Today is a good day to recall the thoughts of Alfred P. Sloan (born May 23, 1875), who spent three decades making General Motors the largest corporation in the world. Sloan brought together disparate companies supplying and building automobiles to create a whole — the first industrial cluster.

Sloan reflected on those times: “when we started on this great adventure in the early 1900s the whole automotive industry was searching for ways and means to find itself. . . The number of sales by dealers was unknown. The number of cars held by dealers was unknown. Trends in consumer demand were unknown… There were no statistics on the different cars’ market penetration; no one kept track of registrations…”

As Peter F. Drucker put it, “The times were ripe for a man who could think imaginatively about the great corporate entities that were being created. . . and Sloan was the man.”

Sloan’s words about flexibility and adaptability are worth considering now, 138 years after his birth:

My generation had an opportunity unique in the history of American industry. When we started in business, the automobile was a new product, and the large-scale corporation was a new type of business organization. We knew that the product had a great potential, but I can hardly say that any of us, at the beginning, realized the extent to which the automobile would transform the United States and the world, reshape the entire economy, call new industries into being, and alter the pace and style of everyday life.

. . . It was our task to find out what forms of organization were suitable to our company. This meant, above all, an organization that could adapt to great changes in the market. Any rigidity by an automobile manufacturer, no matter how large or how well established, is severely penalized . . .

There have been and always will be many opportunities to fail in the automobile industry. The circumstances of the ever-changing market and ever-changing product are capable of breaking any business organization if that organization is unprepared for change.

. . . To meet the challenge of the market place, we must recognize changes in customer needs and desires far enough ahead to have the right products in the right places at the right time and in the right quantity.

In describing the General Motors organization I hope I have not left an impression that I think it is a finished product. No company ever stops changing. Change will come for better or worse. I also hope I have not left an impression that the organization runs itself automatically. An organization does not make decisions; its function is to provide a framework, based upon established criteria, within which decisions can be fashioned in an orderly manner.

The task of management is not to apply a formula but to decide issues on a case-by-case basis. No fixed, inflexible rule can ever be substituted for the exercise of sound business judgment in the decision making process.

Each new generation must meet changes- in the automotive market…in a changing world. For the present management, the work is only beginning. Some of their problems are similar to those I met in my time; some are problems I never dreamed of. The work of creating goes on.

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?

Defining Moment

What is most crucial to the success of a manager – a strong undergraduate education? Top-notch grad school? A steady rise through one company, or a deep understanding of several companies?

How about this: None of the above. Instead, consider the importance of a defining moment.  That defining moment – or more likely, series of moments throughout life – shapes a person’s work ethic and attitude about creativity. It goads, inspires, and warns a manager about how to handle difficult situations.

A defining moment usually centers on a clash between one’s personal beliefs and the culture of an organization. You have to choose between what your heart tells you and what your boss wants. The best solutions that come from these moments mix innovation and ethics.

A true defining moment involves a “combination of shrewdness and expediency, coupled with imagination and boldness,” according to Joseph Badaracco, the John Shad Professor of Business Ethics at Harvard Business School. Coming through a defining moment helps someone come to his or her own understanding of what is right.

When I think about defining moments, I think about a leadership expert who ought to be a household name. She’s Frances Hesselbein, who has a gift for running businesses and nonprofits. She is the only person who can claim to have served as CEO of the Girl Scouts as well as a leadership expert at the U.S. Military Academy at West Point (She’s the first woman as well as the first non-graduate in the chair, named in honor of the Class of ’51.)

When Francs talks to business leaders, she often discusses a defining moment at a time when she was pushing the Girl Scouts to unparalleled growth, inclusiveness and significance.

In brief:

A man went on TV claiming he’d found a pin in a Girl Scout cookie. Soon, more than 300 people echoed that story. This came at the height of the organization’s key nationwide fundraising event. A PR firm urged Frances to continue cookie sales and refuse to comment on the allegations until the U.S. Food and Drug Administration finished investigating seven cookie factories.  A board member objected, but Frances followed the advice.

Three days later, the FDA determined that the first pin couldn’t have gotten into the cookies before the box was opened by the consumer. In addition, the FBI announced a $25,000 fine and 20 years in jail for anyone behind a hoax.

“Immediately, the pins in the cookies disappeared,” Hesselbein likes to say.

One vital lesson of that defining moment for her: When you get good advice from an expert, follow it.

Frances attracts first-rate talent from diverse ethnic and religious backgrounds.  She credits that to a defining moment in her childhood, when she visited her grandparents in a Pennsylvania coal mining town. Here’s a video of her describing that moment:



When Frances tells that story, universally others come up to Frances to tell her their story. Here is Warren Bennis, a pioneer in leadership studies, telling Frances about a defining moment in his life:


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 BP Culture’s Role in the Gulf Oil Crisis

I’ve been watching BP carefully long before anyone heard of a “top kill” or “Lower Marine Riser Package Cap.”

I lived in Cleveland in 1979, when BP was acquiring Standard Oil of Ohio and worried for my friends who worked there. But I got reassurance at the time from Marvin Bower, a founder of McKinsey & Co. He told me BP wanted Standard Oil’s expertise in Alaska, along with their North American distribution system. Marvin emphasized that BP had a very human, non-hierarchical culture, respect for Standard Oil’s people and careful style of doing business. “The executives at British Petroleum,” he said, “are people of integrity.”

Now, 31 years later, in 2010, that culture seems to be lost. Culture is an organization’s operating system, the values that everyone lives by. The operating system helps humans communicate and make decisions. The operating system will not allow communication or decisions that could harm the values or purpose of an organization. It is like a translator.

In the case of BP, the culture didn’t work effectively and now its failure is on full display. It is possible that the error messages were so frequent that everybody chose to ignore them. A good culture would, by default, close all the possible doors to viruses or malware. A good culture or operating system is always going to respect priorities that keep the system working with integrity. Has the culture given way to a voracious need for corporate profits or is the problem simply arrogance? Did management become so cocky that they forgot that drilling in 5000 feet of water means pushing the edge of technology?

BP’s culture allowed extreme shortsightedness in pursuit of profit at the cost of safety or environmental stewardship. As the drill was planned, BP chose a cheaper casing seal, which reportedly contributed to the blow-up. Also, the company intentionally cut corners on procedural and safety. For example, last June, exceptions to BP safety standards were taken to senior executives who approved them. And according to a rig survivor interviewed on “60 Minutes,” BP ordered partners to cut corners because their absurdly ambitious drill schedule was off by several weeks. Hours before the explosion, multiple warnings arose; yet all were ignored. So much for the values of Standard Oil and BP. Incredibly, these penny-pinching moves were made as BP racked up record-breaking profits!

Even worse, the broken values appear to appear to go on, thanks to the company and the government. Consider BP’s attempt to disperse oil with Corexit, the dispersant already banned for 10 years in Europe. It’s highly toxic, but it does get the oil to sink below the surface, where it can’t be seen, thus decreasing the visual horrors as the goo comes ashore. It pushes the oil below the surface into the ocean column where it kills underwater sea life, and breaks it up into such tiny morsels that it can actually be absorbed into the skin of ocean and marsh-dwelling beings. BP snubbed the Environmental Protection Agency’s suggestion to stop using Correxit. In response, the EPA blandly called for a “study” of other dispersants.

This fiasco has become more about public relations than public’s right to know. Rather than releasing realistic figures of the volume of oil flowing into the environment, BP knowingly cited a very conservative estimate. They initially put up a video loop instead of live feed, until Rep. Ed Markey of Massachusetts forced a change. Their website excluded information about damages to fish and wildlife. Remember the Tylenol tampering scandal? James Burke and his team led a company culture that admitted the problem and set out to rectify it without pinching pennies. Along the way, they retained customers’ loyalty. And they did the right thing. That’s an example of a comapny culture leading the way forward and stands in stark contrast to what we see coming from BP today.

In the last couple of days, I called my old friends from Standard Oil of Ohio. One had retired, and lamented that the company’s values had disappeared in the wildcatter ’90s. The other just said, “It isn’t Standard Oil anymore.” How true.

Elizabeth Haas Edersheim founded NYCP, a management effectiveness firm, advises large and small businesses and not-for-profits and has written various management articles and books, including McKinsey’s Marvin Bower, and The Definitive Drucker.

2010 – The CORE Year: Change, Challenge, Opportunity, and Responsibility

As 2009 comes to an end, the sentiment that most immediately comes to mind is good riddance to what Time magazine dubbed the “decade from hell.”  Many Americans are suffering as a result of bad management, fraud and misguided policy – particularly in the financial sector.But let’s remember that even painful change is the precursor of opportunity.  Rather than wait for a new era, we must take an honest look and find ways to benefit from the incredible opportunities obscured amid the turmoil and wreckage.

Each of us has a rare chance to help define what will be; and the only constraint, beyond our financial situation, is our capacity to imagine. With this perspective, I share my optimism about the year and decade ahead while telling you about an unprecedented project that harnesses the expertise of people like you around the world.


Yes, the world has changed dramatically since 2000.  Consider the industries that are now in flux: energy, health care, transportation, technology, and education. Not-for-profits have been decimated, just when the need for social services and support are ramping up. Even individuals with good incomes are less able to give. Throughout all of this, heavily indebted governments are falling behind on critical needs that were already neglected.

Now consider the advantages to the individual.  We have unrivaled global access to information, combined with a transparency that never existed before. We have an ability to make intelligent choices as consumers, investors, entrepreneurs, and global citizens that our parents never even dreamed of.  Ready or not, we are all now self-managers who can be as entrepreneurial in our outlook as we choose.

Our world is connected in ways never before seen.  Even large companies need each other more than ever.  AT&T’s dependence on Apple’s iPhone overshadows its dependency on its own products. The old-line media companies rely on Google for ad revenue. With the technology for borderless commerce, small companies can connect with customers globally without the conventional intermediaries. Governments and regions are reliant on one another for economic stability. We’re seeing the positive and negative of the rise of Chimerica – a term coined by Niall Ferguson to denote the United States and China. America buys Chinese products; China lends us back the money.  That relationship makes a military war unlikely, but a trade war may have already begun.

Finally, the connections among individuals have changed dramatically as well.  As knowledge workers, we are more specialized and thus more reliant on the expertise of others outside our specialty, thus amplifying the need to be part of a whole that is greater than the sum of its parts.  At the same time, as information-empowered people and micro-businesses, we are less dependent on conventional “outside” experts and organizations.

The world today is so different from the one at the beginning of the 21st century that sometimes it is dizzying. And certainly we are prompted to re-visit our assumptions: §  Is Austria, a country I have always thought of as closed-minded, set to be more innovative than America?  They have free day-care for all two-career families.§ Is unemployment really up if I measure it using a global metric? Or should I think of the 16 to 24 year olds in Spain where unemployment for the group nears 43%?§  Will the next generation ever again have the opportunity to earn more than their parents?§ What is too big to fail today?   Might it be every SMALL business?

Here in America, I think we have a unique challenge relative to a number of other countries that are more accustomed to the dynamics of rapid change and lack a long history of global dominance.  Jim Collins tells the story of a Brazilian friend, who grew up with monthly inflation of 30%.  Some days it was cheaper to take a taxi than a bus because the bus fare was paid up front. What we construe as today’s disruptions and discontinuities, they view as relative stability and opportunity, not chaos.  My friends from China have experienced extreme, rapid change for the past 25 years and find relief when visiting what they view as a slow-moving, unchanging New York City.  Back at home, their GPS is unreliable because streetscapes are changing so quickly.

Not only are we uncomfortable with this ongoing economic roller coaster, we Americans are challenged by the very real threat to our long-standing position as the biggest, most dominant economy on the planet. Russia’s GDP is only 4% of ours, but economists are projecting that China’s will pass ours by 2027, and India’s will pass us by 2031. This new reality brings into question how we think about democracies.  Our democracy gives us freedom of expression and quality of life, but it also lets interest groups delay stem cell research and other innovations for years. Our two-party system has degenerated into partisan agendas that constantly delay vital innovations and entrepreneurial support.  Meanwhile, Korea, China, and India are eclipsing us in energy development, scientific research, and industrial policy.

Are we paranoid enough, visionary enough, and courageous enough to reinvent ourselves and our world?

Whether we are self-managing knowledge workers in a large institution, small business owners/entrepreneurs, or CEOs of our own careers, we all have greater freedom thanks to access to information and the reality of borderless commerce. We can do many things without third-parties, and often without leaving the house. This is both reassuring and daunting, liberating and imprisoning.  Collaboration is the linchpin of our interconnected Lego world. So, let’s stop being spectators to our future and instead create it.


From my long-time consulting and advisory work to management spanning many countries and the public and private sectors and my more recent work with Peter Drucker, I have become convinced that management effectiveness is the key to a proactive, smooth transition to a sustainable future.

To paraphrase one of my favorite Drucker quotes, our responsibility is to balance change and continuity.  If we have no change, we risk atrophying in our irrelevancy.  If we have too much change, we risk losing ourselves in chaos. The debacle of the last decade was not due to malice.  It was due to people enjoying their greater freedom while failing to step up to their responsibilities individually and collectively.

To meet our responsibilities head on, we need to be skilled at management effectiveness, not constrained by our tunnel-vision focus on ‘efficiency’, or quarterly profits. Management effectiveness means having the perspective and judgment to be more right than wrong, to leverage the power of people and their creativity throughout the repeating cycle of vision, execution, and outcome.Management effectiveness requires synthesizing information from all sources, challenging and enhancing conventional wisdom, learning from mistakes, and balancing multiple, often competing, objectives in a manner that enhances individuals and society.

To paraphrase Spiderman’s uncle Ben, with great freedom comes great responsibility.
I’m excited about a project that took up much of my time in 2009. It’s a pragmatic tool for helping promote management effectiveness — the Elemental Table of Management.   My team will continue to tap many of you for advice. When this project is fully operating, we hope to have positive impact on a hundred million managers in profit and service industries around the world. 
We are targeting to have a beta version up by the end of February, and a pilot running by the end of March.   We look forward to engaging with you in the testing, refinement, and launching of this effectiveness tool.

As Coleridge wrote, “Wisdom is common sense to an uncommon degree.”  Cheers to a wiser 2010 for all of us.