The Functioning Society

"Unless power is legitimate there can be no social order". Peter F. Drucker

Action: What will the emerging government in Iraq have to do to become legitimate? What must a legitimate government do to create status and function for Iraqis? Peter F. Drucker

Again, I suggest that you buy a copy of this book The Daily Drucker: 366 Days of Insight and Motivation for Getting the Right Things Done by Peter F. Drucker in order to get the full benefit of Dr. Drucker's wisdom on this topic.

Social function for the individual and legitimate power are the keys to Dr. Drucker's thinking on this topic. So, ideally, one can approach an answer to his Action call. Across the divides, create the ability for the individual to succeed (in business or other social function), and put in place the institutional structure which makes that possible, continuously.

And, I suppose this is, theoretically the way to a solution for Iraq. I am skeptical though. I do not believe that the three 'divides' will ever, authentically form an agreement to cooperate in order to put in place such an equitable social and power structure. The Kurds, the Shia, and the Sunni communities (let alone the Baathist sub group), are in my view destined to continue on separate paths. I don't believe that any-one from the inside will have the power to authentically and legitimately change that dynamic for this 'country', artificially thrown together by Western Hegemonists in their day. Call me a pessimist.

With respect to businesses, I think Prof. Drucker's thinking also works... Provide the institutional framework, so that promotion (future wealth building) opportunities are available to all, no matter the gender, race, religion or location of each worker, and run the business in a way so that financial and consuming markets legitimize your existence through cash flow.

Terrorism and Basic Trends

"Management of an institution has to be grounded in basic an predictable trends that persist regardless of today's headlines". Peter F. Drucker

Action: Write down three basic social trends that your business is based on. Are these trends still in tact? Peter F. Drucker

Let's take just three of the basic trends from World Out of Balance (Kindle Edition)

by Paul A. Laudicina

• Globalization--rising levels of trade, communication, and travel
• Demographics--slowed population growth in developed countries, and increased growth in the third world
• Consumption Patterns--increasingly diverse consumer markets, causing fierce market competition
• Natural Resources and Environment--oil markets reaching a crisis stage, and other shortages predicted in the coming decades
• Regulation and Activism--calls for greater regulation point to long-term business challenges

Each of these trends should be a good starting point for any of you in business.

I would love to see some of the responses, if anyone is out there, and has the time. It would also really surprise me to see if anyone at all is not subject to these trends, or has another one that impacts them significantly.

Example: I think Japan and Italy have the highest negative population growth. I can't help but think that businesses in those Geographies are feeling it. I was just through a small town in South Italy, where many of the oldest (in my view, most interesting) homes were standing empty. On inquiry, I learned (my Italian is bad, but I get the gist) that the families were no more, the last had died, and that nobody had claimed the homes. Cheap real-estate in declining population areas!

Performance: The Test of Management

"Achievement rather than knowledge remains both the proof and aim of management" Peter F. Drucker

Action: Which of your management practices have yielded good results? Which practices should you abandon now? Peter F. Drucker

It's still nice in the Bahamas. What do you think about that iPad? Pretty cool, but No camera? Common!!! Skype is a key management tool, without the camera, well I don't know, for $829 (that's what the 64MB will cost). I think it's a big mistake.

Anyways, Achieve... I have a great story on this issue.

A global shipper of packages asked why they were not achieving higher productivity improvements through their ground stations after having hired a team of 80 (or so) industrial engineers, who had already produced reims of "knowledge" about how to speed up the flow of incoming and outgoing packages. They had studies coming out the wazoo on how to improve productivity. Still, over the months, nothing was changing... no improvement. Sure, there were some localized improvements, but they were just drops on the proverbial hot stone when one saw the overall potential, clearly.

The least productive ground station managers, when asked, usually had the same type of answer: "My facility is different than the other facilities in my division". The potential for cost reduction per package was significant (mid 9 figures per year), not to speak of the capital cost avoidance, and increased revenue impacts... this was BIG stuff on a strategic level. And still month after month, the same players in each division made their excuses, and darn it, they were different to other stations in their division.

The dam finally cracked when there was a suggestion to see if one could group "like" stations across divisions throughout the world. Bingo! No, not that easy. In order to 'achieve', they had to struggle long and hard, through the classification, politics and turf. Finally, transparent, data visible every 1st of the Month was published by station class to all Divisions, without comment or 'drumroll', and the miracle started to happen. The station managers at the bottom of the ranking became real visible, prompting calls from their Division GM's (why are 'we' looking so bad?), and this time the standard answer was no longer acceptable. And word also spread, that the top ranked were also receiving attention from Division VP's, of the congratulatory kind.

The dam broke, when top and bottom ranked station managers started calling each other to discuss how to help and get help: Peer to Peer! Soon the demand for the Industrial Engineers cranked up, and they became real busy. Soon the program was passing the standard of best in-house station to who could become best in class (against all competitors), and the program began to conclude (and deliver huge benefits) when station managers were given the challenge of becoming the ruthless competitor. Not ethically ruthless, but ruthless about anything that slowed them down.

Interestingly, throughout this time, there was only one VP who lost his job because of the changes. The guy who actively/vocally politicked against the comparison across divisions... which was the real innovation in a "turf" sensitive organization.

The example illustrates that it is not sufficient to "know" what is wrong. Management's duty is to actually make the changes necessary to achieve the results, as I think Dr. Drucker urges us to do.

Controlled Experiment in Management

"The story of Henry Ford, his rise and decline, and of the revival of his company is what one might call a controlled experiment in management". Peter F. Drucker

Action: Are you an owner-executive who treats all your employees as your helpers? Are you an employee who is treated as a helper? List three ways your organization could be more profitable if employees were encouraged to assume responsibility. Peter F. Drucker

Okay, I admit it, I'm sitting on a blue lagoon today and enjoying it, even while writing this blog. Thank you Kalik beer.

This is a great Action call. I would start with maintenance, first pass quality, and customer service/support. I have found these to be three practical areas to really let your front line employees not only do the work, but also devise ways in which to improve the results and gain responsibility. I'd even go so far to say that the real frontier today lies in pushing responsibility out to customers and users much more so than we have been doing.

Example; Maintenance: It was not until worker (IG Metal unionized) driven maintenance cells were formed, that the real causes and solutions to VW's paint plant productivity problems were discovered and implemented. Without the day-to-day working understanding of production issues in this complex system, no-one but the actual operators could affect the required changes.

Example; First Pass Quality: Without first pass quality responsibility being moved into the hands of the Japanese Auto line worker, Toyota would not be the world leader it is today. And the "Machine that changed the World" would be the computer and not the car. A well known story, but worth re-iterating often.

Example; Customer Service: When customer service and satisfaction was put into the hands of the front line sales clerk at Nieman Marcus stores, a lasting brand (even love brand) was coined. Maybe even supporting "needless markups" and margins.

Three years ago, I had also begun to see customer peer to customer peer maintenance and support connections being formed in retail technology (Tivo tried this in 2004/5). Imagine the TCO (Total Cost of Ownership) implications if maintenance and support issues were handled between customers, bypassing conventional, even Computer aided support. Usually, the smartest user/fixer is a geek customer, not employed by the company.

I have implemented so many instances of driving responsibility up to the front lines, at the customer interface, that I have also seen some of the worst failures. The unfunded, lip service only, 'pilot project' etc. do more damage than good, so if you are going that way, make sure you do it right, otherwise there is sure to be a mess. Are you ready to really trust your employees?

The Discipline of Management

"If you can't replicate something because you don't understand it, then it really hasn't been invented, it's only been done". Peter F. Drucker

Action: Are your management practices ad hoc or systematic? Peter F. Drucker

Probably, the most critical of these replaceable management practices are those which are critical to your competitive differentiation. If your "schtick" is market presence (sales), you had better have replicable processes that are better than the competitors. That's pretty much facile, and even then, many companies don't reach that level of execution (more later).

More difficult to do extremely well, and maybe even more of a competitive edge when executed flawlessly are what I would call "feeder" processes. The ones which make you efficient in your eco-system (I hope to cover this important topic in the future...maybe on a day when I don't get what Dr. Drucker is saying).

Example: Although CISCO's strength is in sales and marketing, their acquisition process is know to be best in class. In reality it is an extension of the product development process.

Example: Fluor supports it's excellent knowledge work in numerous fields with a People promotion/Succession process bar none. It is world class at feeding the right people at the right time into the most complex management jobs.

Example: Citi Banks risk management processes in sub prime were not what they should be, and management did not have the expertise/knowhow in that side business to assess the growing risk levels. They had not put management practice into place in a critical "feeder" process.

So, yes if you are excellent in product design, customer intimacy, or operational excellence it is not enough, you must also be excellent in the critical feeder processes. Does this mean they shouldn't be outsourced?

A Social Ecologist

"For me the tension between the need for continuity and the need for innovation and change was central to society and civilization" Peter F. Drucker

Action: Are you and your organization change agents? What steps can you take to both change and balance change with stability? Peter F. Drucker

My friend, geneticist Erhard Bieberich says that our genetic evolution has only progressed in a minute amount, since our days as “knuckle draggers”. However, socially, we are accelerating our evolution. Our role as managers is both to conserve the core and to be agents of change of the core. Hmmmmm, confusing... liberal conservative or conservative liberal?

Look at the social changes that GOOGLE is driving. Basically, information for everybody, from the source. The Chinese government says it doesn’t like this, because it is causing too much social change too fast. You know you are doing something significant if the government of the world’s largest population shuts you down... WOW. Is it GOOGLE’s role to continue to drive this social information revolution. What if they stop, have they impeded mankind’s evolution rather than do their duty to social evolution?

Reinvent Yourself

"Knowledge people must take responsibility for their own development and placement" Peter F. Drucker

Action: Ask those ahead of you in age how they wet about "re-potting themselves". What steps should you take now? Peter F. Drucker

Reinventing ourselves during the 50 years we are going to work as knowledge workers is no longer a gift but a requirement says Dr. Drucker.

I always saw this as a gift. From the time I went to undergrad school. I switched my major from a fairly defined Architecture (still creative and changing) to System Design (where the key element seemed to be learning new stuff to put together in new ways - constant change). Then, in my career, the same. As a management consultant one needs to constantly try to learn faster than others. One’s reputation seems to depend on it.

One just has to look at the vast number of newly invented knowledge worker job types to see what Dr. Drucker is changing. What used to be a newspaper is today a series of blogs and twitters...with independent writers all over the world. If you are still printing mid-sized newspapers, you likely won’t be fairly soon.

If you can see those trends in your job or business, your best friend will be someone who shows you the way and ropes to your next career. Will you make the shift early enough so it is a gift, or will you be forced into independence.

As I write, the blue ocean flows by endlessly, vast, nothing in sight, yet I can see the bottom clearly, really strange. We are crossing the Bahamas shelf from Cat Cay to Chubb Cay. You see we have reinvented ourselves to become “sailors” for a while. It’s a gift, really.

Feedback: Key to Continuous Learning

"To know one's strengths, to know how to improve them, and to know what one cannot do - are the keys to continuous learning" Peter F. Drucker

Action: List your strengths and the steps you are taking to improve them. Who knows you well enough to help to identify your strengths? Peter F. Drucker

Again, pretty straight forward and not much to add. You either do it or you don't. Introspection is a virtue which I personally have not seen anyone learn.

Private Virtue and the Commonweal

"In a moral society the public good must always rest on private virtue". Peter F. Drucker

Action: Make a list of three new products or services that have failed and will fail because you and your organization have ignored the public good. Peter F. Drucker

I really don't have much to add on this day. Let me just say, that when I hear "the public good" I get that sick feeling in the pit of my stomach. Wh decides what is the public good, and why is that good for me? Anyways, I won't stand on my soap box.

Economics as a Social Dimension

"Keynes was interested in the behavior of commodities, while I was interested in the behavior of people". Peter F. Drucker

Action: Before you finalize a major budget or strategic decision, set aside half an hour to make sure you have really considered the impact it will have on your people in your organization and your customers. Peter F. Drucker

"If you don't have the right people in place, don't proceed with the plan" Bruce Klassen (I'm sure I'm not the only one who has said that). Which is the other side of the coin of today's action call. Plans, budgets and strategies can't be managed, so without the people dimension, there is no management practice. Also see A.T. Kearney white paper from early 90's "It's all about People".

Experts in organizational behavior have provided a useful framework for practitioners at any size of organization. I spoke of this in a previous blog. Using "Informing Theory" each individual in an organization is affected by four separate but overlapping "spheres". Briefly again, they are the social, political, institutional, and business system spheres of influence. The individual's actions within the organization are "informed" by her interaction with others in these spheres. So, in considering the impact on the individual in today's call for action, you may want to do so within this context. I have done this formally many times, and it has always been of benefit. Anyone faced with transformation of any scale, must take into account (real time) the relationships of people to each other and vis-a-vis the program goals. Without that knowledge constantly updated, the most intelligent plans and strategies can't be implemented successfully.

Example 1: On my first day at the (then) 250,000 employee main automotive plant for VW in Wolfsburg,, Germany, I was told that there were only 100,000 inhabitants in the area. I should therefore assume that anything I said outside the plant was heard "inside" simultaneously, and to guard my tongue. My team had been brought in to help VW operationalize new maintenance policies and standards. I had also been brought in to operationalize the new water-soluble paint plant (of that later). My background in industrial engineering, maintenance and and complex manufacturing commissioning in my early career was supposed to qualify me for the work. We pretty soon had a plan for maintenance developed on a giant scale and on "pulse" with the factory, and now wanted to make sure we brought the people on-board whom we were going to help with the implementation. So, when we asked for an implementation team leader, senior plant managers huddled, and with great pride announced that "Henry" would join our team. Long story short, my colleague, Leo Peschl, finally found Henry three weeks later in the "caves" long forgotten from WWII located underneath the plant. He had built out a nice living area, and storage for his alcohol and food supplies. He stank, was dirty, and incoherently drunk when he was brought to our first implementation team meeting. When confronted with their team lead, and our disbelief, management stone facedly assured us that this was the right man for this job. The only thing Henry would be able to lead is the line to the washroom. Plainly that management team had no interest whatsoever in implementation.

Example 2: Redmond Washington was seeing its growth rate in its home markets (USA) for its key products, growing at a rate that was too slow. In addition to solving the riddle of why growth had slowed, management also took great pains to implement a Venture capital model of implementation. There were so many (over 20) separate growth driver programs that implementation by insiders was critical. This was probably the best instance I have seen in which individual "intrepreneurs" were given capital, plan, resources and authority to proceed with implementation. They were also regularly evaluated and and progress measured. Those projects which did not achieve were ruthlessly cut along the way, and resources redistributed to those programs which were succeeding and expanding. Microsoft is probably the best example of companies I know which makes positive competition within programs aimed at the same general goal a virtue.

Example 3: The example I gave you of the Engineering Construction firm also highlights again, the need to assess the impact of plans and budgets on the people expected to "live" the change. If there is even one critical person missed in the process, he/she can completely scuttle any well-intended plan or program.... and get away with it.

Profit's Function

"Today's profitable business will become tomorrow's white elephant". Peter F. Drucker

Action: Insure that you are investing enough in innovation to prepare for the day when your profitable business becomes obsolete. Peter F. Drucker

In a larger economic sense, then profit, if correctly invested, should create economic or job growth. If so, then we should then be concerned if the latest statistics are correct, that there has been no net job/employment growth at all over the last 10 years (with financial services rising to 32% of GDP in the US). Either, there have been no profits, none of the profits have been re-invested, or the investments have not born fruit. Which is it?

I have certainly seen numerous situations in which once successful businesses have become white elephants. It has also always taken investment in innovation to go to the "next level". The good news is, there are many ways in which to give business a new life.

Example 1: Supply chain reinvention. Western Digital, one of the pioneers in storage media, found itself "wallowing" in the late 90's. Even those profits which were supposedly retained in the firm were illusory. Western Digital had indeed sustained hard financial blows late in 1997; the company went from debt-free to $513.1 million in debt between December 27, 1997, and March 28, 1998. While Western Digital stock went as high as 54 and split at 44 in 1997, it had yet to regain its original value a year later, going as low as 14 . Funding was tight, and Western Digital raised money the old-fashioned way: they sold $400 million of zero coupon convertible subordinated debentures. The Dow Jones Newswiresreported on February 12, 1998, that Western Digital "intends to use the net proceeds of the offering for general corporate purposes." A month before, the company had broken ground on a new manufacturing facility in San Jose, California. WD had decided to re-invest, and restructure its supply chain to focus on partner IBM. entered into a special partnership agreement whereby IBM would share its areal-density giant magnetoresistive (GMR) heads with Western Digital, and IBM in turn would have a foothold in the PC peripherals market. It was hoped that this partnership would ensure that Western Digital would be a force to reckon with well into the next century. New facilities were built in Minnesota next to labs and close to IBM facilities. The success of the stock and other indicators show us that turnaround is possible... but without the capital injection it would not have been. Those "profits" wasted in previous years had now become the "new cost" of business.

There have also been numerous examples of companies "close to death" but being rescued by others. I wrote recently about Maxstor and the purchase by Seagate (no stock improvement, because it was simply the "new cost" of doing business, which should have been injected earlier). EDS is another such story. Yes, Michael Jordan (the brilliant turnaround CEO) was able to more than double stock value after he took over the ailing outsourcing giant, and cleaned it up by going concentrating on the core business (and ditching the others). However, that was the end, more capital was needed to replace the "squandered" profits which never went back into the business, and EDS was sold to HPQ.

I guess the bottom line here is: Ya pays me now or ya pays me later. If you neglect to fund change/innovation and take the profits, you will be the white elephant on the block. Prettying up the "pig" only gets you so far.

Isn't it the common practice for Investment bankers and such to take the profits in bonuses? How will our GDP dominating Financial industry rejuvinate in the future?

Nature of Man and Society

"Every organized society is based upon a concept of the nature of man and of his function and place in society" Peter F. Drucker

Action: What is the socially supreme sphere in the your country? How does this affect you? Peter F Drucker

Thomas Aquinas wrote about the supreme sphere in reference to the stars and "natural philosophy"... those stars way far out there which, to him seemed not to move at first glance, but dominated every firmament. I am guessing that is where the root of supreme social sphere comes from. Having lived and worked in so very many countries and regions, I know the social sphere changes, sometime dramatically (even from one valley to the next). What is "supreme" therefore also varies by locale and culture in an overriding way.

"Informing Theory" tells us that the decisions of an individual (business person/employee/citizen) are influenced (hence explained and manipulated) by four spheres of influence: The Social, the political, the institutional, and the business system. Each in their own important way. Who does Jane "hang" with during and after work, and you are beginning to get at her social sphere.

So putting the two together, who are the seemingly immovable icons on the highest/outside rim of your social sphere (in your locality). Those people who's actions you track, but you never seem to really see them move, because they are so exalted. Who is that in your situation?

Given the validity of informing theory, what you learn from those icons will affect your daily management behavior... similarly for your colleagues. Knowing who the icons are will provide archetypes of behavior you can expect from individual managers in your organization.

The Purpose of Society

"Society is only meaningful if its purpose and ideals make sense in terms of the individual's purposes and ideals." Peter F. Drucker

Action: Make time to reach out to a "rootless" person who may be unemployed or retired. Drop them a note of support or take them out to lunch. Peter F. Drucker

The Outcast likely appears dirty, smelly, itching and muttering to themselves or "Harvey"(no one else will listen). You have seen her pushing a grocery cart filled above the rim with bags, maybe adorned with an American Flag on the side. You've seen him, yes those were once army fatigues under a great coat, shoes held together with rags, rummaging in the garbage just ahead of you on your crisp walk to work at 7AM carrying your $4.75 Latte (143 degrees). "Now if I can just get past him without making eye contact".

I don't know about you, but strange feelings and thoughts permeate my id: Pity, anger; disgust,admiration; fear; disdain. "Get a Job"! And then I have successfully walked by, and don't think of her again...If only she hadn't whispered "God bless ya, have a nice day". Was that real... Was that Christ?

So, Dr. Drucker wants us to engage one of these outcasts. Why?

1) My first, was a Mr. Robitaille in Montreal in January 1984, just outside the Queen Elizabeth Hotel (Le Reigne Elisabeth). I had just come out of my regular breakfast ritual, bundled against the cold, when he walked up to me begging for something to eat and something hot to drink. To both of our surprise, I jumped right in, responded immediately, turned us around and proceeded to the line of yawning business folks waiting to be seated inside. We introduced ourselves to each other with some initial difficulty (I speak French, not Quebecois) . He said something about maybe not so fancy a restaurant was okay, but I was on a roll. Maitre Di looked us over with recognition, something twinkled in his eye. "Ah, Mssr. Klassen, vous avez trouvee votre patron? (you have found your boss/client/benefactor ... at times the French are drole)." Let me show you a table where we can attend to you properly (meaning: out of the way). Getting through the menu was somewhat awkward, but not impossible. Mr. Robitaille ended up ordering an 'Amburger with frites (no Poutine) et Kaffee, jus d'Orange. I ordered a coffee. Then it became awkward. (He owned the silence)

I can talk about all kinds of stuff. I have no fear of engagement. I don't care what others think of me. Yeah yeah. We slowly started talking about the weather, when it was going to get warmer. Where he was able to sleep. He came from Chikoutimi. Had come for treatment to Montreal. Likes the warmth here (the tunnels, you see). Ah, and there is the beautiful meal now. One handful of fries in his mouth, the other in his great coat pocket. The complete burger with lettuce and tomato followed into the pocket. The orange juice was gone in seconds, and the coffee refilled once in about the same time (could he take the jug?). Mr. Robitaille got up reached over the table, took my hand and with a look of pure pleasure and genuine thanks said that this must have been my first time, and that it gets easier and "praise you mon frere". He left. The Maitre Di just patted me on the back and said "Well done Mssr Klassen, bienvenue chez nous a Montreal mon cop." By treating with the outcast, I had actually confirmed my humanity to my (heretofore unknown) Montreal clan, to those who interacted with him and me in very different ways, every day. Go figure.

Society of Performing Organizations

"By their fruits ye shall know them" Peter F. Drucker

Action: Are your performance yardsticks appropriate to your objectives? Peter F. Drucker

On this day, Dr. Drucker looks more to the organizations which perform social tasks. Contributions are made toward specific individuals and society as a whole. It contributes outside itself.

Example: In my charity organization www.childrensartwalk.com we have selected as our objective to "plant seeds of desire for success in underprivileged children" and we do this by "teaching" experiencing with them the joys and tribulations of painting in oil. Our program has 9 "success points" which each child must accomplish in her own time, and we naturally/daily measure the childrens' progress against those points. Every one of our 1000's of kids has accomplished the program, and some of them can even paint.

However, Dr. Drucker's question is real... how do we now that we accomplished what we had set out to do... "plant the seed for a desire for success in the kids". Well we measured it as well we could in three ways:

1) We asked the parents to give us feedback on any changes they had seen in their sons and daughters over the course of the program. Given the "open" question, we got many types of responses, but one theme came through loud and clear. The children were more confident and ready/willing to tackle new tasks.

2) We asked representatives of the children in our quality review session to talk of what they had learned. Again an open question, but similarly, we found that children admitted to an increased confidence.

3) We asked the staff of the school to evaluate the children they had sent to the class. And again and again the same answer came back. Confidence, willing to take responsibility. Interestingly, the teachers also spoke of an increased receptivity to mentoring.

None, or very few of the respondents spoke about painting skills or art appreciation. The program is a success, and we have no trouble at all recruiting volunteers.

Maybe this works for our small organization, but it doesn't work for larger, more important ones as we saw yesterday. Maybe it's "by their fruits and costs to bear fruits, ye shall know them". The social cost/benefit. How do the organizations you cherish do it?

Management: The Central Social Function

"Noneconomic institutions need a yardstick that does for them what profitability does for business." Peter F. Drucker

Action: What is the most important nonbusiness institution with which you are associated? Does it use a specific yardstick to assess performance? How successful is the organization?

Today's blog begs for a commentary on how safe I feel against the threat of a terrorist attack, in the air, by a dirty bomb, chemical bomb, WOMD, etc. So what are the most important nonbusiness institutions who are protecting me and mine. Homeland security, Transportation Safety Agency, CIA, FBI, The Military.

So, for instance let's take the most recent "almost" Christmas air bombing. I suppose the ultimate yardstick is whether or not the intended "event" happened. As you remember it was prevented by passengers.... yeah fellow frequent flyers. Or is it? The "event" didn't actually happen. So performance was successful, good, excellent? But why did the President, then come out several days later with a very thoughtful response about the lapses in "daily management" practice by a number of organizations involved in the chain of events which lead the young man onto that plane. Or was the President's commentary simply politically necessitated by the rumblings of a "has been".

So the dreaded event not happening is not enough of a performance measure. Is it then about ... how it doesn't happen? Can one even really attach performance measures to all the "agencies" actions involved with the chain of events leading up to a single event on the ground. Is it that the young, incompetent bomber could be stopped by fellow passengers, because the terrorists' recruiting infrastructure has been so weakened that only "dolts" make it on the plane (unlike 9/11)? Every time an incident happens, have our "protectors" failed, and is the consequence continued, repeated re-tooling?. Some people (Paul Pillar) say there will be failure, no matter what is done to try to prevent.

Maybe it is the cost in civil liberties, good men and women dying in far off lands, transportation slow downs, security infrastructure etc. which should be a part of the performance measure. What is the cost/benefit associated with our "war" on terror. Remember, as macabre as it sounds we do calculate the cost of a death all the time. This is the approach we as a nation have taken for other "public infrastructure" programs (most notably the Tennessee Valley Authority, and since then most public infrastructure). We measure the social "cost/benefit". If terrorism is here to stay, then. Do we need to get to a realistic long term measure which can actually be managed daily through all the noise, or are we destined to react to each incident (maybe exactly as each terrorist who straps a bomb to her chest wants us to)?

If you have a couple of hours, watch this interesting panel discussion preparing a briefing on what our President should do about the terrorist threat in the next year. http://www.c-spanvideo.org/program/291298-1 . Seems the debate is still on.

Okay, then not safety, how about our nonbusiness financial institutions and our nation's ability to generate capital for growth and continued social prosperity..... Naaah, not tonight.

By the way, all books, videos, articles referenced are ones I have read. There are probably many more on each subject, but these are the ones I knew about. Any suggestions from you are much appreciated.

The Function of Management is to Produce Results

"Above all management is responsible for producing results" Peter F. Drucker

Action: Is your organization delivering the results it should? If not, articulate your mission. Peter F. Drucker

I think that Dr. Drucker's Action for today is extremely helpful, because it guides us to differentiate between results and mission, and how to measure production of each. If you don't, it's kind of like the discussion of what is quality in "Zen and the Art of Motorcycle maintenance". You can just keep going round and round until you are insane, if you are not careful. Zen and the Art of Motorcycle Maintenance by Robert M. Pirsig

So, if you are a "for profit business" the result has to be something along the lines of "maximum free cash flow per share over the business cycles" also sometimes called the "bottom line" etc. What you do to achieve that economic earning and how you do it must be contained in the mission. Does your mission relate directly to economic earnings (however you represent that)?

I think results achievement and mission execution should be the discussion points in all Senior Management reviews. It is probably GE that has perfected this as a management practice. Jack Welsh was likely the best at executing this practice, and he became so by doing it diligently and rigorously. Every business leader was evaluated by him (as I understand it) against two parameters. The economic result, and mission execution (effort/success). See Jack: Straight from the Gut by Jack Welch and John A. Byrne

Do you use this simple (not easy) 2X2 to evaluate your leaders? Or, do you clutter up the process with too many measures, or vagueness.

The nice thing about this simple method is that you can use it throughout your entire value chain in a cohesive way. Every function in your company, contributes to Free Cash Flow (look up Dupont Charting if you want to learn this method). And a sub-mission can be developed for every function in support of the overall function.

I would caution, that with every good practice, its application needs to be tempered with sanity. There have been a number of companies that have taken EVA (Economic Value Analysis) too far. EVA and Value-Based Management: A Practical Guide to Implementation by S. David Young and Stephen F. O'Byrne

Once you plot your functional and senior leaders against this 2X2 matrix, you have a pretty good comparative methodology.

The Spirit of an Organization

"It's the abilities, not the disabilities, that count" Peter F. Drucker

Action: Figure out what each of your employees' or colleagues' strengths are and develop these to help people perform better. Peter F. Drucker

It takes reading Dr. Drucker's comments (again, buy the book so you can follow along better The Daily Drucker: 366 Days of Insight and Motivation for Getting the Right Things Done by Peter F. Drucker ) to understand here that he really intends for us to examine and structure high performing teams at the micro-level. He is not here addressing the, also, important question of corporate culture at the macro level. Just because some-one can only "work" for 1 hour a day, doesn't mean that they can't be a core member of a team, contribute huge value, and be the "critical" differentiator if they are excellent during that 1 hour.

That said, in my experience and Dr. Drucker's (if I read him correctly), you will have to be willing and able to break "rules" to make this happen in real life.

Example: We tried again and again in my firm (so willingness was present, to some degree) to integrate part time consultants into high performing teams. The need and desire was particularly acute for those individuals who still desired to work in the "front line" roles (at the client site) even after they had made the decision to start families. Staffing of these assignments was usually done on a full time basis (especially for those age-groups most affected). We failed, in that we were not "able" to break the rules around, staffing time periods, performance evaluation of part timers as a distinct group, creating team mechanisms which made it easy to accommodate part timers. Sometimes the biggest obstacle to overcome is the "envious colleague" who won't make an accommodation. The point here is that even though these individuals might have been, truly the best qualified, "able" individuals, we did not remove the systemic/structural impediments which accentuated their "disabilities" in order to enable their continued contribution. How much insight and excellence did we lose? Have you looked at your teams in this way? Are you "breaking glass" to make room for excellent individuals even though they have disabilities.

This is obviously a topic that is near and dear to my heart. I do not want to seem self serving. I am using my personal example to hopefully jog you into some change of behavior. As you are hopefully seeing, I am capable of writing, and pulling together concepts in a logical coherent way. I am also, probably (I'll leave room for any doubt out there) one of the few, people, in a global sense who has experience and significant success in opening up and sustaining relationships with senior executives/clients in industry leading enterprises, in order to help them solve problems of significant strategic importance for which they might require external assistance.

Take that for given, at the moment. I have about 1 hour a day in which I can actually perform close to, if not at a competitive level before I am unable to continue (it takes me about 30 minutes to write this blog); however, I am not able do so in a sustained way from day to day (I am usually working 6 blog days ahead of delivery date, so bad days without production can be "absorbed"). My "disability" looms so large, that not one of my many former colleagues in so many of the firms who know me has ever truly attempted to integrate my considerable "abilities" into their client interface process, again, even though I am/was considered "talented". I have had calls from several previous clients (thanks Robert Rudzki). While extremely "good" for my bruised ego, those opportunities were not ones I could have taken on and executed. I have also had pings from concerned industry colleagues (Thanks Cuneyt Oge, Bob Duffy, Michael Traem, Norbert Wittemann) who ask when I would be ready to get into the saddle again. Unfortunately, the answer is: likely never as I was before; but I still have valuable abilities, you just have to "break your rules" to integrate me into your teams and disregard my disabilities. I certainly look forward to the day when I might be able to contribute in a way in which I am able, after I execute on my 365 days blog commitment.

So, in addition to Dr. Drucker's Action call, I ask you to seriously consider how many "me's" do you know, whose excellent skills you could integrate into your teams to improve your results, but haven't been able or willing to break the "rules", so far. It's a huge win/win awaiting you if you act.

For your information, I am currently not monetizing this blog in any way (by getting a cut from Amazon click-throughs, for instance). If I ever do, it will be to the benefit of charity.

The Managerial Attitude

"The demands for managerial attitude on the part of even the lowliest worker is an innovation" Peter F. Drucker

Action: What actions can you take now to impart a sense of managerial responsibility to your workforce? Peter F. Drucker

Before getting into today's topic, I hope you all get a chance to watch the Financial Crisis Inquiry Commission www.fcic.gov or www.cspan.org in action. Yesterday morning we had an amazing opportunity to watch the top 4 financial CEO's explain how the financial crisis happened (CEO's of those left standing). And then to experience expert opinion, some of which was obviously ignored by the players as the crisis evolved. What a fantastic learning experience, at minimum. Very interesting, illuminating, and unbelievable, so far.

• CEO Blankfein of Goldman, said that the main change that they made in management practice since the crisis: Do more "what if" stress testing.
• CEO Dimon of J.P. Morgan Chase, said that they never considered a scenario of 40% decline in the housing market
• Chairman Mack of Morgan Stanley, said continuous self questioning was the answer to never repeating the crisis.
• CEO Moynihan of B. of A., said better risk management was the answer.

All very much the same theme, namely: Test what we know we know! This was under oath, but do you believe these guys? Very smart leaders of America's major financial industry companies saying they didn't test (even privately) against a downside scenario, and leveraged themselves to the hilt? I say... Hog Wash! Bull S...! Kyle Blass in his extremely compelling testimony , said that he had shown the folks at Bear Stearns and in the govt. during that time, that even a flat housing market would be disastrous for our financial institutions because of the incredibly high leverage positions they had taken. I flat out, don't believe their testimony, under oath, shame on them... and it shouldn't be that hard to prove that one or all are lying through their teeth. Frankly it makes me angry that they think the American public and taxpayers are utter fools. But who is laughing all the way to their bank? These guys were caught up in the euphoria of competitive "one-up-man-ship"... I can only hope they will have to pay more in penalties.

That said, do heed my advice, which I have repeated throughout this blog. "Test what you know you know" in order to be better prepared for the future. Peter Solomon indicated that there was a heard mentality going on. An interesting new book to read while you watch this aftermath of financial market failure is: How Markets Fail: The Logic of Economic Calamities by John Cassidy

Back to today's blog topic. One way to answer the action item is to "Test what you know you know" and learn appropriate responses in that potential future. I'm not trying to be cute here. One of the most valuable tools I have been privileged to use in order to impart a sense of managerial responsibility to employees, has been a really neat derivative (not financial) of exactly that type of strategic gaming.

Example: For a large beverage manufacturer, faced with unprecedented competition, requiring new innovative thinking and solutions. As part of the "change communication program" we created a "strategy game" like monopoly for the employees to play with each other at company gatherings. Instead of the usual softball game at the company outing, the employees played "strategy". The game basically taught, through socratic questioning, how the industry, competitive dynamics etc. was now working, what the threats were, and drove employees who played the game to a superior understanding, a "managerial" understanding of the new dynamics they faced (it was the dramatic change in competitive dynamics that needed to be imparted, in order to inform the understanding for a need for change). The second part of the game, was a more robust generation of solution sets by those employees than ever before. In essence, putting employees in a position of understanding real strategic industry dynamics, and allowing the self questioning of what we know we know, put the company as a whole in a much better competitive position. Try it, "it" works with any size of company.

Management and the Liberal Arts

"Management is a liberal Art" Peter F. Drucker

Action: What is your plan to develop yourself in the humanities and social sciences? Develop such a plan today. Peter F. Drucker

"Government has nothing, absolutely nothing to do with running a business" Bruce Klassen ca. 1972 (mea culpa)

How can one be an original writer if one doesn't know what's going on in the world or within oneself? How do you set the context for what you write about? The same goes for business. As a leader one must have a sense of history, an interest in psychology, often command of different languages, a philosophical viewpoint. Without these, no business can succeed in a changing climate.

Example: When one of my business acquaintances was first named Vice President of Philanthropy at Hewlett Packard (I believe by Lew Platt), I really did not get it. Hewlett Packard was already thinking of two trends that would influence the company's position, globally.

1) Who really was left as a significant untapped market? The poor of the world living in industrially undeveloped countries. How to open up those huge, untapped markets?

2) When were investors going to start putting their money where their social responsibility lay? Would investors choose to invest in more Socially responsible companies.

By taking a "liberal" approach, Hewlett Packard soon learned about fractional selling, and become one of the leaders on several of the social responsibility indices which were developed. I once did a correlation with a colleague (Dan Gagne). Just for "the fun" of it, I asked him to correlate year end profitability of US public companies with their position in the Fortune 1000 "Perceived Social Responsibility Index". Wow, "without making any claim of causality", the results were astounding. The top 8 most profitable companies were also in the top 11 most socially responsible (again perceived). I passed this startling finding on to the Aspen Institute, which had been looking at this issue across industries.

A liberal, "self questioning attitude" is fundamental to moving toward a paradigm of renewal in all aspects of life including business. This does not mean, as I have said previously that Orthodoxy should have no place in your life. Where are your blind spots? What do you know you know?

Example 2: Of course, suicide bombing is closely linked to religious (especially islamic) fanaticism, right... WRONG! Read the definitive study on "successful" (I use this, maybe, inappropriate word here to mean that the bomber and, at least one of her victims died) suicide bombings Dying to Win: The Strategic Logic of Suicide Terrorism by Robert Pape, Your opinion will be dramatically changed by the facts underlying 452 bombings since 1984. Just one example of testing what we know we know against the facts will change the way we think about the world... our market place.

Your reading lists, as a current or future global business competitor need to include, topical reading related to, at least, the following six subjects (from World Out of Balance: Navigating Global Risks to Seize Competitive Advantage by Paul Laudicina).

1. Globalization
2. Technology
3. Demographics
4. The New Consumer
5. The Environment
6. Regulation and Activism

Test what you know you know every day and apply, sometime startling truths to your business.

Practice Comes First

"Decision makers need to factor into their present decisions the "future that has already happened" Peter F. Drucker

Action: Are the premises that you base your decisions on obsolete? Do you need a new intellectual framework to win in the market, as it exists today? Dr. Peter F Drucker

In order to truly do justice to this question and action call, one would have start with the "predictive decision processes" each of you currently utilize. I know none of you are simply extrapolating from the past....right? Then see if there is anything better out there. Pretty straight forward stuff, so today I'm going to give you a partial reading list whose learnings you can apply to your own practice. I am sure you will find something useful in each of these (also, this is by no means exhaustive, they are simply the ones I remember reading). And remember the words of the immortal Bohr: "Prediction is very difficult, especially if it's about the future."

Art of the Long View, The by Peter Schwartz

The Art of War by Sun Tzu - Special Edition by Sun Tzu and Lionel Giles

Uncertainty: Einstein, Heisenberg, Bohr, and the Struggle for the Soul of Science by David Lindley

Who Stole My Cheese? by Ilene Hochberg

Blue Ocean Strategy by Kim W. Chan

The Black Swan: The Impact of the Highly Improbable by Nassim Nicholas Taleb

The Art of Strategy: A Game Theorist's Guide to Success in Business and Life by Avinash K. Dixit and Barry J. Nalebuff

Have fun with this one testing "what you know you know". It will always be the assumptions you would bet your bottom dollar on which turnout to be on shaky ground.

Management and Theology

"Management always deals with the nature of Man , and with Good and Evil" Peter F. Drucker

Action: Do you have any colleagues who are truly evil? Is there anything you can do about it?

Who is truly evil out there? Bernie Madoff? He probably comes close. But I don't think that this is really the question, for me, here. You have already seen me use words like "cardinal", "orthodoxy", "treat others...", etc. So I am obviously thinking of theological constructs as I write this daily blog. And, I am a believer in the Gospels, and I am a deep student of Islam and Judaism. My familiarity with other theologies is somewhat less, but adequate.

I suppose I "fall back" on theology when it comes to ethics and ethical behavior in the "real" world. Am I acting in a way, in this situation that would clearly identify me to those watching as a follower of Christ? Is my light shining, as I make decisions about retention, contracts, customer service, product design? Do I have the Beatitudes in mind? Let me confess right here, that I often fail. Am I evil?

I often counsel Christian mentees who are starting a business, especially those going into non-profits (or missions), to be sure that they are working for the Glory of God, but to not show intolerance to others, who may believe differently. Rather than founding a "Christian Business", I often bring them to the conclusion that a business "operated by Christians" allows for much more opportunity to serve everyone in need.

I have come across one evil man. He was the COO in a business where I had very good relationships with many senior people and the CEO. I had already done five or six big program implementations. One had failed and one was in trouble. The cause was this man. His Ego was so overblown, that no matter what the outcome for the business, he did all he could to stop progress, obviously with some significant success. He had become visible in his destructive efforts, and was attracting criticism. Because the CEO was close to him, he had not seen his evil intent yet, but was about to. The funny thing was that there was no talking to this man... in his mind he was righteous. He was finally removed, and sued the company.

Most of the time tough, I find that men are not evil... they may be "acting" in such a way, but bringing them back to the nature of what must be done, or reminding them of consequences of their disruption most often allows them to overcome the temptations.

If anybody has read any useful theological business books, let me know.

Management is the Alternative to Tyranny

"The alternative to autonomous institutions that function and perform is not freedom. It is totalitarian tyranny" Peter F. Drucker

Action: What steps can you and others take now to improve the performance of the institution for which you are responsible? Peter F. Drucker

Dr. Drucker is definitely a "free marketer", and he paints a very stark, bipolar picture here. But, are any of us, especially after experiencing the successive failures of the internet, the real estate, and the financial markets over the past ten years still prepared to pay the overall price of this "freedom"? We, as individual market participants have not shown that we will act responsibly and "wisely" given this freedom. I suppose there are still such people. After all, the belief in general economic equilibrium theory is close to being a religion in the US. If we are willing to pay the price of repeated market meltdowns, because the alternative IS the gulag, then I suppose we should continue. But I am having doubts.

Even staunch "cardinals" of the faith such as Allan Greenspan have stated their utter shock at how their assumptions of economic rational behavior by market participants have been shattered by most recent events. The problem is what we game theorists call the prisoners' dilemma. In a game of multiple players (economic or other), what is rational behavior for the individual, does not result in the best outcome for all players including that individual. My economic behavior does impact you, my neighbor. Most assuredly so in this "Flat/Crowded" world.

Is increased regulation tantamount to an inevitable slide into totalitarian tyranny, or does it lead to a stronger economy over time? Do we in Americas Co. have a moral obligation to our neighbors (whose economies melted down with ours) to act more responsibly? How are we going to be held accountable in the future?

There is an real interest in this debate in America. The majority of voters told us this in the last election. Let me remind you that our behavior is "bipartisan". Under President Bush you and I as, taxpayers became the largest owners of financial institutions and under President Obama, you and I all now make and finance cars on a world scale. You tell me whether the free market economy is alive and well in America. We need to take on the responsibility to fix it, because I certainly have seen the ravages wrought by a centrally "planned" economy, and want no part of it. Which is what Dr. Drucker is, I think asking us to ponder, today.

Which brings us back to today's Action call. Maybe we should tag on to it "...in order to prevent the occurrence of future market failures in the industry in which we compete". I'm sure that the "cardinals" are thinking about this big time. How will we contribute to the outcome as business leaders?

This will be difficult, because our current corporate measurement system (the share value of equities) quickly punishes those executives who understand the irrationality of their behavior (Example: Citi Bank) and would like to stop. However, they can't stop because of the immediate negative effect caused by the market and the reaction of shareholders... "Damned if you do, damned if you don't, so stay in the saddle and keep riding in the stampede until all the horses collapse". How can we fix our businesses, so when the next time comes, we can turn and swim against the tide of lemmings going over the cliff? What can we do in our own corporate worlds to perform in a way which avoids the prisoners dilemma? I'm absolutely sure that President Obama would like to hear from those of us with practical proposals NOW. I fear going down the path of regulation.

How about if I hereby asked all public company CEO's and CFO's to stop quarterly financial reporting and updates, and move to a yearly schedule? As some have done.

The New Corporation's Persona

"In the Next Society's corporation, top management will be the company. Everything else can be outsourced." Peter F. Drucker

Action: Focus on your organizations' values, mission, and vision, and consider outsourcing everything else. Peter F. Drucker

Action: Consider moving your headquarters to another city/country and do less there. Bruce Klassen

Action: Consider which delivery functions can be digitized. Bruce Klassen

This was exactly the topic of my speech to Microsoft's CEO clients which I referred to in yesterday's blog. I want to make two additional points to Dr. Drucker's dramatic call to action.

1) Digitizing the function you are considering for "outsourcing" or abandonment is, in my view a critical step in order to protect your competitive interests. The digitized API, Gadget, Widget you create can then not only be outsourced (at least the workflow), it can also be switched between "suppliers" much more easily. This gives you some power in the negotiating game in our co-opetitive world. Remember that the ATM is nothing other than the digitized Teller App., and it is no longer "owned" by the bank (I think EDS is still the largest single owner of ATMs).

2) In opposition to Dr. Drucker, I still believe that there are core capabilities that should NOT and NEVER be outsourced. Without protecting and improving that core capability, whatever it may be, you will no longer be differentiated in the market as your competency is learned by others. I my view, the "persona" of a successful company includes more than Values, Mission and Vision. It also includes the core competency which makes it unbeatable in the competitive market. This must also be protected. It is essentially what drives P/E. For more on this read the classic: The Discipline of Market Leaders: Choose Your Customers, Narrow Your Focus, Dominate Your Market by Michael Treacy and Fred Wiersema

Example 1 - Apple's system integration capability to combine software and hardware/services along with it's sense of style is its core competency. If it could actually be outsourced, then Apple wouldn't actually exist.

Example 2 - Honda's ability to design engines.

Example 3 - Broadcom's ability to work collaboratively with customers' Engineers on new technology solutions in communications chip technology.

Example 4 - Cisco's ability to acquire companies who's technologies dovetail with Cisco's market roadmap, seamlessly.

Example 5 - Cirque du Soleil's ability to integrate live Music, Acrobatic Performance, and Theatrical Performance into its show design.

That said, the corporation as we once knew it IS DEAD. If you are no longer the "natural owner" of a corporate asset/capability and the "ruthless" competitor, then get rid of it to someone who is. It is no longer effective to vertically integrate (or even come close) unless you are best in class in every function, and need to be so in order to return superior returns to shareholders. It is okay to be an also ran in some functions, and still be the leader in your market.

By "outsourcing" the ownership of inventory (in process and finished) DELL was able to achieve the enviable negative working capital position it held for a long time... thereby making shareholders rich.

It is quite exciting for me to watch this trend continue and morph. We originally saw this, and worked with many of our clients to proceed down this path (authors Aurick, Jonk and Willen of "Corporate Genome"). It actually amazes me to see how much design, development and research work is already outsourced today... Why not, if your core competency is sales?

Autonomy in Knowledge Work

"Knowledge work requires both autonomy and accountability" Peter F. Drucker

Action: Write a work plan that includes your focus, desired results, and deadline. Submit it to your boss/financier/team/mentor. Peter F. Drucker

I am drawing a bit of a blank on this one, maybe because it is just second nature to me, and I expect to you also. In knowledge work and knowledge leadership, clearly stating ones objectives and then planning to those seems to be a "no brainer". That's not to say that all do this well. By definition no-one else can do this for the accomplished knowledge worker who is hopefully "pushing the envelope".

So, if you are out there knowledge worker friend, and feel like it, look upon me as a mentor and write away. I promise I will look at all plans sent to me, and make helpful commentary if I can.

I will check e-mail at klassen.bruce@yahoo.com for the next couple weeks.

I'll use today's blog to tell the story you have all been waiting for: Of why I love Dr. Drucker. Liking him was not difficult given his intellect, personality and accomplishments. I came to love him for his kindness.

I was invited to speak at one Microsoft's Annual Senior Client Conferences (Management Summit). This one dealt with the CEO radar screen with respect to "the next big things". Even though I am not known as a "futurist", but as a strategy implementer, I had done this sort of thing once or twice before ;-). So, I felt pretty comfortable.

However, the morning of, I found out that I was in the speaking slot right after Peter Drucker himself. Yeah right! Who's going to listen to no-name Klassen after THE Guru has just spoken. I was sweating bullets.

Peter and I got together that morning for a few moments, and we spoke briefly about my topic and some of the underlying facts: "The breakup of the corporation as we know it".

So, Peter speaks on the next three big money makers: Insurance products for baby boomers, Fish farming, and ...I can't remember. He is totally fascinating and has the audience hanging onto every word... no matter how far he circled away from the topic. He concludes, gets up and walks off-stage, but does a "Detective Columbo" just as he is passing the "baton" to me (my hands are sweating profusely). He says: "Oh, by the way, if you thought my topic was important... then hold onto your hats and listen very very carefully to BK, because he is going to tell you some things that will startle you, and which are uncomfortable, and you may have some problems with, but definitely are coming at all of you!" ... I love Peter F. Drucker! Thank you! thank you! thank you! How can you go wrong after that?

Autonomy in knowledge work. I guess the lesson is that if you are going to be the best, you had better become "the expert" in your field, so you can "hold the audience" after a Guru like Drucker speaks. At some time you are going to be "autonomous" on the hot seat, with some real tough people wanting answers to deep questions.

Knowledge Workers: Asset Not Cost

"Management's duty is to preserve the assets of the institution in its core" Peter F. Drucker

From Wikipedia: Knowledge workers in today's workforce are individuals who are valued for their ability to interpret information within a specific subject area. They will often advance the overall understanding of that subject through focused analysis, design and/or development. They use research skills to define problems and to identify alternatives. Fueled by their expertise and insight, they work to solve those problems, in an effort to influence company decisions, priorities and strategies.

Knowledge workers may be found across a variety of information technology roles, but also among professionals like teachers, lawyers, architects, physicians, nurses, engineers and scientists. As businesses increase their dependence on information technology, the number of fields in which knowledge workers must operate has expanded dramatically.

The term was first coined by Peter Drucker ca. 1959, as one who works primarily with information or one who develops and uses knowledge in the workplace. A man ahead of his time!

Action: Attract and hold the highest-producing knowledge workers by treating them and their knowledge as the organization's most valuable assets. Peter F. Drucker

"No matter how smart you are, you need a team of really great people". Steve Jobs. D5 Interview- 2007

In his recent book, "Dealing with Darwin: How Great Companies Innovate at Every Phase of Their Evolution" by Geoffrey A. Moore, the highly acclaimed author and Venture Capitalist adds currency to the importance of this management practice focus on the knowledge workers. Much of today's and all of tomorrow's global competitiveness of "developed" economies rests on their ability to conceive and develop (not manufacture or service) complex systems. As India Co. leads in Services, and China Co. leads in Manufacturing, the Americas Co. must lead in Complex System Design and Integration. The leading organization needs the best knowledge workers more than the best knowledge workers need the organization, because the worker and her IP are mobile to a great degree.

I want to add two additional concepts that I feel are important and speak to the need for significantly more creativity and rigour with respect to the practice of knowledge worker management. These thoughts may also help you to get more out of executing Dr. Drucker's action call, today.

1) The "hold" in Dr. Drucker's Action Call is in reality a far more complex human capital "work-flow". It is in fact: retain, develop, promote, reward and out-place. So, do you give your knowledge workers what they want in order to keep them? How do you help them to develop into the world's best? Do you have the ability to promote them and help them to generate wealth? How do you help them find their next challenge that is beneficial to you, but outside the traditional "company" boundaries? By finding answers to these (and other) questions, you will be practicing the management science which Dr. Drucker calls for in his call for action for this day.

Our current financial and management systems certainly don't help you in any way. They likely don't even measure the value, let alone the flow of this "critical" asset over time. Have you found ways to do this? Do you have human inventory backed up? How fast is your flow of human capital? Have you encountered HR teams that are up to this challenge, or even think this way (let us hear from you)? The "competition" for knowledge worker talent is global and stiff.

2) Are the vast majority of "your" critical knowledge workers even on your payroll? They are more likely with your customer, your supplier, your competitor, your consultant, your outsourcer. Do you have responsibility for them too, in some significant way? For a more comprehensive understanding of this issue, you might read: "Co-Opetition : A Revolutionary Mindset That Combines Competition and Cooperation : The Game Theory Strategy That's Changing the Game of Business" by Adam M. Brandenburger and Barry J. Nalebuff. How do you attract, retain, develop, promote and out-place outside your four walls?

Losing ground in this arena is not an option we (in Americas Co.) can afford. Increased professionalism and application of working management models will be necessary. The following examples begin to look at those models. What have you seen/done?

Example 1: The repeat Entrepreneur Model. The way I see it, Cisco has actually built a self-improving and "regulating" knowledge worker process into its well respected and much quoted acquisition program and strategy. As did Hewlett-Packard, but they more so in the earlier days. Top knowledge worker talent is "recruited", developed, rewarded and out-placed by ensuring that product development projects they are working on or have completed and must now be brought to market are either out-placed through external venture formation, and then often acquired when the products are at a point that they can benefit from Cisco's "go-to-market" expertise and strength (I tried to shorten that sentence but... ). It is quite common that serial entrepreneurs make repeat paths through the process. This is also a model which has generally been accepted in Silicon Valley (the serial entrepreneur) and other regional innovation clusters. OCTANe is working hard to make this happen in Orange County, CA.

Example 2: The Mentor Model. In this, companies like McKinsey & Co. probably excel. KW employees are matched up with one or two Mentors over their working life who take responsibility for guiding them through the process of HR flow even through to out-placement. That's where I think McKinsey really excels. They seed their own "outgoing" at clients and work partners in senior management positions. It is my view that mentoring, as a management practice is still in its infancy with huge opportunities still untapped. One of the reasons might be that HR functions have to give up significant power to allow mentoring programs to thrive, in my experience. At its core, the built in strength of a Mentor based program is that it fosters "treat others as you would like to be treated" behavior (which helps us with that part of Dr. Drucker's call to action today). It is also the best way to maintain the, oh so important personal link between inside and outside when a talented KW employee chooses outplacement as their next step. It has always been in my best interest as a businessman to keep in close touch with my mentees and mentors.

By the way, other "must" books by Geoffrey Moore for the technology crowd, include "Crossing the Chasm", "Inside the Tornado", "Living on the Fault Line", "The Gorilla Game". Geoffrey and I hooked up in the early 2000's to do some really interesting projects over several years. As with many others, I have lost touch over the past 3 years, but his insight and foresight is always appreciated and fondly remembered. What an intellect... and a really nice man.

Abandonment

"There is nothing as difficult and as expensive, but also nothing as futile, as trying to keep a corpse from stinking." Peter F. Drucker

Action: Stop squandering resources on obsolete businesses (functions) and free up your capable people to take advantage of new opportunities. Peter F. Drucker

This is maybe somewhat redundant or additional to yesterday's Blog. We spoke yesterday of measurement. Certainly the stench of a dead or dying business should be an unmistakable indicator. Alas, the people closest to it, often can't smell it any more. Or they feel fear of being shoved into the grave with the business. Or they don't act for a myriad of other reasons (as you will see below). This aspect is worth looking at a little closer.

Likely some of your best people will endure the longest in a hopeless situation, and that is a "doubling" of the loss. Not only is the business no longer contributing, but the time spent on it is a waste of talent. It is a "triple" loss when you add to the mix what the talented people could achieve in a new opportunity. A "quadrupling" if you add in the further damage of incompetent people staying in the organization. The loss is "quintupled" as the internal shut down costs increase with time. By keeping the cadaver "upright", you lose five times, at least. Kind of the opposite dynamic of customer loyalty (of that later).

And it's not just dead businesses, it's often the useless/ossifying functions. Those things that you still do, which others do much better. Those which add to the complexity and slowness of the business. Extracting those useless, ineffective, complexity creating functions which have often become part of the "social power structure", especially at headquarters is very difficult, but very necessary.

Example 1: The, extremely effective CEO of one of the world's largest, most successful, global engineering/construction companies knew that he had to do less at headquarters, more effectively (faster). Especially when it came to acquisition and integration of purchased companies. He tried for long enough (how long do you let things fester?) to get his most senior team to analyze and act on the tough decisions to jettison the stinking corpses, and they could not do it. Finally, he added a "sixth" cost... Me and my team... to get it done. Believe me when I tell you that the stinking dead linger even in the best run organizations, and they are tough to get rid of. Doing the right thing will test the "integrity" of the leadership (see Blog #1).

Example 2: The most startling/pronounced example I have come across in my 30 years was the stench of the entire economy of the former German Democratic Republic. Specifically one of its "showcase" manufacturers, SKET (Schwermaschinenbau Kombinat Ernst Thaehlman.. yeah yeah I know). I went into "the East" in the very early '90's to supposedly turn around one of the COMECON's largest producers of Rolling Mills, and large industrial machinery (Metal bangers extraordinaire). I can't possibly relate all of the experiences we had over that crazy year, but this one was really putrid. The most clear indicator of "death" came on the very first day my colleague Dr. Norbert Wittemann and I visited the main site of SKET in Magdeburg. The plant manager took us on a tour. By that time I had become pretty good at "walk through" data gathering: How many hard hats standing up doing nothing? How much inventory sitting idle in front of machining centers? How many different manufacturing processes are on the floor creating complexity? I was certainly starting to build a picture, BUT, I hadn't seen anything yet... until we walked over to a high-rise, metal-clad warehouse, where we were "proudly" shown huge stacks of unfinished metal furniture (chairs, desks, cabinets), which were described as "our production quota for the consumer product division" since 1988. None had ever been sold! A whole warehouse full of dead bodies. Even with that evidence, it took us over 6 Months to proclaim the "patient" dead, and help some of the best talent to take over parts of the shops which were actually viable start-ups with real potential customers. As I said this was one of the worst I've seen, and you may not be able to relate to it. The big point is: Norbert and I should have shut the thing down on the first day, when we saw, touched and "smelled" the corpses.

When do you know that a business is dead? "Polly!!!.. Polly Parrot!!!!... Wake up!!! ...Polly!!!. Shop keeper, If you hadn't nailed her to the perch, she'd be pushin' up daisies" Mr. Praline aka John Cleese of Monty Python from the famous Norwegian Blue skit.