a pledge: “1 want you to promise that whenever you come within 10 feet of a customer, you will look him in the eye, greet him, and ask if you can help him.” This pledge became known as the “10-Foot Attitude.” Walton said he learned that one of the secrets of leadership was simple: Speak to people before they speak to you.

In these examples organizational leaders did uncommon things with common values, but most striking is their commitment, tenacity, and zealousness in incorporating values in every facet of their organization. They countered resistance and criticism with enhanced determination. Whether it was textiles or a big-box store, these leaders with strong character were inspired and rewarded by doing good.

Companies that are successful decade after decade, such as Johnson and Johnson, have one thing in common: they have core values that are supported from the top. Companies like Procter and Gamble decided in its infancy during the Civil War not to gouge the military with low-grade soup and candles. Procter and Gamble still thrives. The structure and leadership of organizations change, but core values endure change as long as the organization has leaders who advocate and model them.

Accountability for “The Organizational Good”

If CEOs, managers, and members of organizations were screened using character as a major factor there would be less time spent on perfecting methods to measure accountability and more time spent on developing top performers. Everyone in an organization needs to be held accountable for their performance and productivity, but most Boards of Directors soft pedal their oversight of the CEO’s behavior, and managers work to quantify accountability in general, to protect them from appeals, grievances and lawsuits. When confronted, it is likely a member will defensively respond to the supervisor saying “I am only doing the right thing” or “Everyone’s doing it.” It is not surprising; therefore, that managers and supervisors usually avoid discussions of behavior with a member, unless it is overtly egregious and disruptive. Yet, managers and supervisors are supposed to give “honest” evaluative feedback to members of the organization so they can use the information to improve. Performance appraisals are often used to cover harmful character flaws of members from the top down rather than to improve individual or group performance.

Organizations that practice “the organizational good” connect ethics with accountability. Too often performance accountability is discussed and ethical accountability is assumed in hiring CEOs. Board of Directors usually hire CEOs they deserve. If the bottom line to the Board is increasing productivity, market share, and stock value, that will be what the Board will look for. This kind of bottom line has been a public disappointment in the behavior of CEOs of late. They have been found to practice the ethic of “everyone’s doing it” to justify what they consider “doing the right thing.”

The surreptitious move by former American Airlines CEO Don Carry, to increase pay and retirement benefits for top management while demanding steep pay cuts from workers enraged labor unions, pushed the organization toward bankruptcy, and resulted in his forced resignation. Furthermore, the American Airlines Board approved the management package. The Board of Delta Airlines approved similar retirement benefits for its executives. Enron’s Board of Directors overlooked 30 sham partnerships to defraud stockholders. Tyco’s Board of Directors failed to question a provision in the CEO’s contract that stated a felony conviction was not grounds for dismissal. The former CEO was accused of stealing $600 million from Tyco.

These are but a few current and unfortunately common, examples of the failure to connect ethics with accountability. But they are also disturbing examples of the character flaws of the Boards of Directors and the leaders they hired. These Boards knowingly hired CEOs who would ignore the ethic of the common good.

Conclusion

We tend to treat organizations like individuals with bad habits. It’s usually only after a diagnosis of carcinoma of the lung that a smoker quits smoking, but some do not. It is similar with organizations? There are warnings about the consequences for smoking tobacco, just as there are rules and laws about the behavior of organizations and their members, but some people ignore them. Some people have their own definition of what’s right or wrong. They may have no concern for the well being of other individuals or an organization. In most organizations there are no incentives from leaders to support “the organizational good” and no consequences if one does not. But fortunately not all organizations and their Boards and leaders are moral failures. There are organizations that have successfully connected ethics with the various facets of accountability. These organizations have been successful because they set out to hire leaders with character, who have used common values to achieve uncommon things.