My Father’s Stories:
Decisions and General Patton

Over the past 6 weeks, I have had the opportunity to listen to many of my father’s lessons and stories, and think about the questions he posed. My next few blogs will replay some of these.

Decision Making

Wisdom:  My father viewed the difference between a good leader and a great leader as the ability to know when to make decisions, and when they make them to execute without looking back.  As he phrased it, “you will never have all the information you would like to make a decision, unless you’ve waited too long.   To know when you have enough, to make a decision and then go with it, is critical of great leaders.”

General George Patton: My father served in General Patton’s artillery division as staff sergeant. Patton assembled a bilingual intelligence unit which provided essential logistic information on the movement of the Germans as the American army progressed into Europe. My father’s mind was challenged to gather vital information to his unit’s advancements and then calculate the angles and positions for artillery fire.

Following D-Day, in August of 1944, the heavy artillery as part of the U.S. Third Army was driving through France.  As they were chasing the Germans, and approaching Colmar, Patton asked my father and his team to assess if they had the power and position to blow up a monumental stone bridge that was out of sight.  It appeared as if the Germans were heading towards that bridge to cross the Rhine.

After about 20 minutes, Patton came back and looked at my father eye to eye.   My father said,  “The bridge is at the edge of our range.  We have it as accurately positioned, as we will be able to.   I think we can hit it.”  Patton replied, without hesitation,  “give it everything we have and thank you.”

Subsequently, General Eisenhower called it, “One of the most successful missions in modern history .”  We cut the Germans off and more than 30,000 did not cross that river.

As my father told the story, he was in awe of Patton’s ability to make the decision at the moment, understand the risks, trust the team completely, bet on it’s success, and own the results – even if it had failed.  Patton thanked my father, regardless of the results.   My father’s last words were thank you.

History Matters: The Scanlon Challenge

Elizabeth Haas Edersheim, NYCP Founder

Where are you, Joseph Scanlon? The bonds that hold Americans together seem to be breaking apart as the 99 percent confront the 1 percent, or politicians highlight the 47 percent “who believe they are victims,” and as  outsourcing and downsizing stir resentments.

I’m convinced we desperately need the genius of Scanlon, a professional boxer turned accountant and organizational innovator. By helping workers and management find common cause, Scanlon did more than almost anyone in the past century to save American companies and their jobs.

Scanlon is rarely mentioned these days,  so a brief background:  In the 1930s, he was an accountant at an Ohio steel mill, where tenselabor-management relations and challenging economic times had driven the business near  bankruptcy. He proposed that the company president take the unusual step of attending a steelworkers union meeting.  The result was a groundbreaking agreement: workers promised to find ways to produce higher quality steel more efficiently, while cooperating with managers on deciding how  to measure improvements and defining success for the company. The savings would show up on paychecks; everyone would have a tangible stake in jointly making the company more competitive.

The union and management had to  go beyond simply cooperating; they had to trust each other, test and learn from new ideas together. The result:  the company was resuscitated, the mill stayed open, and everyone’s jobs were saved.

Scanlon became a local union president, and then research director for the National Steelworkers of America. His approach spread far beyond that Ohio steel town. A machine tool company in Massachusetts soon copied it, as did many other companies.  Professor Douglas McGregor invited Scanlon to teach at MIT, where he developed the “Scanlon Plan.”

Much of the gains at these companies was built not on the formula, but on Joe Scanlon’s broader perspective on labor-management cooperation. With greater transparency in their organizations,  he believed, workers would become involved in problem-solving. Breaking from the views of many management experts of the early- and mid-century, he argued that money was not the only motivator; workers wanted to believe in their company and take part in changing it. Workers yearned  for greater involvement and recognition.

No one in the nascent field of management studies caught the imagination of the media and the public like Scanlon.

“The most sought-after labor-relations adviser in the U.S. today is Joe Scanlon, 56, onetime prizefighter, open-hearth tender, steel company cost accountant, union local president and now a lecturer in industrial relations at Massachusetts Institute of Technology,” a glowing profile in Time magazine proclaimed in 1955. “Wearing an open-neck sport shirt and studding his shop lingo with four-letter words, Joe Scanlon looks and sounds like anything but what he is: a fervent evangelist for the mutual interests of labor and management, who knows how to sell the idea to both sides.”

Although he had a notable impact a century ago, what does Joe Scanlon have to offer in the digital age? We live in a different world.  Those workers were doing repetitive tasks, sometimes on complex machines, unlike today’s growing legions of  knowledge  workers.

Still, the basic problems Scanlon addressed persist, with a 21st century twist:

Many executives fail to understand  how to make the most of the impact of knowledge workers on their organizations – how to capture the ideas of engineer in the GM research lab or the salesman on the floor of the AT&T store.  In fact, many workers –  are less than fully engaged in their organizations. Having workers feel bound  to the successes of their companies is even more vital these days. Millions continue working from home long after traditional 9 am – 5pm shifts are over, and millions more work remotely, without supervisors or colleagues nearby.  Employees are shouldering greater responsibility  as  customers demand more responsive service and customization based on their unprecedented knowledge of the competitive landscape  And despite their greater autonomy and status, knowledge workers aren’t  fully invested in the companies they work for – they feel like modern-day steelworkers, who could be replaced at any time by cheaper substitute workers far away. Or even machines.   

We need updated answers to the Scanlon Challenge for enterprises in this century:

  1. How much of what each employee can contribute are they contributing?  How  can employees make a difference?
  1. Is the environment set up to help them make a difference – for example, by working together on testing their ideas?
  1. How can they be recognized and compensated  appropriately for their contributions?

Fortunately, I’m seeing several impressive Scanlon-like projects, ranging from  a huge Chinese manufacturing company to American start-ups, and including innovative non-profits. More on those in future blogs.

Organizational “Weave” – What It Is and Why It Matters

Elizabeth Haas Edersheim, NYCP Founder

In 2002, my client was a large, growing electronics distributor on Long Island. Patrick, the star they had hired from Intel six weeks earlier, was quitting. I sat with Patrick and asked why. His response was simple: “I have lost the bounce in my walk.” He explained: At Intel, he would wake up every morning proud to be going to work. When people asked him what he did, he’d beam, “I work for Intel.” The new job doubled his salary and gave him a shot at being CEO that he’d never have at Intel. But, when he started the day, although he was excited about the work he was doing, he was not excited by the organization.
He ended up calling Intel, taking a slight demotion from his previous job, which had been filled, and returning to the West Coast. I recently spoke with Patrick(not his real name). Intel today probably does not have the magic it had ten years ago. But he doesn’t regret his return. “The bounce has been here for 10 years.”

In 2011, my client was a cutting-edge iPad-based firm with 90 employees, growing fast. When I asked a dozen very talented employees, one-by-one, to discuss their contributing to the organization: What percentage of their talent were they giving?. The answer, again and again, was, “Not what I want to.” Even the founder was frustrated by his ability to contribute.
In 2010, Arron Jiang was graduating from engineering school in Shanghai. He had two job offers –IBM and Haier. Since Haier’s starting  salary was about 20% lower, I asked why he chose the company. He lit up and said, “If I joined IBM, I’d join the systems engineering group and I’d be there for the next ten years growing in my engineering skills, but never learning to be an entrepreneur.” Instead, Haier told him he’d be in the U.S. installing SAP for two years, “with the promise that my next job will be in Marketing somewhere else in the world.” When I spoke with him a few days ago – sure enough – he was happily in Spain – in Marketing.

In the first two situations, both companies were innovative  but the lack of an organizational weave was stymieing the company. In the case of Haier, the company’s agility helped make it an attractive place to work, but the weave, and its very essence were what made it  a hotspot of talent. Some used to talk about organizational “glue” or controls holding a company together through good times and bad, but that image is outdated. Glue connotes a company or non-profit that is inflexible, unable to bend with customers changing needs. These days, I speak of  organizational “weave,” which holds organizations together as they continually reinvent themselves and innovatively connect with other organizations – always learning to adjust and re-apply their  capabilities. Organizational weave can free organizations from holding onto the past, and approach the future with agility and a historical base.  . 
What attracts talent? How do you nurture and retail talent? And what sets talent up to fully grow and contribute to the organizations? Organizational weave.

What helps organizations be agile and adapt to the shifting needs of customers, geography, and technology?  How do the best companies keep reinventing themselves?  Organizational weave.
Over the past, research has touched on this — from Elton Mayo and the Hawthorne Experiments (see our previous Blog) to Henry Mintzberg’s work on Organizations and Society explaining what makes communities effective. This agility, this weave, has never been more vital to organization’s sustainability than it is today.  Consider organizations that demonstrate the most success:  Apple, Haier, Mahindra & Mahindra. They are masters at serial change – innovating from a base with weave.

History Matters: The Hawthorne Experiment’s Legacy for Today

Elizabeth Haas Edersheim, NYCP Founder

Because of the unceasing, 24/7 demands of work, most executives don’t take time to reflect on the lessons from business history.

They should.  The past decades offer insights and guidance for today’s managers, even those in global and high-tech companies.

Consider one of the most-famous but least-understood studies of the 20th century: the Hawthorne Experiments.  The project marked the first time in management history that the power of collaboration was recognized. That was 80 years ago, in 1932, when the first results were reported.

The experiments were resulted from a confluence of factors – a CEO open to outsiders, a team of researchers who knew which questions to ask, and a country searching for answers about productivity.

The power of collaboration has never been as powerful as it is today in the connected world.  In a moment, I will show how a multinational company, Unilever, these days successfully draws from the knowledge gleaned back then. But first a quick recap of those groundbreaking experiments:

Hawthorne Works, a Western Electric plant near Philadelphia, was a studied for eight years staring 1924 and 1932, roughly the time of Franklin Roosevelt’s administration. The President and Congress worked together then to push innovation: The Tennessee Valley Authority built dams and power stations in the South; Social Security started; the Civilian Conservation Corps hired 250,000 young men (at that time, women were not included).

Fortunately, Western Electric – the manufacturing arm of AT&T – had a president, a retired Army colonel, who was persistent in seeking answers. Five teams of engineers had studied the plant and could not find methods for enhancing the productivity or improving attendance on a particularly vexing assembly line. They’d tried financial incentives, but even those failed.

At the time, business leaders believed in the rigid Scientific Management of the leading theorist of the time, Frederick Taylor. But Hawthorne had the experts wondering: Why couldn’t human cooperation be exactly determined by the administrative organization?

Consider two parts of the research. One, the Relay Assembly Experiments, identified several variables on the productivity of workers assembling telephone relays. Some of the variables: Changing payment to a group amount, as opposed to individual payments; changing the length of breaks; shortening the work day; introducing sympathetic observer.

Researchers found that changing a variable was almost guaranteed to increase productivity and output; that worked even if the variable simply meant switching back to the standard environment. Elton Mayo, the Harvard professor who oversaw the experiments, realized that human nature can adapt quickly and regain “equilibrium.” More important, when the group returned to what it considered the normal environment, production increased.  The team was now functioning in a way that “gave itself wholeheartedly and spontaneously to cooperation in the experiment,” Mayo noted. The experiments showed the importance of employee attitudes and sentiments, even as pay incentives failed to boost productivity.

In a second phase, called the Interviewing experiments, workers opened up to the interviewer about personal and business matters. Again, productivity increased, bolstering Mayo’s notion that cooperation provides for social needs.

The takeaway for today: An effective supervisor is one who can look at the whole of the human problem, and remain personal while maintaining enough distance to remain impartial.

The major breakthrough from these works was the realization that collaboration cannot be left to chance. As Mayo wrote:

“For at least a century of the most amazing scientific and material progress and by inadvertence we have abandoned the effort of collaboration. Our methods are all pointed at efficiency; none at the maintenance of cooperation… we do not know how to ensure spontaneity of cooperation – that is, teamwork.”

Teamwork, of course, is as vital today as it was then.  Mayo added:

“The desire for continuous and intimate association in work and with others remains a strong, possibly the strongest human capacity.”

Probably the most perceptive synopsis of the Hawthorne effect came from Stuart Chase, writing in 1941 for Reader’s Digest.  He said, “There is an idea here so big that it leaves one gasping – a management man and a union man did not have a difference of opinion. “

Chase went on, “Their whole attitude had changed from that of separate cogs in a machine to that of a congenial group trying to help the company solve a problem.”

That collaboration is especially important these days, when companies face competitors thousands of miles away. The difference today is that the best managers recognize that workers want connections not just in the same company, but with the outside community, the larger world – and even with customers.

That brings me to what is required today:  Innovative connectors or collaborator, rather than  competitors.  This is what Michael Porter means when he discusses clusters.   This is what Unilever CEO Paul Polman is doing to take Unilever from a stodgy company without the “edge” of its rivals, Procter & Gamble and Colgate; now Unilever is a connector of the future. Polman, who cut his teeth at P&G, has emphasized corporate social responsibility. A marathon runner and mountaineer, he’s made sustainability the key phrase at almost every level of Unilever.  He often discusses with Oxfam’s Barbara Stocking – who until very recently opposed multinational companies like Unilever– how together they can use less water in food production.  “At Unilever,” Polman has said, “we believe collaboration will become the only way of doing business in the future.”

While other chief executives deny or ignore scientific findings about climate change, Polman has embraced scientists and asked for their help changing manufacturing, the supply chain, and distribution. The Unilever Sustainable Living Plan, which started in 2010, sets a goal of doubling the size of business by 2020 while reducing environmental impact.  It includes promises to help a billion people worldwide improve their health, and to source all agricultural raw materials sustainably. Science, the plan says, will be “a critical catalyst and enabler of behavior change.”

In Polman’s words:  “In a world where temperatures are rising, energy is costing more, sanitation is worsening and food supply is less secure, companies can no longer sit on the sidelines waiting for governments to take action.”

He continued, “We have to see ourselves as part of the solution to these problems.”

Unilever’s pro-environmental stand has led to unusual alliances.  For example, the company has endorsed the U.N. Global Compact, which calls on companies to join with government and labor for sustainability and transparency.  And this year, the company announced the formation of The Unilever Foundation, “dedicated to improving the quality of life through the provision of hygiene, sanitation, access to clean drinking water, basic nutrition, and enhancing self-esteem.”

Polman’s actions were unheard of in the consumer industry just a few years ago. Yet they’re boosting the bottom line. Even during a worldwide recession, Unilever’s business has increased, and employee retention is up. There’s a buzz inside and outside the company.  Unilever seems to be inspiring other companies, such as Wal-Mart and Deloitte, which have announced that they view sustainability as good for business.

This is the continuing legacy of the Hawthorne Effect.

And now, a challenge:  Identify an important problem at your company, school or non-profit.   Ask two colleagues how a new collaboration could solve that problem. What can your company draw on Hawthorne’s lessons to increase productivity and satisfaction of employees?

Teach for America – Tomorrow’s Effective Leaders

Make more noise, be louder, push harder.

That’s the advice from feminist leader Gloria Steinman and civil rights leader John Lewis at this weekend’s Teach for America Alumni Summit, which drew 11,000 people.

The results Teach for America, their alumni, the enterprises they have launched, and their friends have accomplished is mind-boggling.  Thanks to Teach for America , students  who had been ignored  are  living dreams – completing college and breaking out of poverty.  Schools built by alumni are breaking levels of performance that were assumed impossible.  For example, Julie Jackson, the principle, at NorthStar Academy in Newark, has taken one of the worst performing schools in the state and is delivering results comparable to the best school in New Jersey.

Communities that had the poorest education standards in the country – New Orleans and Washington DC – are starting to rise from the dust, and even offering some lessons in what can be done right.   In Baltimore, a new generation of public officials is emerging – people who have lived in a classroom.   Colorado is passing promising legislation focused on teacher excellence after senators are visiting the TFA classrooms.

I would speculate that if we check out Facebook in 2020, TFA alumni will dominate the list of the most admired leaders, just as Peace Corps alumni did 30 years ago.

Across the country, teaching is getting renewed respect.  Teaching jobs are now some of the most sought after positions by the best performing college students.  TFA is the only institution that can consistently compete against Goldman Sachs and McKinsey for candidates and win.   Parents who demand excellence of their sons and daughters are no longer questioning their children’s decision to go into teaching.  President Obama and Secretary Arne Duncan recognize the new standards of possible.   And for me, a business-person, the number and scope of entrepreneurial ventures that have been launched on efforts as diverse as training principals to providing one-on-one mathematical teaching with computers is nothing short of Silicon Valley.

It is the synergy and focus within this group that is making these leaders, leaders extraordinaire.  As part of Teach for America, groups in a school meet and collectively learn from each other and mistakes, not unlike the Japanese education system.   At this conference, the number of formal and informal meetings trading ideas and helping each other was a community collectively solving problems and creating new possibilities for education in America.

TFA believes that good leadership will lead to good teaching –- if you know how to lead and manage your classroom, it will lead to achievement gains with your students, regardless of their race or socioeconomic status.  Effective leadership is creating a culture so that the impossible is possible.  That is what this group is doing individually and collectively in and out of the classroom.  The optimism, caring, commitment, and energy of the 11,000 people is contagious.

Teach for America’s challenge now is to scale fast without losing the  focus on putting their core members in the high-need and hard-to-staff places.   America’s challenge is that we can not afford not to. It is this community of 11,000 that have convinced me we will.

China Today

China Today: Beautiful, Stressed, and Optimistic

August 20, 2010

I am returning from three weeks in Chinese cities, with a sense of optimism about this thriving country—strained by its rapid economic growth, urbanization, and environmental challenges. China stands a good chance of creating a vibrant future for itself and contributing to the world.

My family and I were impressed by the kindness of Qingdao, the rage of Nanjing’s and Hangzhou’s future leaders at its corruption, and the indefatigable commitment we saw in Shanghai to preserve the past while pursuing the unique opportunity China faces today.

The Beautiful

Qingdao, a city of eight million, is a village, even though it is the size of New York. Visitors and strangers are welcomed with a warmth reminiscent of America’s small towns. So many people took care of us. For example, we had arranged to rent bikes for a week; when we arrived in our hotel lobby to pick up them up, we learned that each bike rental would cost 160 RMB a day, or $24. The bell captain told me that we could buy bikes for $75 each, so we decided to rent for only a day.

The next morning when we came down at 5:45 a.m. to go to our daily Tai Chi class, a bellman raced over to us and said,  “I came in early so you could use my bike,” as he gave the handlebars to my  teenage daughter. He was not angling for a tip; they are prohibited by law. He was taking care of us. He said, “If you want to use it tonight, I will walk home.  It is important that you enjoy your visit to Qingdao.”  That afternoon, we returned the bike to him.   The next morning, he was waiting for us again at 5:45.

Another example: I was waiting in a park as my daughter was busy working with the Tai Chi master.  An elderly woman was stretching nearby in Music Square, a large paved area on the shore.  She saw me watching and came over to invite me to stretch with her.  She spoke no English.   Over the next few days, I stretched with her every morning.  On our last morning, I said goodbye and she said, in English, “Keep stretching—important.”  She had found someone to teach her that phrase so that she could take care of me.

Yet another example: We were taking Mandarin lessons for a week. I was quoted a price and asked if I would pay in cash. I calculated the amount in RMB and brought it with me the next morning.  The third day, our instructor told me that his price had been in RMB, not dollars; I had overpaid by a factor of six. He gave me a cash refund and urged me to put it away.  After class, he escorted us to a taxi and paid the driver.

These acts of kindness happened many times every day. The people of this city, act like villagers.  It is a beautiful village. The kindness so many people showed toward us, and their comfort and confidence with helping us as Americans made me hopeful that China could one day be our country’s partner, rather than our rival.

The Stressed

As we sense from the U.S. media, China is not universally rosy. The rapid change that has so benefited the economy has also put traditional morality to the test, and in some instances it has failed. Corruption is now rampant. In both Nanjing and Hangzhou, I had opportunities to sit down with 24- to 30-year-olds, China’s future leaders, and ask about their lives. They were all proud to be Chinese and clearly excited to be part of a growing country.  Yet they spoke angrily about corruption  and the threat it poses to China’s survival.   One doctoral student decried the corruption in the academic world, the one place she had hoped would be corruption-fee.  She explained that except for professors over age 70, the faculty sold grades: on every exam, in every class. They wanted money.

A computer engineer who worked a second job as an on-line instructor, described with tears in his eyes the day he took his father to the hospital with pneumonia. He said that, had he not brought a wad of cash every day to pay the hospital staff, his father would have died.    He described with show the doctors who refused to treat other patients because they did not have that extra cash.

One articulate 27-year-old explained to me, “It is a balancing act.  Our job as citizens is to collectively push the government to do the right thing.” He added, “ In your country, the government regulates the corruption in the population.   Here, the population regulates the corruption in the government.”  He gave me an example. To get government support for hemophiliacs, citizens published reports comparing China to Taiwan in the treatment of hemophiliacs. The reports embarrassed the government, and they rapidly corrected the problem in the biggest, most visible cities. He continued, “We cannot push too hard, on too many places, or as individuals.  ”

These future leaders expressed the fear that the corruption may encourage young talent to flee.  Each one described friends who do not live in China because of the corruption, and will not return.   They all said that it is not clear that China can rid itself of corruption in critical sectors such as education and healthcare.  I heard that many government employees have sent their children to other countries or obtained for them alternative citizenship, so if corruption destroys China, they will have an escape route.

The Optimistic

Despite the dark clouds, China retains a rich heritage and fundamental values that may well carry it through.  The message was clear when I visited several companies, then wandered through the Chinese Pavilion at the World Expo. The message: China’s past and future are in harmony.   Its economic gains since it began opening itself to the world are its greatest pride.  The exhibit begins with a short video on the last 30 years—the shifts in living conditions, sizes of homes, and people’s optimism about their lives and those of their children.  It then moves to a hall of historic art. A wall 100 yards long displays a screen that looks like the Marauder’s Map from the Harry Potter films.

It is an image of an ancient scroll displaying village life on the day of the Qingming festival, which honors ancestors; but here, the characters and animals are moving. The images are projected from behind the wall, using state-of-the-art technology.   Other exhibits of Chinese treasures, also strove to integrate ancient values with current technology.  I continued to “The Land of Hope,” which emphasized homes, families, and communities. One film showed an apartment building with a basketball bouncing from home to home.  I saw hundreds of children’s drawings of their hopes; extensive material on creative education; a dialogue on urban planning—architecture, transportation, landscaping, and more. The last hall displays a vision of China’s future. It is loaded with inventions and ideas for a sustainable future: a fully functioning car that runs on photosynthesis; urban plans for streets beneath streets, with no stop lights; sustainable living with plants on the outsides of buildings, geo-thermal heating and cooling, rainwater collection on the roof and so on.  At the exit is an artwork that defines   “harmony,” like a symphony with, many instruments playing a common melody.  In harmony – socialism and capitalistic enterprises have resulted in one of the most sustained expansions in history.

One cannot leave China without optimism.   It is now the world’s second largest economy, having passed Japan while I was blissfully doing Tai Chi in Qingdao.   China leads the world in exports, having outstripped Germany this year, and has a military operation that is second to the United States in size. It is easy for Americans to fear China as an up-and-coming competitor. Yet I departed feeling optimistic that China will continue to be a great neighbor and friend, as well as a leading force in creating our common future.  The best thing we can do is help the individuals collectively challenge corruption while encouraging China’s harmony.

Creating America’s Future Economy

I will begin by saying what everybody would like to ignore or forget but which must nevertheless be stated, namely that our economic engine is absolutely broken. The discussion of how to help our economy is riddled with prescriptions for on undoing “mistakes,” freeing up capital for individual small businesses, bailing out troubled homeowners, and re-building infrastructure.

All that is piecemeal. It is wasteful and wrong. We cannot fix a broken economic engine by standing still, going backwards, or incrementalizing ourselves forward. The rest of the world is no longer there.

We need to move boldly to create the future. U.S. preeminence for at least half a century has rested on superior capabilities in computer science. Many of our most profound private sector innovations (such as microwave ovens, optical fiber, and video) were built off-of defense-related research and it is no coincidence that corporate innovators developed commercial applications.

When I spoke with Kimberly Clark’s head of R&D, he explained to me why they chose to move from Wisconsin to Seoul. “We are close to infotechnology, nanotechnology, and biomedical research.” He added, “We are close to Singapore, Hong Kong, and Tokyo. And access to those communities will drive our future.”

We need to put our energy into identifying the engines of economic growth where we can be global leaders—whether stem cells, nanotechnology, infology, or energy. The American future is not in automotive manufacturing. That is our past. We need to invest in building the capabilities, communities, and connectivity to become preeminent in key disciplines. And we need to do this together – right and left; private and public sector. Without collaboration, we will fail.

Success will happen like it happened in Silicon Valley when the public sector, the academic world, the private sector and the venture capitalist work together on creating a community of capabilities that draws in other capabilities and supports one another. It is more than being an incubator for start-ups — it is creating a community and spirit that work together and grow in capabilities with common underpinnings. The public sector needs to be the standard-bearer and economic encouragement that crosses company bound and academic bounds.

The key issue is not which economic faction gets the tax cuts. The political squabbling does nothing to advance the effort to find the platform from which we can be a leader in the global economy. That’s what keeps me up at night. We are asking the wrong questions. Our goal is not to recover but create–not to regain our past strength but to build the strengths we’ll need to create the future. Let us begin by defining those.

THE AUTO INDUSTRY TODAY: An Opportunity Inside a Responsibility, Wrapped In a Disaster

While the collapse of the U.S. auto industry is a disaster of global proportions, it is a great opportunity for companies and countries.

It is an opportunity to redefine the rules and make them global, reset the boundaries and work with energy and alternative transportation companies, and redesign the ground transportation system, rethinking everything from the fuel stations on the street corner to the size of parking spaces at the train station.

There exist today the cost-effective technology and widespread public concern to make it possible to develop cars that are low-cost, energy-efficient, and practical for everyday use—to make real progress on environmental issues while contributing to global prosperity rather than dampening it.

The automobile makers and governments around the world have a unique chance to create an effective model for trans-national-industrial partnerships.This type of collaboration is uncharted. Rather than operating on their own, Toyota, Honda, Tata, Tesla, Geely, Ford, and General Motors could find common ground with Exxon, CSX, Aichi Kokuki, Indianrail, and academics to design a standard for energy-efficient and environmentally sound transportation. Imagine the global automotive industry embracing this standard rapidly without putting consumers through years of confusion and skepticism—will it be hydrogen, solar, hybrid? Will I be able to refuel on the highway? It would be like skipping over eight-track tape music players, cassettes, and CDs, and going right to MP3 players.

Imagine governments collaborating to fund global development of that new transportation standard while individually investing in the local infrastructure—for example, modified fueling stations in a format common around the world. At the same time governments can create financial incentives for consumers to replace conventional vehicles with the new green cars. Imagine 400 million of the world’s 800 million vehicles being replaced with green cars by 2025. It is possible, if we respond to the decline of GM and its American counterparts as the very real opportunity it is.

Handling the current crisis means rethinking the way industry operates and becoming collaborative, innovative, and strategic—thinking big with a long time horizon. Autoworkers and taxpayers would agree that we haven’t gotten very far in the past two decades by being insular, conventional, and tactical.

Auto manufacturers are expected to sell 9 million vehicles in the U.S. this year, down 50 percent from 2007. The Big Three have about 44 percent of that market, an all-time low. Yes, GM has updated many of its plants and made them more flexible, but it has a long way to go to match Hyundai’s Alabama plant. Yes, Ford’s cars were recently ranked third in reliability by Consumer Reports, the first time in over 5 years that a U.S. company made the top three, but their website section on quality doesn’t even discuss the reliability of the engine.

GM is now asking for help one nation at a time. Toyota views itself as a Japanese company and is seeking support solely from Japan’s government. Consumers are also insular. In Korea, 95 percent of the cars purchased are domestic. In America, where the auto industry drives about 1 in 10 jobs in the U.S., consumers view this as a “Detroit problem.”

As GM goes, so goes Chrysler, and possibly Ford. By the playbook of traditional strategy, the day GM declares bankruptcy, Toyota, Honda, and the others will unload the docks and cut prices on their vehicles by $3,000 to $8,000, offering unprecedented discounts. They may have more than 1 million vehicles on docks already—enough to boost their combined market share more than 10 percent, sending U.S. companies’ share to a new low that may make the Big Three unsustainable no matter what kind of bailout Washington offers.

Even if global competitors step up and do what is right—give The Big Three some breathing room so that they can recover—will the American companies and unions learn from this disaster and re-engineer the entire business? They better. If not, they will die a slow and painful death that all of us will feel.

Institutional courage, bold thought, respectful collaboration, and a collective belief in tomorrow are required.

Drucker vs. GM: Management Science vs. Management Practice

Peter Drucker, the father of management, and Alfred Sloan, the inventor of the modern corporation, had a 25-year running disagreement. We can resolve that disagreement today.

Sloan was the visionary behind General Motors, who believed that management was a science. He saw General Motors’ success as a result of the company’s ability to optimize its distinctive economies of scale, manage the flow of money and investments, and provide an expansive dealer network that encouraged trade-ins while selling new cars.

Peter Drucker, meanwhile, always believed that management was a practice, like medicine or law. The practitioner’s job was to continually challenge the theory and bounds to redefine the “what,” not the “how”. Peter Drucker believed that General Motors’ success was due to its management practices, in particular its people-centric ethos.

At the time of Sloan’s death, in 1964, it wasn’t clear who was right. By the time of Drucker’s death, in late 2005, we had come to see that in business and not incidentally in public policy and politics – practice trumps science. Or as Drucker wrote, the “what” supersedes the “how”. The most powerful management skill in the 21st century is the ability to step back and rapidly assess and modify “what” your enterprise is doing.

By failing to reassess its “what,” GM is just a sickly shadow of the robust corporation that Sloan built and that thrived for 70 years. In the post-Sloan period, GM continued to adapt strategy to his “science,” without the support of Sloan’s innate people and management skills.

The “what” of General Motors is not just a car. The “what” Sloan defined was built on customers from different income levels being loyal to different GM brands, and the prestige of a new car. GM built itself around servicing this market – from factories to dealers. Their market share in the US exceeded 55 percent through 1960. Today it is less than half of that. In 1980, GM was still the most sought after company to work for by college engineers, according to MIT’s placement office. Today it is not even in the top 10.

What happened? Customer’s values changed to reflect major shifts in society, taste, and culture. Americans adopted convenience, safety, fuel efficiency, and commuting comfort. Rather than listening and connecting with these customers, GM invested in quicker patches, solutions built from their old way of doing business, while the company continued to lose marketshare.

Meanwhile, Toyota quietly used the Peter Drucker approach, continuously redefining their approach to “what.” That includes being part of the local community. Who would have foreseen a Japanese auto running in NASCAR? Toyota entered last year. Also last year, Toyota passed GM last year as the number one automobile company in the world; it’s expected to become number one in the US market this year.

Why is getting the “what” right so critical today? In the global information age, managers are inundated with a nonstop flow of real-time information. This information flow brings about change at a breakneck speed unlike anything businesses have experienced before. To move deftly amid so much change, a company needs to keep questioning. What does the customer considers value? How can that value be enhanced? The company must challenge the “what.” Opportunities come from redefining “what” the company should be doing.

The best companies are doing just that. Google’s breakthrough didn’t come from the science of the algorithms, but from the fundamental concept that users wanted a search engine – the “what.&rdquo Management quickly stepped back and asked, given this access to millions of searchers across the world, what other value can be provided? Google’s “what” continues to change both in terms of additional services, and accessing the network of connections.

It is time for Google to challenge the “what” and ask what would make its search function more user-friendly? One that doesn’t provide 10,000 access points, but rather logically helps pinpoint the best one or two sources through a series of menus. Google’s agility at keeping ahead of the competition at re-inventing the business will be the ultimate test of whether it becomes just another General Motors.

Many companies have failed to challenge the “what” of their business, by shying away from asking their customers about what they value. In our conversations, Peter Drucker indicated that this failure is probably the single greatest cause of corporate death. It is what killed Polaroid. It is what killed Wang Laboratories who in the early 1980’s had cornered the market for word processing and completely missed the PC boat. It is what almost killed AT&T. This week, Circuit City announced that the “what” of its business has changed. It is no longer competing with other retailers. Its competition is Apple, Dell and HP. It’s too early to tell if Circuit City can reconfigure and survive.

We are seeing all sorts of companies challenge their “what.” Nintendo challenge the definition of “what” a game is when they introduced WII. Cognizant changed their “what” from a small in-house technology facility for Dun & Bradstreet to one of the most successful global outsourcing companies. When Jeffrey Immelt announced that GE would focus on alternative energies, he changed the “what” of a corporate giant. Rubert Murdoch is challenging the definition of a news company. In our conversations, Peter Drucker suggested that Sony needed to get out of the film business. He indicated that the company’s strength comes from the delivery mechanisms and consumer interface, not from making thrillers and sitcoms.

From the 1940s into the 21st century, Peter Drucker advised management to consistently seek the answers to these forward-looking questions:

1. What is different in the world around us and what of my business still fits with realities?

2. What are our opportunities and what boundaries should we be challenging to create/leverage those opportunities?

3 What results should we expect in 6 months?

4. What competencies do we need to act on these opportunities? Are we building and properly investing in these competencies?

Failure to do so is not a sustainable alternative.


Drucker in the 21st Century

When I mention Peter Drucker, I get two very different responses – often from the same person.

First, comes respect. Drucker, of course, was the management guru of the 20th century. And then comes the doubt: “What makes Drucker relevant today?”

In a 21st century business environment where constraints of time and distance are gone and change comes as fast as the blink of an eye, Drucker’s “take” is absolutely essential to managers.

1. His ideas are practical observations about what works in management. They aren’t theoretical. They are as important in the 21st century as they were in the last. For example, “Management is about human beings.” That very much is at the center of much of Google’s success. It is really the ultimate Druckerian company because they follow his playbook.

2. His ideas force us to think. Drucker challenges his readers, clients, and students to act today for tomorrow. He asks us to abandon outdated assumptions. Doug Ducey, chairman of Cold Stone creamery, commented that until he had read Drucker, the chain was going to be 70 stores. After studying Drucker, he could dream of the 2,000 plus they are today. Or, on the other side, consider the plight of Detroit’s auto companies and you’ll know why this is relevant.

3. His approach lets managers see what is visible and often not seen. He helps us create context so that patterns and changes are more readily identifiable. He believed that the most important measure of a company is its ability to anticipate and invest in tomorrow’s opportunities. For example, by looking at unexpected results – both successes and failures – one often finds opportunities. The ability to use his tools and take a fair amount of uncertainty out of the future by proactively creating tomorrow is of enduring relevance. Seeing shifts in demographics helped the Marriot chain diversify from the standard motel. As Tony Bonaparte said to me, “He looks at things as they are with a very realistic sense of how they could be and helped me do the same. It changed my life.”

4. He holds management accountable – accountable for human fulfillment. No wonder, then, that Drucker puts such great emphasis on the character of managers and on the immense responsibilities they bear and of a healthy society. Management success is measured by results that sustain the whole organization in a manner that values employees, customers, collaborators, and larger society. Wal*Mart still has the opportunity to do the right thing as opposed to its current PR campaign justifying the low wages and benefits as necessary to deliver the lowest cost goods to their customers. Other retailers – The Container Store, Wegmans Food Market, and Whole Foods, were selected as 3 of the best places to work this year.

Drucker believes, that the human freedom most genuinely cherished – fulfillment – depends to a great extent on organizations. They provide the main stage for achievement of personal freedom and a healthy society.

I’d like to hear your stories.

© ElizabethEdersheim