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Dov Seidman

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Beyond the Best Buy Outcry

A debate about Best Buy’s behavior, and the retail giant’s very existence erupted in the blogosphere this month. Although the issue qualified as “big” – the electronics giant’s future as well as the competitive threat Amazon poses to traditional bricks-and-mortar retailers – I believe these deliberations were so heated because much more significant issues are involved.


The discussion began when internet analyst Larry Downesquestioned Best Buy’s viability in a detailed blog post for Forbes. So far, the entry has received more than 2.5 million hits, and thousands of readers posted comments in response (Downes published a follow-up post in response to the feedback). There are reasons this issue struck a chord and these reasons resonate well beyond Best Buy, Amazon, the retail industry and customer service. They include the following four ideas:

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Topics: Corporate Culture

Career Crisis

As we continue to focus on today’s jobs crisis in America, we’re neglecting a larger problem that is keeping unemployment levels too high: a careers crisis.

First and foremost, our political leaders must aim to quickly forge a consensus that addresses the immediate jobs crisis. The unemployed are suffering far too much pain and dislocation.

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Topics: Corporate Culture

Happy Holidays from LRN

On behalf of all of my LRN colleagues around the globe, I am writing to wish you a joyous holiday season. Reflecting on our world as 2011 comes to a close, I am struck by the importance of our community’s conviction that how we do what we do matters more than ever, and in ways that it never has before. It is this idea that inspires us to work diligently with our partners, friends, like-minded organizations, and individuals to make a real difference. On behalf of all of my LRN colleagues around the globe, I am writing to wish you a joyous holiday season.

Reflecting on our world as 2011 comes to a close, I am struck by the importance of our community’s conviction that how we do what we do matters more than ever, and in ways that it never has before. It is this idea that inspires us to work diligently with our partners, friends, like-minded organizations, and individuals to make a real difference.

In that spirit, we have continued our tradition by once again making a donation on behalf of our friends and partners toConservation International, a leading charitable organization committed to preserving global biodiversity. Conservation International's powerful mission resonates with our own commitment to fostering responsible and sustainable relationships.

We are thankful for this opportunity to express our holiday wishes to the friends and partners we have connected and collaborated with throughout the year. Our very best to you and your families for a happy, healthy, and prosperous 2012.

All the best, Dov
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A Reflection on HOW in 2011

When HOW first appeared in 2007, I argued that we were entering what I called the Era of Behavior. Boy, was I wrong. Over the past four years it's become clear that we haven't just entered the Era of Behavior. We're way deep in it. Our behavior matters even more than I thought when I wrote this book, and in ways I never imagined.

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Topics: HOW

Return Flight Trouble

Note: This column refers to a article originally published by Dov Seidman following a Valentine’s Day storm that left hundreds of thousands of passengers delayed and, worse, hundreds of passengers trapped for hours in tarmac-bound planes. That original column from 2007 follows below. It happened again. And it likely will keep happening until JetBlue and other airlines get their HOWs in order. In 2007, after its customers were stranded for hours on tarmac-bound planes during a severe winter storm, JetBlue Airlines CEO and Founder David Neeleman swiftly posted a YouTube video:

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Topics: HOW

Rethinking Occupy Wall Street

“There are times I wonder, ‘Will I be the next Mubarak?’” This question was posed to me not by a despotic ruler in the Middle East but by the highly-respected CEO of a multinational company who was worried about the prospect of his employees or consumers organizing against him, thereby rendering him powerless. It echoes in my mind every time I try to make sense of the questions so far directed at the Occupy Wall Street protesters: What is their purpose? What do they stand for? How long can they keep this up? “There are times I wonder, ‘Will I be the next Mubarak?’”

This question was posed to me not by a despotic ruler in the Middle East but by the highly-respected CEO of a multinational company who was worried about the prospect of his employees or consumers organizing against him, thereby rendering him powerless.

It echoes in my mind every time I try to make sense of the questions so far directed at the Occupy Wall Street protesters: What is their purpose? What do they stand for? How long can they keep this up?

At best, these inquiries miss their mark. At worst, they display a dangerous lack of imagination that all but ensures that this protest movement will continue longer than necessary.

The problem is that the questions ask too much of the protesters – and too little of the rest of us. Like most protest movements, OWS demonstrators are demanding freedom from the current system. Many employees joining the movement want freedom from command and control bosses and task-based jobs and freedom to contribute their character and creativity and collaborative spirit at work in pursuit of a values-based mission worthy of their dedication.

The ultimate impact of the this movement, like all others, hinges upon how all of us involved – and we are all involved – work together to create the freedom to enable all of our employees and citizens to pursue a meaningful career and life.

What’s more, the protesters deserve credit for inspiring us to have the long overdue, truthful, no-holds-barred discussion that business and political leaders have failed to engage in for far too long. As leaders, we should be asking ourselves soul-searching questions about the underlying nature of our economic system and our business environment.

The CEO who used the Arab Spring as an opportunity to rethink his own leadership and the nature – and genuine quality – of his multinational company’s stakeholder relationships would understand the need to have this discussion. He would use the Occupy Wall Street protests as an opportunity to ask some fundamental questions all business leaders should be asking, such as:

1. Are we ready for the truthful conversation we’ve been avoiding?

We better be ready because the discussion about the fundamental structure and nature of business and the global economy is happening right now. The protesters’ conversation may touch upon issues of fairness and justice, but it is fundamentally about freedom. The protesters do not want a free ride; rather, they want the freedom to pursue a meaningful life and build a sustainable career. As the college graduates, soldiers who served in Iraq and Afghanistan, hard-working single parents and other protesters have made clear in their chants, Tweets, blog posts and sound bites, our current economic system does not provide that freedom.

2. Can we differentiate between interdependence and co-dependence?

As if we needed any more convincing following the global economic crisis, the world is hyper-connected and interdependent. A housing bust in Florida helps create a fiscal meltdown in Iceland. The threat of default in Greece decimates retirement-account balances in the U.S. Just because we’re interdependent does not necessarily mean that our interdependencies are healthy.

As leaders we need to create genuine, healthy and enduring interdependencies because we rise and fall together. One banker in London can lose his company billions of dollars, force the resignation of his CEO and send shock waves throughout the global financial community. Or one vegetable vendor can spark revolution towards freedom in the Middle East. The world is also hyper-transparent: anyone can peer into companies and see how they treat suppliers, employees, customers, the environment, communities and other stakeholders.

The CEO who worried about the possibility of becoming the next Mubarak understood that our country’s relationship with the dictator was more co-dependent than it was healthy or enduring. This chief executive also understands how quickly general dissatisfaction can become specific: if his company mistreats a stakeholder, he wondered, why couldn’t a wave of protest sweep him out of his office or, worse, his company out of existence?

3. Can our companies foster cultures of Self Governance?

The OWS protesters have demonstrated their ability to self-organize. Now it’s time for our businesses to demonstrate the ability to self-govern. In self-governing organizations, people act on the basis of a set of core principles and values that inspire everyone to align around a company’s mission, purpose and definition of significance. Employees reject top-down, command-and-control leadership or hierarchical, structure, control processes, performance-based rewards and punishments.

Sounds Pollyannaish? Not so. As the findings of The HOW Report – a new, independent study commissioned by my company LRN and recently written about in The Economist (http://www.economist.com/node/21530171)– demonstrate, self-governing organizations get much more of what they do want and much less of what they don’t want. In fact, they:
 

  • Deliver five times the level of innovation than other organizations;
  • Experience three times more employee loyalty relative to the competition;
  • Provide nine times higher levels of customer satisfaction compared with other organizations;
  • Deliver significantly higher levels of financial performance than other organizations ;
  • Are far more likely to report unethical conduct than their competitors.


4. Can leaders exert “power through” as opposed to “power over?”

In today’s knowledge economy, the sources of power—information and ideas—are infinite. Google gives them away for free. Because we can’t hoard information, the command-and-control leadership habits of the Industrial Age are no longer effective. Just as important, people want more than a paycheck from their jobs—they want to feel that they’re working with others to accomplish something important that they could not accomplish alone. If the only reason I work at a company is for a paycheck, I’ll leave when I’m offered a bigger one. If the only reason I buy from one company is their price, then I’ll switch my loyalty if someone else sells for less. So leaders need to shift from “command-and-control” to “connect-and-collaborate,” from exerting power over people to generating power through them.

5. Can we address the careers crisis?

Yes, unemployment is high and absolutely requires a solution from our political leaders, but it is not a root cause of anger for the OWS protesters – many of whom already have jobs. What fewer and fewer of our citizens have these days are careers: a clear path forward to meaningful, sustainable work. We must start placing a much higher priority on unleashing the potential of the people currently in work, not just out of work. In today’s difficult jobs environment too many recent college graduates do not know where to invest their energy, talent, skills and innovation. We need a careers narrative powered by a national purpose and a story for recapturing America’s greatness that comprehensively answers which are the industries, job descriptions, capabilities and skills that will be providing fulfilling careers for the generation now entering the workplace. Within individual companies, a similarly long-term narrative inspires employees to come up with new ways to connect, collaborate and innovate. And, as we know, innovation not only moves individual companies forward but also stimulates the economic growth necessary to create additional jobs and careers.

Securing enduring economic progress lies not in reforming our system but in rethinking and rebuilding our system. Just as the CEO who drew leadership lessons from an unlikely source has rethought how he leads and how his company behaves, we need to commit to rethinking how we operate as leaders and businesses. If we don’t, we all risk following in Mubarak’s footsteps.

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Topics: HOW

Humanity Is Job #1

As we continue to frequently lurch from one crisis to another, forging a sustainable path forward requires business leaders to rethink the very nature of how their organizations conduct business. The “New Normal” – defined by hypertransparency, hyperconnectivity, and ever- deepening interdependencies –demands new governance structures, organization models and leadership styles. As we continue to frequently lurch from one crisis to another, forging a sustainable path forward requires business leaders to rethink the very nature of how their organizations conduct business. The “New Normal” – defined by hypertransparency, hyperconnectivity, and ever- deepening interdependencies –demands new governance structures, organization models and leadership styles.

More leaders recognize that traditional approaches to business are no longer sufficient. Hierarchical command-and-control styles of leadership are giving way to flatter and more collaborative leadership frameworks. Rules-based management systems are evolving into values-based corporate practices. Short-term mindsets are being displaced by long-term considerations.

Organizations can no longer afford the inefficiencies and obstacles that result from treating governance, culture and leadership as distinct systems.

We need a Super System in which the separate systems of governance, culture and leadership are harmonized and synchronized. Call it a “Human Operating System,” one that fosters self-governance and puts humanity at the core, trusting employees to act, inspired by values and purpose versus being coerced by rules or motivated by dollars and cents.

Leaders of medical schools, including those at Stanford, UCLA, University of Cincinnati, are building new operating systems by identifying and recruiting specific behaviors they believe are crucial to their success – and the success of their graduates in the field. Top test scores and grades? Still necessary, but no longer sufficient. New hands-on behavioral assessments are being used to help determine if candidates possess the necessary ethical decision-making and social skills to succeed in a healthcare system where those qualities are critical. Humanity is now job #1.

A Stanford University School of Medicine administrator described a similar evaluation exercise designed to more effectively determine if candidates are able to work collaboratively and ensure trust-filled relationships between patients, doctors and the healthcare institution itself.

Understanding the Super System that is the Human Operating System

What is the Human Operating System? The answer is found by embarking on a journey that begins with values and behaviors. Simply defined, the Human Operating System is the sum total of the behaviors of the individuals that comprise an organization. And it is these very behaviors—how decisions are made on a daily basis, how employees are treated, how service is delivered, how the organization behaves toward all stakeholders —that drive important business outcomes. We have entered a new Era – an Era of Behavior – where these behaviors can be measured and therefore better managed.

Our research demonstrates that there are three distinct categories of governance, culture and leadership systems that can characterize an organization — based on the actual behaviors that take place on a daily basis.

These archetypes of Governance, Culture, and Leadership exist today. In fact, characteristics of each archetype exist in every organization:
 

    1. Blind Obedience: These organizations are characterized by command and control, top-down leadership and coercion. Blind Obedience systems rely on rules and policing, are transactional, and focus on short-term objectives—there is little focus on building enduring relationships in the workplace, the marketplace or society.
    2. Informed Acquiescence: These are organizations that reflect good 20th century management practices like hierarchy, structure and control processes. Employees follow the rules, policies and procedures established by what they believe to be a skilled management team. Managers rely on performance-based rewards and punishments to motivate people. Long-term goals are important but often give way to considerations of short-term success.
    3. Self-Governance: These organizations are primarily values-based. The organization’s purpose and values inform decision-making and guide all employee and company behavior. In short, people act on the basis of a set of core principles and values that inspire everyone to align around a company’s mission, purpose and definition of significance. Employees at all levels strive to be leaders and the company is focused on its long-term legacy and endurance.

The right Super System that inspires employees to self-govern through inspirational leadership and shared values can drive sustainable business performance and success.

The Case for Self-Governance

My experience, research and conversations with business leaders tells me that human behavior may not be nearly as intransigent, or uncompromising, as one might think. Many of the CEOs I work with express uncertainty about how to align a global team of thousands or hundreds of thousands of employees to deliver when they are confronted with the increasingly challenging objectives in front of them. Despite holding all the “reins of power,” these CEOs increasingly are coming to believe that the traditional ingredients of success, such as a supportive board of directors, a strong executive team, clearly articulated corporate strategies, thoughtful resource allocations, differentiated product or service portfolios, elaborate control processes and highly refined incentive structures – while necessary — are no longer sufficient. What they are looking for – what we all should be looking for – is a better way to influence behavior through our cultures, governance and leadership approaches.

I think a better way is closer at hand than we realize. As leaders we know that one of the most effective ways to influence is to measure. By measuring quarterly earnings, we influence short-term financial performance, for example. We can now measure how companies do business by analyzing links between their Human Operating Systems and a range of quantifiable business outcomes. This will be the subject of my next column.

The role of a company’s purpose and core values is particularly important as it harmonizes them with leadership and governance systems to help define its unique corporate culture. In short, culture as a conscious, deliberate, long-term strategy can be the key to differentiation, success and significance for companies in the 21st-century. Companies and leaders who pioneer and forge ahead on a genuine journey of governance, culture and leadership are the ones who will be around in the 22nd-century.

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Topics: HOW

'How,' Not 'How Much'

The Dallas Mavericks won the 2011 National Basketball Association (NBA) championship because its leadership team understood that measuring “how” matters more than measuring “how much.” Boards of directors and executive teams should take note. Measuring how individuals and organizations behave concentrates attention and resources on a competitive asset that is so varied and rich in supply that it promises to deliver enduring value at time when nearly every product and service can be replicated and commoditized by others. The Dallas Mavericks won the 2011 National Basketball Association (NBA) championship because its leadership team understood that measuring “how” matters more than measuring “how much.”

Boards of directors and executive teams should take note. Measuring how individuals and organizations behave concentrates attention and resources on a competitive asset that is so varied and rich in supply that it promises to deliver enduring value at time when nearly every product and service can be replicated and commoditized by others.

Although adopting a new measurement framework can be difficult, there are a growing number of examples, including Mavs Coach Rick Carlisle, from which to learn.

Right Answer, Wrong Questions

Conversations about “how much” echo throughout business, politics and our personal lives: How much revenue can we squeeze into this quarter? How much debt can we tolerate? How much growth can we generate? How much government do we need? How much square footage can we afford? How many superstars can our basketball team sign?

We have become extraordinarily successful at measuring “how much.” Executives work diligently to scale their companies so they can join the Fortune 500, a list that measures company performance based solely on how much revenue it generates in one year. Professional sports owners vie to out-bid each other for the services of high-priced free agents, such as the NBA’s LeBron James, Dwyane Wade and Chris Bosch, the NBA superstars who this year consumed two-thirds of the combined salaries the Miami Heat invested in its entire 15-man roster.

These and many similar efforts are genuinely impressive; they illustrate successful endeavors to answer the “how much” question by out-selling and out-spending the competition.

But “how much” and “how big” aren’t the right questions – not in a world with dwindling resources, and not in a business realm where competitive advantage cannot be sustained via out-producing, outspending or out-selling. Instead of reflexively asking “how much,” we should examine “how” we can create organizations, societies, institutions and businesses that mirror our deepest values.

Well-Being Metrics

The case for “how” has never been stronger; in recent years, we have repeatedly witnessed that size alone does not guarantee success in business or in life. The aggressive pursuit of scale—whether it’s more revenues, profits, customers, stores, or a bigger market capitalization—tempts companies to lose sight of the values that create true sustainability. Show me a company that’s ‘too sustainable to fail’ and I’ll be interested in buying shares.

Others will too, judging from the encouraging signs that the world is moving from “how much” to “how.”

Consider the Himalayan Kingdom of Bhutan, which has long measured its economic and social progress by the yardstick of “gross national happiness,” as opposed to gross national product. Today, policymakers in Britain, France and even Somerville, Mass. (where census-takers now ask citizens, “How happy do you feel right now?” to help guide future public policy decisions) are debating how similar indices might measure public welfare.

On the basketball court, Carlisle used a different yardstick than his competitors. Carlisle was hired because, in his previous coaching stints, he used optimal lineups far more often than his opponents. That is, he was more likely to have a winning combination of five players working together on the court at any given time.

An avowed “stats geek,” Carlisle accomplished this by expanding his measures of player performance beyond traditional “how much” metrics such as rebounds, assists and points. Carlisle also measured how well different players interact with each other to produce better team offense and defense. By effectively measuring teamwork, Carlisle also rewarded it (those who demonstrated it received more playing time) and helped further it.

In doing so, Carlisle was “managing by measuring” the most important competitive differentiator of our time: his team’s culture. HOW his players collaborated with each other on the floor determined the final score, so he measured it. So, why don’t we as business leaders measure the strength of our own organizational cultures and how well our employees collaborate with each other, inspire each other to greater levels of performance and produce innovation? The answer, as I’ll share in upcoming columns, is that all organizations can manage via “how” metrics, and a growing number of companies are beginning to do just that.

Measurement is a Window

Carlisle’s approach supports one long-held measurement notion and refutes another.

Carlisle shows that the old saw that you can’t manage what you don’t measure became an article of faith in business for good reason: It’s true. It’s also true that what we measure is a window into what we believe matters and how we reward employees.

“Measurements have to come before rewards because you can’t reward anything you haven’t measured, but definition has to be the first thing you do,” says Steve Kerr, my friend and author of “Reward Systems: Does Yours Measure Up?” (Harvard Business School Press, 2008). “Definition includes being very clear about what it is you’re trying to do. One of the central premises of my book is that rewards have to be the third thing you do.”

Many companies need to align their definitions and measures. Kerr points to organizations whose mission statements call for teamwork and long-term sustainability, “yet they use rewards and measurements that, however unintentionally, discourage teamwork.”

By tracking new metrics of performance, such as player efficiency rating (PER), Carlisle disproves the commonly held notion that intangibles like teamwork cannot be measured. Every basketball coach will tell you teamwork is crucial to winning, but only a few have figured out ways to measure it. Business leaders who say intangibles like behavior, inspiration and values cannot be measured would do well to look back to corporate naysayers who argued that quality could never be measured.

They can also look to Carlisle. He knew when to shift his management focus to less tangible metrics to help inspire the excellent team work the Mavericks executed while triumphing over the individual brilliance of the heavily favored Miami Heat.

Asked by reporters how his team managed to outplay the Heat in the fourth quarter, Carlisle quoted an old coaching mentor by replying that he knew when to wipe his whiteboard clean of Xs, Os and statistical measures and instead rely on his players’ desire to fulfill their mission of becoming champions.

It turns out that Carlisle also had a good measure of his players’ winning character.
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Topics: HOW