How to Justify a Breathtaking CEO Pay Ratio

By Theodore Kinni
strategy+business, December 22, 2015

In August 2015, the U.S. Securities and Exchange commissioners voted 3-2 in favor of a new rule that requires public companies to report their CEO’s total annual compensation as a ratio to their employees’ median pay. The SEC didn’t rush into this decision. Far from it. The vote came five years after the passage of the Dodd-Frank Act, which mandated the rule, and two years (and 280,000 public comments!) after the SEC announced that it would consider complying with that mandate. Moreover, the rule has plenty of loopholes. For instance, it doesn’t apply to companies with annual revenues below US$1 billion. And it doesn’t take effect until 2017.

The delay and controversy were blamed on a number of plausible causes: that it was a ploy by unions to gain negotiating leverage; that it didn’t measure anything of consequence; that it would cost too much to implement. But it’s hard not to believe that the real reason corporate lobbyists and leaders weren’t enthusiastic about a swift adoption of this rule was fear. As the Economic Policy Institute has shown, the ratio of CEO pay in major companies to the median pay of their employees is somewhere around 300:1. Formally reporting such ratios in stark terms would likely add fuel to the already roaring fire surrounding economic inequality. In 2014, according to a Pew Research Center survey, the people of Europe and the U.S. pegged economic inequality as “the greatest danger to the world.” (In 2015, inequality dropped a ranking or so because ISIS took the top spot.)

The leaders who fret about class warfare might want to add Harry G. Frankfurt’s slim book, On Inequality(Princeton University Press, 2015), to their reading lists. Frankfurt is a professor emeritus of philosophy at Princeton University. He is also the author of On Bullshit (Princeton University Press, 2005), which topped the New York Times bestseller list a decade ago and opened with this provocative line: “One of the most salient features of our culture is that there is so much bullshit.” His definition of this barnyard epithet: a widespread tendency for people to use words and language to obfuscate.

In his new book, which contains adapted versions of two previously published papers, Frankfurt argues that much of the discourse around economic inequality fits the bullshit bill. He finds nothing morally objectionable about economic inequality per se. “The egalitarian condemnation of inequality as inherently bad loses much of its force, I believe, when we recognize that those who are doing considerably worse than others may nonetheless be doing rather well,” he writes.

On the other hand, Frankfurt also finds nothing inherently beneficial about economic equality. “Inequality of incomes might be decisively eliminated, after all, just by arranging that all incomes be equally below the poverty line,” he writes. “Needless to say, that way of achieving equality of incomes — by making everyone equally poor — has very little to be said for it.”

This might make On Inequality sound like a straw man argument for astronomical CEO salaries. But Frankfurt does not let companies off the hook. Rather than strive to eliminate inequality, he says we should focus on eradicating poverty. He proposes a “doctrine of sufficiency,” which asserts that we have a moral obligation to see that everyone has “enough” money. Frankfurt defines “enough” as a standard that allows people to live a happy life or, at least, one in which their unhappiness cannot be alleviated by more money.

Indeed, what does it matter if some employees have more than others, as long as all employees have what they need? Isn’t this the reasoning behind ideas like the $15 minimum wage? Fast-food workers across the U.S. aren’t going on strike for hikes to CEO-level pay. They simply want to earn enough from their work to live above the poverty line.

On Inequality contains plenty of fuel for flameouts on both sides of the economic inequality debate. And I suspect that Frankfurt would welcome them. (Certainly, they could help him sell lots of books.) But I came away from this volume thinking that any CEO who could run a profitable business that also provided a reasonable living for each of its employees would richly deserve a breathtaking pay ratio.

Rita Gunther McGrath’s Required Reading

by Theodore Kinni

strategy+business, December 9, 2015

When Rita Gunther McGrath studied the 4,793 publicly traded companies with market capitalizations of US$1 billion or more, she could find only 10 that had achieved at least 5 percent annual growth in net income from 2000 to 2009. What distinguished this handful of companies whose performance had weathered the biggest bust since the Great Depression? They acted as if, as McGrath told me in a 2014 strategy+businessinterview, “whatever they were doing today wasn’t going to drive their future growth.”

This finding dovetailed nicely with the Columbia Business School professor’s conviction that competitive advantage in many sectors was becoming increasingly transient — and that companies planning to capture such an advantage and ride it into the sunset were in for a jarring trip. McGrath made a compelling argument for this thesis in The End of Competitive Advantage: How to Keep Your Strategy Moving as Fast as Your Business (Harvard Business Review Press, 2013), which Walter Kiechel chose as the best strategy book of that year.

McGrath was delving into the challenges of attaining competitive advantage long before the study. In collaboration with Ian C. MacMillan of Wharton’s Sol C. Snider Entrepreneurial Research Center, she also wrote The Entrepreneurial Mindset: Strategies for Continuously Creating Opportunity in an Age of Uncertainty (Harvard Business School Press, 2000),MarketBusters: 40 Strategic Moves That Drive Exceptional Business Growth(Harvard Business School Press, 2005), and Discovery-Driven Growth: A Breakthrough Process to Reduce Risk and Seize Opportunity (Harvard Business Press, 2009). 

I asked McGrath, who is ranked among the top 10 global gurus on theThinkers50 list, what books — aside from her own — she recommends to executives determined to cope with the fleeting nature of competitive advantage. Here’s her reading list.

The Little Black Book of Innovation: How It Works, How To Do It, by Scott D. Anthony (Harvard Business Review Press, 2011). Too often, companies invest in the trappings of innovation — boot camps, workshops, the occasional visit to Silicon Valley, skunkworks — instead of the actual work of innovation. In this readable, practical book, Anthony draws on years of consulting experience to explain how to make innovation actually happen. Chockablock full of real stories of successes and failures, red flags and remedies, the book is a great primer for anyone tasked with creating new products, services, and platforms in their organizations.

American Icon: Alan Mulally and the Fight to Save Ford Motor Company, by Bryce G. Hoffman (Crown, 2012). Hoffman’s riveting reportage describes how Mulally, an auto-industry outsider (he was a longtime Boeing executive) successfully transformed Ford’s toxic culture and losing product strategy in the late 2000s. Mulally’s financial wizardry erased billions in debt and his attention to both the hard stuff (eliminating brands, streamlining structures, moving resources to where they were needed) and the soft stuff (changing the culture, creating a One Ford leadership team, honing the values, making hard HR choices) set the company up to exit the Great Recession in fine form. Ford was the only member of the Big Three that didn’t need a bailout. Every page of the book has valuable lessons for any leader seeking to create a stellar organization and culture in today’s transient advantage economy. 

Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers, by Alexander Osterwalder and Yves Pigneur (Wiley, 2010);The Four Steps to the Epiphany: Successful Strategies for Products That Win,by Steve Blank (K&S Ranch Press, 2005). I suggest reading these two books together because they have taken the planning and design of new ventures to a higher level. They provide a set of bedrock concepts and a methodology for lean entrepreneurship. Their authors will help open your mind to the possibilities of different business models, to new ways of sequencing investment, and to nurturing entrepreneurship within large, established companies. No senior executive responsible for growth should be without this two-piece toolkit. 

The Hard Thing about Hard Things: Building a Business When There Are No Easy Answers, by Ben Horowitz (HarperBusiness, 2014). Every chapter of Horowitz’s no-holds-barred book offers hard-won lessons for the CEOs of startups and rapid-growth tech companies. Unlike the pablum that many business book authors deliver, this entrepreneur and VC (Horowitz is a co-founder of Silicon Valley firm Andreessen Horowitz) refuses to sanitize the story: for instance, he admits that CEOs often don’t have great choices and, instead, must find the least-worst option to take their companies forward. Most endearing is Horowitz’s inclusion of details from his personal life in the book. This is as close to the whole story as you can get.

A Good Barrel for Bad Apples in Business

by Theodore Kinni
strategy+business, November 25, 2015

The business news headlines in the early fall of 2015 read like a scandal sheet. In September, the former owner of Peanut Corporation of America was sentenced to 28 years in prison for knowingly selling contaminated peanut butter that killed nine people and sickened hundreds more. Turing Pharmaceuticals, launched earlier this year by a hedge fund manager, purchased a 62-year-old drug that treats a parasitic infection called toxoplasmosis — the only drug of its kind — and bumped the price from $13.50 per tablet to $750. Volkswagen was coping with the fallout from revelations that engineers may have equipped diesel-powered cars with software aimed at deceiving emissions tests.

We tend to think of the people at companies who engage in such behavior as outliers, the few bad apples that spoil the barrel. But in their new book, Phishing for Phools: The Economics of Manipulation and Deception (Princeton, 2015), George A. Akerlof, Koshland Professor of Economics at University of California, Berkeley, and Robert J. Shiller, Sterling Professor of Economics at Yale University, argue that we should direct our attention to the barrel instead. The barrel is free markets, which, according to tenets that go back to Adam Smith, are guided by an invisible hand that ensures the individual pursuit of profit is transformed into common good. Unfortunately, that’s not the whole story.

“Free markets do not just deliver this cornucopia that people want. They also create an economic equilibrium that is highly suitable for economic enterprises that manipulate and distort our judgment, using business practices that are analogous to biological cancers that make their home in the normal equilibrium of the human body,” Akerlof and Shiller write. “Insofar as we have any weakness in knowing what we really want, and also insofar as such a weakness can be profitably generated and primed, markets will seize the opportunity to take us in on those weaknesses. They will zoom in and take advantage of us. They will phish us for phools.”

Phishing for Phools is an extension of the authors’ work on how psychological forces can warp markets, as described in their previous book, Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism (Princeton, 2009). The two Nobel Prize–winning economists — Akerlof in 2001 for his work on the market effects of asymmetric information, Shiller in 2013 for his contributions to economic forecasting — define phishing in a broader way than usual. They say it is any activity that entices us to do something that is not in our own interests, but rather in the interest of the “phisherman” (as opposed to the rational behavior assumed in conventional economic theory). They see two kinds of phishing going on in free markets. The first includes emotional and cognitive glitches. A gambling addict who feeds the paycheck needed to feed his family into a slot machine has been legally phished by a casino. The second includes misleading information that is purposely created by the “phishermen.” Investors who received doctored account statements from Bernie Madoff’s firm were illegally phished in this manner.

Whether the phishing is legal or illegal, ethical or unethical, Akerlof and Shiller see it as being driven by the natural operation of free markets: “The free-market equilibrium generates a supply of phishes for any human weakness.” The two authors endeavor to prove this by describing an ongoing epidemic in phishing in a dismayingly wide variety of market contexts: in marketing and advertising; in industries where high-pressure sales tactics are common, such as auto sales, real estate, and credit cards; politics (the market for candidates); food and pharmaceuticals; innovation; tobacco and alcohol; and finance.

You’ll likely be familiar with many of the examples in the book, which are drawn mainly from contemporary inductees into capitalism’s hall of shame: Big Tobacco and its decades-long battle to discredit the link between smoking and cancer, the S&L crisis, the junk bond crisis, the subprime loan crisis. But they are worth rereading in order to understand what they have in common — that is, how and why they are all examples of phishing.

Happily, Akerlof and Shiller identify four obstacles to free-market phishing. There are “standards bearers,” who measure and enforce quality, such as the testing and certification of electronic appliances provided by Underwriters Laboratories. There are “business heroes,” such as Better Business Bureaus (and, presumably, rating sites, like Yelp and TripAdvisor). There are “government heroes” and their legal checks, such as the Uniform Commercial Code, and also “regulator heroes” like the Food and Drug Administration.

Unhappily, however, phishing continues, and the power of those who resist it is constantly being undermined by phishermen in search of larger hauls. As a case in point, the authors offer up the sad tale of the bond ratings agencies, whose cooptation by bond issuers resulted in reckless and inflated estimates that supported and intensified the explosion of subprime mortgages during the housing boom of the 2000s.

Phishing for Phools doesn’t offer much in the way of solutions. “The free market may be humans’ most powerful tool. But, like all very powerful tools, it is also a two-edged sword,” Akerlof and Shiller write. “That means that we need protection against the problems.” However, the only protection they prescribe is a greater recognition among economists of free-market phishing — a recognition that “it is inherent in the workings of competitive markets.” That would be a good a thing, I guess. But economists could debate the merits of this thesis until the end of time, and the rest of us would still be taken for phools.

Have you been called?

by Theodore Kinni

strategy+business, November 11, 2015

When I was a kid, I really wanted to win the recently established millionaire drawing in the New Jersey lottery. (I remember thinking that I would never need to work after pulling down the princely annual sum of $50,000 for 20 years.) Other than that, I’ve never had what I would call a calling. And it turns out I’m in good company: 60 to 70 percent of people don’t feel like they have a calling, either, according to studies cited by Martin Seligman in his introduction to Being Called: Scientific, Secular, and Sacred Perspectives (Praeger, 2015).

The genesis of Being Called was a meeting at Canterbury Cathedral in 2013, initiated by Seligman and his research team. Seligman, a professor at the University of Pennsylvania, is a pioneer in the field of positive psychology, the study of strengths that enable people to thrive. The purpose of the gathering was to bring together an unusually diverse and distinguished group of secular and religious figures — social scientists, like Seligman; religious leaders, including Jonathan Sacks, then chief rabbi of the U.K.; and political and business leaders, such as Australian Prime Minister Kevin Rudd — to explore the idea of “being called into the future.” The event inspired this academic collection of essays that attempt to define the nebulous subject of callings, and to establish some boundary lines (as loose and permeable as they may be) around it.

All three of the book’s editors — David Bryce Yaden, Theo D. McCall, and J. Harold Ellens — attended the Canterbury conclave. They also describe experiencing callings in their essays. Yaden, a psychologist who serves as the lead editor, awoke in his college dorm to a feeling of warmth in his chest that spread throughout his body and became an “experience of boundless unity” — an overwhelming sense of oneness with the world. As he thought about that experience in the weeks that followed, an inner voice directed him to become a “scriptor” — a Latin word meaning author or scribe, which he had to look up. McCall says that his vocation as an Anglican priest seemed obvious to people around him and inevitable as early as his mid-teens. Ellens reports a half-dozen numinous experiences that contributed to a “sense of destiny” and led him to the ministry.

But the essays in this accessible collection don’t just focus on the pulpit. Finding your calling — and following its dictates in order to live an authentic life — has become a popular work-life topic in recent years ...read the rest here

Best Business Books 2015: Managerial Self-Improvement

What a Character!

by Theodore Kinni

strategy+business, November 2, 2015



Illustration by Gérard DuBois


David Brooks, The Road to Character (Random House, 2015)

Fred Kiel, Return on Character: The Real Reason Leaders and Their Companies Win (Harvard Business Review Press, 2015)

Jeffrey Pfeffer, Leadership BS: Fixing Workplaces and Careers One Truth at a Time(HarperBusiness, 2015)

In 1859, as Great Britain’s Victorian era steamed into its third decade, a Scotsman named Samuel Smiles published a book titled Self-Help; with Illustrations of Character and Conduct. In it, Smiles preached “the practice of the virtues of industry, frugality, temperance, and honesty,” copiously illustrating its transformative power with “the instances of men, in this and other countries, who, by dint of persevering application and energy, have raised themselves from the humblest ranks of industry to eminent positions of usefulness and influence in society.”

Self-Help was a hit in England and farther afield; the aspiring entrepreneurs of the Meiji Restoration made it a bestseller in Japan. The book catapulted 47-year-old Smiles to gurudom, and, as is the wont of gurus, he wrote several volumes that capitalized on the popularity of his boot-strapping thesis over the next four decades. Thus, Smiles played an instrumental role in launching the broad category of business books under consideration here: self-improvement books for managers.

In addition to the literary impetus Smiles provided to would-be gurus, he anticipated this year’s most notable managerial self-improvement theme by about a century and a half. In his book Character (1871), he wrote, “In the affairs of life or of business, it is not intellect that tells so much as character — not brains so much as heart — not genius so much as self-control, patience, and discipline, regulated by judgment.” Character building and its rewards are the principal focus of two of this year’s three best business books on the theme of self-improvement for managers. The third — the best of the bunch — reminds us to take the first two with a grain of salt...read the rest of the essay here

One Algorithm to Rule Them All

by Theodore Kinni

strategy+business, October 21, 2015

As a student in a 1970s high school computer lab, I used a teletypewriter to punch holes in a paper tape, dialed a phone number and jammed the handset into two rubber cups. Somehow, an unseen computer on the other end was told to do something. I didn’t see the point.

     In the 1980s, as a newly minted account executive at a consulting firm, I assured a colleague I’d be dead long before any work I might do would require learning to use a computer. (I also was sure that I wouldn’t ever need to type — that’s what the secretaries outside my office did on electric typewriters, which corrected typos at the touch of key!)

     Thirty years on, the opportunities that I’ve missed in computer science — a set of disciplines that is arguably the most influential and powerful in the world — are obvious. To avoid further embarrassment, I took up Pedro Domingos’s new book, The Master Algorithm: How the Quest for Machine Learning Will Remake our World (Basic Books, 2015). 
     Unlike me, Domingos did not miss the import of computer science. While I was ignoring the computers popping up on every desktop, he was earning alicenciatura in electrical engineering and computer science from Instituto Superior Técnico at University of Lisbon. After reading about machine learning in a book on artificial intelligence, he skipped an MBA and, instead, earned a Ph.D. in information and computer science from the University of California at Irvine. Now a professor at the University of Washington, Domingos is a leading expert in the fields of machine learning and data mining. His Tolkienesque quest — and the book’s subject — is the most powerful algorithm of all.  
     This master algorithm, which many experts, whose views Domingos gives a hearing, think is a Computer Age chimera, would allow machines to learn without human assistance. “Every algorithm has an input and an output: the data goes into the computer, the algorithm does what it will with it, and out comes the result,” Domingos explains. “Machine learning turns this around: in goes the data and the desired result and out comes the algorithm that turns one into the other.”
     Learning algorithms are already commonplace. Netflix uses them to pick movies for us; Amazon to recommend books; Google to search out Web pages. But Domingos is pursuing something much more far-reaching. “In fact, the Master Algorithm is the last thing we’ll ever have to invent because, once we let it loose, it will go on to invent everything that can be invented,” he writes. “All we need to do is provide it with enough of the right kind of data, and it will discover the corresponding knowledge.”
     The corresponding knowledge includes a cure — or, more accurately, myriad cures — for cancer. In theory, Domingos argues, the master algorithm could create a program capable of spitting out the exact formula for a therapy designed to kill a specific patient’s cancer — based on a tumor’s genome, the patient’s medical history and profile, and a “vast database of molecular biology.” Unfortunately, little of the data necessary to fuel such a program exists as yet. But then neither does the master algorithm... read the rest here

Roger Martin’s Required Reading

by Theodore Kinni

strategy+business, October 7, 2015

Prosperity is a theme that runs through Roger Martin’s work in a continuous and unwavering line. Ranked third on the Thinkers50 biannual ranking of the most influential global business thinkers, Martin has served as a director and cohead of Monitor Company, dean and Premier’s Research Chair in Productivity and Competitiveness at University of Toronto’s Rotman School of Management, and, starting in 2013, institute director of the Martin Prosperity Institute. Throughout, he has sought to illuminate the ways and means of economic success for individuals, corporations, and nations.

A prolific writer, Martin has authored numerous books and articles detailing his findings. In The Opposable Mind: How Successful Leaders Win through Integrative Thinking,(Harvard Business Review Press, 2007), he explains how the ability to hold two conflicting ideas in constructive tension can enable leaders to make better decisions and produce superior ideas. In The Design of Business: Why Design Thinking Is the Next Competitive Advantage (Harvard Business Review Press, 2009) and Playing to Win: How Strategy Really Works (with A.G. Lafley; Harvard Business Review Press, 2013), Martin explains how to enhance corporate success through innovation and strategic thinking.

Finally, in Fixing the Game: Bubbles, Crashes, and What Capitalism Can Learn from the NFL (Harvard Business Review Press, 2011) and, most recently, Getting Beyond Better: How Social Entrepreneurship Works (with Sally R. Osberg; Harvard Business Review Press, 2015), he examines the flaws that are undermining democratic capitalism and the potential of socially responsible business to heal and reinvigorate the system. 

Curious about the underpinnings of his own success, I asked Martin about the books that most influenced him in his professional journey. He offered up the following three titles... read the rest here.

Daniel Pink's Required Reading

by Theodore Kinni

strategy+business, Sept 16, 2015

For the better part of two decades, Daniel Pink has been skewering conventional business wisdom and transforming complex ideas into practical approaches that his readers can put to work immediately. A best-selling author, popular speaker, and one of the world’s leading management thinkers, Pink is a practitioner of what has become — in no small part through the skill with which he plies his trade — a familiar format on the business bookshelf: the application of behavioral research to the world of work.

Pink applied this formula to employee incentivization in Drive: The Surprising Truth About What Motivates Us (Riverhead Books, 2009), which described the largely untapped power of intrinsic motivators, such as autonomy, mastery, and purpose, in the workplace. He took on thinking skills in A Whole New Mind: Why Right-Brainers Will Rule the Future (Riverhead Books, 2005), which tracked the rising need for cognitive traits, such as inventiveness, empathy, and meaning-making, in business. And he extended his reach into sales in To Sell Is Human: The Surprising Truth About Moving Others(Riverhead Books, 2012), which described a simple and powerful “ABC” for sales success (attunement, buoyancy, and clarity). In 2014, Pink began broadcasting his behavioral insights to broader audience as host and co-executive producer of “Crowd Control,” a 12-episode series airing on the National Geographic Channel.

Given the influential reach of his work (more than 2 million copies of his books have been sold), I asked Pink to name several books that had made a lasting impression on him. He called out four titles... read the rest here

Leadership à la Douglas MacArthur

Good to see my book, No Substitute for Victory: Lessons in Strategy and Leadership from General Douglas MacArthur (FT Press, 2005), pop up in IBD


Douglas MacArthur, A Triumphant Warrior And Statesman

BY MICHAEL MINK, FOR INVESTOR'S BUSINESS DAILY

09/01/2015 01:46 PM ET

Gen. Douglas MacArthur signs Japan's surrender on the battleship Missouri in Tokyo Bay on Sept. 2, 1945.  

Douglas MacArthur produced victories in war and peace. He held the rare U.S. Army rank of five-star general — and the only one to receive the Medal of Honor.

British Prime Minister Winston Churchill called him the best American commander of World War II — and with good reason.

MacArthur (1880-1964) led the battering of Japanese forces in the South Pacific during World War II, culminating in the liberation of the Philippines.

After the U.S. dropped atomic bombs on Hiroshima and Nagasaki, prompting Japan to give up the fight in August 1945, President Truman empowered MacArthur to arrange and accept the Land of the Rising Sun's formal surrender.

That end of WWII came during MacArthur's choreographed ceremony 70 years ago this Sept. 2 on the battleship Missouri in Tokyo Bay.

"I received no instructions as to what to say or what to do," MacArthur wrote in "Reminiscences." "I was on my own, (with) only God and my conscience to guide me." ...read the rest here

Just say no

My latest post on s+b Blogs:

I was one of those toddlers whose first word — if you choose to believe my mother — was an emphatic “No,” so I’ve always found it hard to believe that people need disobedience instruction. Then I read the stories in Ira Chaleff’s new book, Intelligent Disobedience: Doing Right When What You’re Told to Do Is Wrong (Berrett-Koehler, 2015).

The story I found most shocking took place in a McDonald’s in a small town in Kentucky in 2004. The restaurant’s 51-year-old manager received a phone call from a man claiming to be a police officer; he told her that an 18-year-old female employee had been accused of stealing a customer’s purse. Rather than subject the young woman to arrest and a search at police headquarters, the officer suggested that it might be less distressful if the manager herself searched the woman for evidence of the crime.

The manager agreed and, following the officer’s directions over the phone, stripped the crying woman and searched her clothing in a locked storeroom. When the manager told the officer that she had to go back to work, the officer asked if she could call her husband to watch the woman until the police arrived. Instead, the unmarried manager called her boyfriend, who proceeded to follow the officer’s increasingly sexually abusive instructions (with the manager checking in on occasion). Four hours after the call began, the officer told the manager to bring another man into the room, and she found a handyman who was in the restaurant. The handyman refused to participate, at which point the manager began to act on her own misgivings and eventually allowed the woman to dress and leave the restaurant.

It was, of course, a sadistic hoax. The caller, an off-duty prison guard in Florida, had been making similar calls to fast-food restaurants throughout the U.S. Incredibly, he had been able to convince the managers of nearly 70 other restaurants in 30 states to illegally detain and search employees — and the employees themselves had obeyed their managers’ outrageous instructions.

If you are familiar with the experiments of Stanley Milgram and Philip Zimbardo, who wrote the foreword to Intelligent Disobedience, you already know that most people have been conditioned to obey orders given by authority figures, including orders that violate moral, ethical, and legal norms. “It is part of the socialization process in any human culture to teach our young to obey,” writes Chaleff. But he goes on to argue that teaching employees to disobey orders is an essential organizational safeguard — that nurses are protecting patients and their employers by questioning doctors’ orders that fly in the face of their training, and that accountants can prevent massive frauds by refusing to execute orders that violate their professional standards.

The problem, Chaleff points out, is that we receive little or no counter-conditioning to our obedience-focused upbringing. Unless you are a natural-born naysayer, it is likely that you find it difficult to stand up to authority. And even if you are, like me, one of those pains in the organizational neck, you probably don’t know how to disobey in constructive and effective ways.

Chaleff found the solution to this human problem in canines. Service dogs, like those that guide people with sight impairments, are taught “intelligent disobedience.” They learn how to identify and disobey orders that might cause harm to their charges. A service dog that is ordered forward will use its body to stop its owner from stepping off a curb if there is a potential danger, such as a quiet electric car; it will turn right or left to protect its owner from a low-hanging tree limb on a walk in the woods. “We can use the guide dog,” writes Chaleff, “as a memorable symbol for the capacity to which we aspire: to do the right thing when what we are told to do is wrong.”

Typically, humans want dogs to act more like people. (Sit! Stay!) Chaleff effectively suggests that people act more like these dogs. But the training required to do so doesn’t involve biscuits or rolled-up newspapers that can be wielded as rewards and punishment. Rather, we can short-circuit the ingrained habit of employees to automatically obey orders by teaching them to follow a formula that Chaleff distills as so... read the rest here

The professor of power talks books

My latest book post on the strategy+business blogs:

In a time when ideology often trumps reality, Jeffery Pfeffer is an unrepentant Machiavellian. Like Niccolò Machiavelli, Pfeffer, who is the Thomas D. Dee II Professor of Organizational Behavior at Stanford University’s Graduate School of Business, studies and teaches the ways and means of power. And he, too, is convinced that a clear-eyed understanding of the world and how it works is an essential prerequisite of leadership effectiveness.

Most of Pfeffer’s 14 books are devoted to bolstering this effectiveness. In Hard Facts, Dangerous Half-Truths, and Total Nonsense: Profiting from Evidence-Based Management (Harvard Business Review Press, 2006), Pfeffer and coauthor Robert Suttonshowed that conventional management wisdom was rife with fallacies and argued for a more scientific approach that presaged the current interest in data science. In Power: Why Some People Have It — and Others Don’t (Harper Business, 2010), which stemmed from his popular course at Stanford, “The Paths to Power,” Pfeffer argued that the ability to attain and wield power was an indispensable trait of leadership success.

In his latest book, Leadership BS: Fixing Workplaces and Careers One Truth at a Time (Harper Business, 2015), Pfeffer delivers a powerful indictment of the leadership industry, whose teachings, he says, undermine the overall state of leadership because they are “based more on hope than reality, on wishes rather than data, on beliefs instead of science.” Curious to learn where we might go for better information, I asked him what books he would recommend for aspiring and existing leaders.

Influence: Science and Practice, 5th Edition, by Robert B. Cialdini (Pearson, 2008). “Influence is both well-written and profoundly insightful about human behavior. It demonstrates that business books can be rigorous and accessible at the same time. If you want to understand the use of power, you need to begin with Bob Cialdini’s seven principles of influence.”

Moneyball: The Art of Winning an Unfair Game, by Michael Lewis (W.W. Norton, 2003). “The thing that attracts me to Moneyball and why it such a wonderful book, aside from Lewis’s engaging and inspirational writing, is that it did a better job of explaining evidence-based management than Bob Sutton and I did in our book. It is a book that speaks to the power of analysis and critical thinking — of asking tough questions and using data to answer those questions, and how that can improve decision making and business performance. Moneyball shows why CEOs cannot push off data science to the IT department.”

The Power Broker: Robert Moses and the Fall of New York, by Robert A. Caro (Knopf, 1974). “This Pulitzer Prize–winner is a brilliant biography of a transformative figure of the 20th century that does not mythologize or sugarcoat who and what Robert Moses was. It’s also a history of New York and the policies of urban renewal that exist to this day, as well as a tremendous study of power and power dynamics. Caro’s ambivalence about power is reflective of what I see in students and other people. On the one hand, we admire power for its capacity to get things done (Moses basically reconstructed New York City) — and on the other, we are horrified by the tactics and the strategies needed to actually make big things happen. In a very explicit way,The Power Broker examines the tradeoff between means and ends.”

The Reckoning, by David Halberstam (William Morrow, 1986). “When I first read The Reckoning, I thought it was going to be about the fall of the U.S. auto industry, which of course it is. It also turned out to be a fabulous study of business cultures and management told through the story of Robert McNamara and the so-called Whiz Kids. Halberstam tracks the rise of the modern management ethos in the U.S. — which focuses on numbers and returning money to shareholders, and which claims that a good leader can run anything from General Motors to the Department of Defense — versus the very different ethos we see in countries such as Japan and Germany. The Reckoning is an important book because it speaks to the implicit and sometimes explicit assumptions we have about what leaders and managers do and how they ought to think about their jobs. These are issues that we are still struggling with today.”

The Audacity of Holacracy

My latest book post on the strategy+business blogs:

These days, utopianism is rife in the business world. Perhaps it presages an evolutionary leap to a brave new paradigm. Perhaps the proliferation of pie-in-the-sky thinking is a reaction to the unsettled times, driven by environmental threats, shifts in the global power structure, technological disruption, and economic disparity. Perhaps it’s a cyclical outbreak — an overly exuberant bubble of dissatisfaction with business as usual that will naturally deflate over time. In any case, there seems to be a notable increase in proposals aimed at transforming business from a heartless profit mechanism into a force for good that empowers people and enriches lives.

One of the most radical of these proposals has been put forth by Brian J. Robertson, computer programmer, entrepreneur, and, most recently, management messiah. In Holacracy: The New Management System for a Rapidly Changing World (Henry Holt, 2015), Robertson, without a shadow of doubt and with little due diligence, calls for a fundamental revamping of how businesses are run.

You’ve probably heard of holacracy by now. The controversial management concept has received a lot of media attention because Tony Hsieh has been adopting it at Zappos for the past couple of years. Back in April, almost 15 percent of the online shoe-retailing company’s then-1,500 employees took a live-it-or-leave-it buyout offer rather than stay the course and commit to holacracy. That’s a pretty notable number because Zappos is known for its culture of empowerment and its highly engaged employees.

However, most of the Zappos coverage doesn’t really get to the radical and utopian nature of holacracy. For that, you need Robertson’s book.

It’s a sneaky read. One minute, you’re immersed in the minutia of vocabulary and etiquette that governs this alternative “social technology.” The next, you realize that Robertson’s rules of order are intended to do nothing less than completely replace the hierarchy of managerial power and authority on which all large companies are structured...read the rest here

Kellogg strategy prof recommends 3 books for aspiring leaders

Harry Kraemer’s Required Reading

 

by Theodore Kinni

s+b Blogs

 

One of my favorite lines from a business book was written by Harry Kraemer: “Throughout my career, up to and including when I was CEO, I benefited from the fact that I worked with a number of amazing people who were willing to prevent me from doing things that did not make sense.” Oh, the humility!

Since stepping down as chairman and CEO of Baxter International in 2004, Kraemer has been a leading advocate of values-based leadership, which he says is supported by four principles: self-reflection, balance, true self-confidence, and genuine humility. He has written books exploring those principles, including Values to Action: The Four Principles of Values-Based Leadership (Jossey-Bass, 2011), which includes that favorite line. Currently, Kraemer serves as a clinical professor of strategy at Northwestern University's Kellogg School of Management, where he was named Professor of the Year in 2008, and as an executive partner at Madison Dearborn Partners, a private equity firm.



Other people’s books have played an important role in Kraemer’s career. “Values-based leadership starts within, developing the self-awareness and self-knowledge that allows you to become your best self. As your best self, you are better able to relate to and influence others, which is the essence of leadership,” he explained to me. “Although the process is highly personal, I have always found insight and inspiration in the thoughts and experiences of others.” Kraemer called out the following three books as especially notable for having “helped me look more deeply at my own actions and behaviors, and how I can become my best self.”

 

Mere Christianity, by C.S. Lewis (HarperCollins, 1952)
“A classic of philosophical and religious thought, this book presents a compelling argument for the existence of moral law that governs the behaviors of all people. I read it for the first time many years ago when I attended my first silent retreat at the invitation of my future father-in-law. I was immediately taken by Lewis’s conversion from nonbeliever to believer, because he kept an open mind as he explored the beliefs and opinions of others. In addition to guiding my spiritual journey, Mere Christianity influenced my leadership by providing examples of values-based leadership principles, especially balance (listening to a variety of opinions to gain a broad perspective) and genuine humility (knowing that everyone is important and no one has all the answers).”

The 7 Habits of Highly Effective People: Powerful Lessons in Personal Change, by Stephen R. Covey (Simon & Schuster, 1989)
“One of the quintessential books on leadership, 7 Habits never ceases to inspire me with its depth and simplicity. Covey’s habits, including being proactive as opposed to reactive, beginning with the end in mind, and win/win thinking, are straightforward leadership lessons that can be applied at every career level. For me, these powerful practices serve as affirmations on the path of values-based leadership.”

Team of Rivals: The Political Genius of Abraham Lincoln, by Doris Kearns Goodwin (Simon & Schuster, 2005)
“Abraham Lincoln was one of the greatest leaders in history, and Goodwin’s book offers deep insights into his leadership approach. Lincoln knew that he needed to bring together a team of the absolutely best people after he was elected president in 1860, and as he led the nation through the Civil War and the abolition of slavery. And he did exactly that — no matter that those people held very different views or even that they disliked him personally and had opposed his presidency. (Three of Lincoln’s cabinet members had run against him in the 1860 election, including Secretary of State William Seward.) I can’t think of a more powerful role model for bridging differences of opinion and using diversity of perspectives to lead more effectively.”

p.s. Harry Kramer's new book, Becoming the Best: Build a World-Class Organization Through Values-Based Leadership (Wiley, 2015), is also well worth a read.

The top executive coach calls out 4 must-read books

Marshall Goldsmith’s Required Reading

 

by Theodore Kinni

s+b Blogs

The other day I was reading about a CEO who had a near-fatal skiing accident, which caused him to embrace a more humanist approach to leadership that is now transforming his company. Marshall Goldsmith would call the accident a trigger, which he defines as “any major or minor stimulus that reshapes our thoughts and actions.” In his new book, Triggers: Creating Behavior That Lasts — Becoming the Person You Want to Be (Crown, 2015), he explores the role that such stimuli play in behavior change.

Helping leaders achieve positive, lasting behavior change has been Goldsmith’s life work. A top-rated executive coach, he has worked with more than 150 CEOs of major companies and their management teams. Among many recognitions and awards he has received, Goldsmith has been ranked among the 15 most influential business thinkers in the world in the biannual Thinker50 list since 2009. He teaches executive education at Dartmouth’s Tuck School and has been a volunteer teacher for U.S. Army generals, Navy admirals, Girl Scout executives, and International and American Red Cross leaders.



Goldsmith has written more than 30 books, including What Got You Here Won’t Get You There: How Successful People Become Even More Successful (Hachette, 2007) and MOJO: How to Get It, How to Keep It, How to Get It Back If You Lose It (Hachette, 2010), winner of the Harold Longman Award for Business Book of the Year. When I asked him to name a few books that could serve as triggers for leaders who are intent on enhancing their performance, he recommended the following titles.

Hesselbein on Leadership, by Frances Hesselbein (Jossey-Bass, 2013)
“Of all of the great leaders that I have had the honor to coach, Frances Hesselbein, the former CEO of the Girl Scouts of America and a winner of the Presidential Medal of Freedom, the highest civilian award in the U.S., stands out as one of the few from whom I learned far more than I taught. Peter Drucker said that she was the most effective executive that he had ever met, and after having served on the Drucker Foundation Advisory Board for 10 years, I can assure you that he was no easy grader! In Hesselbein on Leadership, Frances shares her philosophy on leadership and life. If you take nothing else away from it except the importance of leading by example, reading it will be time well spent.”

The Leadership Challenge: How to Make Extraordinary Things Happen in Organizations, by James Kouzes and Barry Posner (5th ed., Jossey-Bass, 2012)
“This book, first published more than 25 years ago, in 1987, is still the gold standard on leadership. The five leadership practices that it details are based on extensive research, and they add up to the most comprehensive and thoughtful analysis of what it takes to be a great leader that I have ever seen. And I love the stories and examples because they are immediately applicable by leaders at all levels — not just CEOs.”

Management of Organizational Behavior: Leading Human Resources, by Paul Hersey, Kenneth Blanchard, and Dewey Johnson (10th ed., Prentice Hall, 2013)
“The development of the situational leadership theory by Paul and Ken in the 1970s gave us the first practical model for analyzing situations and determining which leadership style work best in each. Since then, I have taught this model to thousands of leaders. The ideas in this textbook can seem like common sense, but they are far from common practice.”

The Miracle of Mindfulness: A Manual on Meditation, by Thich Nhat Hanh (Beacon Press, 1999)
“I have been a philosophical Buddhist for many years and have read more than 400 books on Buddhism, but no other Buddhist author has influenced my thinking as much as Thich Nhat Hanh. His work is simple and profound at the same time. What, for instance, could be more powerful a leadership mind-set than to approach every task as an opportunity to enhance your awareness of the world? Many of the elements of my coaching process, such as feedforward, have been derived from this Vietnamese monk’s work.”