Blogger's Block Broken!

Posted At : September 8, 2009 7:45 PM | Posted By : Charles Weinstein
Related Categories: Business Strategy

Treasured readers, I've been stuck. Call it late summer lethargy, call it the casualty of work and life demands, call it gasp bad blogging. The mental logjam broke over the weekend. It's good to be back. I had a most interesting conversation with some close friends about their childcare experience. Their infant son has been attending a center run by one of the national firms. The rates are at the high end of the spectrum, approaching twice the going rate for home-based child care. They were happy to pay those rates for the center's explicit brand promise: an excellent, developmentally-oriented experience. They were also willing to pay for the tacit assurance of standards, processes, and the resources to execute based on them. They will soon be serving notice of their departure, a few months after they arrived. It wasn't a disaster that led them to look elsewhere; it was an accumulation of more minor disappointments. The teachers gossiped about other infants and their families. The parents were irked when their 8 month old child was introduced to chicken nuggets and Clubhouse crackers at lunchtime, against their prior instructions. They objected loudly when staff told them (in the tone of a humorous anecdote rather than a contrite apology) that their child had been eating scraps from beneath other children's high chairs, "because he just kept going over there." It came as no surprise, then, when they observed that the student/teacher ratios were not in compliance, for more than just a few minutes, more than just a couple of times. Center management was made aware of the problems, and expressed neither surprise nor concern. It was time to go. The center in question is fully accredited, and touts its "highest possible ratings" in an impressive array of marketing materials. Its Parents' Handbook discusses a developmental curriculum and details the many ways that teachers communicate with parents. "It was like they were describing a different center altogether," scoffed our friend, the mom, on her way out the door. She acknowledged that the staff was basically friendly, and clearly cared about kids. They had the resources they needed. What went wrong? Our further conversation revealed the critical theme: nobody at the center was motivated to do more than what was required. They sought mediocrity, and appear to have achieved it, at least by charitable assessment. Teachers who came in excited about education and excellent care were taught instead to focus on process compliance. Managers didn't reward or seem to notice excellence, and they didn't seek to inspire creativity or commitment to great childcare. "The manager of my local Jiffy Lube does a far better job of inspiring his people," said the father. "I can see it in the time it takes to change my oil." That's a terrible shame. While enlightened mechanics will tell you that proper lubrication is essential for performance and long service life, they'll also admit that excellent child care is even more important to our collective future. As a parent, I have known great early childhood educators and great centers, and they make a huge difference for the families they serve. In fact, we published an Ethical Leaders in Action profile about one such center, AppleTree Connections, in 2008. Child care is demanding work. The pursuit of greatness must be continually fostered, even among talented and committed professionals. Leaders must cultivate and communicate a vision, and be engaged with staff on the realities of execution. Standards must be based on real values, which become a meaningful part of the organization. Employees must be valued and appreciated, rewarded for achieving high levels of performance. Ethical leadership isn't easy, in that setting or in any other. The rewards are apparent. So are the results of something less. Even if that center doesn't seem to care about greatness, the cost of a acquiring a new customer far exceeds the cost of maintaining an existing relationship. Economics aside, the greatest cost is the lost opportunity to truly make a difference in the world. Isn't that always the case? CAW

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Pay Your Taxes

Posted At : June 28, 2009 1:39 PM | Posted By : Charles Weinstein
Related Categories: Business Strategy

Treasured Readers,
I was confronted with an interesting question last week, regarding the ethical status of paying taxes.  In general, following the law is considered to be a basic ethical requirement. Exceptions for unjust laws notwithstanding, we may obey the law to avoid sanctions, but might also be driven by a sense of fairness. If we understand the spirit of the law, we should abide by it as well.  So, on that basis, should we pay more taxes, if we are able to do so?
Nope.
Going beyond the letter of laws or regulations to honor their spirit is also often cited as an ethical principle. Indeed, the Caux Roundtable Principles for Business, descended from the venerable Minnesota Principles , state, in part, that a “responsible business …adheres to the spirit and intent behind the law, as well as the letter of the law, which requires conduct that goes beyond minimum legal obligations.”  
As an ethical principle, doing more than is minimally required by law makes sense in many instances. For example, we ought to make our workplaces safer than OSHA requires, and we ought to do less harm to the environment than statutes or regulations allow.  In the context of trusting business relationships, we don’t exploit every loophole or opportunity to gain further advantage relative to our partner. We may seek clarity of understanding, rather than clinging to a self-serving interpretation of a given contract term. Each of these examples represents a sound, ethical business practice.
Taxes are different. First, we would be hard-pressed to argue for a coherent “spirit” of the tax code. The code, as applied, results from an admixture of revenue objectives, economic forecasts, and especially policy- and politically-driven incentives. Enforcement is intended to be fair, driven by an accurate application of the code and not by any over-arching spirit or ideology.   Our obligation, therefore, is to follow the rules as we can best understand them. That standard promotes a playing field that is as level as the tax code allows, and assures that we are paying “our fair share.” In this case, fairness entails compliance with the same code that governs everyone else.
Further, if we choose to make additional contributions to the community, I would argue that there are many more efficient means of doing good than paying additional taxes.   The private sector is a tremendously powerful engine for social change, good and ill. If generosity might move a business leader to pay more than the tax code requires, then that spirit would be better expressed through gifts to many other agencies, private or public.
With respect to taxes, we can go ethically wrong in at least two ways. Most obviously, there’s a reason that tax evasion (rather than avoidance) is commonly called,”cheating.” It’s wrong. Even if you disagree with the government, or the way it collects or spends revenue. More interestingly, I argue that it is also an ethical mistake to become obsessed with reducing one’s tax burden, at the expense of more productive pursuits. It is true that a dollar saved through legitimate tax avoidance drops right to the bottom line. It is also true that the amount of energy and resource spent to save that dollar might be better allocated to projects that actually grow our businesses or otherwise enrich lives, ours or others. It is both prudent and ethically sound to keep taxes - along with other expenses – in proper perspective.
Another ethically honorable option, as a citizen and taxpayer, is to influence tax policy and enforcement. To do so, we need look no further than the J.J. Hill Library’s CFO, Anne Rasmussen, CPA, who was selected from among hundreds of qualified applicants to serve on the The Taxpayer Advocacy Panel (TAP).  TAP is an independent IRS agency whose 100 members across the country listen to taxpayer concerns and makes recommendations for improving IRS service. You can reach Anne and her colleagues through TAP: call 414-231-2360, or go to www.improveirs.org.  
Contacting TAP is much more effective than grousing to neighbors, friends, or co-workers.  It gives taxpayers a very a real opportunity to make a positive difference for all of us who are served by the IRS.  
TAP doesn’t work to solve individual tax problems. If you are facing economic hardships or are unable to resolve a federal tax problem, you may want to contact the Taxpayer Advocate Service (TAS), an independent IRS agency that assists individuals and businesses. In St. Paul call 651-312-8082.
So, pay your taxes, talk to TAP if you have recommendations for improving the IRS, and grouse to friends and neighbors about other stuff.
Thanks for reading.

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The Department of Redundancy Department

Posted At : February 16, 2009 12:25 AM | Posted By : Charles Weinstein
Related Categories: Business Strategy

Last week I had the pleasure of presenting to the City of Lakes Rotary Club. I speak to a fair number of Rotary Clubs.   As business and community leaders, Rotarians don’t need much convincing to believe the Hill Center's message that doing the right thing pays off, and so we can quickly get down to the “hows” and “whens.” Plus, often enough the breakfast or lunch is fairly tasty.
So, I did my spiel, got laughs in the right places, and was delighted when hands shot up to ask questions.   Then I got what is fast becoming the question of 2009: “Are people actually doing this stuff when times are so tough?”
It was an out of body experience. I started shouting. I was pounding on a table. I wasn’t speaking in tongues, but it was close. Clearly, I feel strongly about this.
I’m not talking about charity here, and I’m not talking about fluff.   I’m talking about doing the right thing, in ways that make businesses stronger. Now is an outstanding time to strengthen relationships: with customers, with vendors, with employees, with the people who touch your business.   In tough times, the great ones get creative.   Now is the time to meet with customers to really understand how you can serve them better, how you can create more value and capture it for your mutual benefit. If your vendors want to serve you better, help them to do so. If they don’t seem to care, there are certainly others who would.    Now is the time for all of us to improve our games, and work together to achieve what we cannot achieve on our own.
I know I’ve said this kind of thing before, including on this page.  This time, though, people got it. You could feel the attention (okay, I am not certain whether it was the substance of my comments, the quality of my oration, or a growing concern that I was having a stroke, but in any case, I had them).   I’ve already had several subsequent conversations as a result, and it is fun to hear about how these very ideas are actually working:
·         A lawyer told me about his firm’s commitment to using available hours for pro bono work now, to remain staffed up for when their business improves.
·         An electronics firm has used their available engineering resources, partnering with a vendor to re-vamp its environmental practices. Then they covered the costs by obtaining concessions from their current vendors in exchange for longer-term contracts. They’ll share the ongoing savings with the vendors willing to step up now.
·         A component manufacturer faced shut-down when their key customer, a heavy equipment manufacturer, idled plants. Recognizing that end users were keeping their old equipment rather than buying new, they partnered with a distributor to market a new line of spare parts to keep the old machines running.
Anyone else have a story to tell?

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The High Road in Low Times

Posted At : February 2, 2009 1:44 AM | Posted By : Charles Weinstein
Related Categories: Business Strategy

Treasured Readers,
Earlier this week I spoke to an architecture and construction management class at the University of Minnesota. We talked about the Hill Center's perspective on ethical leadership, and from that perspective presented a set of techniques for avoiding conficts, and for working through the inevitable conflicts that arise. (I’ve heard that conflicts sometimes do arise in building design and construction.) One of the construction management students asked whether, in these tough economic times, people can really afford to think about ethics beyond what is minimally required.  
I muffed it. His was the classic question, whether doing the right thing makes business sense. I answered it with a ramble of (accurate) statements and (true) observations, instead of a clear (and therefore persuasive) argument. It was word salad, despite my best intentions. Good thing I write a blog…
Make no mistake: construction management students are a pragmatic bunch. Social responsibility without a well-defined return on investment is a tough sell with them. Still, it’s a legitimate question for anyone to ask.  I believe that the answer, when appropriately framed, is true and persuasive. Tough times are among the best times to take to the high road.
I have always argued that ethical leadership is not about altruism.   The student’s question underscores precisely why this is so: because altruism is fragile, and times are sometimes tough. An enlightened perspective on self-interest, by contrast, is both durable and timeless.  It is easy to see that businesses benefit from strong commercial relationships.
When we think about social responsibility, we think about relationships with stakeholders, the people who touch a business, without whom a business cannot prosper.  Stakeholders include shareholders and employees; customers, vendors, and partners; and the broader community.  The socially responsible business leader is committed to ethical conduct with respect to these stakeholders. The smart leader is also committed to investing in those relationships in ways that pay off for everyone involved.  This isn’t altruism, it’s good business.
In tough times, strong stakeholder relationships become more important, not less. It is more important to develop strategic vendor relationships when some businesses are failing, and when others are straining to honor their commitments.  In an environment of layoffs, employees are often asked to do more with less. It becomes more important, therefore, to retain the right people and to sustain their motivation and commitment. The value of customer relationships is obvious, at any time, but especially when they are fewer and purchases smaller. In all of these cases, the biggest single factor is trust. Trust increases the speed and reduces the cost of commerce.   Couldn’t we all use a little of that right now? 
We build trust by choosing partners who are trustworthy and by being trustworthy ourselves.    Communicate early and often, honestly and clearly. Listen carefully to what people need, and seek ways to meet those needs.  Be willing to make commitments and dogged in honoring them. When circumstances intervene, communicate some more.   Make sure that employees share in the vision of the organization – both embracing it and participating in shaping it. The same could be said, in different ways, with respect to vendors and customers. If we are honest about “all being in this thing together,” and genuinely act in ways that promote trust and build relationships, we will all be stronger for it.
There may be another silver lining, as well. Building trust need not be costly, at least in terms of cash outlay. In fact, expectations for cash outlays might actually be lower when everyone feels the pressure. So, non-cash measures take on new meaning.   Think about creative ways to exceed customer expectations and to reward employees. Reinforce that your organization remains committed to excellence. And, to the extent that business is slow, this may be an excellent time to invest in longer-term partnership initiatives and to build internal capabilities that will accelerate growth as circumstances change.
Yes, smart businesses absolutely do the right thing, even in a recession.  They leverage the power of trust, and build relationships to help them weather the current storm and build toward a brighter future.
We’ve got lots of speeches coming up; I won’t be caught flat-footed again. I’m printing out a copy of this posting and keeping it in my shoe.

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From Obligations to Opportunities

Posted At : June 12, 2008 3:18 PM | Posted By : Charles Weinstein
Related Categories: Business Strategy

How many times are we going to see Milton Friedman’s quote from a New York Times Magazine Article: “"there is one and only one social responsibility of business— to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game…" The article was published on September 16,1970.  Almost continuously since then, writers in business ethics have used that single article as an argument from which to diverge. I’m so tired of it that I could barf. I hereby apologize for every time I have ever cited the article, including right now.
 
Almost 40 years ago, Friedman was responding to advocates for a broadly expanded view of managers’ moral duties and obligations.    By so doing, he made it all too easy for four decades’ worth of lazy writers (like me) to jump into our own arguments for what managers ought to do, in contrast to Friedman’s assertion that they simply ought to make money for shareholders. 
 
What probably horked off Milton Friedman in 1970, and continues to offend many managers today, was not so much the content of the message of social responsibility, but the tone of that message, too often couched in shrill, moralistic, finger-pointing invective. Nobody likes to be called skuzzy, and nobody likes to be told what to do. Almost everybody, by contrast, likes to be recognized as a leader and rewarded for wise investments. So, why not think about social responsibility in more positive terms?
 
Managers do have a fiduciary responsibility to shareholders. They also have fundamental ethical responsibilities to the people who are touched by their businesses. Rather than argue solely about the nature of these duties, about the obligations that stakeholders impose on managers, we would do better, and go farther, by focusing instead on stakeholder relationships as strategic investment opportunities.   By investing wisely in these relationships, managers can act in socially responsible ways, while fulfilling their duty to shareholders. Their businesses will prosper by their wise investments.
 
By moving beyond the ethics of obligation to the ethics of opportunity, we open up a new realm for discussion among business leaders who are already inclined to do the right thing, just as they are motivated and driven by a desire to prosper commercially. We still need to think about compliance with relevant laws, regulations, and ethical norms. We ought not limit our thinking to those obligations, but continue thinking creatively about ways to win by going beyond them.  
 
Aligning commercial success and social responsibility is an essentially creative undertaking. By looking at our businesses through this lens, we might create competitive advantage in the supply chain, by transforming transactional vendor agreements into shared destiny, mutually beneficial partnerships. We can create organizations that attract the best employees, and environments in which those people get even better over time. We connect with customers based on a commitment to truly serve them and an awareness of the benefits that excellence can confer on our own firms. 
 
None of these benefits can accrue merely by following the rules. Compliance with ethical norms is a minimum – and failure to comply can undo much of the good we are seeking through our positive actions – but ethics is about more than compliance. Ethics is about living well and doing good. As one friend of the Hill Center, Rich Iverson of the Principal Financial Group, recently observed, “complying with ethical norms is like building a home in accordance with the building codes – that’s just the minimum. Saying a house is built to code doesn’t prove that it’s a great house, just a minimally acceptable house.” The real opportunities happen when we look for ways to build great things that others value.
 
As people concerned with ethical leadership, we need to minimize finger-wagging and moralizing, and maximize creative thinking and, for that matter, inspirational storytelling. By so doing, we help create more great stories to tell.
 
That’s my story, and I’m stickin’ to it.
 

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Lessons from the Ski Slopes

Posted At : March 1, 2008 8:58 PM | Posted By : Charles Weinstein
Related Categories: Business Strategy

A few weeks ago, I had a most enjoyable day skiing in Northern Minnesota. For those unfamiliar with skiing in the Midwest, it typically involves very short runs into a river valley, or in this case, down from the bluffs surrounding Lake Superior.  Some of the runs have names like “Wendel’s Widowmaker,” but nobody really believes them. On the other hand, it was a gorgeous winter day, I was with a dear friend, and we had a great time.
During the many (many, many) times up the chair lift, I got to thinking. I began to reflect on the physics of skiing, a topic of pressing interest given my recent lapses in strength training.  In our daily lives, gravity and friction are generally physical forces that slow us down. We use gasoline or jet fuel to overcome these forces, to varying degrees, in order to get where we want to go. Our business metaphors imagine us “achieving lift-off” or “streamlining” to reduce drag and friction. We see these forces as the enemies of progress. Without gravity and friction, however, skiing turns into, well, either standing or falling.
 
On the mountain, gravity and friction are our friends, so long as we treat them as such. Gravity gives us speed. Friction, when channeled into the edges of our skis, gives us control. We manage these forces to propel us down the hill and away from rocks, trees, and other skiers. When those forces manage us, we find ourselves carving snow with our noses rather than our edges.
 
The connection to business seemed clear: do we manage the forces that drive our business, or do they manage us? Or, more accurately, do we manage our business in harmony with those forces, or in opposition to them?   Do we see vendors and customers as partners in efficient, mutually beneficial transactions, or do we challenge ourselves to take a little extra from each of them at every opportunity? Are competitors enemies to be crushed, or do we seek to benefit from them when we can? Great competitors can expand markets, drive demand, and even promote innovation, if we are operating in harmony with them as external forces.
 
On the ski slope, the sensations of harmony and disharmony are unmistakable. Skiing with the mountain is smooth, flowing, gentle.  We look downhill and flow from turn to turn, aware of our surroundings as a gestalt, making decisions and acting on them in a continuous process.  Skiing against the mountain is a different experience altogether. It may begin with anxiety or inattention, and quickly devolves into a series of disconnected moves calculated, however desperately, to keep us upright. We perceive a series of snapshots and try to react accordingly. All too often, the result is both sudden and sodden.
 
In business, disharmony may be harder to perceive, until we are dangerously in its cold embrace. Many of our performance measures are actually following indicators. The forces that ultimately result in reduced revenue or profitability may have been operating for some time before the results show up on our balance sheets.  Mild employee discontent may go unnoticed until key people start to leave; customers’ needs or preferences change and they tolerate a mild mis-fit with our services until…they don’t. Key vendors experience problems that we are unaware of until we find ourselves on allocation, just when our own key customers need product immediately.
 
A great strategy for preventing these kinds of commercial spills involves cultivating strong, trusting relationships with the people who touch our business. That way we can perceive problems as they emerge, and move smoothly toward their resolution before they become disruptive. It’s another good reason for understanding those relationships while you are in the flow of successful business, and investing in maintaining that flow.  
 
Returning readers will know about my belief in the SAIP Process as a means of understanding ethical risk and aligning social responsibility with winning business practices. That kind of reflective, analytical approach to stakeholder relationships can also help businesses remain in harmony, by building stronger relationships with the people who make that possible. 
 
If my readers happen to include any Midwest ski area operators, allow me to reiterate how much fun I had, skiing in the Heartland. And, if you are interested in exploring how you might differentiate your ski area through a commitment to social responsibility…
 
Look out below!
 

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Turning Up the Lights on Positive Business Ethics

Posted At : February 6, 2008 5:27 PM | Posted By : Charles Weinstein
Related Categories: Business Strategy

”The Hill Center for Ethical Business Leadership helps organizations prosper through a strategic commitment to ethics and social responsibility.” 
 
I can only apologize if you are tired of reading the sentence above, the Mission Statement for the Hill Center. I can type it almost as quickly as I can type my own name.  The degree of repetition arises not merely from my unfortunate lack of imagination, but also from the repeated realization that the Hill Center is doing something distinctive under the rubric of “Business Ethics.” We’re helping business leaders find ways to do right, to do good, and to achieve measurable business results by so doing. Instead of constraining bad behavior, we’re promoting good actions on the part of organizations. 
 
The success of our approach hinges on the power of stakeholder relationships.  Here, too, we approach these relationships in ways that differ somewhat from conventional stakeholder theory. There is tremendous power in changing our perspective.
 
Stakeholder theory is highly influential in business ethics and management schools. It begins with the (fairly obvious) position that shareholders are not the only parties to whom management is ethically accountable. Stakeholder theorists articulate ethical claims held by others who participate in (or are touched by) an enterprise, such as employees, customers, vendors, and the communities in which the enterprise does business. Stakeholder management arguments are powerful from an ethical perspective, but they also tend to be divisive and problematic among managers and shareholders. Thankfully, we need not embrace a full, conventional view of stakeholder management to significantly improve an organization, both commercially and socially.
 
There is enormous power in a more positive notion of stakeholders: these critical relationships often present opportunities for managers to do good and to benefit in the process. Rather than argue about ethical obligations, we can often meet those obligations – or exceed them - by focusing on opportunities to invest in stakeholder relationships for mutual benefit.  Applying analytical rigor to this process can, in turn, change the way that we look at our businesses and offer rich insights into how we can do better, commercially as well as socially.
 
If we step back from the debate about who owes what to whom, the power of stakeholder relationships is unmistakable. In order to succeed, a business must produce something of value to someone. To achieve that basic end, the business needs customers who value those goods or services; employees who are willing and able to produce it; typically some vendors of needed components, materials, supplies or services; the list goes on. It seems perfectly rational, then, that an astute, creative manager can find abundant opportunities to invest in those relationships in ways that benefit stakeholders, strengthen the business, and thereby produce measurable business results.
 
If I’m right, this positive approach to stakeholder relationships underscores the general value of astute and creative management. Indeed, by looking at stakeholder relationships as levers for improving organizational performance, we open our eyes to all kinds of opportunities to reduce costs, improve products or services through innovation, streamline sales processes, open up new markets, or pursue any number of avenues for improved performance. These opportunities might not be visible through the lens of day-to-day operational management. Focusing on who owes what to which stakeholder will almost certainly keep them obscured. By considering stakeholders in positive terms we shed new light on our organizations in general. It is by that light that great managers can make remarkable changes for the better.
 
Next time, I’ll talk about some of the problems associated with this very point of view, and the solutions I propose.
 

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The Paradox of Shareholder Value

Posted At : January 20, 2008 3:05 PM | Posted By : Charles Weinstein
Related Categories: Business Strategy

I recently had an interesting and challenging conversation with an attorney who was generally interested in the Hill Center. He raised a number of questions concerning the kinds of people who seem naturally drawn to our core concept, the alignment of business strategy with a commitment to social responsibility and ethics. The question behind his questions was basically, “while there are certainly altruistic people out there, aren’t hard-core businesspeople really supposed to focus on generating shareholder value?” 
My initial answer was, of course, that it isn’t “either-or.” I proposed that creative business leaders can generate remarkable growth in shareholder value by investing strategically in the relationships that build the organization’s ability to generate profits and create value. A better answer would have been more complex…
 
Of course, many business people are single-mindedly focused on shareholder value. I have heard some executives describe, with some pride, their “laser-like focus” on intermediate measures such as profits, revenue growth, or both. As business leaders, these folks are too often unsuccessful at driving the very measures they revere. I’ve worked in various capacities with several firms that were single-mindedly focused on generating shareholder value. Some of them were privately-held, pursuing the killer IPO. Others were publicly held, trying like crazy to boost share price. In every instance I can think of, the management teams that were singlemindedly-focused on shareholder value failed to increase that value. In a couple of instances, shareholder value plummeted – it was like watching a slow-motion train wreck.   What was going on there?
 
Of course, the actual causal factors for business performance are generally complex, often profoundly so.  As managers, we rely on business measures to indicate what’s happening in the business. We need data to manage the business, both to predict and to influence outcomes. One problem is, when we start managing the business exclusively by the data points, we lose sight of the complex – and critical - factors that drive those data points.
 
Potential metaphors are practically roaring in my ears right now: a pilot who stares intently at the altimeter, the compass, and the artificial horizon, while she flies her plane into a mountain. Stephen Covey’s story about the team of lumberjacks that worries about its productivity until one of them climbs a tree and shouts out, “We’re in the wrong forest!”   The Three Mile Island engineers focusing on one set of gauges, worrying about pressure or something, while a stuck valve and dropping water levels almost melt down the reactor. All interesting and instructive analogies (say I), but there is something deeper and more interesting going on here, as well.
 
To illustrate my point, please bear with me through some old-fashioned philosophy.   I promise to make it worthwhile.  You may recall that hedonism is the view that pleasure is good – ethical hedonism (the classic author here is Jeremy Bentham, 1748-1832) is the view that an action is morally right to the extent that it generates the most possible pleasure overall. The particulars vary – distribution of pleasure, what kinds of pleasure, etc. – but a hedonist is someone who acts to maximize pleasure.    The egoistic (let’s just say, selfish) hedonist is someone who seeks to maximize his own pleasure.
 
Here’s an interesting problem: if you focus single-mindedly on maximizing your own pleasure, you are unlikely to achieve that goal over time.  For one thing, if you think about your actions only in terms of how much pleasure they will generate, you will forego the pleasures of spontaneity, of being delighted without seeking it. You may also waste a lot of time simply deciding what to do. More important, many great pleasures just don’t work that way: if you are entirely focused on your own pleasure, you will likely have trouble being an excellent friend, partner, spouse, or parent. These relationships inherently require that we suspend our own pleasure-seeking. They also deliver unique and remarkable pleasures not otherwise obtainable without commitment. And, making your critical commitments continent upon their pleasure-delivery potential doesn’t work. Finally, it is hard to know, in advance, how pleasurable an activity or experience will be. Nothing is more pleasant than a pleasant surprise. As a practical matter, it is difficult or impossible to predict the degree to which our actions will result in pleasure, and our very attempts to do so often diminish the very pleasure we are seeking to maximize. 
 
Contemporary philosophers, including Peter Railton and others, have called this “the paradox of hedonism.” I believe a closer look at this paradox can be instructive for us as business leaders, as well.
 
Think about the course of our lives. It is easy to imagine that the most pleasurable life is one that includes a host of commitments that are not driven directly by their potential to deliver pleasure. These certainly include the kinds of significant relationships I noted above. Likewise, our spiritual lives, our work lives, and our other passions and commitments can be deeply meaningful and afford us enormous pleasure. We can experience those kinds of pleasures only by thinking about other things first.
 
So it is in business, as well. By single-mindedly pursuing shareholder value, we put that very outcome in jeopardy.    The reasons for this are not surprising. Businesses succeed by delivering value to customers, consistently and efficiently. A business leader who focuses on strengthening the organization’s ability to do so, paying appropriate attention to a well-designed set of metrics, will do far better than a leader who focuses only on a narrow set of metrics or outcomes.
 
Moreover, because it often especially difficult to predict how specific actions will affect shareholder value, undue focus on that end point can lead us to make short-sighted decisions that will not make our organizations better at generating real value.  We succumb to the temptation to invest in promotion or hype aimed at attracting or stimulating shareholder interest. In the worst cases, we organize our businesses specifically to be attractive to shareholders, rather than to customers. We think about revenue multiples and scalability before thinking about value propositions and core-business effectiveness and efficiencies. Even without succumbing to those temptations, we are better off building our businesses to serve customers by whatever means we have chosen as our strategic direction. Very often, we can generate real shareholder value most effectively by thinking about other things first.

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Intuition or Analysis? Yes!

Posted At : December 1, 2007 5:55 PM | Posted By : Charles Weinstein
Related Categories: Business Strategy

It’s a snowy Saturday afternoon in Minnesota, a perfect time to make substantial progress on the redesign of www.einsight.org, our online resource center. We’ll be re-launching the site with new content in Q1 of next year.   Before I turn to that, I wanted to share some thoughts from the week.  
 
Procrastination? Perhaps, but, a very sweet aspect of blogging is that it resembles both work and play.
 
The current question arose in a meeting with a client’s board of directors, presenting an organizational strategy developed with management and staff. It was well-received, and I think well-understood.   As we began to discuss strategic implications for project priorities, one member interrupted me. 
“This is way too analytical,” he said. “I know a good project when I see one.” He perceived a disconnect, and he attributed it, interestingly, to “a clash of Myers Briggs Types.” When someone asked him to say more, he observed that trying to create matrices to make decisions seems at odds with intuition, with gut feel. He then went on to clarify that he wasn’t denigrating intuition or analysis, just putting on the table his personal orientation toward intuition and against analysis, and in a sense, disqualifying himself from the discussion at hand.
 
It was the first time in my life that anyone has accused me of being too analytical.   I am a huge believer in intuition as a critical faculty and a critical factor in business success. At the same time, the tension between intuition and analysis can become a serious problem for leaders when one faculty or the other is misapplied, or when we aren’t able to bring both to bear to the greatest extent possible.
 
Malcolm Gladwell wrote a great book, entitled, “Blink,” on the subject of intuition and the phenomenon of “just knowing.” Gladwell wrote about the extraordinary power of intuition, as well as its limitations: when we ought to trust gut feel, and when we ought not. Among his key points is a strong argument that we can trust our intuitions in areas where we do, in fact, have knowledge and experience. (That may seem obvious, but the importance of it became clear to me when I reflected on the breadth of topics about which I have intuitions, and the narrower subset of areas about which I actually know something.) The book is a quick, lively read, and I highly recommend it.
 
The tension is particularly acute where ethical decisions are concerned. Most of us have a gut feel for when something is wrong. It is easy to conclude that that unethical conduct arises from ignoring our guts. There are real problems with that view of ethical reasoning, however. First, our guts – or, our intuitions – register lots of inputs at once: a sense of duty toward shareholders, an empathy for and commitment to employees, a strong desire to please customers, etc.   Second, fear can cloud moral intuition, particularly when we perceive that our livelihoods or our families’ finances are at stake. So can many other emotions or circumstances that we might or might not perceive.  Perhaps most important, our initial impressions of what to do may be mistaken.  Some decisions are inherently tough calls, that require careful consideration well beyond gut feel.
 
On the other hand, we can often trust our intuitions as initial indicators of a potential problem. We may have very good gut feel for identifying when obligations or commitments are potentially in conflict, for example. We may know when something might be wrong, or when something is profoundly, inexorably, undeniably wrong. However, different people have different sensitivities, different thresholds of concern, and different priorities. Individual moral intuitions are sure to vary. So, even under the best of circumstances, our ethical judgments can’t be based on gut feel alone.
 
Analysis has its limitations as well. We come to work with different values and moral orientations. Of course, having a strong, shared set of organizational values helps provide a good framework for discussion.  It is a critical, perhaps necessary, but certainly not sufficient condition for ethical deliberation within an organization. Even with a common framework for discussion, too many people who are very adept at business analysis are unwilling or unable to engage in ethical analysis. Agreeing on common premises then arguing through their implications to a common conclusion is challenging, and like any skill it takes practice. A good first step is recognizing that ethical deliberation and analysis do in fact require skill and practice. 
 
By the same token, it is very often gut feel or intuition that alerts us to a potential problem. We ignore those intuitions only at our peril. In fact, leaders should create environments where people are encouraged to speak up when they perceive a problem, and where there are processes for examining and evaluating those perceptions.
 
There is no single answer, no easy resolution to the tension between moral intuition and ethical reasoning or analysis. Instead, we can avoid the problems associated with that tension first by understanding the power and limits of our intuition, and then by developing skills and language that enable us to communicate and evaluate ethical concerns as capably as we are able to analyze business opportunities. Finally, we need to continue to develop shared values frameworks and skills for ethical deliberation within our organizations.
 
These are ongoing processes, which I intend to explore further over time. Right now, however, I’m quite certain that eInsight.org won’t redesign itself.  Thanks, as always, for spending the time with me.

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