Wednesday, December 7, 2011

An Ultimate Question Serendipitously Showing Up On Charlie Rose (PBS)

Charlie asked about a “theory of everything for society.” Is There One?

Before we can do anything profound, we need to develop a societal theory of everything. Recent discussions on the national level have broached this subject, but haven't gone far enough.

We are all fortunate to have the Charlie Rose show on PBS to have truly relevant,
instructive discussions about life in all its aspects. Charlie asks many of the world’s
finest thinkers and doers some of the best questions it is possible to ask.

This post turns to a couple messages we took from some of his recent interviews,
addresses them through our colored glasses and gives an ultimate answer to Charlie.

He interviewed David Brooks, a highly respected New York Times journalist and
author, recently (11/21/'11) about the supercommittee report and its admission of
failure. The interview was good and Brooks had some instructive things to say. Most
important for our purposes, though, paraphrasing here, Rose asked Brooks whether,
in political economics, government and society, there is a counterpart to the scientific
community's search for a "theory of everything," referring by name to Einstein and
Stephen Hawking. David gave a thoughtful response, saying that he believes the U.S.
is unique in the sense that we have an ability to put large groups of people together and
manage them as they deal with complex, complicated matters better than other nations
do. This aptitude in part he connects to our understanding that all kinds of people,
diversity in every way, can come together and make great things happen - and we know
how to do that.

We believe David and Charlie missed a golden opportunity to add real enlightenment to
the public discourse:

a. David’s answer was a reasonable way to characterize a demonstrated ability
that exists in the U.S.
b. At best, though, it was an incomplete answer to a profound question.
c. Charlie asked an ultimate question, David gave about a B- response and
Charlie failed to pursue the matter. Either Charlie did not know he had asked an
ultimate question or did not know that David’s response was quite inadequate or
d. It was, therefore, an ultimate opportunity lost.

On 11/29/’11 Mr. Rose interviewed two journalists, Mattathias Schwartz and John
Helemann, about the Occupy movement – where it is and where it might go. Their
responses were in line with the outcomes that can be produced by a societal “theory of
everything.” Through selflessness (and selfless behavior), individuals and organizations
can maximize their own self-value as a by-product. Both the Occupy and Tea Party
movements have the seeds of the theory’s grounding in their movements. The Occupy
movement has its own blind spots, such as having part of its platform(as informal as it

is so far) perceivable, somewhat correctly, as free, free, free. In addition, they do not
fully know they have an ultimate nature to their purpose. The Tea Party movement also
unknowingly shares part of this purpose in its nature, except its platform is perceivable
(also somewhat correctly) as me, me, me.

Charlie also interviewed Marc Benioff, Chairman and CEO of on 11/
29/’11. Mr. Benioff’s corporation appears to have built at least part of the foundation
principles of the societal “theory of everything” into its corporate DNA – their 1,1,1
philanthropy model for one thing. They are; a. a significant exception to inward-focused
corporate behavior as we have seen it in recent years and b. still only partly there.

One need not study Locke, Hume, Hobbes, Smith and others in context to try to capture
an evolution or synthesis in their thinking and teaching. It is certain, though, that they
would agree with the functional relationship, set forth below, between self interest and
other interest. Adam Smith explicitly endorsed it.

The natural law, social contract, etc. ideas all crystallize in the following, straight
forward "theory of everything" for societies, governments and political economics. This
would have been an ultimate answer to Charlie Rose's ultimate question. Connecting
self interest and other interest is the purpose and the challenge, just as in physics
connecting quantum mechanics and general relativity is the purpose and the challenge.
We offer the functional relationship here, in kitchen table mathematical language,
preceded by a narrative explanation:

a. Theory of Everything for Political Economics, Governments and Societies:

(1) Our self interest and self value ( for organizations and individuals alike) is maximized

over the long run as a direct function of focusing on and optimizing the value
provided to those persons and groups whose lives we affect (our stakeholders).

(2) Self interest is best satisfied by focusing on and serving others – those whose lives

we affect in a meaningful way.

b. NOTE: Here it is in a mathematics- like formula relationship:

IVM = f(S1VO, S2VO,……….SnVO), where

1. I means “institutional,” which really is an all-inclusive synonym
for “organizational” for our purposes.
2. V means “value,” and value is financial, ethical, security, quality, safety, etc. – the
finite and knowable list of things valued by each stakeholder group (marketing
groups are some of the knowledge leaders here).
3. M means “maximization,” where value is defined.

4. f means “function of” – it really indicates that an organization’s long term value
is directly dependent on how well it does in optimizing the value packages it
provides to each stakeholder group in the context of all the other groups.
5. S means “stakeholder,” – those main groups affected by an organization.
6. O means “optimize,” and optimize means doing as well as possible for each group
in the context of doing the same for every other stakeholder group.

It is important to add that every organization (institution) has a finite number of main
stakeholder groups. In general they are; a. Customers, b. Employees, c. Investors, d. Suppliers, e.
Communities where they have a presence and f. The general public interest or common good.

There is a substantial amount of empirical research directly and indirectly supporting this “theory
of everything” and there are many stories about specific organizations whose value is high and
continuously growing over decades, and they all have at least some of the characteristics that
fit the theory. We need not be concerned about a refutation of it. Rather, we are searching for
the right ways to present it to organizations and have them take the risk of adopting it as their
philosophical and behavioral paradigm.

There are of course other concepts related to the theory, such as “globally ubiquitous
human characteristics” - virtues, traits or paths to these virtues, values and a yearning
for or possession of the fundamental rights of life, liberty, pursuit of happiness, and
property - at least that property each human has that is his or her own aptitudes.

This kind of approach to public interest decision-making, let alone decision-making
in large corporations and in governments will take more wisdom and fortitude than
currently is evident - especially in Congress and the Administration, and certainly on
Wall Street.

No one else appears to want to take this fully on, either because they do not understand
it, have not focused on it or simply do not want to "go there", but we are going there.
Ultimate questions must be asked (a thought effort in itself), answered and acted upon.

It is all actionable at the organizational level through seminars, lovingly tough love
seminars and similar forums and through follow up - like teaching and helping people
rise to the highest level of human behavior ----too much to ask? We think not. Just
the opposite is true. It is that main remaining leap to the high plateau implicit in the
question, “is there a theory of everything for economies, societies, governments and
political economies?”

That’s our story and we’re sticking to it. It can be called naïve, pollyannaish, innocent
and similar names. It is none of these. It simply invites us all to “mature up.” It is at
the very heart of pursuit of the common good and public interest, theoretically precise,

commercially robust and societally optimum. It respects national sovereignty while
recognizing we now have one global village and market. Opportunity costs will move
toward zero as all organizations (including governments) adopt it.

Wednesday, November 2, 2011

CEOs The World Over Must Become Servant Leaders

Adam Smith Must Be Spinning In His Grave In Edinburgh
Self Value Is Maximized Only By Optimizing Value For Others
[Note: It has been an active seven months for all of us, as we have been watching the global and domestic political, economic and pursuit of freedom activity around the world. The reinforcement for the ideas we discuss here (from the kitchen table) has been flowing from all this activity. In this post we begin to address it all. It is a bit long (1900 words) but the subject matter requires it. J.]
CEOs should be on the factory floor and in the back offices every day, supporting, asking, serving and leading through inclusive, disciplined empowerment. They must also have the right people in the right jobs. Servant leadership is one imperative. As leadership goes, so goes the company, the government, the organization of any kind.
Only a small fraction of all companies, all organizations for that matter, practice this simple recipe for excellence. And it is this failing that significantly contributes to the national and global economic failures in the 21st century – brink of disaster failures since 2008 and continuing. And from about 1980 through 2007, just prior to the 2008 blowout in the U.S., the ground was laid for at least the U.S. and Europe to come to this cliff’s edge. And, China and the rest of the globe are in harm’s way going forward unless ways are changed.
This servant leadership stuff, mushy as it might sound, is one of the primary ingredients essential not only to recovery but to the path of value maximization and excellence. We will discuss the other ingredients in this brief post.
Is Adam Smith really spinning in his grave? Just consider the following excerpts from his writing, and a few comments from others, to understand that this moral philosopher taught that free markets would maximize value; a. if individuals were free to pursue their own interests – by employing their own labor in what manner they think proper and b. if individuals (and organizations) followed their nature to advance the common good – the good of all their neighbors. The quotes:
*“The property which every man has is his own labour; as it is the original foundation of all other property, so it is the most sacred and inviolable…To hinder him from employing this strength and dexterity in what manner he thinks proper without injury to his neighbor is a plain violation of this most sacred property.”
*“How selfish soever man may be supposed, there are evidently some principles in his nature which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it, except the pleasure of seeing it.”
*Man was made for action, and to promote by the exertion of his faculties such changes in the external circumstances both of himself and others, as may seem most favourable to the happiness of all.”
*Joseph Stiglitz, Nobel Prize winner in Economics and professor at Columbia University – Two observations about Adam Smith:
*“A naïve reading of Adam Smith might have suggested that he had relieved market participants from having to think about issues of morality.”
*“We should remember that Adam Smith was a professor of moral philosophy. …Economics is concerned with how we make decisions about the use of resources – and how these decisions affect others. Any (such) inquiry quickly brings us into a moral discourse.”
Smith always believed that man's self-interest was not in conflict with his urge to help others and that this sympathy between fellows was a fundamental part of human nature.

Another view of Adam Smith’s teaching: Howard Gardner is a Harvard professor. He recently wrote Five Minds For The Future. Some praise for his work includes:
1. “By most accounts, Howard Gardner is the most influential living theorist in the education world today,” NEA Today.
2. “Howard Gardner is….the man who changed our notion of what it means to be clever,” The Financial Times.
3. “One of the most influential psychologists of his generation,” The Economist.

Talking about markets, Gardner writes that, in addition to Smith’s well known invisible hand concept so widely embraced, “They (markets) can be quite cruel and, anyway, are fundamentally amoral. Adam Smith actually had a quite nuanced view of markets; their morality presupposed on a certain kind of society, inhabited by actors who were able to take a long – rather than a short term view. Moreover, when he moved from a singular focus on transactions (butcher, baker, brewer), Smith issued strong strictures: ‘He is certainly not a good citizen who does not wish to promote, by every means of his power, the welfare of the whole society of his fellow citizens.’ “(emphasis added).
We can take from all this that Adam Smith prescribed both perspectives and behavioral paradigms for societies and economies – in simplest terms, harmonizing of self interest and other interest. That is, self interest and the welfare of the whole society must advance together, and it does not happen automatically as a naïve reading of Smith’s writing might suggest. We can also be certain that he would not approve at all of the failure to achieve this harmonization in the national and global economies of today. In fact, this failure is the heart of the problem. That is why he must be spinning in his grave in Edinburgh.
Of course it has not helped that the once and long time intellectual leader of the University of Chicago School of Economics, Milton Friedman, and a long standing chair of the U.S. Federal Reserve Board, Alan Greenspan, effectively ignored the second perspective – choosing to assert that an automatically good outcome for the whole society would result if the first perspective is given free reign. What a monumental mistake!
The Congressional Budget Office (CBO) in the United States recently released its study on income inequality in the U.S. In a nutshell it shows that Smithian economics is not being successfully applied in the U.S.
A brief look at the income inequality story in The Peoples Republic of China gives us a similar picture. Of course, the Chinese economy has been growing rapidly over the last 30 years. A similar failure to satisfy the expectations inherent in Smithian economics, though, appears to be presenting itself in China. The details are different.
The point is that Adam Smith was setting out a prescription for maximizing economic and societal value through a specific economic model. The model, time has proven, works excellently when properly applied. That is not the case in the U.S. over the last 30 + years and may not be the case in China as it rolls out its market economy. This same reasoning applies around the globe, national economy by national economy and in the interactive global economy.
This brings us to self interest and value as a function of providing optimal value to others – to what are widely called the “stakeholders” of an organization. The CEO on the factory floor really means that leadership in all organizations, including governments, such as the U.S. Administration and Congress, must take on the responsibilities Adam Smith so succinctly prescribed in the second part of his two-part economic value maximization teaching – that of “promoting the welfare of the whole society of our fellow citizens.”
With or without Adam Smith’s wise and inspired teaching from the late 1700s, one could still easily reach this conclusion at the kitchen table. Self interest value is directly related to promoting the welfare of the whole society. The same goes for the conclusion regarding local and global economic value maximization.
It is really apolitical. It is not grounded in liberal or conservative philosophies, democratic or republican philosophies, left or right philosophies. Rather, it is grounded in the idea that all should be allowed and enabled to attain the happiness that Adam Smith prescribed.
The very idea that this self-interest, other-interest connection is not fully understood and embraced by leadership groups everywhere is a pivotal 21st century problem that must be solved.
How Do We Make Servant Leadership Flourish, Optimize Value For Others And Let Adam Smith Rest In Peace?
We connect the servant leadership, self-interest and other-interest imperatives by combining standard strategic planning elements with the organizational excellence elements that flow from our discussion here. This nexus, stirred together and then lived out by both leaders and all persons in every organization, will do the job.
Standard Strategic Planning.
This subject is sometimes regarded as superfluous, just a paper exercise that adds no real value. Perhaps the best judges of its value are coaches of major sports teams. Their playbooks, culture, style of coaching and year after year consistency in application are strategic planning in action. Its elements are; a. a core purpose and set of values, b. a vision, c. a mission, d. a set of long term and near term goals and d. adaptable strategies and tactics to achieve those goals. Those who do it best are most likely to achieve excellence.
Organizational Excellence.
Organizational excellence flows from a philosophically solid mind-set, has the clear and largely fixed sets of gold standard leadership and cultural characteristics, and the behavior necessary for excellence is that which applies this mind-set and these gold standard characteristics to standard strategic planning. The synergistic result is that “standard” becomes “robust” and the detailed pieces of an ongoing, adaptive strategic planning process are thoroughly enriched by the other-focused mind-set and the gold standard leadership and cultural characteristics. It all raises this nexus, this combination, to that individual, organizational, national and global level that lets Adam Smith rejoice, let alone rest in peace.
Our Actionable Take-Aways.
Selflessness is the key. Stakeholder value optimization is the goal and self-interest value maximization is the natural by-product. That is, to passionately re-state the answer provided above,… We connect the servant leadership, self-interest and other-interest imperatives by combining standard strategic planning elements with the organizational excellence elements that flow from our discussion here. This nexus, stirred together and then lived out by both leaders and all persons in every organization, will do the job.

As Professor Howard Gardner says, “Adam Smith actually had a quite nuanced view of markets; their morality presupposed on a certain kind of society, inhabited by actors who were able to take a long – rather than a short term view.”(emphasis added).
It is imperative that all persons in leadership positions - in government, business, in all organizations – rise to this high level of wisdom, courage and vision. The short-termism that prevails today is a fatal condition. The failure to consider the two parts of the Adam Smith prescription for societies and economies as co-equal and integrally connected is also fatal.
It is important to write the obvious: The fatal conditions we describe here apply to the real economies and their participants, to the financial sector part of the economies and their participants and to top government leadership groups – both executive and legislative branches.
So then, specifically in the U.S. it is time for the Congress and Administration to adult-up. It is time for the entire world to put in place the 21st century organizational, financial, economic and societal systems that allow this harmonization to be elegantly achieved going forward. Adam Smith, correctly understood and applied, demands it. He was and is a once-in-a-millennium visionary. He captured kitchen table wisdom. With or without him telling all of us the obvious about human nature, though, adult-up time is here.

Sunday, April 3, 2011

The Ultimate Big Idea That Unveils Capitalism’s Highest Value Creation Role - Locally and Globally

It has been a couple months since our last post. We have been engaged in sessions with clients, and comments from our clients will be added as a page on, our website.
We continue to check our thinking, to check the principles that are the foundation for the consultative advice and mutual learning we engage in with clients. At the same time, new information comes our way that, thankfully, reinforces our beliefs. This post shares an important affirmation of our beliefs. It is a bit long, but we believe the subject matter is extremely important. We hope you agree.
Rather Than Being Under Siege, The Capitalist System Should Be At A Moment Of Value Creation Breakthrough.
A significant and serendipitous piece of information came our way recently in a Harvard Business Review (HBR) article written by Michael Porter and Mark Kramer, both professors at Harvard. The article includes a video interview with Professor Porter. Porter is one of only a handful of Harvard professors to carry the distinguished title of university professor. It is reserved for those who make not only a significant contribution to knowledge in their field but who “are individuals of distinction….working on the frontiers of knowledge, and in such a way as to cross the conventional boundaries of the specialties.” The HBR January - February issue includes an article about their big idea – creating shared value. Their article begins with the words “The capitalist system is under siege.” Professors Kramer and Porter then go on to present the idea of corporations creating shared value with society. They believe this idea might be the next major transformational breakthrough in understanding the real value of capitalism.
They have recognized and explained, in clear language, part of the underlying and ultimate truism about the elegant beauty of capitalism. It is a good step forward in understanding the exquisite interrelationship of organizations and society in terms of value creation. They include Johnson & Johnson and IBM in a list of companies that are creating shared value – companies that do have this deeper understanding of how to reset the boundaries of capitalism. We too see these companies as having this necessarily broad view of value creation. Johnson & Johnson is a particularly good example of a company whose history, leadership and cultural characteristics have enabled them to maximize their own value in the long term by focusing on doing their very best for their stakeholders ( customers, employees, communities, suppliers and society in general).
We applaud their work. When Professor Porter speaks, the business world listens – heads of state listen.
However, Professors Porter and Kramer have not brought the thoughts to completion, in our view. That is, they have stopped short of the almost self-evident and truly Big Idea. We are confident they understand what this elegant beauty is when expressed in full. It might be that, in some part, they view the shared value concept in an instrumental way. That is, they describe the principle of creating shared value as a new way of creating economic success for the corporation. It is, to be sure, but that is really just the natural by-product of connecting self-interest and other-interest. And, it stops short of its logical completion.
• We are quite confident they know the rational, logical extension of the concept of creating shared value that they describe. Adam Smith certainly did, though he did not expand on his firm belief regarding this clear connection between self-interest and other or societal interest. What is this rational and logical extension? It is that organizations thrive when they focus on all their stakeholder groups instead of just their bottom line. Maximizing net global and local organizational and societal welfare (value) flows directly from this other, stakeholder-centered, long term value optimization mindset.
• The beauty is that self-interest is best maximized as an outcome of focus on serving others (stakeholders). An organization must be almost maniacally dedicated to optimizing value for each of its stakeholder groups. Optimizing is kind of like making music in an orchestra. The organization must strive to harmonize everything for its stakeholders, as a result maximizing its own long term value. At bottom, it is simply a mindset and focus matter, one that will unveil the real potential value of capitalism and of organizational value to society in general.
• Professor Porter’s five forces of competition, of course, remain centrally important in this expanded understanding of value creation. In fact, they take on an even deeper multi-dimensional nature when stakeholder (other) focus is dominant, and self-interest value maximization is the by-product.

Just as Professor Stephen Hawking and others have focused on finding a “theory of everything” to explain the physical world (quantum mechanics and general relativity in a unified way), leading thinkers observing the world of organizations - for profit, non profit, large and small (including but not limited to those fully engaged in free market capitalism) - should focus on finding and articulating an “organizational excellence theory of everything.” To qualify as a truly big idea or rather The Big Idea it is necessary to do just that – and Professors Porter and Kramer appear to be on the right path. At Jack Haffey & Associates (JH&A), we believe we have in fact identified and presented this theory, as briefly summarized above. It might need a bit of fine tuning, as much as we hesitate to admit it, but we were heartened to read the HBS article precisely because it looks like these two world class professors might “get it,” at least directionally they certainly appear to get it - in part. There is more to do, of course. And certainly Professor Porter’s five forces of competition do fit firmly in the mix – as a means to the end.
While the HBS article does not address it explicitly, we believe it is axiomatically true that until we move toward and get closer and closer to having all organizations behave as described here, organizations and society, globally, will continue to incur significant, harmful and avoidable near and long term opportunity costs as they individually and collectively fall short of actualizing their individual and our collective global value potential. Behavior in accordance with our ideas presented here, on the other hand, will tend to produce just the opposite – full actualization of long term organizational and societal value. That is capitalism’s potential – its elegant beauty actualized.

Monday, January 24, 2011

Leading the way to excellence: the attributes that are essential

It’s January 24. Remember that New Year’s Resolution you made way back on the first? If you’re still keeping it, bravo! Great job. Keep it up. If not, no worries. You
aren’t alone in letting it fizzle as the exuberance for a new calendar year wanes.

Authentic change typically doesn’t occur by choosing to do—or not do—something on an arbitrary date, like Jan. 1. Whether we’re talking about an individual who decides to start exercising or an organization that resolves to sell more widgets, it
usually takes a closer look under the hood.

We’ve talked extensively about the importance of creating a strong vision and mission statement when working toward true organizational excellence. Indeed, when
looking at gold-standard leadership characteristics, one of the first is the ability to establish direction and vision.

In addition, leaders must possess other attributes, many of which have little to do
with self-reliance or individual strength in the conventional sense. Gold standard
leadership characteristics include:

• Personal humility and professional will: One definition of humility is an accurate
assessment of one’s own abilities and shortcomings. Couple such an attribute with
a fearless conviction to improve, and you’re on your way.

• Inclusivity: The common theme through much of what we discuss is that one
person’s best ideas—even the best ideas of one really smart person—simply
aren’t enough to move a company or organization forward in a profound way.
Others need to be involved, and in many cases, the more stakeholders who are
represented, the better the results will be. And the smarter the leaders will look.

• Stakeholder focused, in a maniacally profound way: There’s that word again:
stakeholders. Organizational excellence is predicated on the concept that all
parties involved in or affected by a company or nonprofit must benefit in some
way from the company’s endeavors. Typically, such stakeholders include (not
necessarily in order of importance) owners/stockholders, employees, customers,
vendors, and the community in which the organization operates.

• Heart of a servant: We’ve heard the saying, “You get back what
you put in.” Leaders who focused on their own needs and desires often don’t
understand why the people around them aren’t loyal and self-sacrificing. Serve
those you lead by keeping their professional needs at the forefront of your mind,
and in return, you will get a stakeholder who is as true to the vision and mission
as you are.

• Ethical and just: The standard for ethical behavior is best set at the top of an
organization. Open conversations about doing things the right way—even when
inconvenient—will be appreciated by and ultimately benefit all stakeholders.

• Fun: In an organization that is led in such a manner, all stakeholders will
enjoy being involved. Imagine all stakeholders leaving your company with a high five everyday. Whether it’s a metaphoric high five or a physical one, it’s the kind of response you can achieve when striving for excellence.

Many or most organizations are alert enough to talk this kind of talk. Few, the
excellent ones, actually walk this walk. All should.