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Aflac Compensation Vote

adevero — Fri, 28 Mar 2008 09:15:31 CDT

Aflac, the insurance company with the spokesduck, is putting its executive compensation plan before stockholders for their approval. While the vote is non-binding, they have taken the perspective that it is morally binding. Aflac consistently out-performs the market (by a lot), and the leaders could certainly justify outrageous packages -- but they have chosen instead to remain transparent and accountable.

This is a real example of Principle-Power in action. The principle in greatest prominence here? "Build better value for our shareholders". More public companies should consider having this as a core value and addressing it similarly.

In a cultural shift, CEO Dan Amos appeared on the NBC Today Show, perhaps the most un-business-oriented television show on the air, proving the uniqueness of this move. He went on the record saying that if the shareholders objected to the compensation committee's recommendation then Aflac would reexamine and change its practices. Talk about putting your money where your mouth is!

Below is an excerpt from Aflac's website. Read the corporate announcement by clicking here.

Our Philosophy
Mission
To combineinnovative strategic marketing with quality products and services atcompetitive prices to provide the best insurance value for consumers.
Guiding Principles

Offer quality products and services at competitive prices and use new technology to better serve our policyholders.
Build better value for our shareholders.
Supply quality service for our agents.
Provide an enriching and rewarding workplace for our employees.

Fuel prices and Plane Fares

adevero — Sat, 15 Mar 2008 10:26:35 CDT

If you've purchased a plane ticket lately you may have noticed the same inconsistency that I did. Why is it that the cheapest tickets are those that take the most circuitous route, thereby using the greatest amount of fuel? Understandably, one pays for convenience, and non-stop flights are more convenient. But still, there is a gross disconnect between the airlines' lament over fuel prices, and their using them to justify increased fares, and their irresponsible wastage when creating crazily roundabout routes.

Case and point: On a recent trip to London I saved $800 US (at least) by purchasing a ticket that required three stops. But consider that the total distance from start to London was 5000 if flown directly. Instead, I flew 1200 miles west, and then 6200 miles east, adding 2400 miles (at least) to the trip. if amortized across the many people who also purchased this "cut-rate" ticket, the amount of wasted fuel numbers in the hundreds of thousands of liters.

How can this pricing structure be justified (or this route--EVER)?

Shallow Diversity Training Fails

adevero — Mon, 21 Jan 2008 13:03:06 CST

It took a study to figure out that superficial training fails to change attitudes and culture?? Diversity training works in a context of strategic alignment and Principle-Power. But most training (like most core values) is shallow--intended to cover up a problem rather than transform a condition.

This seems like an apprpriate article for MLK Day -- the revelation that tolerance of diversity stems from a context, NOT from learning catch-phrases and taboo vocabulary. Real organizational culture transformation goes from top to bottom and through every layer of an organization. It requires being Powered by Principle, and constant vigilance in the quest for violations that can be corrected.

Home

adevero — Thu, 17 Jan 2008 22:18:01 CST

Welcome to the Powered by Principle blog!

This is a place for anyone with an interest in building strategically aligned, values-based organizations to weigh in, learn,respond, rant or otherwise participate in a community of ideas, organizations and individual practice and technique.

While I am working to migrate the postings from our former locatation at http://poweredbyprinciple.blogspot.com/, I will also be adding new thoughts and observations here. But the great thing on this blog, is that you can do the same!

The world is a vast community of organizations, networks and other connections. If you are like me, then everywhere you look you see connections, and many of those are connected to the ideas in the Powered by Principle approach. Bring your observations, add the example you find, suggest new approaches, laud the great models of Principle-Power.

This conversation will be as rich as we make it!

Here is the link to buy the book!

There is a full page of other suggested links--and I know we will all add more to those! Just view the page titles and look for "Suggested Links".

Uh Oh-- Is Home Depot Telling the Whole Truth???

adevero — Tue, 15 Jan 2008 16:01:57 CST

Well--I may have to eat my words on this one. I've heard clarification from a whole lot of Home Depot employees all over the country. Apparently, in stores that are doing less that are doing under $35m, the night crews are not being moved, they are effectively being phased out. IMAs (orderers are being eliminated) and offered other positions. But those new positions are often part-time, a significant sacrifice for long-term full-time employees.
The same kind of not-so-subtle tactic to force attrition is being used on night crew personnel in smaller stores. They are being offered insufficient hours to replace their income.
I'm waiting to hear what benefits they lose in that transition.
This is only a problem because of the smokescreen that yesterday's announcement. Layoffs are legitimate in hard times -- lying about them is not.

Home Depot Claims to Avoid Layoffs

adevero — Tue, 15 Jan 2008 16:00:48 CST

"Home Depot Inc. plans to reassign overnight-shift employees to days at its lower volume stores, a change that puts more workers on the sales floor without raising costs."

Home Depot avoids layoffs and redeploys night workers instead. CEO Blake deserves real kudos for taking the Principle-Powered road to re-building the belabored company's famed customer service. This shows real strategic thought and creativity!

Sears Spyware

adevero — Thu, 10 Jan 2008 12:18:13 CST

Check out this story. Sears installs spyware on your computer when you join its seemingly innocuous "community". That they do it is less problematic than the effort they expend in making sure NOT to tell you that's what they are going to do. One key characteristic of being Powered by Principle is transparency. If they gave consumers a real choice before beginning to spy on their web activity it would be fair play. This isn't. And it is unbecoming on Sears!

Buffett's Marmon Deal

adevero — Thu, 27 Dec 2007 15:48:49 CST

Demonstrating his customary Principle-Power, Warren Buffett has purchased an organization that is itself, Powered by Principle. For anyone who thinks that principles can not endure multinational diversification and demand for profit, one has only to explore the Marmon Group and its guiding principles--plus their stellar financials. I highly recommend looking at their site, and exploring some of their many holdings to see how the quest for long term viability through principled leadership produces extraordinary and sustained growth and earnings.

What this demonstrates is that through true alignment, from the top with the Board of Directors, throughout an entire organization (even if it is hundreds of unique companies), principles can thrive and dictate decision-making.

Federal Reserve Tries to Avert Future Sub-Primes Fiascos

adevero — Tue, 18 Dec 2007 16:13:02 CST

Inevitably, when the government begins to try to fix something, it gets it not quite right. It's hard to tell what went awry here, since presumably, the Fed isn't subject to the political forces that dictate to Congress.
In the regulation put forth today, many aspects of lax and predatory lending are addressed. But the one that would have made the biggest difference is left out. Ultimately, the real sub-prime debacle hasn't hit yet but is imminent with rate increases. Instead of addressing that, the Fed addressed all of the problems that are the source of the spate of foreclosures already underway. Effectively, those would all have been averted by mortgage bankers simply following basic accounting principle, like verifying income and analyzing borrower's budgets before closing the deal. Since that is the obvious, easy stuff to solve, the Fed addressed that.
But the real problem is the bait and switch aspect of these loans. By offering low introductory rates, borrowers are lured by a false sense of affordability. What the lenders fail to do is walk the borrower through the "worst case scenario" possibility--what that payment will be should the rates adjust to their maximal level. That is anathema to all sales people, and borrowers who are in the sub-prime category are, by definition, not financially conservative or perhaps savvy.
The Fed paid lip service to this issue by attacking the advertisement of low introductory rates. But the problem resides in the guiding principles of the lender or lender's agent. Caring for a customer's eventual solvency is different from simply closing the deal. It requires adherence to a different set of values, one that treasures the delivery of truly sustainable loans over the immediacy of origination fees and mortgage commissions.

Powered by Principle BLOGROLL (wikis too)

adevero — Mon, 17 Dec 2007 09:00:08 CST

Bizcomm, Educational Wiki: Lots of thought on communication in business and by business

Small Biz Secret Weapons: VERY Basic information on setting up the architecture of a business.

Triple Pundit: A Blog dedicated to triple bottom line thought

Instigator Blog: Comic-Edged Business Blog

Michael Wade's Musing on Business

CEO Blog: All for and from perspective of Chief Executives

Management Chat: self-explanatory

LeaderNotes: Really cool, eclectic blog

Social ROI Blog: Amazingly comprehensive blogroll, plus thoughtful entries

Verizon Wireless's Next Good Move

adevero — Sat, 01 Dec 2007 12:33:30 CST

Verizon Wireless made a second announcement that it will begin development of a next generation network beyond its current technology, CDMA. The great think about this is the degree to which it is an acknowledgment on Verizon's part that we are in a global community and people are transient--so their technology needs to be flexible. CDMA sis incompatible with GSM, the prevailing worldwide standard. The next generation that Verizon is developing would correct that. This announcement, coupled to their announcement days earlier that they will allow any cell phone to be used on their network signals a massive advance beyond their competitors. While in the short-term the release of their customers from the need to by proprietary technology may be frightening, ultimately it is a principle-powered gift to consumers that will engender loyalty. The same can be said of creating a means for their network to be used by others and their own customers worldwide.

Verizon Wireless Thinks Clearly!

adevero — Sat, 01 Dec 2007 12:18:02 CST

This week Verizon Wireless made two announcements that signal really well-aligned strategic thinking and longer vision than is normally associated with the mentality of publicly traded companies. They will begin opening their network for use by any telephone that a customer has . This allows for far greater hardware choice for consumers, and the potential for more innovation technologically. It's a brave and pioneering move in the US since all the other carriers are continuing to hamstring consumers by requiring purchase of their phones from the carrier. Only in the US is that done--the rest of the world can switch between networks or carriers by exchanging SIM cards. That gives them more hardware choice and more competition.

Along with the allowance of hardware on their network, they also plan to provide the source code for their network. That will create a forum for innovation beyond what the major electronics companies may be generating. New ideas can then be tried out and tested on the Verizon network, and the resulting innovations can be ready for market faster.

As a Verizon Wireless customer I'm delighted. If I was questioning my desire to remain with Verizon (for example, if I wanted to get an iPhone--which only work on At&T Cingular--a curious inversion of the US carrier lockout) those leanings are allayed.

Can technology security be enhanced through Principle Power?

adevero — Tue, 27 Nov 2007 14:22:03 CST

In the Wall Street Journal Technology Blog, Ben Worthen suggests that workers who are sloppy with data and other technology security may not understand its worth. His analogy is great: If someone handed you a suitcase and told you it had $2million dollars in cash inside it--and asked you to guard it, you would do so with enormous vigilance. That's because you understand what $2m is worth.

Of course, if the same person asked you to guard a box of (say) comic books, you might exert less vigilance. If the box of comics were stolen, it might amaze you to learn it was worth more than $2m, as the contents were rare collectibles.

To quote Worthen
The perception problem: When workers lose a computer disk or a portable storage device such as a USB memory stick, they seem to look at the $20 it will cost to replace the device, not the value of the data inside it. (It’s like valuing that theoretical $10 million shipment by the cost of the briefcase and not by the cash inside.) “There’s a real disconnect between the perceived value and the real value of information,” says Larry Ponemon, chairman of the Ponemon Institute, a privacy think tank. “The rank and file employee still doesn’t seem to get it.”
You could say the same about myriad aspects of organizational reality--most obviously, strategy and core values. Employees fail to perform certain aspects of their jobs well because the don't understand the cost of those lapses. When the cashier at a retail outlet appears dead on her feet, and stares at you with listless eyes as she robotically says "have a nice day", she is only concerned with her next break. If asked about the consequences of that performance, she might expand her perspective to include your personal experience and even her own evaluation. But the more reaching problem of your dissatisfaction and how prolific you are likely to be in complaining to your sphere of influence--and the damage that can cause when multiplied by lots of robotic cashiers and complaining customers--that cost is beyond her understanding.
Alignment of core values an strategy has the same critical impact as securing data. Breaking the bond with a customer by delivering sup-par products or service does not differ from lapses in security that place personal information at risk. Any difference between the two is but a matter of degree, not essence.

Mortgage Reform Act--Trying to Solve the World's Ills With Rules

adevero — Sun, 11 Nov 2007 13:35:48 CST

To learn about this bill, The Mortgage Reform and Anti-Predatory Lending Act, read the Bloodhound Blog, or the House of Representative's Committee on Financial Services publication of the bill itself.

As usual, Congress has reacted to a problem by trying to solve retroactive bad behavior with new and complicated legislation. Whenever there is some systemic issue that no one can fix instantly, our leaders' reaction is to try to fix it with a new law. I guess the thinking is that if we circumscribe enough of what is "bad behavior" what will be left will be the right behavior. It's a persistent sociological fallacy that always fails. Our history is littered with failure of such laws to fundamentally change behavior.

Having said that, the industry surrounding the sub-prime mortgage fiasco ought to create structural parameters that would dissuade the kind of predatory selling that the mortgage industry succumbed to. Unfortunately for Congress, the culprits are spread across a huge field, ranging from individual mortgage brokers to banks that sell their paper (and with it their responsibility) to securitization as a means to finance lending, and finally, to the securities market itself which drives the whole complex mess.

The law, like all such laws, creates as many problems as it solves. The onus of determining whether a particular loan is appropriate is shifted --but it's not clear exactly who it is shifted to. This is pretty muddy. If a broker sells the mortgage, but the paper is written by a bank, who holds the responsibility? And if a borrower, for whatever reason, defaults on his loan, who's to say whether that is due to the inappropriateness of the loan or the borrower's irresponsibility or an unavoidable change in circumstances? Stuart Saft of The Wall Street Journal correctly points out that this law opens to door to lawsuits preceding or following every foreclosure. Will each and every attempt by a bank to foreclose now require a test for liability litigation? And if the criteria for lending become so restrictive asto leave every mortgageopen to litigation upon default (or even, just when the borrower finds it hard to pay) who would lend anyway?

Another peculiarity of the bill, and one that seems a bit far-reaching given the stated purpose of the law, is that it extends protection to renters in foreclosable properties. Imagine you are a lender holding the paper on a rental property. If the mortgage goes into default but the property is let, the foreclosure proceedings are trumped by the renter's tenancy. This is a potentially mischievous means for defaulting borrowers to cover themselves, but also, even in the most ordinary of circumstances, a potential minefield for lenders. It foretells lots of restrictive lending in which borrowers sign away their rights to rent out their property, not to mention their rights to litigate under the act itself (think about the work-arounds that vendors have found to lock in buyers from exercising their 3 day right of rescission).

There is lots more to uncover in this bill regarding its unintended consequences. But the deeper point from the perspective of the PxP approach is that it is wrongheaded. Core values can't be legislated through rules, because, as we've seen in this exploration, rules engender loopholes to those who aim to violate them. Better yet would be the self-policing of the industry by each component piece. The mortgage industry ought to have a strict code of core values that attaches to licensure. That code ought to imbue brokers with concern for repayment--instead of just the incentive of commissions to get people into loans, even if the first period of interest adjustment is sure to be bank-breaking for the borrower.

The HR Bill does address one issue that needs tackling, albeit in some clearer way.Securitization allows for a great distance between the borrower and those who ultimately hold the paper. There needs to be some way to maintain responsibility throughout the process so that banks, even though they sell off the paper, are still accountable for the fiduciary strength of their lending. Likewise with mortgage brokers and with investment backs that generate and sell securities. And finally, are those who purchase mortgage securitiezs to be held responsible for the quality of the risk assessment in the mortgages that make up their investment instrument? That's a very long arm of responsibility indeed. How would investors assess that? It would require a great deal more documentation and disclosure on the quality of the loans and the criteria used in making them. But that exploration may be best left to another blogger on another day!

Oprah Could Have Averted Scandal

adevero — Thu, 08 Nov 2007 14:36:38 CST

One of the biggest laments of those following the Oprah School scandal is that Oprah should have opened a school here, in the US, where she could watch things. That is ridiculous as a solution. If having to be present was a prerequisite for being able to have one's business (or organization) be Powered by Principle, or even just ethical, than multi-nationals would all be dismal failures in every way. But that isn't the case. The problem isn't that Oprah wasn't there. The problem was that there was way too little alignment between the principles underlying the school (Oprah's personal values may, in fact, have been all there was) and the actual, moment-by-moment operation of the school.

There are lots of aspects to this problem. The first, and most important, is that Oprah's personal values, while laudable, are probably not sufficient to act as a core values list for the institution. The school needs its own set of core values, both those that are fundamental to anything Oprah cares about, and those which were essential for the particular mission to get accomplished. While I don't know for sure, I suspect that there was not work like that done, since Oprah is so powerful, and her "brand" would have been seen as a clear enough statement of principles.

Along with a complete and relevant set of principles, the school needed top to bottom alignment with those values--not just cheer-leading and self-congratulations. Those values should have been completely woven throughout the hiring, training, compensation, teaching approach methods, performance reviews and evensome feedback mechanism that might have given early warning of the abusive behavior. These structural elements are always vital, but they become even more crucial when the founder and "heart of the enterprise" is remotely located. Counting on the sentimentality and inspiration that the school's creation generated is a naive move. But one can understand how Oprah chose to do it that way. She runs a very successful enterprise here, in the US. Of course, she is here, evangelizing, modeling, correcting and managing all the time. Plus, she probably has lots of appropriate structure in Harpo Productions--structure that encourages the right choices and level of excellence she demands.

The key for the school is not just replacing the people--even if the new batch has no one of abusive tendencies. Corruption and the gravitation toward mediocrity areintegraltendencies in most organizations and in many people. They get corrected through structure, reinforcement, self-criticism, improvement and the understanding that being Powered by Principle is always just a moment away from the next violation. Having that humility and vigilance on the ground, in Africa, is what was and is needed.

Old Blog Oct. 2006-Sep. 26, 2007

adevero — Wed, 07 Nov 2007 14:02:19 CST

Wednesday, September 26, 2007

Thought-Provoking Adage

The other night a waiter (Nathan) recited the following adage to me, first told him by his father:

When you don't stand for something you will get knocked over by nothing.

I wonder how many executives at Mattel are now wishing that they had heeded Nathan's Dad's advice? From a business standpoint, nothing could be more true over the long haul. The principles that underpin the culture and arise out of the strategy act as a skeleton for the organization's structural integrity. And the edifice will stand or crumble depending on their stamina, strength and ubiquity.

Posted by Amie Devero at 2:13 PM 0 comments

Friday, September 21, 2007

Berkshire-Hathaway's Owner's Manual

When you are lucky enough to be able to purchase Berkshire-Hathaway stock, you will receive an "Owner's Manual". Within it are 15 principles that Warren Buffett and his partner, Charlie Munger, promise to be guided by (and warn that they will be guided by). It's a great example of being Powered by Principle-- and more specifically, of the courage it takes to let those who can't align with those principles fall by the wayside. Buffett suggests in this manual that if the new owner is comfortable with and shares these principles, he will be content as a stockholder; and if he isn't and doesn't he should probably get out.

The full link is: Berkshire-Hathaway Owner's Manual, Owner-Related Principles

Posted by Amie Devero at 6:58 PM 0 comments

Wednesday, September 19, 2007

Powered by Principle Now Available

To purchase the book behind the movement click here!

Then come back and join this conversation once more!

Posted by Amie Devero at 4:25 PM 0 comments

Wednesday, December 06, 2006

Values as Differentiator

In the process of undertaking the PxP process, you will need to develop strategic core values. These are principles that are generated in response to the strategy. Whether or not an organization uses a strategy map (my preference) or any other means of articulating strategic thought, the strategy acts as the guide for final values development.

Another way of thinking about this: Given your differentiator, what core value best expresses it? And, given the behaviors that your differentiator will require (this piece is work worth doing, by the way), what core values best engender those; Or, what core values would be essential to performing those necessary behaviors?

These are, respectively, direct strategy-enablers and indirect strategy-enablers.

Consider the Southwest business model.(read The Southwest Airlines Way by Jody Hoffer Gottell) One key element of their low-cost, non-spoke and wheel-hub system is that they have super-fast turnaround of planes on the ground. In fact, everyone in the organization can be overheard saying "we can't make money on the ground--only in the air" regularly. In order to support the low-cost model, one explicit direct core value is "Deliver the most reliable service at the lowest cost". Most low-cost airlines do that by cutting wages. However, if you cut wages you get less employee retention, morale problems and less teamwork and cooperation--not to mention resentment between tiers of pay grade. Why does this matter?

Well, being able to turn planes quickly requires certain behaviors. Specifically, it takes a high level of cooperation and teamwork, a flexibility amongst workers to do any job that is needed, and a respect between departments so that resentment doesn't impede the flow of work. On that basis, the indirect strategy-enabler is "Good people are essential to success" and "Invest the time to connect with employees and customers". Furthermore, although it isn't stated as a core value per se, the overriding principle that guides Southwest and that endures over time despite shifting conditions and challenges, is that they focus on relationships and have built every aspect of their organization to support that key value.

Posted by Amie Devero at 3:48 PM 0 comments

Thursday, November 23, 2006

Values-->Employee satisfaction-->Revenue

There are a bunch of studies pointing out that when employee satisfaction is high so is customer retention. It doesn't take a huge logical leap to see, therefore, that it might pay in revenue and reduced marketing costs to make sure that employees are satisfied--and that the right core values might be a big piece of that puzzle. The causal link is straightforward:

The Right Core Value, Driven through the PxP Organization-->Satisfied Employees-->Great Customer Service and CRM--> Customer Retention--> Increased Sales and Less need to Acquire Customers (reduce marketing cost).

While I haven't yet checked it out, I'm told that TARP has studies that indicate this holds true particularly for family-owned businesses, in which the core values are steadfast and honored, and in which the fundamental drive is to create longevity rather than quarter on quarter returns.

Posted by Amie Devero at 12:23 PM 0 comments

Tuesday, November 14, 2006

M&A and Principle

One of the greatest challenges for principle-powered organizations is the delivery of a consistent culture throughout acquired organizations. If the strategy of the company is based on acquisition, and they are snapping up other companies at any rate, then it will be vital to find ways to evangelize the Powered-by-Principle model. Doing this requires a specific plan that can be rolled out time and time again.

Furthermore, as the organization and its modules expand, they get further and further away from the CEO and his influence--at least on the culture. That means that a special vigilance has to be developed in order to ensure the enfolding of the new company in the culture. I was speaking to a CEO friend yesterday and he was explaining how his acquisitional company does it. Since his core principles revolve largely around the necessity of teamwork, he has developed his pay structure for hourly workers such that without the team succeeding no one can achieve maximal compensation. It isn't just a stick--it has a carrot side too. When the team reaches its goal, everyone gets compensated for it, even those who only reached 70% of their individual goals (of course, there is a cost for them on them on that side).

Sunday, October 29, 2006

The Scientific World

I hadn't given much thought to the application of the PxP model in the realm of research and scientific/engineering invention. Then I ran across citations to Herbert Holloman, the inspiration for an ongoing symposium called "Engineering as Social Enterprise".

The challenges that arise in this nexus between the pure quest for knowledge, the marketplace in which technological innovations sell and the impact those goods and services have in the world, is striking. As engineers go about looking for new ways to engage the physical world, they are bound to uncover technologies with negative impact--even those that also have positive sides. The nuclear bomb/energy being the paradigmatic case.

How then, how to direct research, with all of its reliance on grants and underwriting from the corporate world, so that the core values embraced by the engineers, or their governing association, get honored?

Like so many of the issues that arise in the PxP evolution, this requires insight from multiple disciplines: economists, engineers, social scientists, environmentalists, anthropologists and perhaps even futurists must weigh in on the conversation.

In the meantime, the challenge of developing, refining and expressing the core values that would best forward science and the goals of both society and the individual enterprise is left to the competencies available; No doubt some of those are formidable. No doubt, some are less so.

Thursday, October 26, 2006

Leading with a Purpose

A Business Week article described a new trend--using the Baghavad Gita and Hindu thought as basis for leadership and management training and thought. The idea is that social responsibility and good-works are the route to leadership satisfaction and management excellence. In the PxP model I've taken the very "bottom-line' perspective that ultimately, everything must be in service of shareholder value. But it begs the question of whether leading for a purpose--or being socially responsible as an end in itself--is reason enough to behave well.

It's difficult to tease out my own personal belief in the basic rightness of simply choosing to do good for its own sake, from my suspicion that business people operate in an amoral context. That is, for many people who go into business, and certainly for the stock market as a non-personal, abstract phenomenon, there must be a material reward that justifies behavior. In order for business leaders and organizational teams to make new choices, that material reward must be at least as big as it would be if one were acting neutrally.

Of course, there isn't any way to really measure this. And probably, there are representatives of every position along the continuum from completely mercenary to utterly altruistic. But is there a critical mass of business leaders willing to view the spritual, social impact and karmic consequence of their actions as primary concerns, rather than their profit margin and stock price?

Wednesday, October 18, 2006

Principles in a Culture of Laws?

As I work through the last bits of the book I keep noticing my accidental omission of this very central theme. There is a fundamental difference between governance by laws and by principle. One of the reasons that I think the US is in a cultural crisis is because of the basic lack of guiding principles--at least consistent and shared principles. Instead, we have a law-driven society in which the attempt to delimit bad behavior and some predation is exercised on a virtually case by case basis. In this way we end up with ever more complex and obtusely specific rules--our entire tax code being a case and point, as are those laws governing corporate malfeasance.

Without shared values though, there is very little else to use as guides to behavior. This is a morass. Choose your arena of action and you will find a maze of ever-increasingly technical and specific rules, often with un-like issues wedded together as a result of their tortured and illogical genesis. The problem with this approach should be obvious. It is the reason that a mentally disabled person or an infant, even with good intentions, can't be relied upon to behave appropriately. The lack of an inferential capacity to use guiding principles to decide action leads to a total absence of a behavior compass. But trying to teach appropriateness on a case by case basis is a logical impossibility. The possible cases are always infinite, while the rules can only apply to the ones that have either taken place or which can be conceived.

So it goes in organizations. Teach a principle to ordinary, committed people, and they can make an infinite number of fine distinctions leading to the right choices. Teach rules to a brilliant person and he will naturally try to work back to a guiding principle--whether or not there is one. The rule-guided organization will be full of missteps taken in the assumption of principles that aren't there, and rules that inevitably contradict each other. The Principle-Powered organization will be full of subtle innovations in the application of core values, and an ever-rising level of behavior and performance.

Tuesday, October 17, 2006

Sacrament, Fidelity and Love

Sister Joan Chittister is a Benedictine nun who writes prolifically and co-heads Tikkun, the spiritual hub with Rabbi Michael Lerner. After listening to her a new notion opened for me of the nature of sacrament and the confusion that may drive our current political orientation.

She points out that it can be extremely difficult to make the distinction that listening and learning from other faiths (if one is, say, Catholic, or any other defined religion) is not obviously right. The idea is that for many devout people, it seems as though any exposure to or interest in the doctrines of other faiths would be an act of infidelity. This made me think about this term: infidelity. In my world it is usually related to the faithfulness one brings to a sexual partnership. But the word "infidel" is also a variation of infidelity--and it could be reasoned that a Catholic who read the Torah or studies the Talmud is an infidel.

Her position is rather more interesting. There are not, she says, Gods. Instead, there is God--and we are all moving toward that possibility. When we learn others' doctrines it can act to deepen our own faith, to illuminate our own hearts. It can be, for us, a sacrament; that is, something which brings forth the sacred.

This is how I see my own immersion and quest for the sacred. It isn't doctrine that I am looking to embrace, and conversion to anything is no option. But the doctrines and their articulations often deepen my experience of grace, and allow me, in my un-religious existence, to witness the sacrament of love. In that way, I am reaching for a divine way of being--and perhaps, that reaching is the ultimate act of fidelity. Contrastingly, when I am lost and in despair, separate from God and from grace, perhaps that is when I lapse into infidelity. I am unfaithful to my own spirit.

Posted by Amie Devero at 11:29 AM 0 comments Labels: divinity, fidelity, God, religion, sacred

Religious Principles and The PxP Model

There have been several reports and news features of late about companies that are run with religious principles at their foundation. Ironically, several of those cited in a recent Wall Street Journal article were based here, in Tampa. Clearly, there are principles at the core of religions that could be very useful and productive as guides to business behavior. Kindness, tolerance, honesty and humility are but a few of those. But this becomes problematic in a number of ways.

First of all, there also principles in many religions that would drive conflict within the workplace. For example, when matters of doctrine arise, how can that be resolved without a religiously monolithic workforce? Do meetings get opened with prayer? If so, what kind of prayer. Does everyone have to pray? Some of the companies the WSJ explored have Bible study classes and other forms of evangelistic activities. How do non-believers get treated? Can they trust in the meritocracy based on the value of their work, or is there always a lurking suspicion that they have a glass ceiling, one that is grounded in their failure to conform/convert?

There are also, of course, legal issues--like can you legally hire only Christians, Jews, etc in order to create that monolithic workforce? That potentially violates the EEOC regulations. But it is also a deep philosophical and ethical matter. One could argue that a privately held business is entitled to establish any criteria for its job descriptions, including adherence to a certain belief system.

Some of the principles that could be natural areas of tension include other, less obvious issues. Will the company healthcare plan cover abortions if the owner is vehemently pro-life? What if an observant Jew wants to change the work week to accommodate a Friday Saturday weekend? Are there five breaks a day given to everyone for prayer in a Muslim company? Does the pay-for-performance structure embrace or set aside issues of faith and observance?

The most important issue though is the matter of how this variation of a "principle-driven" business diverges much from the Powered by Principle model--or whether it does. The bottom line is, it is NOT the same as the PxP model at all, and it is only a profoundly conflated view of the PxP approach that allows for any confusion. A religiously-driven organization simply fails to create the exact context that PxP aims to generate: An aligned organization that uses its strategic core values to guide ALL behavior and policy. Powered by Principle is not, at its heart, about generating morality or ethics--that is just a bonus. Fundamentally, the PxP model is about business results, and about generating a value system that is both inclusive of the ethical and moral boundaries of the organization, AND of its basic business model, stance toward customers and toward the marketplace.

Posted by Amie Devero at 11:12 AM 0 comments Labels: Bible, Christian leaders, conflicts, religion, workplace religion

Old Blog Oct. 5-Oct. 23,2007

adevero — Wed, 07 Nov 2007 13:58:56 CST

Tuesday, October 23, 2007

How Long Should Countrywide Back Mozilo?

At the end of last week, William Patterson, executive director of CtW Investment Group, the investment arm of labor federation Change to Win, called for Mozilo, Countrywide's CEO to resign or be fired. CtW's unions' pension funds own something close to 3.5 million Countrywide shares. To this point, the Countrywide Board has been silent on the issue, as has Mozilo himself.

There are lots of reasons for Boards to "stand by their men", even when investors become belligerent. Oftentimes, downturns in financial results can't be directly linked to the CEO's leadership or decisions; they come about because of unexpected market changes, unforeseen events or even in the midst of strategic turnaround. After all, altering the course of a huge organization away from proverbial icebergs is very much like turning a huge, slow-moving ship. Sometimes the results suffer along the way. GM's CEO, Wagoner, is in the midst of such a change. And while it hasn't yet been reflected in stock price or other lag indicators, the recent union agreement will likely create a real potential for positive change at GM. Changing leadership at that point would be foolhardy.

There are also cases where the Board needs to jump on the problem. "Chainsaw" Al Dunlop should have been axed prior to his complete evisceration of Sunbeam. The Board waited too long and paid the price.

But one place where it is not all that ambiguous is in the case of Mozilo. The decisions that have led Countrywide to its current state of decline were predictable. It didn't require a crystal ball to know that the ARM's that made up most of the company's product line, once they were adjusted, would be painful for a great many of the less-than-credit-perfect lenders. Even if the housing market had remained strong, those homeowners would have faced untenable increases in payments with no commensurate increase in their own earnings. After all, the stagnation in salaries and hourly wages is not a new phenomenon. Wages have risen at a rate far below consumer prices, and certainly way below the rates of increase in property prices(until recently).

This turn of events at Countrywide could have been averted in any number of ways had the leadership been thinking clearly about the future while strategizing: A different mix of products, more disclosure to lenders about the likely ramifications of their rate adjustments, a willingness to grow somewhat less quickly by having marginally higher standards for lenders so that the overall credit-worthiness of customers was higher on average. Any of these decisions could have made a significant difference in todays results.

To have done that though, there needed to be firm principles in place that would have dictated red flags as the strategy was created. If the organization or its leaders had been operating with even the most skeletal of core values, both strategic values (those necessary to deliver the company's value proposition) and ethical principles, the strategy would have been different. But those core values were missing at Countrywide, and so the only principle determining action was a commitment to short-term profiteering. The consequences are far worse for the nearly 12,000 employees who are being laid off than they will EVER be for Mozilo. Too bad. It would be nice if just once those who caused the pain had to suffer it too.

Posted by Amie Devero at 11:24 AM 0 comments

Thursday, October 18, 2007

Carbon Footprint Reduction Hogwash

Something that is most dismaying to analyze through the filter of principle power is government policy--in particular, energy policy. One could say that when we (by "we" I mean our public representatives as policy-makers) voice a concern over something, we are declaring a core value. For example, there are multiple directives from government, at both National and State levels, to reduce carbon emissions and so forth. One significant source of carbon emissions is gasoline powered cars and trucks. Yet, despite these clarion cries to reduce emissions, and hearing in congress now regarding electrical utility price-setting, there is no real power behind the words.

If the government was really intent on reducing the amount of carbon emissions created by Americans driving cars they would take severe action in several key areas; Of course, they would be major upsets to the world of car ownership and maintenance and would breathe fear into the oil companies. Amongst those steps would be:

- Increase federal gasoline taxes to at least the level imposed in Europe.
- Increase federal mandates for mass transit usage (this would include penalties for lack of investment or usage within States and municipalities).
- Increase the tax on automobile purchases
- Create enormous tax breaks for auto and other manufacturers who create non-carbon emitting vehicles (hybrids are not non-carbon emitting--they simply transfer the emission from the exhaust pipe back to the power plant).

Of course, this would require courage beyond that possessed by any current leaders. Ultimately, the stranglehold that foreign oil has on us will lead to the same place--but it will take longer and make us victims rather than causal agents. CIBC economists are predicting oil barrels in excess of $100 by the end of 2008. That translates into about $4 a gallon says Richard T. Stuebi, BP Fellow for Energy and Environmental Advancement at The Cleveland Foundation. The comparative rate charged for a gallon of gasoline in Europe vs here demonstrates the marked difference in the actions of a government paying lip service to reducing greenhouse gases to those that mean what they say. Currently, with average gas prices in the US at $3.01, the comparable price per gallon today is $7.37 in Belgium, $6.88 in Germany and $7.45 in the United Kingdom.

What we really learn from the lack of consistent public policy is that the claim of concern for reducing carbon emissions is, like so much in politics today, hot air.

Posted by Amie Devero at 4:22 PM 0 comments

Tuesday, October 16, 2007

Inspired by (the) Acumen (Fund)

It goes beyond being Powered by Principle--and straight into the next dimension. Instead of engaging in micro-lending or charity, also valuable contributions to emerging markets, Acumen is a "patient" venture fund.

Here's how they describe themselves:
We seek to prove that small amounts of philanthropic capital, combined with large doses of business acumen, can build thriving enterprises that serve vast numbers of the poor. Our investments focus on delivering affordable, critical goods and services – like health, water, housing and energy – through innovative, market-oriented approaches.

Founded by Jacqueline Novogratz, the idea is to invest relatively small amounts of capital in businesses in merging markets, and then working directly with the business to guide it to the point where it is serving or selling to one million or more customers among the poor--and is self-sustaining.

Following on from the last entry in this blog, ultimately, small, thriving businesses in emerging markets are the surest way to lift the world's poor into sustainability.

For more on Jacqueline Novogratz and the Acumen Fund, visit:
Stanford Business Journal
Social Edge Blog
Business Week
TED Talks
Reuters

Monday, October 15, 2007

Doing Business Where It Counts (and Adds Up)

If you can do business anywhere in the world, but have a core value related to globalism or humanitarianism--where do you think of expanding? There are myriad opportunities to do business in emerging markets. As some of the world's formerly corrupt and unstable nations begin to clean up their acts, they become far more attractive as destinations for first world capital. For example, Nigeria had been busy at work trying to reduce corruption, improve consistency in operations and build financial stability. Economically, businesses in Nigeria are doing 4 times the expected level of growth based on their previous trend. For example, five years ago Nigeria had 8 or 9 banks;now it has more than 20. To catalyze this growth the government began to increase the bank's capitalization requirement -- forcing the disaggregation of the few. That expansion led to more foreign banks entering the market, and brought with it investment capital from the developed world.

In telecom, the government changed the structure of the utility system and caused explosive growth in access (by a factor of over 1 million)-- and therefore, all of the services that accompany available connectivity. Connectivity acts as a bedrock for many other industries. With all of this change, Nigeria is just one example of an extraordinary business opportunity in many different sectors, including financial services, tourism and education.

Africa is an open frontier over much of its breadth. More than 2/3 of African countries have had democratic multi-party elections and the average economic growth is 5% per annum (from 2.5% ten years ago). According to Nigeria's Finance Minister, Ngozi Okonjo-Iweala, to really make a lasting difference in the emerging world, we in the developed world should bring businesses and create jobs. This impact is more profound than feeding the hungry or giving out AIDs medications (although, my own sense is that also makes a vital difference in critical circumstances) --jobs solidify families, improve education and cause generations of change.

This approach would be a great example of Principle-Powered capitalism--expansion due to opportunity that happens also to inject vitality into emerging markets.

Tuesday, October 09, 2007

Business Schools as Principle-Power Incubators

An interesting article entitled: Shaping Tomorrow’s Business Leaders: Principles and Practices for a Model Business Ethics Program is now available. Visit The Business Roundtable Institute for Corporate Ethics and read the report by clicking here.

Posted by Amie Devero at 6:43 PM 0 comments

Thursday, October 04, 2007

Intriguing Opinion Piece

For a very direct critique of Countrywide's PR response to the sub-prime mortgage crisis, see Countrywide Rearranges the Deckchairs in the Wall Street Journal.

Posted by Amie Devero at 2:12 PM 0 comments

Countrywide Unfairly Accused?

In response to the implications by various media that Countrywide somehow preyed upon innocent borrowers, they have begun a campaign of corporate patriotism. "Protect our House" is the tag-line of this internal cheer-leading and includes pledges of allegiance and the assistance of the crisis management team at PR superpower Burson-Marsteller.

If Countrywide were Powered by Principle rather than powered by an overriding concern for revenue, they might take an entirely different approach--one based on a commitment to continuously uncovering violations of their core values (whether extrinsic or intrinsic). To do so would be equally as effective as a PR tool, but would have the added benefit of improving the overall compliance of the organization with core values that would ensure strategic and ethical consistency.

At this very moment, instead of fortifying their denial of their distraction from the long-term consequences of their lending practices, they could be articulating appropriate principles that would avert another similar crisis. Unfortunately, as it has been from the start, Countrywide's attention is on their quarterly results and not on their long-term stability and performance. As so often happens in business, the longevity of the company is sacrificed at the alter of fast money.

Wednesday, October 03, 2007

Principle vs. Principal

We must use time creatively... and forever realize that the time is always ripe to do right.
--Martin Luther King Jr.

One of the most valuable edicts that any long-term enterprise must embrace is best articulated by Warren Buffett (or at least, attributed to him).
It takes a lifetime to make a reputation--but only five minutes to lose it.

How many longstanding reputations are lost when one employee or policy or supplier errs--and fails to take responsibility and correct it? Organizations can afford to make mistakes--they can't afford to pretend they haven't.

Tuesday, October 02, 2007

Sub-Prime at a Local Level

It must have been so easy as a mortgage broker to simply "follow the money". Quick and painless mortgages available to the endless number of borrowers flooding in as leads --and no downside for anyone until so much later that everyone can overlook the impending storm. The borrower gets the low payment mortgage for the house he can't really afford, the broker gets his origination fee and commission (often by "fudging" the customer's credit worthiness), and no one pays heed to the obvious risk for everyone. The brokers are raking in fees, and feeling like this boom can never end as long as property prices stay high. But all the while, the very basis for their business is sinking under them.

The securitization of the paper means even the lending bank has no long-term concern with the real viability of the loan or the ultimate predicament that the borrower will surely have when, as must happen, the index to which their interest rate is linked, moves upward. And from the perspective of direct repercussions, only the investors in the mortgage-backed instruments get hurt. But the law of unintended consequences catches up. When your business perspective is short-term and solely self-interested, you are liable to have a business model that can only work so long as conditions do not change. So the mortgage broker model only works if the conditions are static: If property keeps rising in price, if mortgages keep being awarded to fairly weak applicants, if borrowers don't understand the real risk of the adjustable clause in their mortgages, and if banks keep lending 105% of the market value of homes. As soon as one condition changes the model collapses.

On the one hand, operating in the manner described above is naive and a sign of bad planning. On the other hand, to have such short-sighted vision points to a lack of principles, both ethical and strategic. And the outcomes prove it. Those businesses that counseled questionable borrowers away from risky mortgages, that suggested that fixed-income workers not purchase homes values at 20 times their annual salaries, and who carefully outlined for customers both the downside and the upside of their mortgages--they can still function; More likely than not, they would have had structures in place to hold their employees (both mortgage bankers and originators) accountable for the long-term status of the mortgage. In a Principle-Powered universe, the banks would also have had a way of incentivizing long-term stability and low default rates by linking their commission payments to those results. Instead, the institutionalized business model has been "when the ink is dry, the deal is done". But those who were themselves, Powered by Principle, will be far less damaged in these new economic conditions. Because even in the new conditions, their closing rate will be similar, and so, their revenue more stable.

Entries from The Old Blog Oct. 27-Nov. 6

adevero — Wed, 07 Nov 2007 13:57:08 CST

Saturday, November 03, 2007

Great Site--Check it out.

There is simply too much on this website to start to discuss it. So go there--check it out. Enjoy!
YES Magazine

Posted by Amie Devero at 8:44 PM 0 comments

Monday, October 29, 2007

GM Harnesses the opportunity of Emerging Chinese Market

In a next step to recovering some of the value of GM, CEO Rick Wagoner has announced a massive investment in a joint venture research center in China. The $250 million investment will be focused on research into alternative fuel technologies, and will take place in Shanghai. The joint venture with China's state-run Shanghai Automotive Industry Corp and Liuzhou Wuling Motors Ltd will undoubtedly attract some degree of criticism from protectionists here and in Europe. But the strategic intelligence of this move must not be underplayed.

Since the developed world's competitive landscape is becoming ever more commodetized by the overall flattening of the world's labor and knowledge markets, there is a corresponding growth of opportunity to do business in emerging markets. As the world's fastest growing marketplace and most populace nation, China is the next great frontier. Failing to try to seize some piece of that huge pie would be worse than neglectful--it would be idiotic.

In the US, GM will never regain is pre-eminance. It's current "big" plans for alternative fuel cars are limited to a relatively efficient hybrid, the Volt, which can go 64 kilometers on electricity alone. But it won't be available until 2010. By 2010, it may not even be efficient under current standards.

The declaration of focus on China and India as growth opportunities for GM is a step in the best possible direction. In those markets, there is still a huge opportunity not only to grab market-share (a wondrous possibility in itself, if accomplished), but also to alter the environmental disaster that is imminent as 20,000 new cars are introduced to the road in China, each and every day!

This move is a tremendously progressive track for Wagoner to take, and is consistent with his successful agreement with UAW--an agreement that virtually "eliminates the cost advantages of Japanese automakers". This trend, of exploiting the opportunity to make a difference to the global community through capitalism is a key trend identified in the Powered by Principle approach. Today, it is wise for entrepreneurs to look around for the greatest global problems--and solve them--solving them with the ingenuity that capitalism inspires, and reaping the profits while making an impact that benefits all of us.

This isn't to say that Wagoner is free of principle violations--but to be in such a Principle-Powered "state of grace" is a highly aspirational goal, and one that is progressively more seemingly unattainable the more complex the enterprise. I could argue (and so could you) that lobbying Congress against tightening emissions standards is a contradiction of the very mission embodied by the Chinese venture--and it is. But that doesn't make the choice to be opportunistic about China's needs any less superb. Kudos to Wagoner and GM.

Posted by Amie Devero at 6:07 PM 0 comments

Friday, October 26, 2007

Gaviotas II-- Unique Ideas

Paolo Lugari is the founder of Gaviotas II, an eco-village in the middle of the most inhospitable part of Columbia. Along with the eco component of the project, Gaviotas II has yielded some important bio-technological breakthroughs and inventions. The way they have accomplished that in these unique circumstances has ramifications for SR-inspired capitalism.

Lugari has some fascinating rules for how to conduct business. I don't think they are all perfectly applicable in ordinary life, but seem to serve him in this very unique circumstance. Of course, in Gaviotas II, the people are working there exclusively out of their commitment to the mission -- and in other workplaces, at least some of the people are there just to earn a living. However, as in most paradigms, there is something to gain from his rules. Many of these are very consistent with the Powered by Principle model, which is part of what I find useful about them--others are not, and therefore are even more interesting as prospective inclusions to the approach.

I am only including their basic iterations, but the full text can be found by clicking here.

1. Ban brainstorming meetings
2. Practice Da Vinci's code (this means deal with problems without any assumptions--similar to the Disciple Discipline in the Powered by Principle approach)
3. Play nice with others
4. Burn the corporate policy manual
5. Rule out "degree-itis" (this means forget about hierarchies--identical in practice to Oobeyah)
6. Master the art of indiscipline (work across disciplines)
7. Trash your Outlook calendar

Even the ones I can't quite embrace have a certain maverick-like appeal. But then, working in a eco-village in the middle of the jungle with only other scientists and committed participants would allow for working together with a high degree of freedom and entropy.