THE SUPERPERFORMING CEO
Management/Leadership U.S. $14.95 Canada $18.20 U.K £ 8.50 The Superperforming CEO Uncommon Sense for Uncommon Results
In his latest book, Dave Guerra introduces 15 unconventional strategies for executives who seek to achieve Superperforming levels of organizational performance, stakeholder engagement, and shareholder return on investment. Through a multi-year conversation with Superperforming CEO George Martinez, CEO of Allegiance Bank Texas and former Chairman and CEO of Sterling Bancshares, Guerra elucidates 15 Distinctions for today’s executives that any leader can use to turn organizations into places where systems sing and spirits soar.
Liberating the Promise Within Replete with both hard-hitting statistics and illustrative anecdotes, Guerra explores the uncommon people, uncommon practices and uncommon paradigms that reveal the fully expressed right brain of a Superperforming CEO. Drawing on new science principles including complementarity, emergence, and increasing returns, Guerra demonstrates why dramatic change is possible and how it can occur. The real-life experiences and the penetrating insight that Martinez offers clearly provide credence, and his enthusiasm for people, processes and performance is contagious.
To learn more about Superperformance and The Superperforming CEO visit www.corpusoptima.com or call 832-497-1283.
LIBERATING the PROMISE WITHIN
Cover Design by Axiom, Houston SuperperformingThe CEO
LIBERATING the PROMISE WITHIN
Uncommon Sense for Uncommon Results
Dave Guerra Copyright © 2009 Dave Guerra All rights reserved Printed in the United States of America
This book may not be reproduced, stored in a retrieval system, or transmitted in whole or in part, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of Dave Guerra.
Cover Design by Axiom Design Group, Houston, Texas.
Guerra, Dave The Superperforming CEO: Liberating the Promise Within
Version 1
ISBN 978-0-9819922-1-1 This book is Dedicated to my father Robert Guerra, who was the first servant leader in my life.
Contents
Preface ...... xi Introduction ...... xv Acknowledgments ...... xxi
Uncommon People 1 Believing in the Unlimited Potential of People...... 3 Sharing the Wealth...... 15 Treating the Community as Stakeholder...... 25 Making Sure All Stakeholders Win...... 35 Fulfilling Life’s Purpose through Work...... 41
Uncommon Practices 51 Taking the Long View of Business ...... 53 Staying in the Sweet Spot...... 59 Use of Coaching...... 67 Measuring Things Hardly Measured...... 75 Open and Honest Communication...... 85 vi The Superperforming CEO
Uncommon Paradigms 93 Tacking ...... 95 Making Responsibility a Choice...... 103 Context as Lever ...... 115 Distributed Being ...... 121 Continuous Emergence ...... 133
Epilogue 141
Appendices 8 Simple Rules for the Emergence of Superperformance...... 145 The Superperformance Executive Advocate...... 149 The Superperforming CEO Inventory ...... 155 The Superperforming CEO Resources...... 163
Notes...... 167
Index ...... 175 vii viii The Superperforming CEO Preface
liked George Martinez, cofounder and CEO of Allegiance Bank Texas, immediately. I found him gentle, intensely curious, brilliant, Iand enigmatic, and I followed him from Sterling Bancshares to Allegiance Bank Texas. We first met when I was finalizing research for Superperformance: New Profound Knowledge for Corporate Leaders. Sterling Bancshares, his first bank, was one of the wonderful companies profiled in Superperformance, along with Berkshire Hathaway, Harley-Davidson, Johnson & Johnson, Microsoft, Southwest Airlines, SYSCO, Toyota, and Wal-Mart. Together over a 20-year period, these ten amazing companies had outperformed the S&P 500 by a margin of almost five to one! Moreover, their Wisdom and behaviors proved the 8 Simple Rules (for the compassion emergence of Superperformance) outlined in the book (Appendix 1). As we visited I became are inseparable increasingly excited to discover that most of Christmas Humphreys these unconventional behaviors were essentially cultural in nature, and what’s more, I found them astonishingly simple. The more George shared, the more convicted I became that there must be another book. There was something more, something valuable to learn x The Superperforming CEO
about Superperformance from this amazing individual. Combined with a study of the behaviors of other Superpeforming CEOs, this book gives a real voice to this rare category of top executive. It does this through a latticework of 15 distinctions—they are new and come straight from the Superperformance frontier. When we first met, George was Chairman of Sterling Bancshares, having just passed the torch to Downey Bridgewater, who remains Sterling’s Chairman and CEO today. Over a 30-year period, Sterling Bancshares had risen to become a colossus in the regional banking world, having pioneered a new banking life form called (ironically) the “Supercommunity Bank.” Over several decades Sterling had experienced tremendous performance growth, consistently outpaced the market, and easily qualified as a bona-fide Superperformer in the most essential sense of the word. (In Superperformance, the category was defined as industry- outperforming return on investment sustained over at least a dozen years.) It was fascinating to see how Sterling’s finely tuned business model contributed to what could only be described as a steady-state of increasing returns. But it was an especially powerful A little unlearning discovery to see that Sterling Bancshares was an goes a long way. outperformer when it came to people too. One of numerous testimonies to this distinction Richard Kehl was Sterling’s inclusion in Fortune’s list of 100 Best Companies to Work For® for no less than three years in a row (2003-2005). It was exciting to hear from George’s perspective the astonishing leverage Sterling was able to reap from its amplified corporate culture. This opportunity provided me, once again, confirmation of the ubiquitous connection between corporate culture and Superperformance. All of my time with George Martinez has been extremely valuable to me. I am grateful that he was so generous with his time and unfailing in his encouragement over all of these months. It has been a great privilege to visit this territory with George to further understand Superperformance and its underlying drivers. Over the course of many months and over Preface xi
40 interviews, we have managed to distill everything down to a set of 15 distinctions. These are the mainstay of The Superperforming CEO. As a set, they represent a valuable arsenal, but most especially they show how the right brain of Superperformance—the leadership hemisphere— actually works. The Appendices include more background on the theory of Superperformance as well as a practical set of guidelines for adopting these distinctions. My prayer is that they help you and your organization breakthrough to unprecedented, previously unimagined new levels of success and achievement.
Dave Guerra October 15, 2009 Houston xii The Superperforming CEO Introduction
eorge Martinez is, of course, a vital part of the explanation for the Superperformance of Sterling Bancshares and the rapid Gemergence of Allegiance Bank Texas over the last several years. He is a bona fide Superperforming CEO, the real thing. For this reason alone, the reflections he offers here are extremely valuable, especially in these urgent Learning is not times. Moreover, they point us, inevitably, to compulsory… the need for a new guiding science. neither is survival. While science has been the leading informant in the evolution of other disciplines, Deming management science is woefully past its expiration date, and is still tethered to a paradigm (call it “Machine View”) that is 400 years old. Machine View is incomplete, and left to its own devices, leads to the sub-optimization of people and companies. A different operating framework (call it “Organism View”) offers much greater possibilities. There are innumerable, invisible interactions and relationships influencing behavior everywhere, at every moment, inside and outside of organizations—in their operating environments. Many Superperforming CEOs and eminent business theorists including xiv The Superperforming CEO
W. Edwards Deming and Peter Drucker have called attention to this territory—to the importance of what occurs in this field. They have argued for a different approach, a new thinking, but regrettably, most organizations to this day still remain fundamentally trapped in Machine View. Very few have been able to break out of this self-limiting paradigm. But trading Machine View for Organism View reveals a very different landscape. An Organism View of economy is a view of a vast and complex interconnected ecosystem, replete with all of the self-organization, diversity, emergence, and self-regulation found in your own body. An Organism View leads to a distributed The first step is view of management and leadership—an transformation of approach that involves every cell, every person. Deming’s “system optimization” the individual. and “profound knowledge” theories This transformation take on powerful new meaning in Organism View. Trading Machine is discontinuous… View for Organism View reveals The individual, previously hidden opportunities to transformed, will transform individual and organizational performance—for free. Authentic new perceive new possibilities for true joy in work and meaning to his life, personal fulfillment begin to unfold. to events, to numbers, When you make this trade, you now see, for the first time, unprecedented and to interactions breathtaking opportunities that were not between people. there before.
Deming The patterns of Superperforming CEOs like George Martinez and the patterns of their companies lead us to the inescapable conclusion that the very best management science is not a management science alone, but a leadership-management science together. It turns out that superperforming leadership and management come as a matched set. You cannot have one without the other. Deming’s wise and prophetic words ring true today: “To manage, one must lead.” Introduction xv
Superperformance science is a whole brain science for organizations. This view proposes that the major province of leadership is people (release of their passion) while the main work of management is process (control of its flow). When these two hemispheres, operating as distributed properties, become one, Superperformance will surely follow “like the shadow follows the hand.” This is how the evidence stacks up across the now substantial fabric of Superperforming individuals, teams, projects, and organizations it has been a privilege to examine over the last several decades. Time and time again, Superperformance unfailingly springs from the interaction of the two super-partners: process and culture. Superperformance science is a dual-life science, both biology and physics, informing different hemispheres. The first, improvement science, is the science for transforming work, the proper focus of management. The second, complexity science, is the new science that informs the self- organization and emergence of culture—the province of leadership.
Complementarity is the Source
The essential pattern of Superperformance is an obvious pattern of “complementarity,” or mutually dependent opposites. All of nature exhibits this pairing. Niels Bohr’s famous Complementarity Principle revealed the paradox of particle-wave duality to establish the foundation of quantum physics. So, too, this pattern is at work in the double helix and complementary bases of the DNA molecule. The subtle and shockingly simple science of Superperformance is essentially about tapping the power of complementarity—management and leadership, process and culture— together. Organism View, the operating landscape of Superperformance, is based on scientific discoveries that have emerged over the last century (especially the last 30 years) in biology and physics, especially in the area of non-equilibrium thermodynamics. The organic nature of these 15 distinctions reveals a compelling new understanding and an accessible new toolset in the areas of personal and organizational performance achievement. This territory continues to yield a tremendous harvest of xvi The Superperforming CEO delicious fruit. George Martinez’s own experience certifies the great returns that will come from treating intangible factors as if they were as important as tangible factors. These complements are all part of the same universality that every one of us, consciously or unconsciously, experiences every day. This fundamental marriage, this vibration, is dramatically more robust in Superperformers. A mechanical world view cannot account for this phenomenon. Only a quantum mechanical world view will work. In fact, only a combined Leadership-Management Science can fully explain it. Only a life science will do. Introduction xvii xviii The Superperforming CEO Acknowledgments
have to confess I was not looking for Servant Leadership. I was in search of Superperformance. Through the process of examining I this rarified category of company and the people at the top of these organizations I continued to run across a consistent pattern that I guess you could say eventually led to my own personal “road to Damascus.” So first and foremost, I would like to thank God for His patience with me, and for giving me the seeing to recognize that Servant Leadership is indeed the predominating pattern of Superperforming CEO. I am grateful that He fortified me with the strength and perseverance to complete this project and fulfill on this commitment. It has not been easy—in many ways this relatively simple and straightforward project has been threatened. These various obstacles have all served to strengthen my resolve and increase my appreciation for the invisible part of Superperformance. I of course could not have completed this book without the many hours spent with my now good friend George Martinez. We started out with fifty-four distinctions, and then winnowed steadily down to fifteen, in search of the most vital and unconventional paradigms, practices, and approaches to people that distinguish the Superperforming CEO. Throughout this multi-year process, George has been unflagging in his xx The Superperforming CEO availability and encouragement. I have grown tremendously through our association and can only hope to pay it forward, which of course is how servant leadership works. Regarding models of Superperforming CEO, I have been blessed to meet and learn from an amazing array of these individuals firsthand, and I’m sure I will not remember them all. These include Ed Roberson, John Adams, Jeff Holland, Dan Wilford, Jack Lowe, Peter Forbes, Drew Kahn, Wayne Voss, Rob Ferguson, Willy Verbrugghe, Gene Perkins, Ted Bauer, and others. Additionally I have learned from examining other popular Superperforming CEOs including Warren Buffett, Herb Kelleher, Richard Teerlink, Bill George, John Baugh, Sam Walton, Eric Schmidt, and others. Every single one of these individuals currently leads or has presided over a bona-fide Superperforming organization, technically defined as peer-outperformance sustained over at least a dozen years. Every single one of these individuals exhibits an unmistakable, singular pattern of servant leadership. God does work in mysterious ways. It has been my privilege, simultaneous with the completion of this book, to become part of a wonderful organization whose purpose it is to promulgate the principles of Servant Leadership at the highest levels in business: CEO Netweavers. Through this organization we are united in a single purpose—to move the needle in our respective host communities to this very different way of operating organizations, and to shine the light on the link between servant leadership and high performance. I could not complete this section without acknowledging my many new friends and mentors John Casey, Phil Resch, Mike Kelley, Stan Marts, Michael Pinckert, Lori Siegel, Anne Davis, Eric Standlee, Marian Davenport, Gadi Pollack, Gregg Stocker, Don Hare, Jeff Johnson, Luis Ossorio, Peter Hanik, Sam Diaz, Tom Ferguson, David Krueger, John Jordan, Laura Raymond, Art Saxby, Rudy Soliz, and others. Closer to home in Corpus Optima, my own firm, I am especially fortunate to be surrounded by some of the most human and talented individuals on the planet. Together our purpose is to bring a powerful Acknowledgments xxi arsenal of process and culture transformation tools to our clients, to help them to find (and sustain) Superperformance for their organizations and themselves. I especially want to acknowledge my partners David Wayne, Chris Welsh, Craig Boewe, Robbie MacIver, Ben Dilla, Richard Dillard, Debra Carpenter, Marv Aardahl, Evania Nichols, Rubi Deslorieux, and all the others. Of course, there are the many associates and customers of Corpus Optima to whom I am grateful for their wisdom and counsel throughout this journey. These include John Gore, Frank Lee, Matthew Pritchard, Doug Gattuso, Tom Bonesteel, Bill Fetter, Bruce Bain, Teresa Moraska, Manish Nandy, BJ Jhaveri, Max Windham, RoseAnne Howland, Michele Bell, Brenda Rarey, Bambi McCullough, Linda Humphreys, Osvaldo Gotera, Jason Wolf, Sheryl Dawson, Carmen Carter, Beverly Casey, Pat Nahas, and Barbara Ward. Certainly, this book is blessed by the tremendous effort by Pearl Cline, editor, Old Live Oak Books, cover design by David Lerch, Axiom Design, and the elegant layout by Linda Hoffman. Finally, I have to thank my sweet wife Jodi and my wonderful children Carmen, Luke, Paulina, Danielle, and little Stephen, for the endless joy and support they have provided throughout this oftentimes harrowing journey. Like Shackleton, I have learned the simple truth of his family motto, Fortitudine Vincimus (“Through endurance we conquer”). xxii The Superperforming CEO Section 1 Uncommon People 2 Th e Superperforming CEO Distinctions
1: Believing in the Unlimited Potential of People Chapter 1 Believing in the Unlimited Potential of People
ost of us long to live a life that is more open to new possibilities, yet we systematically constrain ourselves by operating from a Mfixed set of assumptions, beliefs and attitudes. In effect, we block ourselves. We expect the future to be different, but without any inherent personal change. It is only when we can see beyond our own self-imposed limitations, when we are able to reframe who we are and what can be—that we can transform. This requires living in a new way for most of us. This requires living in possibility. George: “One important limit to a company’s growth is the transformation of individuals. We tend to live in a world of probability, with a limited future, expecting more of the same. We limit ourselves with our Nothing great was conclusions about what is probable for ever achieved ourselves and for others. A probable future does not allow for transformation. Living in without enthusiasm. a world of probability is living in an ordinary Ralph Waldo Emerson way. But living in possibility makes room for transformation. Living in possibility is living in a new way. It’s amazing what happens when you come out from under a cramped ceiling and 4 The Superperforming CEO become committed to generative results. Miracles can happen.” Superperforming CEOs hold a psychological space for the possibility of people. This is a way of looking at each person as a bundle of unexpressed potential, containing unlimited possibility for growth and achievement. This is not the conventional way for companies to think about their people—as unrealized Superheroes. The implicit paradigm is that people are generally not going to grow much further than their current position and scope of authority. In business, this sort of thinking has been perpetuated by pop theories and ‘conventional’ wisdom. In contrast, the approach companies like Berkshire Hathaway, Toyota, Microsoft, SYSCO and other Superperformers take to people is much more positive and hopeful. Call it an abundance view of people. Call is the super view. But whatever you call it, the result is that, in these companies, people step up when they are provided an opportunity to grow. They learn they can break through to unprecedented new levels of achievement, performance and personal fulfillment. And the yield? You guessed it. Even more Superperformance.
The First Step is the Individual
At its core, the transformation of any We cannot organization, project, or team is first and foremost become what about the transformation of individuals. W. Edwards Deming, quality and business transformation expert we need to be wrote: “The first step is transformation of the individual. by remaining This transformation is discontinuous. The individual, transformed, will perceive new meaning to his life, to events, to what we are. numbers, to interactions between people.” 1 Max DePree George: “In organizations, there are usually three levels of personal transformation required (for a system-level change to occur): • Bottom Level: They love it—their ‘Seabiscuit’ is released. Believing in the Unlimited Potential of People 5
• Top level: You have to work at it; transform this group first. Otherwise nothing will happen. • Middle level: They usually see this type of change as a loss. “It’s important to impact the top first, however hard that may be to do. Unless people at the top level are personally affected, nothing significant will happen. When things are You are going well, the middle level is highly responsible, pure potential. not assigning blame; there is freedom to delegate to others. When things are not going well, the middle Martin de Maat level seems the most vulnerable to a retreat to the old ways. The shift has to occur in the individuals. Until people reinvent themselves, it will be hopeless to try and reinvent the organization. This translates into personal business practices, and requires a shift in personal business concerns. There is a personal responsibility requirement that cannot be imposed. It must be chosen. No system of monitoring created by anyone could come close to replacing a system of personally chosen responsibility. “If personal responsibility is not shared throughout a system, growth will be limited. Without shared responsibility, it would not be possible for a system to operate on a larger scale. Most companies seem to have an easier time getting this integrated into the lower and higher levels. It is vital to insert this thinking into the middle levels of management. “The ideal system should be organized around each person fulfilling his life’s purpose through the work, instead of working in order to ‘fill in the blank.’ As Deming noted, people are already hard-wired for greatness; we are all intrinsically motivated to become the best we can be. To optimize our organizations, we have to collectively create the future, believing and trusting that we have a legitimate opportunity to win in that future.”
A Leadership for Everyone
The pattern in Superperforming companies is that everyone is called 6 The Superperforming CEO
to lead. In the best companies, leadership is not constrained to a single location on the organizational chart. It more resembles an organizationally shared capacity, a distributed property of the whole. Some crucial elements of this form of leadership are serving, inspiring and engaging.
Leading by Serving
Leading through service is attributable to Robert Greenleaf, who coined the phrase Servant Leadership in a book Optimism is of the same title. According to Greenleaf, Servant the true moral Leadership is a model for people who choose to serve first, and then lead, as a way to express a courage. commitment to individuals and institutions. The
Ernest Shackleton “servant” comes first and the “leader” comes second. Leading through service encourages trust, self-awareness, and the ethical use of power, resources and authority. According to Greenleaf, “The servant-leader is servant first… It begins with the natural feeling that one wants to serve, to serve first. Then conscious choice brings one to aspire to lead. He or she is sharply different from the person who is leader first, perhaps because of the need to assuage an unusual power drive or to acquire material possessions. For such it will be a later choice to serve—after leadership is established. The leader-first and the servant-first are two extreme types. “The difference manifests itself in the care taken by the servant-first to make sure that other people’s highest priority needs are being served. The best test, and difficult to administer, is: do those served grow as persons; do they, while being served, become healthier, wiser, freer, more autonomous, more likely themselves to become servants? And, what is the effect on the least privileged…will they benefit, or, at least, will they not be further deprived?” 2
Leading by Inspiring Others
After service is inspiration. We all want to be inspired. In a popular study of 1500 managers, 55 percent listed ‘inspiration’ as the most Believing in the Unlimited Potential of People 7
desirable attribute currently missing in their leaders. People are hungry for inspiration, for something to believe in, today more than ever. According to the Merriam-Webster Dictionary Online, ‘inspire,’ from the Latin inspirare (breathe life into) means to affect by spiritual influence; to stimulate to action, to draw forth, elicit, or arouse; to bring about. Inspirational leaders breathe new life into people, teams and communities. The best leaders move us. They inflame our passions and inspire the best in us. The same work that was ordinary yesterday is seen as extraordinary today when we reframe it as part of a larger purpose. The best leaders inspire us to do that.
Leading by Engaging Others
Active engagement of people at work has become the new leadership frontier—and for good reason. On the invisible frontier, in the deep sea of culture, Gallup research shows that over 70 percent of U.S. employees are not engaged at work.3 Additionally, a recent Conference Board study showed that 53 percent of American workers are unhappy in their jobs.4 Clearly, disengagement and unhappiness drive lower productivity, which (surely everyone agrees by now) negatively affects earnings. In Drucker’s new economy of ‘knowledge capital,’ this is an alarming statistic. It would likely be a shock—if it were possible—to reckon the full cost to a company of a failure to engage its people. The indirect opportunity costs in lost performance, productivity, and innovation are incalculable, but there are many direct costs, like absenteeism, sick pay, recruitment and replacement costs, (including recruiting fees often 30 percent and more of compensation), overtime pay for shifted job duties, ramp-up time for replacements, as well as outplacement fees and continued benefits if termination occurs. Campbell’s Soup, for example, credits employee engagement as the driving force of a total return to shareholders of more than 30% over the last eight year period, during which the S&P 500 lost more than 10% of its value.5 George: “To my mind, it is obvious that committed and empowered employees are a must. I have learned that engaged employees create 8 The Superperforming CEO robust, lasting relationships, make better decisions, and produce amazing results. For this reason, I advocate that all people at work should strive constantly, work hard to nurture and improve relationships with each other, with their customers, and with the communities they serve.”
Not Good Enough?
George: “Believing you’re not good enough—nature doesn’t have that, it is always fulfilling its potential—that’s A company how it works. In our human condition, we is stronger limit ourselves; we are subject to self-defeating behaviors, getting in our own way. A rose, in its if it is bound bud form, contains the flower that it is going to by love, rather become; there is nothing to add; it will unfold and blossom into its full self. What if people have than by fear. an essential self too? We all are prone to getting Herb Kelleher, in our own way. We must have a never-ending Southwest Air willingness to explore our own roadblocks. “When it comes to people, you have to trust them. Give them authority. When you make a request of them, you provide them with an opportunity, encouragement is a critical lever. I believe we contain within us great human potential that goes mostly unrealized, mostly untapped. I have learned that you get dramatically better returns when you treat people from their unexpressed future…not how they show up today.”
Nature Goes Up
George: “Nature emerges—its natural direction is up. When you are treated as if you will become your best, will do something great, your own intrinsic motivation is awakened. I am an example of this, first owing to my father and then others who saw something in me. By relating to the essence of people—not who they are today, but from their unfulfilled future—you can change them, release their ‘Seabiscuit.’ This Believing in the Unlimited Potential of People 9 leads to creating a future from the future, instead of creating a future from the past. Relating to people from their unfulfilled future opens an immense Whatever you truly opportunity for them to fully express conceive of, in your themselves—to create, grow, and contribute dramatically greater value.” mind, is possible. The story of Seabiscuit is a true story of Every action of our unleashed passion and unlimited possibility. lives touches on Seabiscuit was an unlikely, consistently some chord that will disappointing, despair of a racehorse when his new owner Charles Howard, vibrate in eternity. acquired him in 1935 for the paltry sum of Edwin Hubbel Chapin eight thousand dollars. Horse whisperer Tom Smith had seen something more, something powerful hidden in Seabiscuit’s angry glare. In Laura Hillenbrand’s biography Seabiscuit— An American Legend, the tipping point of Seabiscuit’s spectacular transformation is captured:
Story of Seabiscuit Once Seabiscuit was settled in Detroit Smith took the colt to the track to stretch his legs. It was a disaster. Seabiscuit didn’t run. He rampaged. When the rider asked him for speed, the horse slowed down. When he tried to rein him in, the horse bolted, thrashing around like a hooked marlin. Asked to go left, he’d dodge right, tugged right, he’d dart left. The beleaguered rider could do no better than cling to the horse’s neck for dear life. Smith watched, his eyes following the colt as he careened around the track, running as a moth flies. Smith knew what he was seeing. Seabiscuit’s competitive instincts had been turned backward. Instead of directing his efforts against his opponents, he was directing them against the handlers who tried to force him to run. He habitually met every command with resistance. He was feeding off the fight, gaining confidence from the distress and rage of the man on his back. Smith knew how to stop it. He had to take the coercion out of the equation and let the horse discover the 10 Th e Superperforming CEO
pleasure of speed. He called out to the rider: Let him go. The rider did as told, and Seabiscuit took off with him…He made a complete circuit at top speed, but Smith issued no orders to stop him, so around he went again. After galloping all-out for two miles, weaving all over the track, Seabiscuit was exhausted. The rider simply sat there, letting him choose where to go. There was nowhere to go but home. Seabiscuit turned and walked back to the barn of his own volition. Smith greeted him with a carrot. Neither Smith nor his exerciser rider had raised a hand to him, but the colt had learned the lesson that would transform him from a rogue to a pliant, happy horse. He would never again be forced to do what he didn’t want to do.6
George: “Command and control takes away authority and self-worth. Once people are enrolled, they are working for their own satisfaction. They have become self-motivated; it is inside-out. Then true alignment happens. It is never insisting; it self-organizes. It is always pull versus push. It is always choice versus no-choice. You have to create the conditions to engage intrinsic versus extrinsic motivation. “Heidegger called accomplishment the Though no one can fulfi llment of something into its essence. go back and make Most individuals are highly underutilized and undervalued. It’s important to relate a brand new start, to them from their unfulfi lled future. This anyone can start means having a view of the individual entering the company in much the same from now and make way a gemologist can look at a diamond a brand new ending. in the rough—it isn’t fully itself yet, but the diamond essence is there. For many Carl bard people this is a different way of approaching things—believing in the unlimited potential of people, truly optimistically. To maximize its value, a company must create opportunities for people to develop themselves, create a safe Believing in the Unlimited Potential of People 11 environment for interacting and learning, create a way for everyone to express and grow and contribute value. “One common challenge is helping people break through their self- limitations. This means working with people to help remove their own self-imposed boundaries—how they listen and interpret things can keep them in a box. But living in possibility is a way to get out of the box. There is a possibility that the barrier doesn’t provide but that you create when you surrender one view to embrace something different. When we start to see behind our self-imposed limitations we can spring forward to unbelievable new levels of achievement.” 12 The Superperforming CEO
Summary
The Superperforming CEO: Believing in the Unlimited Potential of People
• We tend to live in a world of probability, with a limited future, expecting more of the same. We limit ourselves with our conclusions about what is probable for people. A probable future does not allow for transformation. Living in a world of probability is living in an ordinary way. But living in possibility makes room for transformation.
• Superperformers hold a psychological space for the possibility of people. When you approach people as bundles of unlimited potential you release something powerful inside them.
• It is impossible to unleash the Seabiscuit hidden inside organizations, projects, and teams without servant leadership. This calls for a different leadership. Leading by service, engagement, and inspiration are qualities of a leadership for everyone.
• When you treat people as though they are more, their intrinsic motivation is awakened. They begin to appreciate! To maximize value, a company must create opportunities for people to develop themselves, create a safe environment for interacting and learning, create a way for everyone to express and grow and contribute value. Believing in the Unlimited Potential of People 13 14 Th e Superperforming CEO Distinctions
1: Believing in the Unlimited Potential of People
2: Sharing the Wealth Chapter 2 Sharing the Wealth
uperperformers aggressively share the wealth. These companies have no doubt this philosophy has helped them to: S • Maximize the Bottom Line: The additional cost Superperformers put into benefits is more than returned in the quality of people they attract, who create results their competitors cannot match. To Superperformers, people are an investment, not an expense. • Attract the Best People: Superperformers are able to hire the best and the brightest. The best people tend to find their way to the best companies. • Keep Them: Superperformers know that a great compensation and benefits program is an incentive for people to stay, as opposed to opting for a higher salary from a competitor. • Transform Productivity: Superperformers are able to generate astonishing productivity from fewer employees. Sharing the Wealth is a major part of the explanation. • Provide Great Customer Service: Employees who act like owners are created by instilling real ownership. This translates 16 The Superperforming CEO
into people who are willing to go much further to satisfy customers. George: “Sharing the wealth is great for business. People will not provide the highest kind of personal service if they’re unhappy with their compensation, so I have always endorsed a view that employees should receive great wages, regular stock option grants and quarterly cash bonuses, along with the best benefits possible. I believe any organization that wants to be great should aim to provide the best compensation in the industry.” Sam Walton, founder of retail Superperformer Wal-Mart, believed in Sharing the Wealth with Associates. “Sam’s Way” is the name Sam Walton gave to Wal-Mart’s vaunted culture. Its principles were simple. In 1992 Sam Walton outlined his Ten Rules for building a business so that anyone could learn from them:
Sam’s Way for Running a Business Rule 1: Commit to Your Business Rule 2: Share Your Profits With All Your Associates, and Treat Them as Partners Rule 3: Motivate Your Partners Rule 4: Communicate Everything You Possibly Can to Your Partners Rule 5: Appreciate Everything Your Associates Do for the Business Rule 6: Celebrate Your Successes Rule 7: Listen to Everyone in Your Company Rule 8: Exceed Your Customers’ Expectations Rule 9: Control Your Expenses Better Than Your Competition Rule 10: Swim Upstream1 Sharing the Wealth 17
Sam Walton believed in sharing the wealth. In his words, “Encourage your associates to hold a stake in the company—remain a corporation and retain control if you like—but behave as a servant leader in a partnership. Offer discounted stock, and grant them stock for their retirement. It’s the single best thing we ever did.” 2
Superfacts for Sharing the Wealth
Sharing the Wealth is an amazing principle George Martinez calls a critical requirement for success. Sharing the Wealth isn’t something you initiate once your business has achieved success. On the contrary—providing outstanding compensation and benefits helps a business get there in the first place. Need proof? Consider these Superfacts: • Southwest Airlines adopted the first profit-sharing plan in the U.S. airline industry in 1973. Through the plan, employees own about 10% of the company’s outstanding stock. • Microsoft has minted more millionaire employees than any other company. Since it was founded in 1975, it has created over 1000 millionaires. • Harley-Davidson is a model of labor-management optimization. Harley and its union representatives agreed to collaborate to establish a High Performance Work Organization partnership. An outcome of this agreement is a Harley-Davidson commitment to partnership extending to each and every employee. • Johnson & Johnson’s knowledge (intangible) value has been calculated at $1.43 million per employee. Employee wages average $109,000 per employee. • Tiffany & Co. employee satisfaction is the highest in the industry; retention is over 90 percent. The company emphasizes a corporate culture of humility. • Today Wal-Mart health plans insure more than 1 million people, making the company among the largest providers of 18 The Superperforming CEO
health insurance in the nation. Wal-Mart recently reported that 90.4 percent of Associates now have health coverage through Wal-Mart or another source—an increase of almost 8 percent in 2006. • SYSCO is a paragon of employee participation and involvement. 65 percent of employees own stock in the company, earned through SYSCO’s vaunted customer performance culture. • Although Berkshire Hathaway does not award stock options, the company is regarded as a highly successful model of compensation. Not one Berkshire Hathaway CEO has left the company in 40 years • In 2006, Toyota surpassed the average worker pay of U.S. auto manufacturers, topping out the field at an average $30 per hour ($60,000) with bonuses.
Stock Options
More and more companies are offering stock options as a way to reward people and link their interests with those of the company and other owners. The popularity of ‘broad-based’ stock option plans has increased dramatically since the late 1980s. Mercer describes a broad- based stock plan as one that provides for eligibility to receive stock option grants to all (or at least 50 percent) of the company’s employees.3 Broad- based stock options are now the norm in high-technology companies and are growing in popularity in many other industries as a larger influence in overall equity compensation strategy. Large publicly traded companies like Wal-Mart, Johnson & Johnson, Southwest Airlines, Microsoft, Whole Foods, and Cisco now give stock options or grants to most if not all of their employees. As of 2006, the National Center for Employee Ownership (NCEO) estimates that up to 20 million employees own equity in their companies. American workers own stock in their company through a 401(k) plan, ESOP, direct stock grant, or similar plan, while 10.6 million hold stock options. One super finding reported by NCEO Sharing the Wealth 19 is that sharing ownership (through profit and gain sharing programs) is directly correlated with increased employee involvement in work-level decisions.4 A 2003 World at Work study showed that options are popular in all kinds of public companies, with 15 percent of public companies offering options to most or all employees.5
What Is a Stock Option?
A stock option gives an employee the right to buy a certain number of shares in the company at a fixed price for a certain number of years. The price at which the option is provided is called the “grant” price and is usually the market price at the time the options are granted. Employees who have been granted stock options hope that the share price will go up and that they will be able to “win” by exercising (purchasing) the stock at the lower grant price and then owning the stock at the current market price. There are two principal kinds of stock option programs, each with unique rules and tax consequences: non-qualified stock options and incentive stock options (ISOs). Stock option plans are a direct way to instill a A man’s true culture of ownership. They are a flexible tool for wealth is the employers to share ownership with employees, reward them for performance, and attract and retain good he does a committed, motivated workforce. For growth- in this world. minded smaller companies, options are a great way Mohammad to preserve cash while giving employees a piece of future growth. They also make sense for public firms whose benefit plans are well established, but who want to include employees in ownership. The dilutive effect of options, even when granted to most employees, is typically very small and for Superperformers, is easily offset by their commitment, productivity and employee retention benefits. Options are, however, usually inappropriate for companies whose future growth is uncertain. They can also be less appealing in small, 20 The Superperforming CEO
closely held companies that do not want to go public or be sold because they may find it difficult to create a market for the shares. The ultimate impact of any employee ownership plan, including a stock option plan, depends a great deal on the company and its goals for the plan, its commitment to creating an ownership culture, the amount of training and education it puts into explaining the plan, and the goals of individual employees (whether they want to cash out sooner rather than later). In companies that demonstrate a true commitment to creating an ownership culture, stock options can be a significant motivator. Companies like Southwest Airlines, Wal-Mart, Leadership is a Whole Foods, Johnson & Johnson and many process in which others are paving the way, showing how effective a stock option plan can be when combined with we bring people a true commitment to treating employees like together to work owners. toward mutual There are some practical considerations. Generally, in designing an option program, goals because companies need to consider carefully how much they want to, not stock they are willing to make available, who because they will receive options, and how much employment will grow so that the right number of shares is have to. granted each year. A common error is to grant
Richard Teerlink too many options too soon, leaving little room for additional options for future employees. Great stewardship is called for to design and implement a great stock options plan.
Retirement Plan
In all truth, many people are afraid when it comes to saving for retirement; afraid they’ll need the money today that they’re saving for tomorrow; afraid of choosing the wrong investments afraid that—in the end—they still won’t have enough money to pay for health care and other Sharing the Wealth 21 expenses during retirement. That fear often results in complete inertia. George: “If you look at nature you will see no separation, only one interdependent whole. The exception we make is humankind. We operate as if we are separate from nature, immune to its laws, disconnected from its universality. If you are operating with the intention that the needs of people must be fulfilled, you are operating with a commitment to the larger whole. We are social organisms. We have a fundamental need to be part of something we help to create. I have found that the organizations do benefit from sharing the wealth, because when people are being fulfilled, they bring their all to the cause. Sharing the wealth is a critical need in any organization. It creates a wholesome environment. Unusual levels of sharing the wealth produce a huge benefit. “Nature shares the wealth—nothing is wasted in an ecology. When value is created, every element in the ecology shares in that created value. You see this in animals in the wild, certainly. Everybody wins. You can kill the golden goose by focusing only on the top line. This is the mechanistic way, win-lose, zero-sum. It is not that way to the greatest return on investment. By creating a bigger pie, you create more value and everybody will win. You must overemphasize the stakeholder ecology. One component, or even two stakeholders alone, is not enough. You must focus on delighting an ecology of stakeholders. This is feeding the golden goose. Good feed = good life. In the mechanistic model there is no expectation that everyone is going to share the wealth. If you want to optimize the system, you cannot avoid this piece. Sharing the value created is not sharing the revenue. What I am talking about is a fair exchange, an even exchange of value.” Unsurprisingly, Superperformers have little trouble balancing such incentives with shareholder demands for greater returns. These companies maintain that sharing the wealth is a huge part of the explanation for their astonishing shareholder returns. 22 The Superperforming CEO
Summary
The Superperforming CEO: Sharing the Wealth
• Superperformers aggressively share the wealth. These companies have no doubt this behavior has helped them to (1) maximize the bottom line, (2) attract the best people, (3) keep them, (4) transform productivity, and (5) provide the best customer service.
• There are multiple ways to share the wealth, but incentive stock options for everyone tied to aggregate performance is a growing trend.
• The largest concern for people in the benefits area is healthcare. There are many creative approaches emerging such as disease management, health incentive programs, one-on-one orientation, robust communication, and prevention programs. As a nation, we’re just not very healthy. It’s no surprise, then, that the health care trend focuses more and more on wellness. The evidence is that a focus on engaging employees through wellness will lead to healthier employees and a healthier bottom line.
• Nature shares the wealth—nothing is wasted. When value is created, every element in the ecology shares in that created value. Sharing the Wealth 23 24 Th e Superperforming CEO Distinctions
1: Believing in the Unlimited Potential of People
2: Sharing the Wealth
3: Treating the Community as Stakeholder Chapter 3 Treating the Community as Stakeholder
uperperformers actively honor and participate as members of their communities. Not only do these companies encourage their Speople to contribute to community causes, they themselves tend to rank highly when it comes to philanthropy. Since their corporate giving is typically significant (Wal-Mart, for example, is the world’s largest corporate philanthropy) these companies often are very critically involved in adopted causes, local charities, and community development. Two great examples can be found in the shared philanthropic efforts of Superperforming CEOs Warren Buffett and Bill Gates, expressed through the Gates Foundation, promising a charitable organization unlike any the world has seen, and one that will test the limits of what a single group can do against global problems of health, poverty and education. Buffett’s decision to sign over nearly $31 billion of his company’s stock to the Bill & Melinda Gates Foundation creates a giant of the charity world, a colossus on track to give away $3 billion a year by 2009. The Foundation, already the nation’s largest with a $30 billion endowment donated largely by Bill Gates, will hand out more per year than the gross domestic product of nearly 40 countries, including Mongolia, 26 The Superperforming CEO
Togo and Zimbabwe. The sheer size of the amount, which is larger than UNICEF’s 2005 budget of $2.7 billion, is one of the reasons the Gates Foundation thinks it can make significant inroads with campaigns against AIDS, tuberculosis and malaria. The Healing only Foundation’s funding is considered a crucial comes from part of the scientific effort to cure diseases that mostly or entirely afflict the developing world. that which leads Buffett, in turn, explained that by giving the patient his money to the Gates Foundation, he was beyond himself simply following good investing strategy: put your assets in the hands of trusted managers and beyond his and give them the freedom to make decisions. entanglement Those whom global capitalism has made rich, with ego. he said, should help the world’s less fortunate. “We really owe it to society to give back,” Gates C. J. Jung declared, on announcing the gift. Leaders of philanthropic foundations said Buffett’s donation was a historic event they hoped would build momentum in the donor community. “You have an innovator and a world business leader—the combination of the two making such a huge personal investment of time and wealth, it does raise the bar and raise the profile of philanthropy,” said Thomas M. Springer, senior editor at the W.K. Kellogg Foundation, a $7 billion philanthropic organization.1
Toyota
Toyota operates under a “global earth charter” that promotes environmental responsibility throughout the entire company. Toyota is leading the way in lowering emissions and improving fuel economy in gasoline powered vehicles. Not only did the company create the world’s first mass-produced gas/electric hybrid car, but Toyota is also at the forefront of developing tomorrow’s fuel cell vehicles. Treating the Community as Stakeholder 27
Toyota Community Care
Toyota’s Guiding Principles 1. Honor the language and spirit of the law of every nation and undertake open and fair corporate activities to be a good corporate citizen around the world. 2. Respect the culture and customs of every nation and contribute to economic and social development through corporate activities in local communities. 3. Dedicate ourselves to providing clean and safe products and to enhancing the quality of life everywhere through our activities. 4. Create and develop advanced technologies and provide outstanding products and services that fulfill the needs of customers worldwide. 5. Foster a corporate culture that enhances individual creativity and teamwork value, while honoring mutual trust and respect between labor and management. 6. Pursue growth in harmony with the global community through innovative management. 7. Work with business partners in research and creation to achieve stable, long-term growth and mutual benefits, while keeping ourselves open to new partnerships.
Toyota’s Earth Charter
Basic Policy
1. Contribute Toward a Prosperous 21St Century Society Aim for growth that is in harmony with the environment, and set a challenge to achieve zero emissions throughout all areas of business activities. 28 The Superperforming CEO
2. Pursue Environmental Technologies Pursue all possible environmental technologies, developing and establishing new technologies to enable the environment and economy to coexist.
3. Take Action Voluntarily Develop a voluntary improvement plan based on thorough preventive measures and compliance with laws, that addresses environmental issues on global, national and regional scales, while promoting continuous implementation.
4. Work in Cooperation With Society Build close and cooperative relationships with a wide spectrum of individuals and organizations involved in environmental preservation, including governments, local municipalities and related companies and industries.2
Southwest Airlines
Southwest Airlines is celebrating 27 years of partnership with Ronald McDonald House. In 1985, the airline adopted the charity as its primary corporate charity and gave $10,000 to each Ronald McDonald House located in a city served by the airline, with A man’s true a total donation of $210,000. Southwest seeks to wealth is the assist the Ronald McDonald House by increasing public awareness about the houses and their value good he does to the community. During the holiday season in this world. each year, Southwest runs a television advertising campaign highlighting its Ronald McDonald House Mohammad partnership. The original commercial was filmed at the Fort Worth House and features children and families from the Ronald McDonald Houses as well as Southwest Employees, including Southwest President Colleen Barrett. Southwest has said that its interest in the Ronald McDonald House Treating the Community as Stakeholder 29 program was initiated in 1983 by one of the company’s pilots, Dick East. Following the loss of his daughter to leukemia, East began volunteering at Ronald McDonald Houses in cities to which he flew. East recruited his coworkers to join him and introduced Southwest Airlines’ former Vice President of Customers Colleen Barrett and former Chief Executive Officer Herb Kelleher to the Ronald McDonald House program.3
Harley-Davidson
For more than 26 years, Harley-Davidson has been a national supporter of programs to raise funds for the Muscular Dystrophy Association. Support for MDA began in 1980 and since then, the Harley- Davidson family of customers, dealers, suppliers and employees has raised more than $60 million to aid research and program services for children and adults with muscular dystrophy. This funding supports life- saving research, comprehensive medical care for children and adults with neuromuscular disease, and MDA summer camps. Harley-Davidson customers, dealers, suppliers and employees are committed to improving their communities and helping others, and their support of MDA has enabled riders to work together for a common cause. Creating open houses, holding fundraising rides, and hosting Black-n- Blue charity dinners are just a few of the ways the Harley-Davidson family raises money for MDA. The hard work of Harley enthusiasts helps make life brighter for people with muscular dystrophy and helps make strides in finding a cure. In addition, the Harley-Davidson Foundation is dedicated to supporting their host-facility communities with employee volunteerism and funding.4
Johnson & Johnson
Johnson & Johnson has a history of giving that stretches back to 1906 when it provided disaster relief in the aftermath of the devastating San 30 The Superperforming CEO
Francisco earthquake and subsequent fires. Since that time, the company’s commitment to philanthropy has played an increasingly important role in the communities where Johnson & Johnson people live and work. As the world’s most broadly based human health care company, Johnson & Johnson feels a responsibility to help those in need. To maximize its philanthropic efforts, Johnson & Johnson focuses on three areas: saving and improving lives; preventing diseases; and building health care capacity. The Johnson & Johnson Worldwide Corporate Contributions Vision Statement reads: A better world is possible by living the values of the Credo, which puts people before profits and reflects a philosophy of “A Company That Cares.” Specifically, Johnson & Johnson believes a better world is possible by: working toward global communities in which every person has access to quality health care; providing innovative solutions to today’s—and tomorrow’s—health care problems; creating unique and powerful partnerships to continuously improve the quality of health care; extending knowledge by sharing what we know and what we learn; demonstrating real results through improved health and quality of life; and helping communities realize greater self-sustainability. As the nation’s largest philanthropy devoted exclusively to improving the health and health care of all Americans, the Robert Wood Johnson Foundation was created by Robert Wood Johnson to use almost the entirety of the fortune he accumulated from growing Johnson & Johnson into the world’s largest healthcare products company. The Robert Wood Johnson Foundation works with a diverse group of organizations and individuals to identify solutions and achieve comprehensive, meaningful and timely change. For more than 30 years the Robert Wood Johnson Foundation has brought experience, commitment and a rigorous, balanced approach to the problems that affect the health and health care of those it serves. The Foundation states, “Because when it comes to helping Americans lead healthier lives and get the care they need, the Foundation expects to make a difference in our lifetime.” 5 Treating the Community as Stakeholder 31
Microsoft
Besides the tremendous personal and financial commitment of founder Bill Gates through the Bill and Melinda Gates Foundation, Microsoft in 2008 pledged direct and in-kind philanthropic giving of over $400 million.
Microsoft believes:
1. As a major corporation, Microsoft has a responsibility to support organizations and issues that impact our community. 2. Microsoft has a responsibility to our employees to offer programs and opportunities that support nonprofit organizations. 3. Microsoft partners with others to create innovative technology solutions to meet the needs of the nonprofit community or to address social issues.6
Wal-Mart
The Wal-Mart & SAM’S CLUB Foundation is a major philanthropic influence. Last year Wal-Mart again topped the list of corporate givers to the tune of $188 million. While 70 percent of Wal-Mart’s giving is through the Foundation, its signature program for contributing back to the community is the Wal-Mart Good Works Community Involvement Program. Each store and club has funding to assist organizations and programs improving the quality of life in their local communities. Dedication to local organizations is the cornerstone of the Foundation Community Grant Program.7 George: “I have learned that people are committed to making a difference in their local communities. With a company’s encouragement, they will engage in a wide range of community activities. They will seek to maintain civic leadership and participate actively in charity and other events, which helps demonstrate the company’s commitment to that 32 The Superperforming CEO
Healing only community. From a banking perspective, this comes from comes from a belief that a bank is the financial heart of the community, and the catalyst of its that which leads economic growth. Bankers must be dedicated the patient to the growth and development of their regions and local people and businesses. Together these beyond himself efforts produce the goods and services that and beyond his secure a more abundant future for the entire entanglement community. The goal, in partnership with other organizations, leaders and residents, is to create with ego. a better future for our communities and our
C. J. Jung diverse neighborhoods. This commitment helps a bank give back to its host communities, while at the same time providing staff a way to fulfill personal goals.” Treating the Community as Stakeholder 33
Summary
The Superperforming CEO: Treating the Community as Stakeholder
• The best organizations believe in giving back. They honor and participate as active members of their communities. Not only do most super companies encourage employees to seek opportunities to contribute to community causes, they themselves tend to rank highly when it comes to philanthropy.
• Superperformers participate in the community in a variety of significant ways, from adopted causes to local community initiatives.
• People are committed to making a difference in their local communities. With a company’s encouragement, they will engage in a wide range of community activities. They will seek to maintain civic leadership and participate actively, which helps demonstrate the company’s commitment to the community. 34 Th e Superperforming CEO Distinctions
1: Believing in the Unlimited Potential of People
2: Sharing the Wealth
3: Treating the Community as Stakeholder
4: Making Sure All Stakeholders Win Chapter 4 Making Sure All Stakeholders Win
xcellence is a Multifaceted Diamond. As a governance strategy, everybody-win is a common Superperformance mantra. ESuperperforming companies know that a strategy of win- lose, over the long term, is really a strategy of lose-lose. They appreciate organizations as complex networks of interdependencies between stakeholder groups that directly and indirectly affect each other. The best companies balance the needs and wants of multiple constituencies. To these companies, everybody-win is the best way to maximize corporate profits. Over the long term this mindset does not create a conflict of interests. On the contrary, it serves to maximize the principal objective of the firm—maximum shareholder value. While attending to the exclusive needs and wants of shareholders may work in the short-term, the longer- term interests of shareholders will not be well served if the interests of other stakeholders are not addressed. Superperformers know instinctively, for example, that engaged and energized people are essential to outperformance in all areas. Herb Kelleher for Southwest Airlines, emphasized the importance of an engaged staff when he said, “If the employees come first, then they’re happy. A motivated employee treats the customer well. The customer is happy so they keep coming 36 The Superperforming CEO
back, which pleases the shareholders. This is not one of the enduring green mysteries of all time; it is just the way it works.” 1 Harley-Davidson also includes the employee’s critical role in the company’s famous vision statement: “Harley-Davidson, Inc. is an action- oriented, international company, a leader in its commitment to continuously improve our mutually beneficial relationships with stakeholders: customers, suppliers, employees, shareholders, governments and society. Harley-Davidson believes the key to success is to balance stakeholders’ interests through the empowerment of all employees to focus on value-added activities.” 2 Health care products Superperformer Johnson & Johnson’s famous Credo outlines the corporation’s responsibilities to customers, employees, the community and shareholders. In publishing the Credo, Robert Wood Johnson urged fellow businessmen to embrace this “new industrial philosophy.” Published in 1943, the Credo was heralded by business leaders and the public as farsighted and astute. Putting customers first, and stockholders last, was a refreshing approach to the management of a business.3 General Robert Wood Johnson’s Credo codified his company’s socially responsible approach to conducting business. The Credo states that the company’s first responsibility is to the people who use its products and services; the second responsibility is to its employees; the third to the community and environment; and the fourth to the stockholders. General Johnson and his successors, in managing the business, have believed that if the Credo’s first three responsibilities are met, the stockholders will be well served. Superperformers all know that creating positive relationships with multiple stakeholders is business-critical. Each stakeholder relationship represents a potential opportunity as well as a potential threat to sustained outperformance. How do Superperformers achieve the balance?
It All Begins With a Declaration of Intent
John M. Hood’s excellent book, The Heroic Enterprise, provides numerous illustrations of how companies can and do serve the larger Making Sure All Stakeholders Win 37
community and the pursuit of profits. For example, sponsoring safety and health promotion programs for employees can lower health, accident, and life insurance premiums. Providing personal development programs, childcare, family leave, flexible work schedules, job sharing, employee assistance programs, and telecommuting opportunities benefit the firm and its workers. By helping to restore inner cities, making them safer, and educating their residents, businesses can serve their own interests as well as those of the urban population. Earning the trust of consumers and community leaders can lead to long-term economic gains.4 George: “So, if we serve the community well, serve the customers well, and serve the employees well, that’s good. But is that compatible with being a successful business? Here again we have objective measures. Sterling enjoyed record earnings for fifteen consecutive years. The company placed on itself Opportunity is a challenge to outperform the market in building missed by most shareholder value while serving the three other constituencies well. Serving multiple stakeholders people because does fulfill the investors’ intent. it is dressed “It has been my experience that the best in overalls and way of satisfying the ‘unspoken’ expectations looks like work. of the business banking customer is through a decentralized decision-making structure, which Thomas Alva Edison includes providing them with access to a banker who is an experienced decision-maker; making sure that their banker understands their industry and, more importantly, their specific business enterprise, providing them with a consistent source of credit to help them build their business, providing products and services locally, responding quickly to their requests, and generating a personal service relationship that adds value to their company. “The challenge is to maintain and build on your marketplace advantage. To move ahead, it is important to keep from attributing a static nature to the demand that drives a company’s marketplace advantage. To the contrary, I have learned that you have to anticipate that your 38 The Superperforming CEO customers’ demands will inevitably change, perhaps even dramatically, over time. Therefore, we must continue to assess the needs of our customers to ensure true continuing marketplace advantage. We must also routinely pursue methods both to enhance our market niche through new products and services, as well as to establish new profit opportunities wherein the company’s infrastructure and processes are maximized; this unique approach to banking quality service will continue to produce a clear competitive advantage.” Making Sure All Stakeholders Win 39
Summary
The Superperforming CEO: Making Sure All Stakeholders Win
• Superperformers all know that creating positive relationships with multiple stakeholders is business-critical. Each stakeholder relationship represents a potential opportunity as well as a potential threat to sustained outperformance.
• Super companies balance the needs and wants of multiple constituencies. To them, everybody-win is simply the best way to maximize corporate profits. Over the long term this mindset does not create a conflict of interests. On the contrary, it serves to maximize the principal objective of the firm—maximum shareholder returns.
• Superperformers have proven it is possible to serve the community well, serve the customers well, and serve the employees well, without damaging shareholder value. The experience of Superperformers shows that serving multiple stakeholders does fulfill the investors’ intent. 40 Th e Superperforming CEO Distinctions
1: Believing in the Unlimited Potential of People
2: Sharing the Wealth
3: Treating the Community as Stakeholder
4: Making Sure All Stakeholders Win
5: Fulfi lling Life’s Purpose through Work Chapter 5 Fulfilling Life’s Purpose through Work
o you know your life’s purpose? Are you living it? Nothing is more transformational (or important) for a person than to Ddiscover and be in integrity with his or her life’s purpose. But what is it? What is the definition of ‘life purpose’? George: “I am fond of the phrase ‘living in possibility.’ I think it should be important to a company that people realize their full potential as human beings. I would even go so far as to advocate that companies should see this as a part of their larger purpose. Once, in an employee seminar, a new employee revealed she had always dreamed of being a youth minister. I found myself asking her, ‘Why are you here?’ She left the bank shortly after that to pursue her dream. I’m happy to report that many years later, she returned to us. When people are in alignment with their life’s purpose, work becomes easy, effortless, even joyful. It is possible to see work as much more than just a job. “In the broadest sense, we all have a shared overall purpose in that we are here to discover as much of our true selves as we can, and express it through our lives to the greatest possible extent. We all share this purpose. We share it through our experiences, through the relationships 42 The Superperforming CEO
we nurture, through the professions we choose, and through the people who affect us most deeply. “But I believe that each us also contains the seed of something else, something individually unique. It’s a single purpose that no one else can accomplish, a purpose for life that transcends our daily activities. It is the service we are here to provide, the segment of the planet we are here to improve. It is much broader than a job or career—this unique purpose pervades our entire being. Before the industrial revolution, we had a craft society. In a craft society, everyone has a special craftsmanship, a ‘Maker’s Mark.’ This was an original imprint we made through our craft. I believe we are going back to something like that now.” Life’s purpose is fun, absorbing, and deeply rewarding. When you are carrying out your life’s purpose, time goes by unnoticed. Abraham Maslow called these periods ‘peak experiences.’ 1 Mihaly Csikszentmihaly called it operating in “flow” state.2 Peak experiences are regular occurrence when you are following your life’s purpose. “Knowledge worker,” a term coined by Peter Drucker in 1959, is “one who works primarily with information or one who develops and uses knowledge in the workplace.” 3 Due to the burgeoning and continuing growth of globalization, there is increasing need for an information workforce. In direct response to this, knowledge workers are now estimated to outnumber all other workers in North America by at least a four to one margin.4 A knowledge worker’s benefit to a company could be in the form of improving operating systems and business intelligence, increasing the value of intellectual capital, gaining insight into customer preferences, or a wide range of other knowledge-based processes that lead to the transformation of the business. The world of work is increasingly moving toward Drucker’s predicted “Knowledge Economy,” where the most important assets are intangible, held by knowledge workers who are in high demand, and who can take their means of production with them wherever they go. Drucker wrote; “Finding ways to improve the productivity of knowledge workers is one Fulfilling Life’s Purpose through Work 43 of the most important economic issues of our time.” 5 Alignment with life purpose is a major fulfillment issue for knowledge workers. At the same time, organizations face a human capital crisis as the knowledge worker pipeline contracts significantly. No one else can fulfill your life’s purpose. Whether it is an area that affects many or few, what matters is that no one can approach it in the special way that only you can. If you have not experienced the level of success that you know matches your capabilities, or if you have felt as if something is ‘missing’ from your life, take note of this very important fundamental: you will experience success in your life to the extent that you are clear about, and in integrity with, your life’s purpose. George: “This is a very valuable distinction for a company. Having a core value that all people fulfill their personal and professional aspirations is living in true possibility. If a company’s approach to the individual is holistic, it should be concerned with bringing the whole person to work. I have learned that people will be intensely more creative if they are not required to leave parts of their lives at home because some feelings or aspirations are not ‘appropriate’ at work. People work better and more flexibly if they are acknowledged, respected as human beings, and encouraged to follow their dreams. This is in contrast to the mechanistic, traditional view of people as fungible—perfectly rational, economic units to be interchangeably used and carelessly discarded.”
It All Has To Do With Integrity
The word integrity comes from the Latin tangere (“touched”), consequently integrity means something or someone untouched, free of disease, whole. We refer to ourselves as being in or out of integrity in a given situation. Usually integrity describes someone’s innermost being, her essence, her foundation. Often integrity is used as a synonym for virtue itself. Psychologist Carl Jung described integrity as the “virtue of virtues.” Marie-Louise von Franz, a student of Jung’s, said of integrity that, “If people have not in their innermost essence a genuineness, or a certain integrity, 44 The Superperforming CEO
they are lost when meeting the problem of evil. They get caught. This integrity is more important than intelligence or self-control, or anything else.” 6 George: “I describe three levels of integrity: Level 1: Keep Your Promises “This is what every bank asks of its customers. A promissory note is, after all, a ‘promise to pay.’ The first four words in a promissory note read: ‘I promise to pay…’ This means whole and complete, with nothing missing. For instance, a chair has integrity in a physical sense if you can sit in it and it holds you up—if a leg gets broken, it loses its integrity. In the ‘conversational world’, when a person fails to keep his word, he loses his integrity. A defaulting customer would pay current and then keep his word going forward to regain his integrity. The two types are casual pretend commitment and real actual fulfillment of a promise. Level 2: Live Consistent with Values “Often someone promotes, but does not live by, his/her espoused values. One example is the Catholic Church and its recent scandals. Most of us fall short; no one lives in integrity with his values all the time. If you ask people if they are ethical, everyone will answer yes but if you ask them if they are “sinners” they will also answer yes. How is this possible? We hold up values as a sort of ideal. Level 3: Live Consistent with Purpose “This is the highest integrity level. This is living in integrity with your own core purpose and full expression of God-given gifts and talents. Joseph Campbell referred to this as ‘following your bliss.’ 7 This level of integrity is the highest—it refers to discovering and living your life’s purpose. “You have to co-create a place like this, a great place to work, a place people love. This is not something you put in place only once; it is perishable. It has to be nurtured to be sustained. If you stop feeding it, it will die, like any organism. Trust and a sense of great possibility have to Fulfilling Life’s Purpose through Work 45
be nurtured. With no hope, no expectation, and no future vision, people lose energy and things start to fall apart. People want to understand where they are in the whole thing. You have to create an environment of unlimited opportunity for people with great room to be fulfilled.”
Back to the Future
“The principal object of management should be to secure the maximum prosperity for the employer, coupled with the maximum prosperity for the employee.” Few would guess these profound but simple words were written by Frederick Taylor, father of Scientific Management, over a century ago. Ironically, Great minds have ‘Taylorism’ is almost universally regarded as purposes, others the antithesis of the empowerment philosophy of business management. Concerning other have wishes. Little ‘old-fashioned’ industrialists of his day, Taylor minds are tamed wrote, “The majority of these men believe that the and subdued by fundamental interests of employers and employees are necessarily antagonistic. Scientific management, on the misfortune; but contrary, has for its very foundation the firm conviction great minds rise that the true interests of the two are one and the same, that prosperity for the employer cannot exist through above them. a long term of years unless it is accompanied by the Washington Irving prosperity for the employee and vice versa . . .” 8 What a surprise! How is it that the man who wrote these profound, super words has come to be known as the very source of mechanistic management, dehumanization of workers, and sub-optimization of systems? Without a doubt, Scientific Management transformed industrial production, but it also brought a dark side. Many accused Taylor’s new management science of reducing workers to ‘automatons’, unthinking cogs in a machine. Through Taylorism, every action and every decision made in the organization was explicitly spelled out in the name of efficiency. Taylor became a lightning rod for controversy, and through the end of 46 The Superperforming CEO
his life was the target of much criticism for his ‘machine-based’ theories of organization management. The ‘win-win’ part of Taylor’s message was eclipsed by concepts like division of labor, time and motion, task allocation and the like. But the point is that even the progenitor of Machine View of business understood optimization (‘maximum prosperity’) as a symbiotic employee-employer relationship. Over the last century, the importance of people and their personal needs has drifted in and out of popularity, informed through the work of Douglas McGregor (Theory X and Y), Abraham Maslow (Hierarchy of Needs), W. Edwards Deming (Optimization Theory), Peter Drucker (Knowledge Economy) and other great minds. The new terrain of human capital fulfillment is at the forefront of business consciousness today. It is suddenly on everyone’s radar screen. Some contributing drivers are: Employee loyalty is waning. Gallup reports that 70 percent of U.S. workers are not engaged, and the Society for Human Resource Management has recently published data that shows over 75 percent of workers are currently in search of new jobs.9, 10 In today’s accelerating, hyper-competitive world, companies are finally beginning to see culture as a real advantage—something unique and difficult to replicate that will keep them ahead of the competition. We have moved from a material-based A goal without a to an information-based economy. In this method is nonsense. economy, “knowledge workers” hold the leverage—knowledge, specialized skills W. Edwards Deming and creativity—and their motivation is tied to more than a paycheck. Knowledge workers want purpose, meaning and personal growth. Organizations are turning the magnifying glass on themselves— they want to create environments that prevent the ethics and financial scandals that have plagued and destroyed so many companies recently. Increasingly, companies want to attract and retain great performers with Fulfilling Life’s Purpose through Work 47 talent and cultural ‘fit’. Companies depend on creativity for growth and renewal, which in turn depends on human initiative, risk-taking, and trust—all qualities that are only embraced by a healthy culture. Mounting evidence shows that a company cannot become everything it can be without a corporate culture that is everything it can be.
Let the People Shine!
George: “Employee fulfillment occurs when people feel (1) alignment between personal and corporate values, (2) they are being treated fairly, with dignity and respect, (3) they are being encouraged to become everything they can be, and (4) their work has meaning and they believe they are making a difference in the world. “I spend a lot of my time at work. If I count the time that I am preparing for work, and the time that I am recovering from work, that makes up the majority of the day, not to mention a very high percentage of my waking hours. It’s important to me that whatever work I do contributes to fulfilling my purpose in life. I have read that two hundred years ago, a person’s life and their livelihood were the same. With the Industrial Revolution came a separation. For many people today, one’s livelihood provides a means to have a life, but it’s not the life itself. I believe that we can create the original concept anew. I believe in the possibility that, given the right environment, work in a modern business can be the highest form of self-expression. My work has been that for me for thirty years. I know it is possible to create a workplace where it’s possible for everyone to be self-expressed through the work, to shine.” 48 The Superperforming CEO
Summary
The Superperforming CEO: Fulfilling Life’s Purpose through Work
• Each of us contains the seed of something else, something individually unique. It’s a single purpose that no one else can accomplish, a purpose for life that transcends our daily activities. It is the service we are here to provide, the segment of the planet we are here to improve. Living outside of this purpose is living outside of integrity.
• Having a core company value that all people fulfill their personal and professional aspirations is living in possibility. If a company’s approach to the individual is holistic, it should be concerned with bringing the whole person to work.
• When you Let the People Shine, you create a workplace where it’s possible for everyone to be self-expressed through the work.
• You have to co-create a great place to work, a place people love. This is not something you put in place only once; it is perishable. It has to be nurtured to be sustained. If you stop feeding it, it will die, like any organism.
• We are moving from a material-based to an information-based economy. In this economy “knowledge workers” hold the leverage—information, specialized skills and creativity—and their motivation is tied to more than a paycheck. Knowledge workers want purpose, meaning and personal growth. Fulfilling Life’s Purpose through Work 49 50 The Superperforming CEO Section 2 Uncommon Practices 52 Th e Superperforming CEO Distinctions
1: Believing in the Unlimited Potential of People
2: Sharing the Wealth
3: Treating the Community as Stakeholder
4: Making Sure All Stakeholders Win
5: Fulfi lling Life’s Purpose through Work
6: Taking the Long View of Business Chapter 6 Taking the Long View of Business
ne dividing line between Superperformers and their industry peers can be found in their extraordinary resilience. OSuperperformers have proven to be more durable, maintaining a steady state of industry-outperformance over very long periods of time. Some Superperformers, like Johnson & Johnson, Tiffany & Co., and Harley-Davidson, for example, have been at it for more than a century.
Simple, Organic Patterns
George: “There is a majestic old live oak tree in my neighbor’s yard. It’s huge. It has to be over 100 years old. How did it survive for so long? Its roots must go deep—these are akin to the core values that anchor an organization to survive generations of different challenges. Its trunk is massive; it would take three people holding hands to make it all the way around. This is the unchanging identity of a great organization living its purpose. Finally, its enormous branches have the freedom and flexibility to sway and bend with the frequent wind and rain we get here in Houston —these represent the adaptability an organization must contain to survive over long periods. 54 The Superperforming CEO
Old Live Oak Tree “Like yin and yang, there must be the solid with the flexible, the permanent with the impermanent. The unchangeable, deep roots of a great company will always contain its core values. To persist, there must be a timeless identity. Some cultures call this ‘Original Face.’ Jim Collins refers to this as ‘core ideology,’ the part that is unchangeable. People must be aligned in purpose and values to be personally affected. This provides the flexibility the organization needs to reinvent itself as needed to survive long-term.” “This necessary continual reinvention is not a change in purpose and values—not a change in the who or why—but a change in the how and what of an organization. It’s a paradox, but it’s true. To persist, an organization must contain an unchangeable essence as well as the capacity to continually change, improve, and create new structures. In this way the best companies are able to maximize both permanent change and changeless permanence, forever co-evolving with their environment to fulfill on their purpose. “To create a future to live into, it is important for that future to be disconnected from the past. For example, Christopher Columbus had to see a future that was disconnected from previous experience, not a past reshaped or improved. A long-term horizon is really about endurance. You do things differently for endurance (as in a marathon) than for a Taking the Long View of Business 55
sprint. A long-term view has power over the short-term. The prevailing wisdom is that the choice can only be either/or, one or the other. I take a different view—that it is possible to focus on the long-term and still produce excellent short-term results. “A long-term view drives creativity. This comes from a different declaration than a quarterly-results mindset, focusing on short-term results exclusively. The decisions that will impact the short-term—influence by the street, analysts, etc., represent the same operating field for a company with a In the short run, the long-term view. There is nothing original stock market is a or creative about that—while a long-term view comes from declaring some vision, voting machine, but and then living that declaration. A long- in the long run, it’s a term view affects every decision and every weighing machine. interaction. It is a decision—that you are not going to be influenced by the street, Benjamin Graham analysts, and others in the short-term—and then living that declaration. A long-term view for long-term growth will produce good short-term results too. If you do not take the long view for your company, you create a lot of unnecessary volatility.”
On the Role of the Board
In truth, today’s corporate boards cannot afford to be distracted from performance issues. On the whole, corporate performance is lagging. According to Bain & Company research, only one in eight companies achieve even modest targets for growth. Bain reports that only 13 percent of companies post (top and bottom-line) growth rates of 5.5 percent or better over a 10- year period while also earning back their cost of capital.1 Superperformers consistently surpass this benchmark by keeping company performance at the center of the board’s attention. Great boards focus on long-term value and how they can help create it. 56 The Superperforming CEO
George: “Boards, by and large, are the product of the CEO, not visa versa. Instead, we should turn this around. To my mind, the interests of investors should be sacred—their interests have to be at the heart of the enterprise. Toward that end, boards should Challenging the be the stewards of measurable results—earnings performance, long-term versus short-term meaning of life growth, stakeholder delight, and so on. At the is the truest same time, they should also be the vanguard of a expression of company’s ethics and values. the state of “In the very best companies, board members have a critical role to play in the development of being human. company strategy; they have a sense of ownership Viktor Frankl for it. The more a board grasps and has ‘felt ownership’ for a company’s strategy, the more they will be able to contribute when important problems or opportunities arise. “Corporate governance is the most important function of the board. To govern well, directors need to understand how the strategies being employed comply with the broader purpose of the organization and differentiate it from its peers. It’s crucial that a company’s board, charged with overseeing the company’s growth, understand in detail who the company is and what it is trying to accomplish. This is why, for founders, succession planning is so important. As much as possible you want to make sure the company will continue with the purpose and values that made it great. Instilling a long-term vision of the company that exists beyond our lifetimes is one way to ensure that the essence of what made the company great is retained in corporate memory.” Taking the Long View of Business 57
Summary
The Superperforming CEO: Taking the Long View of Business
• Like a majestic old live oak tree, an organization needs core values to anchor it, an unchanging identity to connect it to its purpose, and utmost adaptability to assure its resilience over long periods.
• A long-term view drives creativity. This comes from a different declaration than a short-term view for quarterly results, which focuses on short-term results exclusively.
• A long-term view for long-term growth will produce good short- term results too. If you do not take the long view for your company, you create a lot of unnecessary volatility.
• Boards have a vital role to play. They should be the stewards of measurable results, earnings performance, long-term versus short-term growth, stakeholder delight, and so on. At the same time, they should also be the vanguard of a company’s ethics and values. 58 Th e Superperforming CEO Distinctions
1: Believing in the Unlimited Potential of People
2: Sharing the Wealth
3: Treating the Community as Stakeholder
4: Making Sure All Stakeholders Win
5: Fulfi lling Life’s Purpose through Work
6: Taking the Long View of Business
7: Staying in the Sweet Spot Chapter 7 Staying in the Sweet Spot
he ‘sweet spot’ is a popular term in baseball. They talk about it in tennis, and in golf. And of course, they talk about it in business. TWe’ve all heard the term. We’ve almost certainly experienced it in one way or another. But what exactly is the sweet spot? Batters know from experience that there is a leverage point on the bat, between four to seven inches from the end of the barrel. This is the hitting area that produces maximum batted-ball speed, where the most energy is transferred to the ball, and where the shock of the impact felt by the hands is reduced to such an extent that the batter is almost unaware of the collision. At other impact points, the impact is usually felt as a painful sting or jarring of the hands and forearm, particularly if the impact occurs at a point well removed from the sweet spot. In a tennis racket, the sweet spot is the area of the string bed that produces the best combination of feel and power, the most powerful area in the center of the string bed. Every tool or object has a center of gravity (e.g. tennis racquet, baseball bat, golf club). It is the balance point within an object that offers the greatest leverage. The sweet spot in product or service development 60 The Superperforming CEO
is discovered through the use of the Quality Function Deployment (QFD) method. QFD enables product or service developers to listen to the ‘voice of the customer’ by collecting information on customer’s needs and preferences. Customer needs are translated into prioritized design specifications to deliver the optimum feature set, to hit the ‘sweet spot’ of customer needs, preferences and cost. The developer’s task is to balance features and cost with the quality and performance demanded by customers. The desired outcome is the optimal design that captures the market’s sweet spot, or center of gravity.
QFD Diagram
In the same way, Jim Collins describes the importance of staying in the ‘sweet spot’ of company purpose, which he describes as “the confluence of what the organization’s people are passionate about, what they can pursue to greatness or even perfection, and what is uniquely profitable for the firm (or, in a non-profit setting, uniquely productive of value).” 1 In Profit from the Core, Bain and Company’s Chris Zook demonstrated how companies who find and stick with their core, mainstay business Staying in the Sweet Spot 61 produce decidedly better outcomes than their industry counterparts.2 This is also true for Superperforming companies.3 Throughout corporate life, Superperformers keep the same identity and purpose. By focusing on just the one sweet spot, the thing that they do better than anyone else in the world, Superperformers transform productivity and value. Zook, Collins, and others have shown that other growth strategies fail to deliver maximum value—and can even destroy it—because they wrongly diversify from the core business. The experience of Superperformers has been that this timeless strategic precept, “building market power in a well- defined core,” remains another critical source of competitive advantage for all Superperformers, and the most viable platform for continued growth and successful expansion.
Staying On Target
Like individuals, every organization has a purpose. Operating outside of that purpose is operating outside of integrity. Zook identifies a company’s core purpose as the junction of a company’s most: (1) potentially profitable franchise customers, (2) strategic and differentiated capabilities, (3) critical product offerings, (4) important market channels, and (5) any other critical strategic assets that contribute to the above (such as patents, brand reputation, position at a control point in a network).4 Staying in the sweet spot is a critical discipline of Superperformers. George: “We always did a lot of business in the commercial sector. It was always a sweet spot. Most banks try to be everything to everybody —they attempt to grow large corporate, small business and consumer business segments at the same time. This is very hard to do without losing effectiveness at all three. The fundamental opportunity that makes any business plan viable is some marketplace opportunity. Our sustained internal growth demonstrated to us over and over again that we could enjoy a particular advantage based on a demand for the level of service and type of products we could offer to owner-operated businesses. “Before 1986, we had only one location. Then banks decapitalized— 62 The Superperforming CEO
many banks closed because they could not recapitalize themselves. Then came deregulation, and branching became possible. Branching proliferated in Texas, driven by out-of-state banks seeking to capitalize on the huge Texas market. Suddenly every bank was part of a larger network. All of the significant banks were owned by out-of-state companies. In effect, they recapitalized the banking industry, consolidating many banking functions to achieve cost efficiencies. Every one of them centralized their lending authority—which translated into centralized decision authority. This greatly impersonalized and extenuated the lending decision-making process, creating a wealth of disaffected customers and a tremendous niche opportunity for us. “But the point is that the marketplace opportunity has to exist. Environmental fitness must always be present. Our real opportunity emerged when big banks took away their local lending authority. This created our window of opportunity. You need perfect conditions to be successful. If you take what we did and went to St. Louis, conditions might be different. “At one point, we decided our mortgage company, which we had acquired in 1996 was operating outside of our sweet spot. While it was tremendously successful (it grew from $6 million to $102 million in annual volume in under seven years), long-term it would have taken our focus away from the sweet spot. When the mortgage company was sold, the effect was to slice earnings in half. We were surprised the stock price didn’t go down. How do you explain this? My interpretation is that investors appreciate transparency. And they appreciate a simple story. Fortunately, we sold this business at peak and could make good use of the proceeds to capitalize further growth of our core business model. “In Good to Great, Jim Collins describes the tough decision by Walgreens to divest itself of all of its restaurants, which had been a distraction to that point. The company had previously been unwilling to become great. We sold our mortgage company for the same reason. It’s important to welcome, versus resist, these types of decisions—to be willing to endure the fear of letting go. There will always be tradeoffs. Staying in the Sweet Spot 63
Like a siren song, there is always a seductive call to move away from your sweet spot. Discipline is the challenge. The seduction of moving away from your sweet spot can produce brief periods of euphoria. But like the ancient mariners in Homer’s Odyssey, there is always the real danger of awakening to find you are headed for the shoals. It takes great discipline to focus on your sweet spot with vigor and creativity. “It is important to first find your sweet A musician must spot, which, according to Collins, is ‘The make music, an thing you do better than anyone else in the world.’ The economics have to be there—then there artist must paint, must be the passion dimension. In other a poet must write, words, there must be the right set of fertile if he be at peace environmental conditions for the business to sprout and grow. with himself. “Every seed doesn’t come up. You need a What a man can protected space to incubate, to find your sweet be, he must be. spot. The Amazonian rain forest or Australia’s Great Barrier Reef for example, are sweet Abraham Maslow spots for the proliferation of biodiversity. Wal- Mart’s sweet spot is that they can buy at the lowest cost and pass the savings along to customers. They are better at it than anyone else in the world, or 99 percent of all others. The sweet spot relates to organism and environment together. I think this is a critical point; trees, plants, need a certain soil and climate based on the organism’s capacity to grow in that environment. It’s dynamic. Everything co-evolves, grows together. “If you garden, you know you have to weed your garden on a regular basis. Why is this? Maybe it is because weeds will take energy out of the soil that needs to go to plants; the weeds will use up the nutrients—they also get in the way at harvesting. Weeds grow faster than good plants. In a company, anything you do that takes away from your sweet spot takes away energy. So why marginalize? Is it additive? Or is it something else? “Environment is so important. While trees can withstand changing 64 The Superperforming CEO conditions, a citrus tree here in Houston isn’t going to do very well. The environmental conditions are not optimum. Farmers know certain soil is unfit for certain crops. They know that if you leave nature alone, it will self-organize. The sweet spot is a confluence of factors, like the sweet spot of a golf club, the prime crop for an area, or the QFD of a company that performs at its very, very best.” Staying in the Sweet Spot 65
Summary
The Superperforming CEO: Staying in the Sweet Spot
• Every person and every organization has a sweet spot. It is the place of maximum leverage. Superperformers have found their sweet spot and they stick to it.
• The experience of Superperformers has been that this timeless strategic precept—building power in a distinct core—remains another critical source of competitive advantage for Superperformers as well as their most viable platform for continued growth and expansion.
• To qualify as a company’s authentic sweet spot, the economics have to be there—and then there must be the passion dimension. There must be the right set of fertile environmental conditions for the business to sprout and grow.
• The sweet spot in product or service development is discovered through the use of the Quality Function Deployment (“QFD”) method. In QFD, customer needs are translated into design specifications to deliver the optimum feature set, to hit the ’sweet spot’ of customer needs, preferences and cost.
• Like a siren song, there is always a seductive call to move away from your sweet spot. Discipline is the challenge. The seduction of moving away from your sweet spot can produce brief periods of euphoria but there is always the real danger of awakening to find yourself in real trouble. It takes great discipline to focus on your sweet spot with vigor and creativity. 66 Th e Superperforming CEO Distinctions
1: Believing in the Unlimited Potential of People
2: Sharing the Wealth
3: Treating the Community as Stakeholder
4: Making Sure All Stakeholders Win
5: Fulfi lling Life’s Purpose through Work
6: Taking the Long View of Business
7: Staying in the Sweet Spot
8: Use of Coaching Chapter 8 Use of Coaching
tatistician W. Edwards Deming is generally considered the father of modern quality science. Using and expanding upon methods sacquired from Walter Shewhart at Western Electric in the 1930s, he is credited with supplying much of the knowledge that informed the miraculous transformation of post-WWII Japanese manufacturing, leading to Japan’s As a good tremendous economic growth throughout rule, profound most of the last half-century. Deming’s theories were rediscovered in the U.S in the knowledge comes frenetic quality movement of the 1980s, and from the outside, are today generally widely regarded as tenets and by invitation. of modern quality practice. Deming was a master statistician but was also a physicist. A system cannot He insisted, “Transformation requires a view understand itself. from the outside.” 1 Why? Deming George: “Without some access to outside intervention and an outside view, we are trapped in too narrow a context. An outside view leads to a shift in concentration from the wrong to the right things. Outside intervention and coaching provide a new lens, 68 The Superperforming CEO offering a way to see ourselves and our environment clearly. Without this critical influence, even highly talented people can lack the self-awareness, knowledge and motivation that transforms individuals into champions.”
Access to Blind Spots
New knowledge comes from the outside. An outside-the-system perspective will reveal aspects of ourselves and our environment others can see, of which we are not aware. As a result, we can make take more informed action, recognizing that knowledge of these hidden dimensions can represent new opportunities or reveal critical self-limitations. Use of outside intervention can provide this outside-the-system perspective.
Johari Window
Known to Self Not Known to Self
Known to Others
Arena Blind spot
Not Known to Others
Façade Unknown
The Johari Window The Johari Window, developed by psychologists Joseph Luft and Harry Ingham is a communication model through which you give and receive information about yourself and others. There are four panes two columns and two rows. The two columns represent the self; the two rows represent the group. Column one contains “things Use of Coaching 69 that I know about myself;” column two contains “things that I do not know about myself.” The information in these rows and columns moves from one pane to another as the level of mutual trust and the exchange of feedback varies in the group. As a consequence of this movement, the size and shape of the panes within the windows will vary. The first pane, the “Arena,” contains things that I know about myself and which the group knows. Characterized by free and open exchanges of information between myself and others, this behavior is public and available to everyone. The second pane, the “Blind Spot,” contains information that I do not know about myself but of which others may know. As I begin to participate in a group, I am not aware of the information I communicate to the group. The people in the group learn this information from my verbal cues, mannerisms, the way I say things, or the style in which I relate to others. For instance, I may not know that I always look away from a person when I talk… or that I always clear my throat just before I say something. The group learns this from me. Pane three, the “Facade” or “Hidden Area,” contains information that I know about myself but the group does not know. I keep these things hidden from them. I may fear that if the group knew my feelings, perceptions, and opinions about the group or the individuals in the group, they might reject, attack, or hurt me. As a consequence, I withhold this information. The fourth and last pane, the “Unknown,” contains things that neither I nor the group knows about me. I may never become aware of material buried far below the surface in my unconscious area. The group and I may learn other material, though, through a feedback exchange among us. This unknown area represents intrapersonal dynamics, early memories, latent potentialities, and unrecognized resources. The internal boundaries of this pane change depend on the amount of feedback sought and received. Knowing all about myself is extremely unlikely, and the unknown extension in the model represents the part of me that will always remain unknown (the unconscious in psychological terms).2 70 The Superperforming CEO
Personal Discovery
Coaching emphasizes personal discovery. It reveals what habits are working so they can be further exploited and leveraged. It reveals what habits need to be changed, and what new habits will replace them. Coaching provides direction and focus for an individual’s energies, helping to channel his/her efforts toward a desired single outcome. Coaching encourages learning, reflection, and development of new skills and capabilities for greater personal effectiveness. New ways of working and interacting can be practiced until they become implicit behavior. George: “My own experience has been that coaching communicates to people that they are valued and needed. This strengthens the bonds of loyalty that people have to the organization. It provokes new actions. Through coaching, people learn to take the initiative and raise their own levels of performance. They are encouraged to use new methods, which accelerates the company’s initiatives.”
Transformation Bridge
Coaching creates a bridge to transformation. A good coach integrates, facilitates, and shortens the transition period. Coaches identify hidden patterns that prevent high quality, optimum behavior. Coaching offers interventions that form the bridge to greater self-awareness and insight. The coach, free from political, authority, or power issues, is able to help an individual (or team) make changes in a much shorter time period than they could on their own. According to Eric Schmidt, Superperforming CEO of Google, coaching has proven to be an invaluable personal development tool: “The coach doesn’t have to play the sport as well as you do. They have to watch you and get you to be your best. In the business context a coach is not a repetitious coach. A coach is somebody who looks at something with another set of eyes, describes it to you in [his] words, and discusses how to approach the problem.” 3 George: “Failing to look at ourselves and our organizations from an outside view is another example of how we get in our own way. A Use of Coaching 71 third party has no attachment, but can still be committed to your success. If you created it, you typically cannot see it dispassionately. A good coach should not When you’re tell you what to do, but offer you methods to in the field you help you discover this for yourself. The outside interventionist should bring some technical cannot see knowledge, and total commitment to being a the field. catalyst. Attachment is a special problem for many Ralph Waldo Emerson of us that can be effectively addressed with a view from the outside.”
How do you know when you’re ready for a coach?
Here is a list of questions to help you decide:
• Is there a gap between where you are and where you’d like to be?
• Do you have a clear goal?
• Do you have a sense that there is something getting in the way?
• Do you have a method? “A goal without a method is nonsense.”
• Are you willing to focus on the present?
• Are you interested in developing yourself?
• Are you about to make a critical decision pertaining to your life or career?
• Are you getting the message that you need to make some changes?
• Are you willing to take on personal responsibility?
• Do you have time and resources to invest in your growth?
Reinvention
Coaching provokes reinvention. A coach’s effective involvement with an executive or a leadership team can exponentially affect many other 72 The Superperforming CEO people in a fruitful way. Coaches can help drive changes to produce quantum leaps—versus trial-and-error. A coach offers a fresh outside view, helps depersonalize problems and refocuses energy. Perspective is gained and new possibilities emerge. This Trust only in greatly facilitates problem solving. movement, life According to Bambi McCullough, Executive Coach and president of Chrysalis happens at the Partners, coaching has been a critical lever level of action. for personal transformation. “In the past, the We are not what paradigm that I operated with is that individuals are supposed to be two people—the professional person who we say but what is always serious, rational and proper, versus the person we do. What we who is human, with feelings, emotions and spirit. I do is the real key used to think I had to turn off parts of myself—kill off one part so I could go to work—I learned it is possible to our intentions. to bring the whole person to work, and still preserve
Alfred Adler appropriateness. This has been a tremendous advantage to me that came directly from coaching.” Use of Coaching 73
Summary
The Superperforming CEO: Use of Coaching
• New knowledge comes from the outside. A system cannot understand itself. Use of outside intervention seeks an outside- the-system perspective.
• An outside-the-system perspective will reveal aspects of ourselves and our environment that others can see, of which we are not aware. As a result, we can make take more effective action, recognizing that this new knowledge can represent new opportunities or reveal critical self-limitations.
• Outside intervention can reveal oft-hidden dimensions. We all have “blind spots,” containing information that we do not know about ourselves and our environment. The Johari Window is a tool to illustrate this principle.
• A good coach integrates, facilitates, and shortens the transition period. Coaches identify hidden patterns that prevent high quality, optimum behavior. Coaching offers interventions that form the bridge to greater self-awareness and insight.
• Failing to look at ourselves and our organizations from an outside view can be self-limiting. A third party has no attachment, but can still be committed to your success. A good coach should not tell you what to do, but offer you methods to help you discover for yourself.
• Outside intervention must bring some technical knowledge and total commitment to being a catalyst. Our attachment is a special problem that can be effectively addressed with a view from the outside. 74 Th e Superperforming CEO Distinctions
1: Believing in the Unlimited Potential of People
2: Sharing the Wealth
3: Treating the Community as Stakeholder
4: Making Sure All Stakeholders Win
5: Fulfi lling Life’s Purpose through Work
6: Taking the Long View of Business
7: Staying in the Sweet Spot
8: Use of Coaching
9: Measuring Things Hardly Measured Chapter 9 Measuring Things Hardly Measured
nvisible assets, no longer an oxymoron, are increasingly being recognized as fundamental drivers of organizational value. In an Iearly bellwether signal, over a decade ago the January 12, 1999 issue of The Economist argued, “The value of a business increasingly lurks not in physical and financial assets that are on the balance sheet, but in intangibles.” 1 In addition, the United States Accounting Standards Board recently stated that “…the important value drivers in the new economy are largely non-financial,” and recommended that intangibles should be measured and included in financial statements.2 According to Brenda Rarey, intangibles measurement guru, “As little as one-third of most companies’ stock market value is accounted for these days by hard assets such as Destiny is not a property, plant and equipment. The growing share of matter of chance, valuation lies in intellectual or “invisible” attributes not traditionally viewed as assets at all—such as brand but of choice. Not reputation, customer delight, the organization’s ability something to wish to learn and grow, and the effectiveness of corporate for, but to attain. culture. It is within this realm of invisible factors that business spirit lives.” William Jennings Bryan 76 The Superperforming CEO
The Coming Tidal Wave
In early 2004, Accenture published the results of a global survey to gauge the current state of accounting for strategic assets—both tangible and intangible. How do companies think about and handle intellectual capital and intangible assets when traditional value-based management is focused on fixed assets? If intangible assets account for the lion’s share of future value creation, how do companies manage assets to optimize growth? Accenture’s research showed that on average, a whopping sixty percent of a company’s stock market value is tied to expectations of future performance—even as the majority of company-owned assets are increasingly intangible. In order to plan and manage for future growth, accounting for intangible value dimensions—brand reputation, knowledge, creativity, customer, and culture capital—will become critical. Currently this is largely a new discipline. In today’s knowledge economy, many industries operate without a traditional capital base, and without traditionally observable assets. Yet these companies are increasingly the main contributors of value to the economy. (Google, for example, today enjoys a mind-blowing market capitalization of over $163 billion.) Overall, Accenture’s survey showed that executives believe intangible assets will be of ever greater importance to increasing their companies’ long-term value. Nearly half (49 percent) considered intangibles to be the primary source of future shareholder value creation, while another twenty percent saw intangible and tangible assets being of roughly equal importance. While the importance of intangible assets and intellectual capital was largely recognized, measurement of their performance, according to the vast majority of respondents, was lagging or nonexistent. Only five percent of executives reported that their companies had in place a robust system to monitor intangible asset and/or intellectual capital performance. While sixty percent applied some measures to assess the performance of intangible assets and intellectual capital, a third admitted Measuring Things Hardly Measured 77
the measures did not constitute an organized system, and the remaining two-thirds defined their measures as mainly informal or qualitative. Yet fully thirty-six percent of reporting executives believed outstanding corporate performance included the management of intangible assets. Sixty percent believed companies needed to manage intangible assets well to be successful, but believed there were other contributing factors that drove outstanding performance. While Accenture’s survey results show an unmistakable trend toward intangible asset awareness and optimization, most companies today still focus primarily on financial and operational measures alone. By implementing systems to measure intangibles, a great opportunity exists for enlightened companies to enhance their performance and create additional value.3
Culture Capital
The new frontier of intangible value is corporate culture. Research by Kotter and Heskett of Harvard Business School found that organizations with strong cultures had significantly higher performance than firms with rigid or weak cultures. The organizations with the strongest “adaptive” cultures saw their revenue grow four times faster, experienced job creation seven times faster, enjoyed stock prices that increased twelve times faster, and had 750 percent higher profit performance.4 Values guru Richard Barrett found that the return on assets and return on equity in companies with the best cultures was higher than the S&P 500 from 1991 through 1997.5 NIST research on the comparative performance of Malcolm Baldridge award winners against benchmark industry performance over a five-year period showed a statistically significant level of outperformance of as much as 34 percent.6 Examining 950 businesses across sectors, Denison Consulting also found a correlation between strong culture and the bottom line. Such cultural traits as involvement, consistency, adaptability and mission were positively linked to operational performance measures, including return on investment, product development, sales growth, market share, quality 78 The Superperforming CEO
and employee satisfaction. One Denison study found that the average return on equity for organizations with the lowest culture scores was six percent, while the average return on equity for organizations with the highest culture scores was 21 percent.7 Hospital Corporation of America (HCA) recently found that its 12 highest financially performing hospitals were also its 12 highest culturally performing hospitals, enjoying an employee engagement ratio of 5.68, as compared to an average of 2.44 for the entire system (173 hospitals) and 1.83 for its lowest performing hospitals. HCA also found a steadily decreasing employee turnover rate of 16.6 percent for the highest performers versus a steadily increasing turnover rate of 23.3 percent for the lowest performers.8 Finally, in Superperformance, the hypothetical ‘Superperformance Fund,’ comprised of ten Superperforming companies whose ultra-efficient, lean processes were wed to inspired cultures, outperformed the market over a twenty year period by a margin of almost five to one.9 The evidence is in—passion is essential for high performance. Along with the requirement for measuring things hardly measured, organizations must become adept at leveraging People who think and amplifying corporate culture. This of business only includes learning to attract and continuously energize talent, relentlessly encourage the in terms of growth and collaboration of individuals, and numbers are unleash creativity to produce unprecedented results. People are looking for organizations missing the where they can win and be part of something heart of business, phenomenal; organizations whose values are which is people. aligned with the success of their people will reap a rich and abundant harvest. George Herb Kelleher Martinez experienced this firsthand. George: “For us, the measurement of intangibles became a critical influence in Sterling’s scorecard as soon as Bambi McCullough was promoted to Vice President of Human Resources and Chief Learning Officer. Bambi, a high school math teacher by Measuring Things Hardly Measured 79 background, became immensely interested in quantifying the intangibles performance of the company. She led a purposeful campaign to measure these invisible indicators. This led to the creation of new measures for employee fulfillment, interdepartmental cooperation, company and employee values alignment, attitudes, and of course, internal and external customer service. I’m certain this contributed to our being selected to be on Fortune’s 100 Best Companies to Work For® list for three years in a row. I realize now that we were ahead of our time. I look around today and see these intangible measures only growing in popularity.”
Tools for Measuring Things Hardly Measured
• Employee Fulfillment Surveys: Employee Fulfillment Surveys measure the level of passion and engagement reflected in an organization, function, project, or work team. Results can track the aggregate level of commitment as well as be stratified to explore performance in component-areas such as teamwork and commitment, respect, and loyalty.
• Cooperation Indexes: Cooperation Indexes measure the amount of interdepartmental cooperation present in the current culture. Results should describe the prevailing level of service, friendliness, helpfulness, and collaboration.
• Values Alignment Assessment Tools: Values Alignment Assessment Tools are used to measure personal, prevailing, and desired values and their level of their alignment in the current culture.
• Culture Maps: Tools like Social Network Analysis (SNA) Culture Maps depict the patterns of relationships in an organization or project. Culture Maps provide a new understanding and communication for this invisible territory, identifying patterns that can potentially impact organizational and project outcomes.10 Values guru Barrett believes that anyone interested in understanding and affirming the values of an organization should focus on behavior, the outward manifestation of an organization’s stated values. An organization 80 The Superperforming CEO
needs to identify those behaviors related to its values. After all, when one looks at an organization, one looks at its actions, not the stated values it espouses. An organization should work to find the behaviors that represent desired values and to look for and avoid behaviors that undermine or limit desired values.11
Financial/Nonfinancial Scorecards
Deloitte Touche Tohmatsu several years ago commissioned a study by the Economist Intelligence Unit (EIU), which reported that only about 34 percent of board members and top executives polled say their companies are proficient at monitoring critical nonfinancial indicators of corporate performance. In a similar pattern to the responders in the Accenture study, the majority of board directors and senior executives surveyed for the study called In the Dark: What Boards and Executives Don’t Know about the Health of Their Businesses—described factors such as customer satisfaction, innovation, supplier relations, and employee commitment as critical to corporate success. But they admitted that they were unsophisticated in monitoring these intangible drivers of organizational performance. By contrast, the study indicated that over 86 percent of executives believe their companies are excellent or good at measuring and tracking the performance indicators necessary for financial reporting purposes.12 Just as vital signs are global measures of an individual’s health, system-level scorecards (consisting of approximately seven to ten system indicators) will reveal an organization’s complete health picture. These measures should include both tangible and intangible indicators, cascade down into an organization, and relate to work in every area. Everyone should be able to understand how the work of his/her function relates to one or more of the global measures. A system-level financial/nonfinancial scorecard creates a common language and focus, making it easy to communicate total performance so that everyone can understand the company’s strategic plan and its relationship to key system processes and cultural behaviors. Measuring Things Hardly Measured 81
In predicting tomorrow’s measurement systems, Rarey issues the clarion call for more effective intangibles measurement for every organization. “The current reality of business measurement does not match the current reality of the Management is environment. Future measurement systems will have a in a stable state. direct impact on the success of business by integrating overall corporate strateg y with system measures that Transformation is include intangibles, such as employee fulfillment, required to move customer satisfaction, knowledge and intellectual out of the current capital. The benefits will be enormous. What better area to set up as a game of goals and objectives, state, not mere including a system for tracking results—meaningful patchwork on the results than these? An astonishing number of managers present style of are still not aware of the difference a shift in culture can make. Cooperation, engagement, creativity, values management. alignment—all of these you can implement in a fun, W. Edwards Deming meaningful way.” In a recent article, “When Balance Sheets Collide with the New Economy,” Denise Caruso of the New York Times lamented, “Today’s sophisticated knowledge economy is stuck with the equivalent of an abacus for measuring the actual financial value of corporate assets and liabilities…today’s markets are being transformed by intangibles, and a growing number of companies are scrambling to find the methods that will help them better use, develop and communicate about them.”13 Understanding and measuring things hardly measured is a sure bet for any organization who wants to improve its performance in today’s urgent, brutal economy. 82 The Superperforming CEO
Summary
The Superperforming CEO: Measuring Things Hardly Measured
• There is an unmistakable trend to capture and optimize the value of intangibles, especially intellectual, knowledge and cultural capital. Tools for measuring intangibles are emerging across the landscape.
• Along with reputation, intellectual and knowledge capital, measuring things hardly measured includes measuring cultural capital. This includes employee fulfillment, cross-functional cooperation and collaboration, organization/individual values alignment, and social networks.
• Just as vital signs are global measures of an individual’s health, system-level financial/nonfinancial scorecards (consisting of approximately seven to ten system indicators) will reveal an organization’s health.
• A system-level financial/nonfinancial scorecard creates a common language and focus, making it easy to communicate total performance so that everyone can understand the company’s strategic plan and its relationship to key system processes and cultural behavior.
• A rapidly growing percentage of companies are adding intangibles metrics to system-level scorecards, producing more robust performance monitors and provoking real cultural improvement. For organizations who seek to unleash passion, this can be a higher-leverage distinction. Organizations with a “Dashboard” or “Scorecard” already in place would benefit greatly from increasing the weight of intangibles. Measuring Things Hardly Measured 83 84 Th e Superperforming CEO Distinctions
1: Believing in the Unlimited Potential of People
2: Sharing the Wealth
3: Treating the Community as Stakeholder
4: Making Sure All Stakeholders Win
5: Fulfi lling Life’s Purpose through Work
6: Taking the Long View of Business
7: Staying in the Sweet Spot
8: Use of Coaching
9: Measuring Things Hardly Measured
10: Open and Honest Communication Chapter 10 Open and Honest Communication
eople cannot perform at their best unless they feel safe. Second- order change cannot be achieved with people who are afraid Pto try something new, make mistakes, point out problems, or recommend improvements. W. Edwards Deming used strong words about fear in the workplace, “The economic loss from fear is appalling. Drive out fear, so that everyone may work effectively for the company.” 1 When people are afraid for their jobs, afraid A company is of their supervisors, afraid of being punished for much stronger making mistakes, organizational culture unravels. Fear produces the wrong numbers and leads to the if it is bound wrong decisions. Fear, regardless of its subtlety, is by love rather wasteful and leads to unnecessary complexity. Fear than by fear. zaps productivity, and drives people to do counter- productive, sometimes even bizarre things. People Herb Kelleher who are afraid are willing to invest untold energy and take whatever action is necessary to remove the source of the fear. Dr. Joyce Orsini, a Deming disciple and respected consultant, tells a powerful story about the effect of fear in the banking workplace: 86 The Superperforming CEO
The Cost of Fear One common problem in banks is the daily cash shortages and overages bank tellers have compared with their accounting balances. While the discrepancies are generally quite small, sometimes the differences can be substantial. A chief executive of a New York bank noticed the [teller shortage/overage] problem and decided he would eliminate it the old-fashioned way. He just wouldn’t tolerate it. He issued an edict that any teller with more than two differences a month would be placed on probation. Any teller on probation for three months would be terminated. Most of the differences disappeared. The chief executive was elated. He reported the results to his board along with an explanation of his form of management. All that was necessary, according to him, was for him to put his foot down and not accept errors. The board of directors was elated. But why tolerate two differences? No one could think of a good reason, so the rule was changed. Just one difference placed a teller on probation. All the differences disappeared. How could differences disappear so quickly and so completely? In fact, a simple but sophisticated system had been developed by the tellers to deal with the problem that management denied existed. The tellers began operating their own pools of money when the new policy was initiated. When overages occurred, instead of being reported, they were saved. When a teller came up short on a given day, he would withdraw from the funds saved on the days he was over. Those who needed funds borrowed from those with excess funds. A sophisticated system of borrowing and lending had evolved. This was, of course, contrary to bank policy, but it was the only way of surviving in the bank. Everyone in the bank knew of the existence of these pools of funds except management.12
Whenever fear exists in the workplace, people will develop defense mechanisms to survive. This further decreases productivity, because people work first for survival—based on how they perceive they are being judged. What energy remains will be dedicated to accomplishing the actual work objectives. To bring about an authentic transformation, one Open and Honest Communication 87 fundamental requirement is to trade fear for passion. George: “If you create an environment where people can make mistakes without getting fired, they will be more likely to rise above their fears. They will rise above competitive survival tactics (politics, CYA, blaming, and so on) to become something more, something larger together. Safety is a requirement for achieving real psychological commitment to a company, certainly at the level of felt ownership for the company that we’re describing. It is a powerful force multiplier. I have found that to achieve these kinds of returns you have to create an environment of safety and trust; you have to always be pushing fear into the background.” The law of conservation of energy states that energy can neither be created nor destroyed; it merely changes from one form to another in an even exchange. This is true for energy used up by fear and anxiety. It can be traded for something else. This same tradeoff occurs in the process of organizational transformation. There is an even Water is exchange, a system-level conversion, from one transformed steady state into another steady state. In the case of Superperformance, fear is traded for passion, into ice… rework for improvement, waste for fitness, same complexity (organizational entropy) for simplicity. molecules. Bad habits are traded for good habits. Something is always traded in the acquisition of a new habit. What When you adopt a new view, you trade in an old happened? view; when you give up destructive behaviors and habits you replace them with healthy behaviors W. Edwards Deming and habits. Always there is an exchange—Nobel laureate and complexity pioneer Ilya Prigogene’s ‘dissipative structures’ were so named to capture the inherent order and chaos in their pattern of behavior. They exhibited simultaneous structure and dissipation. There is always a pattern of simultaneous releasing and embracing in any authentic change. 88 The Superperforming CEO
George: “Open and honest communication must be present-based. There must be in place some inherent rules of engagement; otherwise you will create a status-quo of no communication. Another requirement of engagement is that, as a leadership team, you create the context that the company is better off facing its fears. This is the opposite of being inauthentic, withholding, overly formalized, or refusing to communicate at all. It must be present versus past-based. The communication must be saying ‘what’s actually so.’ It cannot be an assessment of ‘what’s so.’ “Open and honest communication Most discussions is coming from the future. As far as of decision making innovations and improvements, the people doing the work—they know long before assume that only management knows where most of the senior executives opportunities lie. But fear-filled is the default for most people. We already have it make decisions when we walk in the door on the first day or that only of work…apprehension…fear of failure senior executives’ and being accepted. Fear that somehow we won’t stack up in the workplace. How do decisions matter. you eliminate that fear? Leaders must make This is a dangerous communications present-based. Present- mistake. based, open and honest communication is rare and my experience is that people are Peter F. Drucker very responsive to it.”
Back to Basics: Earning People’s Trust
Honesty is not only the best policy; it is an essential part of leadership. The only way to earn people’s trust is to be completely open and honest with them at all times. Consistent actions and words create tremendous commitment and engagement. Superperformers are authentic—people trust them to deal openly and honestly, and to do what they say they will do. Open and Honest Communication 89
George: “Open and honest communication up, down, and across the system has to be the standard way of operating. Transparent communication creates organizational credibility, strengthens a company’s reputation, and encourages loyalty. It is indispensable for enlisting the hearts and minds of people—to move them to right action.” Trust seems to be missing from a growing percentage of employer- employee interactions, even though people crave it, as they negotiate through the increasing turbulence and accelerating urgency of the current economy.
Trust is Missing
Recently, only 2% of respondents to a Roper poll described CEOs of very large companies as “very trustworthy.” 3 In a recent survey of 800 US organizations by Mercer Human Resource Consulting, just 40% of workers trusted management “to always communicate honestly.” 4 That trust has dropped even further today, thanks to such factors as the economic meltdown of the worldwide financial services industry, thanks to exotic financial instruments like derivatives, credit swap defaults and the like. Dan McCauley, a principal in the Chicago office of Mercer Human Resource Consulting, says that workers’ trust in management has been declining since the onset of downsizing and restructuring in the late 1980s and early 1990s signaled the end of traditional job security. The corporate and economic scandals of the past few years have exacerbated the slide, says McCauley; so has the widening pay differential between executives and front-line employees. “There’s a fundamental perception that executive teams have their own interests at heart,” says McCauley. “That seems to be becoming very embedded in the workforce mind-set.” 5 The evidence is that most companies have failed to engage hearts and minds (they come as a matched set). The Society for Human Resources Management (SHRM) recently reported that even in today’s unemployment economy, as many as 75 percent of people at work are 90 The Superperforming CEO currently seeking new jobs, the largest percentage in search of a better place to work.6
A Leadership that is Authentic
As many have noted, great leadership is authentic and human, not mechanical. Many of us can spot mechanical leaders a mile away. For those who can’t, there is still a sense something isn’t quite what it should be. Mechanical leadership is saying the right thing to the right people at the right time, but never connecting at an emotional level with any of them. Mechanical leadership is leadership based on a formula, but it is lifeless. It may be executed by highly intelligent people, but it doesn’t move anyone. Real leadership moves people. George: “Will there be failures? Of course! But every failure is a gift and can be embraced as a vehicle for learning rather than an evaluation of your own worth. As Henry Ford said, ’Failure is the opportunity to begin again, more intelligently.” Open and Honest Communication 91
Summary
The Superperforming CEO: Open and Honest Communication
• When people are afraid for their jobs, afraid of their supervisors, afraid of being punished for making mistakes, organizational culture unravels. Fear produces the wrong numbers and leads to the wrong decisions. Fear, regardless of its subtlety, is wasteful and leads to unnecessary waste.
• Safety is a requirement for achieving real psychological commitment to a company, certainly at the level of ‘felt ownership’ for a company. It is a powerful force multiplier. To achieve truly super returns you have to create an environment of safety and trust; you have to constantly be pushing fear into the background.
• Trust seems to be missing from a growing percentage of employer/employee interactions, even though people crave it, as they negotiate through the increasing turbulence and accelerating complexity of the emerging knowledge economy.
• Honesty is not only the best policy; it is an essential part of leadership. The only way to earn people’s trust is to be completely open and honest with them at all times. Consistent actions and words create tremendous commitment and engagement. 92 The Superperforming CEO Section 3 Uncommon Paradigms 94 Th e Superperforming CEO Distinctions
1: Believing in the Unlimited Potential of People
2: Sharing the Wealth
3: Treating the Community as Stakeholder
4: Making Sure All Stakeholders Win
5: Fulfi lling Life’s Purpose through Work
6: Taking the Long View of Business
7: Staying in the Sweet Spot
8: Use of Coaching
9: Measuring Things Hardly Measured
10: Open and Honest Communication
11: Tacking Chapter 11 Tacking
any dilemmas in business can be thought of as ‘tacking,’ shifting back and forth in response to prevailing winds. MTacking is a nautical term. In sailing, you are always tacking, oscillating from port to starboard and back again. It’s the same principle with an airplane on autopilot. The system automatically reacts and corrects for wind shift. In much the same way, many so-called business problems are really polarities to manage. George: “Loan-quality versus volume, centralization versus decentralization, or short-term versus long-term horizon are examples. “Many so-called problems in organizations can be reframed this way. There is no way to What we call “I” stay in one place; the course is not a straight line, is just a swinging it moves back and forth. It’s important to know that this is the game. I see it as a sort of infinity door that moves diagram, with an endless oscillation between when we inhale the ‘standard bearers’ and the ‘new guard.’ Dr and exhale. Barry Johnson, in his excellent book Polarity Management, gives us two questions for deciding Shunru Suzuki 96 The Superperforming CEO
whether a difficult issue is (1) a problem to be solved or (2) a polarity that needs to be managed: 1. Is the issue ongoing? A dilemma which can have an end through the application of a solution suggests a problem, while an ongoing dilemma suggests a polarity. 2. Are the dilemma’s opposite points of view interdependent? If there is interdependency between each of the primary perspectives on the issue, then it is a potential polarity. “According to Johnson, a polarity, therefore, is a dilemma that is ongoing and in which opposite points of view are interdependent.1 “It is important to “hold the tension” of the polarities. This makes it OK for both poles to matter, and shifts the paradigm from a right/ wrong choice, to balancing the system. According to Johnson, effective management of a polarity involves focusing on the positive side of each point of view, understanding the downsides, and not allowing the negative factors to control decisions and actions.
Tacking “Say, for example, someone makes a decision at the local level of a bank to accept a transaction that ends up being fraudulent. The knee-jerk response could be to centralize decision-making authority—this would include a lot of other decisions that don’t need to be made centrally, but which would get caught in the net. We would be tempted to move some of the decision-making authority in order to protect against the impact of one bad customer—but in the process, we could affect a thousand Tacking 97 good customers! There is no way to guarantee that a lending process is 100 percent “fraud proof” without also making it 100 percent “customer proof” too. This would obviously sub-optimize the system. “Instead of thinking of these as problems to solve, it may be better to think of these as opposites to balance. It’s important to not get too far out of balance on either side. In banking, one obvious relationship is how to grow loans fast without losing quality, or grow quality (of loans) without losing loan volume. Another example is overserving shareholders vs. underserving customers. Or overserving customers without underserving shareholders. Or emphasizing process vs. culture. Tacking is always going on.”
A Time for Everything There is a time for everything, and a season for every activity under heaven: a time to be born and a time to die, a time to plant and a time to uproot, a time to kill and a time to heal, a time to tear down and a time to build, a time to weep and a time to laugh, a time to mourn and a time to dance, a time to scatter stones and a time to gather them, a time to embrace and a time to refrain, a time to search and a time to give up, a time to keep and a time to throw away, a time to tear and a time to mend, a time to be silent and a time to speak, a time to love and a time to hate, a time for war and a time for peace.
Ecclesiastes 3.1-3.8 98 The Superperforming CEO
Short Distances
George: “It has to do with being aware of both aspects of the duality at the same time. You have to manage not to let them get too far apart. You have to have coordinated action between the two. Usually this is missing; they usually operate independently in silos. Tacking left, left, then even more left (or right, then even more right, for that matter) could be fatal. As an airline autopilot system auto-corrects, it keeps the variance small. A company has to keep a sense of duality about things. Don’t go too far out in either direction. Nature has two sides, two faces; tacking is operating in harmony, in tune with nature. “There are elements of tacking between dualities you can use to manage parts of your own business. Johnson’s book is a template for how to get people to understand the concept. People can get it quickly, this ‘polarity management.’ It is a brilliantly simple strategy for dealing with life’s dualities. With a tacking mindset, you won’t overdo in either direction.”
Optimization: Balancing at the Edge
Sustaining optimization is a never-ending challenge. Because business is dynamic, there are always competing factors working to influence organization behavior. This makes optimization an eternal balancing act. In this state of persistent disequilibrium, things are constantly being shaken up as a company shifts to conform to a constantly de-forming environment. Southwest Airlines must adjust to The happiest increasing energy costs; Toyota must adjust to gardeners have a global downturn in demand; Wal-Mart must adjust to shifting employee issues; Microsoft simply learned must adjust to a shifting technology world. No how to relax. Superperformer is immune from threat and must continuously evolve to maintain fitness. Michael Garofalo George: “Circumstances are always changing. Tacking 99
You must go forward in a way that is consistent with your values, yet adapts to current market conditions. This can be very difficult if you do not know who you are and what you value. What happens when a company comes under pressure? Usually, this sort of pressure drives over-control, Growth, in some which drives rule-making, which can easily curious way, I drive disengagement. How do you safeguard against this? The prevailing wisdom is to rely suspect, depends on tradition. But the tradition in business has on being always been a top-down, command-control approach. in motion just If you want a fully expressed company of distributed personal responsibility, tradition is a little bit, one a perilous strategy. You have to be careful not way or another. to take out the essence, so that it can never return to its previous state—if you tamper with Norman Mailer things arbitrarily, you could easily damage the intangible dimension of the organization, and kill the golden goose. “This is another reason for a long-term horizon: a long-term view should change the way we react to everything. It is based on a long- term future state, not a short-term condition. All of our actions must be consistent with the future we are becoming. It is analogous to learning to ride a bicycle. When you are learning to ride a bicycle, you don’t want to be focused on the pedals or handlebars alone, you also want to be looking down the road to your destination.” 100 The Superperforming CEO
Summary
The Superperforming CEO: Tacking
• Tacking is a nautical term. In sailing, you are always tacking; oscillating from port to starboard and back again. It’s the same principle with a plane on autopilot. The system automatically reacts and corrects for wind shift. Many so-called business problems can be approached in the same way.
• Instead of thinking of these as problems to solve, it may be better to think of these as polarities to keep in balance. It’s important to not get too far out of balance on either side. In banking, one obvious relationship is how to grow loans faster without losing quality, or grow quality without losing loan volume.
• To optimize, you have to be aware of both aspects of the duality at the same time. You have to manage not to let them get too far apart. You have to have coordinated action between the two. Usually this is missing; they usually operate independently in silos.
• Tacking left, then even more left (or right, then even more right, for that matter) could be fatal. As an airplane autopilot system auto-corrects, it is never a big variance. A company has to keep a sense of duality about things. Don’t go too far out in either direction. Tacking is operating in harmony, in tune with nature. Tacking 101 102 Th e Superperforming CEO Distinctions
1: Believing in the Unlimited Potential of People
2: Sharing the Wealth
3: Treating the Community as Stakeholder
4: Making Sure All Stakeholders Win
5: Fulfi lling Life’s Purpose through Work
6: Taking the Long View of Business
7: Staying in the Sweet Spot
8: Use of Coaching
9: Measuring Things Hardly Measured
10: Open and Honest Communication
11: Tacking
12: Making Responsibility a Choice Chapter 12 Making Responsibility a Choice
eadership in the world of Superperformance is something experienced everywhere in the organization. It is something self- Lorganizing, like an immunity, on-demand and available at any time. In this context, it is a shared commitment to make the organization everything it can be. Superperforming leadership is an energized, distributed leadership—everyone having a feeling of ‘ownership’ for the whole. When everyone owns the whole, an organization is transformed into a powerful force. This is how the “promise within” is liberated. In the mechanistic world, mechanics are needed. In a living organization, you need gardeners. Gardeners approach life with a special wisdom. They know a great harvest is not assured. They understand how organic growth occurs, and they know that, in order to become everything that they can be, gardens must be tended. They must be pruned, watered, and weeded constantly, adapting to every season. But the best gardens are then left alone to grow and bloom. The lesson of a garden is a lesson of habitual tending, and habitual patience. Great faith is a critical requirement. George: “Loan making, of course, is a core process for a bank. As 104 The Superperforming CEO
with all banks, poorly documented loans often lead to problems. This problem goes back to the old assembly line mentality. Is the product acceptable or defective? This mentality leads to rework. It is better to design quality into the process of loan making, so that improvement is built in along the way, throughout the process. “One important part, after a decision to make a loan, is the documentation process—have all the required documents been assembled? (Collateral, historical information, financial data, and so on.) Sometimes there are ‘exceptions.’ If these aren’t handled, they can lead to degradation of the credit. A loan with exceptions gets marked. Maybe we’re missing information because we didn’t require it—or we received it and didn’t review it. All of this can happen in the pursuit of growth. In keeping with the assembly line mentality, we tend to cover up that part that is defective. “The key to overcoming these issues is It’s the intangibles personal responsibility. There is a tendency to that are the ignore the obvious. This mistake, in banking, could lead to reducing the portfolio. There is a hardest things difference between personal responsibility and for a competitor some structurally imposed responsibility. For example, an imposed structure will never be to imitate. as good as a lender who is being responsible. Herb Kelleher Additionally, imposed structures are very expensive to put in place and make effective. “Sometimes it is possible to use a structure, such as a credit scoring process, with different categories. These are mechanisms programmed with certain amounts of intelligence to predict whether or not a customer will pay back a loan. These structures may work to a degree, but they also increase the cost of loans. Responsibility is not a process issue—it is a culture issue; for a bank, it is the key to avoiding serious losses without the requirement for a large amount of additional bureaucratic oversight. “To illustrate, consider the loan-making process. To make a loan there Making Responsibility a Choice 105 are two simple stages: STAGE 1 Understanding Phase Decide to Make Loan or Not. If yes, then we move to…
STAGE 2 Documentation Phase Collecting Documentation “The environment of a company is one piece of it—the culture. The mentality of, ‘if you make a mistake you’re gone’ is not possible in a responsible environment. Personal limitations are the other end. Mostly this is people learning to get out of their own way but sometimes it is people in the wrong job. In a bank, still a third need is the need to be structurally setup so that every person has the information they need to operate. With these three mechanisms in place, loan making is greatly enhanced.”
Loyalty to People vs. Holding Each Other Accountable
George: “Communication is a two-way street. Open and honest communication also requires an environment of individual accountability. In any sustainable enterprise, people must be able to hold each other to their commitments. In organizations, this creates a natural tension between ‘loyalty to people vs. holding them accountable.’ This is one of those paradoxes that, for me, has proven to be a critical lever. It is an important way to get people to align with their organization. For many of us, it is difficult to hold accountable people that we care about—to ask that they take responsibility when failing to perform. We tend to think of ‘loyalty to someone’ and ‘asking them to take responsibility’ as an either/ or proposition. This creates a lack of alignment. It is limiting to continue down this path. It is important to move toward individual accountability without eroding loyalty; it is not one or the other! We usually experience an overwhelming tendency toward loyalty, and have to bring this back into balance. It is liberating to think of ‘Loyalty to People vs. Holding 106 The Superperforming CEO
Them Accountable’ as simple opposites to keep in balance, rather than a choice to make. “I think the ideal is that each relationship in the company be both a professional and a personal one. While everyone has professional duties, we also still have—and greatly value—personal relationships with each other. Seen clearly and distinctly, these correspond. For example, in a marriage, although the roles are different, the same principle applies.”
PxC: Liberation and Control Together!
When you treat people as if there is a Superhero inside of them, it significantly alters the environment; it changes the way people relate to each other. George Martinez and other Superperforming CEOs will tell you that unlocking this passion is what separates the wheat from the chaff, what differentiates ordinary performance from Superperformance. George: “If you look at it in practice, empowerment is part of a duality too. Empowerment needs responsibility to be effective, to produce sustainable results. Responsibility needs empowerment to work. They complete each other. To make empowerment work on a global scale in an organization, every individual has to choose responsibility. This is not possible without some form of locally self-organizing, distributed leadership. To create this form of leadership is to engage everyone in its practice, to distribute it to everyone. To do this you have to be willing to take a stand for this way of being. People often misunderstand what taking a stand means. It doesn’t mean being resolute, steadfast, or grimly determined. It means committing to behave consistently with some declared possibility, from the moment the declaration is spoken, regardless of the circumstances.” Superperformers operate with a vision of unlimited growth and opportunity for the organization—wed to unlimited growth and opportunity for the individual. Sterling CEO Downey Bridgewater defended Sterling’s unbreakable stand for people, “I mean any successful company has to have a clear strateg y, great people, and well-defined processes and Making Responsibility a Choice 107 operations, and you have to execute well on all of them. We do all of those things, but in our case, our great people really make the difference.” 1 Superperformers take a much larger approach to the individual. This also points to another powerful Superperformance implication; the function of superperforming leadership must be to unleash Superheroes! George: “Leadership is opening cage doors—you have to let people out of their cage. A wonderful culture is always at risk. You have to continually look at how it becomes natural—so that everyone has the opportunity to be self-expressed—so that no one is oppressed—so that no, or almost no, permission is required to act on behalf of the company; this requires continuous tending and continuous vigilance.”
Removal of Barriers
George: “Heidegger used the term Lichtung for ‘clearing,’ meaning literally ‘a clearing in a forest.’ 2 He used it because it conveyed a sense of opening. As Heidegger described it, we create a ‘clearing’ for God to appear. Without that clearing, there is no possibility for God at all. As long as we fill the hole (or clearing) with our own self-consciousness, whether positive or negative, nothing can show up but the fiction of our own ‘self.’ If you want to make a new track through the woods, you have to create a clearing to let the sunshine in. The future This clearing in our world is an opening through is going to dense, conflicting attitudes. When you are being the future of your organization, you are being be about Heidegger’s ‘clearing’ in the world: an opening in empowerment. which your invented future can crystallize. Over Bill Gates time, others will quite naturally relate to you as this invented future, rather than as a personality.” In companies, creating a clearing for transformational performance often requires the removal of objects or obstructions that keep people from ‘acting like owners.’ This could include broken systems, politics, fear, bureaucracy, or a number of other hindrances. We all want to know 108 The Superperforming CEO that people care for us. We also need to be present to be fully contributing members of a team and participants in a company. Every preoccupation, even those that are incidental, blocks our being present. George: “You have to constantly work to eliminate these waste- creating factors. You have to work for simplicity. The rules should be as simple and as few as possible, to promote creativity and customer excellence. It is like the rules of football. When force of You can do anything as long as you stay on circumstance the field, in the domain, and follow the rules of the game. Otherwise you create a whole upsets your bunch of rules for the purpose of control— equanimity, lose not for the purpose of playing the game. no time in “A great example of this is the way companies make decisions. There are recovering your different ways that everyone can share in the self-control, and decision-making process and the creation of do not remain a company’s future. Take involvement on operational councils and self-organizing out of tune longer project teams, for example; employees than you can help. can create all new products, services, Habitual recurrence and approaches through this process. It requires a high degree of communication, to the harmony involvement and cooperation but it is well will increase your worth the effort. mastery of it. “Further support for the flow of information from those “‘n the field’ can be Marcus Aurelius provided by the much-referenced upside- down structure—an inverted pyramid. In a bank model, for example, at the top of the upside-down pyramid are the tellers, lenders and staff at each bank office. At the bottom, the smallest point of the pyramid, is the executive management team. The executive management team has ultimate responsibility for implementing company strategy. Projects and functions can be rated by internal and external customers using standards Making Responsibility a Choice 109 which can be developed by employees for their own group’s measurement and accepted by their customers. These surveys can also focus on measuring interdepartmental service and collaboration. Such tools can offer a way for people to review feedback regarding how they are doing, what is needed, and how Forgetfulness service to internal and external customer service of self is can be improved. Another level of measurement is ongoing executive team review of all company- remembrance wide projects; in this process, a multi-level team of God. of employees participates in approving proposed projects. In addition, all project teams can include Bayazid Al-Bistami employees throughout the company, including the end users of the reviewed system or project. “The most important thing is alignment with values, not skills. If you hire for skills and do not have alignment with cultural values, you will lose. If you hire for cultural alignment and do not have skills, you may be able to develop them. But without people who truly share organizational values, you will experience an inevitable erosion in quality, service, and ultimately…market performance.” Imposing command-and-control solutions to business problems— especially around knowledge work—has been shown to be ineffective. Instead, many “directives” can be replaced with conversations. The more powerful resulting behaviors will be emergent, bottom-up, and dramatically more sustainable. George: “While conversations are the fulcrum, alone they are not enough. You have to equip people with the tools to succeed. You have to place great emphasis on the selection and development of people. You have to provide them with knowledge, skills and information to amplify their contributions. There is also the need for a sense of wholeness, of workplace as community. This requires the integration of the business person with the human person. “There is always a trade off between responsibility and empowerment. 110 The Superperforming CEO
It’s important to keep them in balance. Empowerment without responsibility can lead to entitlement, what some call the loafing syndrome (stereotypically, as with some civil service roles or tenured professors). We do this at the expense of served customers, the community, and business excellence.”
Personal Responsibility is a Lever
George: “Responsibility sometimes mistakenly shows up as a burden. For example, a persistent customer complaint may be interpreted as, ‘Our customers don’t get it.’ But someone who is personally responsible would say, ‘We caused that!’ Responsibility stands so people can align. You start believing its truth. Responsibility is a lever for transformation. I’m talking about responsibility as choice. No burden. No duty. You have to be fully present for responsibility. “Furthermore, it is not possible to manage responsibility extrinsically—people have to choose it freely. Enrollment is a large part of creating a culture of responsibility. This is a core leadership challenge. Some people are bent in this direction already; they have proven to be a more natural fit for a responsibility-based organization. But responsibility is something you choose. For example, occasionally a customer borrows money and can’t pay on time, but promises to pay somehow. We can decide to relate to the customer on this basis. His responsibility comes from a much deeper, internal place. And when you truly assume responsibility, you give up the right to blame other people—this is the polar opposite of the ‘victim mentality’. “An organization without empowerment or responsibility (see diagram) creates needless waste. An organization with responsibility but without empowerment (all too common) creates frustration; likewise, an organization with empowerment but without responsibility creates entitlement (a short-term condition). For this reason, personal responsibility has been crucial. At Sterling Bank before, and now at Allegiance Bank Texas, we could not have been as successful without Making Responsibility a Choice 111 a very high level of responsibility to match our very high levels of empowerment.”
Empowerment vs. Responsibility Graph
Frustration Optimization
Responsibility Waste Entitlement
Empowerment
112 The Superperforming CEO
Summary
The Superperforming CEO: Making Responsibility a Choice
• To make empowerment work on a global scale in an organization, every individual has to choose responsibility. This is not possible without some form of distributed leadership. To create this form of leadership is to engage everyone in its practice, to distribute it to everyone.
• There is always a tradeoff between responsibility and empowerment. It’s important to keep them in balance. Empowerment without responsibility leads to entitlement, while responsibility without empowerment leads to frustration.
• The most important thing is alignment with values, not skills. If you hire for skills and do not have alignment with cultural values, you will lose. If you hire for cultural alignment and do not have skills, you may be able to develop them.
• Imposing command-and-control solutions to business problems—especially around knowledge work—has been shown to be ineffective. Instead, most “directives” should be replaced with conversations. The more powerful resulting behaviors will be emergent, bottom-up, and organic.
• It is not possible to manage responsibility—people have to choose it freely. Enrollment is a large part of creating a culture of responsibility. This is a core leadership challenge. Some people are bent in this direction already—they are a more natural fit for a responsibility-based organization. Making Responsibility a Choice 113 114 Th e Superperforming CEO Distinctions
1: Believing in the Unlimited Potential of People
2: Sharing the Wealth
3: Treating the Community as Stakeholder
4: Making Sure All Stakeholders Win
5: Fulfi lling Life’s Purpose through Work
6: Taking the Long View of Business
7: Staying in the Sweet Spot
8: Use of Coaching
9: Measuring Things Hardly Measured
10: Open and Honest Communication
11: Tacking
12: Making Responsibility a Choice
13: Context as Lever Chapter 13 Context as Lever
he concept of attraction, from complexity science, describes the tendencies of systems to pursue certain end states. ‘Attractor’ Tscience works to model the way dynamic systems such as organizations behave by modeling these states. Modeling attractors is a way of modeling the way systems develop, by modeling the end states toward which they tend. This is an attempt to understand systems by understanding where they’re headed, instead of where they’ve been. An attractor pulls the system toward itself. An attractor is an invisible field. It is the magnetic pull of a system. One simple example is dropping marbles into a bowl. The marbles will travel around and around, but they’ll always come to rest at the bottom of the bowl. The bottom of the bowl is the attractor of the system. This is called the basin of attraction. Rupert Sheldrake, biologist and morphic fields expert, explains attractors simply. Regarding morphic fields, The“ basin is, in fact, their principal metaphor. So the ball rolls down to the bottom. It doesn’t matter where you throw it in, or at what speed you throw it in, or by what route it takes—what this model does is tell you where it’s going to end up. This kind of mathematical modeling is extremely appropriate, I 116 The Superperforming CEO think, to the understanding of biological morphogenesis, or the formation of crystals or molecules, or the formation of galaxies, or the formation of ideas, or human behavior, or the behavior of entire societies. Because all of them seem to have this kind of tendency to move towards attractors, which we think of consciously as goals and purposes.” 1
Fixed Point Basin of Attraction
Attractors can be positive or negative. Some examples of organizational attractors are management and leadership style, political order, and shared purpose. In organizations, these are invisible fields of influence that shape the direction of the system. To break the power of an established negative attractor, it is necessary to create a positive new one. New proposals or actions will have to create great instability within the established system to reach the critical tipping point, where the energy required to keep the old context intact is finally too much to sustain and finally gives way, “flipping” the system into a new watershed pattern. You cannot control the change or define the precise form the new attractor pattern will take. The real challenge is to create the conditions to allow the best attractor pattern to emerge. To the extent that the system becomes locked in the old context, meaningful change cannot occur. This is the key problem that blocks organizational transformation in most organizations. Because of the power of the traditional context, management ends up trying to do new things in old ways. Attractors are a simple but tremendous lever for organizational change. As chaos writer Jeffrey Goldstein has pointed out, much of Context as Lever 117 the literature on organizational change has focused on the problem of ‘resistance’ instead of focusing on ‘attractors’ that can pull the latent energies of a system into a new form. Resistance arises when the forces of an established attractor are more powerful than those of a new or desired one. The challenge for any organization who desires to be super is to shift the balance. George: “Context is your attractor. It is the The mind is umbrella inside of which you operate—it frames everything; everything you see and do. For this reason, it is of monumental importance. It pulls everything what you think, toward itself. For example, the context of a 200- you become. year horizon creates a completely different way of Buddha operating in a company; it changes how you relate to each other, to customers, to the world. The context of a 200-year horizon leads to some great questions. For example: “Who would we have to be today, and what would we have to do today, and what kind of system would we need to design today that would make it possible for the company to endure another 200 years? Some examples of context are: • Superperformance as a Business Strategy (process x culture) • Organization as Organism (Interdependent subsystems, functions, organs, tissue, cells) • Intrinsically Motivated Workforce (versus extrinsically motivated workforce) • Optimistic Worldview (always looking up) • Chosen Responsibility (versus imposed responsibility) “If you look at things from an optimistic mentality, there are thousands and maybe hundreds of thousands of potential customers out there who don’t know what you can do for them yet, who are waiting for you and your product or special service to show up. In a context of optimism, the opportunity is unlimited. Conversely, attachment to a scarcity mentality 118 The Superperforming CEO
is driving many of the world’s problems today. Buckminster Fuller referred to this problem repeatedly. Our actions are correlated to the way we see the world—like the back of a hand follows the front, like a shadow follows substance—our actions are directly correlated to the way we frame things. Context is a powerful The entrepreneur lever. All our actions are correlated to the always searches for way the world occurs for us, the pattern this creates in our consciousness. Our actions change, responds are correlated to our attractor pattern. You to it, and exploits it have to shift the way the world occurs for you to shift your attractor pattern. You have as an opportunity. to shift your frame. Peter Drucker “Context has transforming power. When you give people a different frame, you give them a different paradigm to step into. In politics, for example, you can be pro-choice versus pro-life. You can use context to either transform or cause something else. Everything exists within a context. Perceptions shift if you dress for the country versus dress for Houston’s River Oaks Country Club. There is great power in this. You can transform by creating context; everything else exists within this frame.” Context as Lever 119
Summary
The Superperforming CEO: Context as Lever
• Context can be a powerful lever. All our actions are correlated to the way the world occurs; the pattern this takes on in our consciousness. Our actions are correlated to our attractor pattern.
• Context is the umbrella inside of which you—it frames everything you see and do. For this reason it is of monumental importance. It pulls everything toward itself.
• Attractors are a simple but tremendous lever for organizational change. Most organizational change has focused on the problem of ‘resistance’ instead of focusing on ‘attractors’ that can pull the latent energies of a system into a new form.
• Resistance arises when the forces of an established attractor are more powerful than those of a new or desired one. The challenge for any organization desiring to be super is to shift the balance.
120 Th e Superperforming CEO Distinctions
1: Believing in the Unlimited Potential of People
2: Sharing the Wealth
3: Treating the Community as Stakeholder
4: Making Sure All Stakeholders Win
5: Fulfi lling Life’s Purpose through Work
6: Taking the Long View of Business
7: Staying in the Sweet Spot
8: Use of Coaching
9: Measuring Things Hardly Measured
10: Open and Honest Communication
11: Tacking
12: Making Responsibility a Choice
13: Context as Lever
14: Distributed Being Chapter 14 Distributed Being
f you look into nature, into these places of community, you will find an amazing degree of alignment; there is a beautiful, symmetrical Ipattern. No friction, no member out of alignment—the flow is seamless. These organisms all behave intelligently, even though their members are unaware of the big picture and there is no “central controller” to guide them. According to futurist and complexity author Kevin Kelly, they are out of control—a state he describes as “distributed being.” Since this is the preferred operating mode of complex biological forms that have thrived for millions of years, Kelly suggests that our own increasingly complex organizations will inevitably follow the same pattern. In the simplest terms, they solve problems by drawing on masses of relatively simple and locally autonomous agents, rather than a single, super-intelligent executive branch. They are bottom-up, self-organizing systems. In the language of complexity science, they are complex adaptive systems (CAS) displaying emergent features.1 For organizations, reaching anywhere close to this level of performance is only possible in a decentralized environment. But decentralization of decision rights requires corresponding levels of personal responsibility. Agile project teams are an excellent example. 122 The Superperforming CEO
George: “Birds flocking, fish schooling, bees swarming, all move effortlessly in the same direction, it is a more efficient way to forage and travel, the whole uses less energy to operate in this way. Somehow great teams and great organizations are able to operate as something approaching this ‘frictionless’ state. There is something extra–something invisible at work. “Some companies become fossilized by centralizing all authority. This is wrong. Decisions have to be made as close to the customer as possible, at the lowest level of knowledge and skill. Organizations are patterns of relationships. Conversations are the heart and soul of organizational life. Conversations shape commitment to the organization and create a sense of what is possible. Like Buckminster Fuller’s trimtab on the rudder of a ship, conversations seem insignificant, but have tremendous hidden power; they define context—which shapes worldview—which drives actions—which ultimately produces results. Conversations characterize everyday work life and negotiations between people in the organization and their customers. They determine the quality of service and the overall effectiveness of the company. In many organizations, conversations are negative and blocked or fall into otherwise destructive loops. “Change cannot be imposed or controlled from the top or from the outside. It is better to work with people at all company levels to help them discover for themselves what is possible and what can be done better. This helps to facilitate new conversations, which often cross boundaries within organizations. By focusing on those conversations at the core of the organization, the greatest leverage can be created, for executives working on strategy, teams working on projects, the whole organization working on its next transformation, or any other critical business function. Systems, structures and processes all help the effective organization, but they count for little if the conversations and relationships are not real. Imposing command-and-control solutions to business problems, especially around knowledge work, has proven to be almost completely ineffective. Distributed Being 123
Fish Schooling Birds Flocking
“An important point is that, while conversations are the fulcrum, alone they are not enough. You have to equip people with the tools to succeed. You have to place tremendous emphasis on the selection and on the continual development of people. You have to provide them with knowledge, skills and information to amplify their decisions. There is also the need for a sense of wholeness, of workplace as community. This requires the integration of the business person with the human person, opening new territory for many traditionalists.”
Distributed Being in Battle
The story of George Washington’s crossing of the Delaware is a great example of distributed being:
Revolutionary Critical Mass Six months after signing the Declaration of Independence, the American Revolution was in tatters, facing imminent collapse. A much larger, better equipped and better-trained British force had routed the revolutionaries at New York, occupied three colonies, and advanced within sight of Philadelphia. Washington had lost ninety percent of his army and was near despair. Rivals vied to replace him and the revolution itself seemed to be facing disaster. Panic gripped the fragile new nation. But on an icy, unforgiving Christmas night in 1776, Washington made a bold decision to cross the half-frozen Delaware to Trenton 124 The Superperforming CEO
for one last stand. His rag-tag band of soldiers—tracking blood from their bare feet in the snow—surprised the Hessian encampment on the other side, capturing the garrison at Trenton and a thousand soldiers, creating the turning point for the entire war. As word of this astonishing victory spread throughout the colonies, support for the revolution surged, leading to a new hope and confidence throughout the colonies. The startling success of Washington and his brave compatriots not only saved the faltering American Revolution, but gave it new meaning at a pivotal moment in American history.2
Almost everyone has a personal story of distributed being with a favorite sports team coming from behind to triumph over impossible circumstances. When it occurs, time almost seems to slow down—every team member seems perfectly synchronized in a well choreographed performance. It looks easy. Distributed being in an organization is the same thing. Superperforming leadership and management are distributed leadership and management. In this form, everyone is called to lead and everyone is called to manage: this is the distributed DNA of the Superperforming organization. This pattern joins the tangible and intangible properties of the system, the community, and the organism.
What is Localness?
George: “According to Peter Senge, ‘…learning organizations will, increasingly, be localized, extending the maximum degree of authority and power as far from the ‘top,’ or corporate center, as possible.’ Localness means moving decisions and authority down the organizational hierarchy; designing business units where, to the greatest degree possible, local decision makers confront the full range of issues and dilemmas appropriate to growing and sustaining the business enterprise. Localness means unleashing people’s commitment by giving them the freedom to act, to try out their own ideas and to be responsible for producing results.3 “If you can master the process of enrolling people—then ‘localness’ Distributed Being 125 can be very effective. Control of people from the top down doesn’t work. A paradox in organizations is that in order to have power operating at work, you have to give it away. This requires a faith that empowerment will work, and a willingness to remove the parts that are inconsistent. You can only create responsibility through enrolling people in it—people have to choose to be responsible. As an approach to decision-making, localness demands that decisions be pushed as far away as possible from central managers. There are two reasons to do this: first, I am convinced that over time you will get better decisions if you keep those decisions as close to the customer as possible. Second, and just as importantly, localness unleashes unprecedented levels of commitment from people. “Distributed means ubiquitous—everywhere. It is the spirit of the company—it emerges—there is no central controller. You see it in the patterns of nature we’ve described, in ecologies. At some point, everything The centralized mindset just ‘snaps’ together in the best is deeply entrenched. organizations, and the friction is gone, or greatly diminished. A great When people see example here in Texas is the ‘Aggie’ patterns and structures, spirit of Texas A&M University. It they instinctively assume has lasted for a great many years, and many of greatest leaders have come centralized causes from there. There is tremendous or centralized control. pride and deep feeling of belonging. It looks like everybody and everything. They often see leaders It is contained in the many famous and seeds where none Aggie jokes and stories. As the formal exist. When something leader of an organization, you can be the ‘source.’ Outsiders cannot cause happens, they assume it but they can help you to discover that one individual agent it. It is contained in the storytelling, must be responsible. the relationships, and the decisions of people in the company. It is akin to a Mitchel Resnick 126 The Superperforming CEO
force-field and it comes from the inside out. “As an approach to decision-making, ‘localness’ should produce the effect over time of substantially reducing the number of operational issues falling under the sway of central decision-makers; Making good this makes empowerment not only a vigorous but crucial business strategy. At the same time, those decisions is a high-quality decisions that feel right and sensible crucial skill at for the local office may be fundamentally wrong every level. for the company as a whole. The opposite is also true. Protections against this phenomenon, Peter Drucker initially identified by ecologist Garrett Hardin as ‘the tragedy of the commons,’ must be built into the superperforming organization’s decision-making process.4 “The crucial first step in protecting against the tragedy of the commons is to develop a collective understanding of what changes might constitute a threatening ‘commons.’ An ecological illustration of the concept in action may be a helpful starting point. In Texas, the Edwards Aquifer is a great example. This underground river provides most of the water used in Central Texas. For years everyone had access to the water at no cost and industries whose success depended on large quantities of cheap water began to relocate there. Over time, the amount of water removed became greater and greater, until finally, the amount being removed far exceeded the amount of new water being added to the system by rainfall. The obvious point, of course, is that the users undoubtedly were making high-quality decisions from the standpoint of their own needs, but in the process actually were undermining the long- term good of the community as a whole, themselves included! When the water table dropped alarmingly, a government agency had to be created to manage water use to protect the community from those individual users who otherwise would have depleted the supply for their own benefit. The Edwards Aquifer now is a managed commons. “Areas that could give rise to a ‘commons’ issue at any bank include liquidity, capital, asset quality, risk diversification, community reputation, Distributed Being 127 customer good will, overall productivity and efficiency, investor satisfaction, and staff morale. A commons opportunity is a systemic opportunity, an opportunity to leverage the whole.”
How Culture Occurs
Culture is alive and emerging at every moment. Anthropologist Mary Douglas describes culture as not a static ‘thing’ but something that everyone is constantly creating, affirming and expressing. A great culture is not imposed extrinsically but emerges; it is inside-out. Understanding culture as emergent means that any attempt to change it through executive fiat is going at it backwards. If culture is being created all the time by everyone, how is it that we experience it as reasonably stable? We can begin to answer this question by using some of the insights of complexity theory, in particular, through a closer look at emergence. Organizational culture is the cumulative effect of ongoing interactions about values, meanings, and behavior between members of an organization and its environment. Culture is the result of all the conversations and negotiations between the members of an organization. People are continually agreeing (sometimes explicitly, sometimes implicitly) about the ‘right’ way to do things and how to draw meaning from the events of the world around them. If you want to change a culture, you have to change these conversations—or at least the majority of them. But changing conversations is not the focus of most change programs. Change programs concentrate on organizational structures or reward systems, or other incentives and interventions. Emergent culture is the “something for free” that is volunteered; this is what powers the Superperforming organization. Without the inside-out, there can be no Superperformance. This invisible force creates a tremendously powerful asset—it is a force multiplier. 128 The Superperforming CEO
Computer Boids
For the Boids We’ve all observed emergent properties in nature. Emergent patterns are reflected in social systems too. Emergence occurring in communities of people follows the same pattern of “something for free.” For example, in the now famous BOIDS demonstration of simple rules computer scientist Craig Reynolds developed a program to simulate the flocking behavior of birds. To Reynolds it appeared that there was no drill instructor bird, that the phenomenon of flocking was a decentralized activity, where each bird followed simple rules. Reynolds programmed some “bird-oids,” or “boids” to follow simple rules (1) Stay close to other boids, (2) try to match the speed of nearby boids, and (3) try to avoid bumping into things, including one another. With these rules, which each boid could apply in relation to its local environment, his simulated birds behaved as a flock. Flocking is the “emergent” property, the something for free Reynolds got from applying these simple rules, out of all of those nonlinear interactions, ‘flocking’ emerged.5
Distributed Being includes Distributed Authority
George: “Distributed authority must be a part of distributed being. It Distributed Being 129 takes years to hone and refine this capacity. There are several advantages to this approach, but for us, the most important by far was the advantage of customer intimacy. By providing customers direct access to super- friendly, empowered, responsible decision-makers, a bank can leverage its talent in the field, where its actual customer transactions—its loans and deposits—occur. Although this layer could otherwise be eliminated, for us it represented a finely tuned advantage, assuring the highest quality banking experience possible for our customers.”
Humility with Intensity
Distributed being is a critical success factor for producing Superperformance. You can’t examine a real Superperforming operation without stumbling across it. Across all areas of every Superperforming company (including every Superperforming company boardroom) you will find a shared, deeply felt sense of commitment to the long-term success of the company. Superperforming CEOs are humble, in tune with Robert Greenleaf’s “Servant Leader” and Jim Collins “Level Five Leader.” Here, Superperforming CEO Warren Buffett likens his job to the job of Eddie Bennett the batboy: “My managerial model is Eddie Bennett, who was a batboy. In 1919, at age 19, Eddie began his work with the Chicago White Sox, who that year went to the World Series. The next year, Eddie switched to the Brooklyn Dodgers, and they, too, won their league title. Our hero, however, smelled trouble. Changing boroughs, he joined the Yankees in 1921, and they promptly won their first pennant in history. Now Eddie settled in, shrewdly seeing what was coming. In the next seven years, the Yankees won five American League titles. What does this have to do with management? It’s simple—to be a winner, work with winners. In 1927, for example, Eddie received $700 for the 1/8th World Series share voted him by the legendary Yankee team of Ruth and Gehrig. This sum, which Eddie earned by working only four days (because New York swept the Series) was roughly equal to the full-year pay then earned by batboys who worked with ordinary associates. Eddie understood that how he lugged bats was 130 The Superperforming CEO unimportant; what counted instead was hooking up with the cream of those on the playing field. I’ve learned from Eddie. At Berkshire, I regularly hand bats to many of the heaviest hitters in American business.” 6 Herb Kelleher, another Superperforming CEO, is characteristically unabashed about his feelings for the people of Southwest Airlines: “I cofounded Southwest Airlines in 1967. The three-legged stool Because I am unable to perform competently any of Harley-Davidson’s meaningful function at Southwest, our 25,000 employees let me be CEO. That is one among transformation were many reasons why I love the people of Southwest statistical methods, Airlines.” 7 continual improvement, The evidence is that without a fundamental love for people and their and total employee emergence, Superperforming leadership involvement. will elude you. It is the involvement and growth of people that matter most to Richard Teerlink Superperforming CEOs like George Martinez. If you want to change the results created by your company, you will have to shift your paradigm from a “leader first” to a “server first” paradigm. The evidence of Superperformance clearly reveals this truth. George: “Leadership is a way of being, not a location on the organizational chart. The idea is to tap the leadership possibility that lives inside of each of us. There is the currently unexpressed possibility— the rosebud that will become a rose. This ripening calls for patience. Distributed being creates a new capacity to take things to another level. The emergence of the team creates great leverage. When we feel pressured, we experience a tendency to move away from this way of operating. Responsibility and integrity are keys.” Distributed Being 131
Summary
The Superperforming CEO: Distributed Being
• Birds flocking, fish schooling, bees swarming—all move effortlessly in the same direction. Somehow great teams and great organizations are able to operate as something approaching this frictionless state. There is something extra, something invisible at work.
• Organizations are patterns of relationships. Conversations are the heart and soul of organizational life. It is conversations that shape commitment to the organization and create a sense of what is possible.
• Leadership is a way of being, not a location. The ideal is to tap the leadership possibility that lives inside every one of us. Distributed being creates a new capacity to take things to another level. The emergence of team creates great leverage.
• If you can master the process of enrolling people—then ‘localness’ can be very effective. Control of people from the top down doesn’t work. A paradox in organizations is that to have power operating at work, you have to give it away. This requires a faith that empowerment will work, and a willingness to remove the parts that are inconsistent. 132 Th e Superperforming CEO Distinctions
1: Believing in the Unlimited Potential of People
2: Sharing the Wealth
3: Treating the Community as Stakeholder
4: Making Sure All Stakeholders Win
5: Fulfi lling Life’s Purpose through Work
6: Taking the Long View of Business
7: Staying in the Sweet Spot
8: Use of Coaching
9: Measuring Things Hardly Measured
10: Open and Honest Communication
11: Tacking
12: Making Responsibility a Choice
13: Context as Lever
14: Distributed Being
15: Continuous Emergence Chapter 15 Continuous Emergence
here is no automatic guarantee that any Superperformer will remain so into the future. To paraphrase Deming, T‘Superperformance is optional.’ Of the 18 “visionary” companies profiled in the 1994 Collins and Porras classic, Built to Last, only three today would qualify as Superperformers. (Wal-Mart, Johnson & Johnson, and American Express.) Of the remaining fifteen, most have slipped from great to good. Additionally, of the 11 “great” companies profiled in Collins immensely popular 2001 book Good to Great, two have actually slipped from great to “gone.” 1, 2 Even Superperformers know the future is uncertain, and that nothing is assured. George: “Back at Sterling, we were broadly challenged by the investment banking community when we set out to go public. No bank had filed an IPO in ten years. The first seven investment bankers we approached did not see the vision. Legg Mason, the eighth investment banker we spoke with, agreed with us and saw what we saw. Did Legg Mason make a good decision? We think so. The bank’s stock price has returned over 950 percent in value since the IPO in 1992 and dividends 134 The Superperforming CEO increased every year. This is an important example of why it is vital to remain open to a sense of possibility. Success correlates with the number of times you are willing to make a request. “As is clearly evident in the recent downturn, you cannot assume a static environment. The future is not predictable or controllable. There is a tendency to think it is possible to predict and control for every eventuality—but this is a danger; it is operating Order for free, outside of reality. It is better to envision multiple utterly natural, possible scenarios, along with multiple possible responses. The point of this exercise would not is previously be to predict a precise future, but instead to mostly unknown, increase responsiveness to any new shift in the environment, of your risk and opportunity field. and will change You can create a plan, but you can’t predict the our view of life. future. Many whirlpools can arise out of a single wind. You have to be able to handle different Stuart Kauffman scenarios and agendas.”
Reality vs. Possibility
“Reality vs. Possibility” reflects a similar relationship. Cynics and fools operate at the extremes of either side. All available options for today occur in what is real, while all available options for tomorrow live in what is possible. It is the tension of “what can be” balanced against the tension of “what is” that brings you to a place of new learning and creativity. Optimum growth comes from holding the tension, oscillating between the security of certainty and the excitement of unlimited potential.” George: “With only a sense of what is real, you hesitate to take risks. In a concern for safety, you will hug the reality line. The opposite is also true. With only a sense of what is possible, you can ignore important risks. In addition to my own father, I was blessed with two great mentors— George Gentry, who, with a 39-year career in banking, emphasized what was real, and Al Retzloff, whose chemical company was my first employer, Continuous Emergence 135 who emphasized what was possible. Until 1986 (our first 12 years as an organization), we were a company influenced almost completely by a strong sense of reality and fundamentals. Then deregulation happened, creating an opportunity for us to soar. This coincided with my own “emergence,” a personal breakthrough I experienced in my own development and self- awareness. Together, these led to the onset of what turned out to be a stream of continuous emergence and continuous reinvention. Some of the most exciting examples were (1) when we went from a single to a multiple bank office system, (2) when we went from a private to a public company, and (3) when we went from a company with a local Houston footprint to a company with a multi-city footprint. “Without a sense of what is real or what is possible, a business will operate in crisis mode. With only a sense of what is real without a sense of ‘what can be,’ all that anyone can hope for is a life of ’business as usual.’ Conversely, living only in a world of what can be without ever confronting reality will produce a business that never grows out of its startup phase. Optimum fitness, or continuous emergence, occurs where there is both a sense of what is real and what is possible at work in an organization.” This pattern and its countless variations produce the continuous emergence of Superperformance. It operates like a fountain; increasing returns simply pour forth, it seems, without end. But this condition is also amazingly subtle; it is easy to lose without an appreciation for the critical, continuing influence of both management and leadership together, at all times. This makes succession planning a vital issue for Superperforming CEOs. Without a felt understanding for what makes companies great, it is very easy to destroy, to plow under what can take generations of great gardening to create. It is easy to throw the baby out with the bath water. The most important new knowledge for corporate leaders is the complementarity pattern of process x culture; this formula always gives rise to Superperformance. Superperformance is the emergent outcome of process wed to culture. Companies who desire to survive and perform into the future will adopt this knowledge and profit from it. For all others, sub-optimization is guaranteed. 136 The Superperforming CEO
It Takes Two In mathematics, operators and operations are studied only in a paired relationship. It is unusual to learn an operation in mathematics without also learning its inverse operation. Addition and subtraction, multiplication and division, raising to a power and taking roots, the distributive law and factoring, are all examples of dual operations. Statistics is based on mathematical poles. Calculus is nothing more than Bohr Family Coat of Arms Contraria sunt Complementa the study of two dual operators (Opposites are Complements) that are, in fact, inverses of each other, integration and differentiation. In physics, we have particle wave, positive and negative charges, electro-magnetism and Bohr’s complementary principle. Now, with the explosive awareness in the area of non- equilibrium thermodynamics, we have order and chaos, Bohm’s unfolded and enfolded universe, and supersymmetry. In biology we have the double helix of DNA, with its paired bases. There is stimulus-response, the functions of chlorophyll and hemoglobin, contraction and expansion, anabolic and catabolic, osteoblasts and osteoclasts—these all fall sway to this pattern of complementarity. In politics and philosophy the concepts of liberalism and conservatism, thesis and antithesis are opposites, and also fall into the dual category. In chemistry, we have bases and acids—Lavoisier, the father of modern chemistry, theorized that every definite compound consists of two parts having opposite electrical activity. This formed the basis for Jacob Berzelius’ dualistic theories of chemical bonding. Life and death, mind and matter, space and time, subjective and objective, yin and yang, endlessly, the pattern is pervasive throughout all of nature. It’s the water we swim in.4 Continuous Emergence 137
Deming on the Duality of Optimization
Deming developed a system of profound knowledge for optimization of a system. It is widely regarded by quality experts as the central tenant of Deming theory. It described the interdependent interaction of four components (Appreciation for a System, Knowledge of Variation, Theory of Knowledge, and Psychology) required to optimize an organizational system.5 The discovery of Superperformance shows that these components can be distilled even further into two basic elements: Process and Culture. Dr. Paul Hertz, Quality consultant and Deming collaborator, was mentioned in Deming’s landmark Out of the Crisis. Today, as president of the Hertz Group in Miami, Dr. Hertz shares, “Even back then, over 30 years ago, Deming talked about there being two sides—a process side and a behavioral side—to optimization.” Operating with this new awareness is operating with a view of organizations as living systems, with right and left brain, with complementarity as their fractal pattern. This yields a simple, shockingly robust understanding of organizations, at once greatly simplifying but also unifying the paradigmatic structure from which we experience all of organizational behavior and daily life. The pattern is pervasive. George: “Business drives the future, not universities, government or church. If society Sitting quietly, is going to be transformed, if it is going to be doing nothing, possible to create ‘God’s kingdom on earth,’ if there is going to be a way to really positively affect Spring comes, the world, then you just can’t ignore business; it is and the grass such a huge factor in our lives. It seems there is grows by itself. a particular quality; if you can get and keep this quality, it will become evident that you have the Shunru Suzuki right balance. Again, this requires high levels of personal responsibility ‘beyond the scope of only doing my job.’ There has been the perception promoted by the media that if you enjoy prosperity it is because you have hurt or squeezed it out of others, that you can’t be successful unless you have oppressed someone else. My experience is that you can have goodness and still outperform the rest of your industry.” 138 The Superperforming CEO
Summary
The Superperforming CEO: Continuous Emergence
• Superperformers live in a state of continuous emergence. This means they are continually experiencing breakthroughs in performance, achievement and growth. Living in continuous emergence is living on the edge of passion and process.
• With only a sense of what is real, all that anyone can hope for is “business as usual.” The opposite, only a sense of the possible, would produce a business that never grows out of its startup phase. Optimum fitness, or continuous emergence, occurs where both a sense of what is real and what is possible are at work in an organization.
• Operating with this new insight is operating with the knowledge that organizations are organisms, tangible and intangible, and that PxC is their sweet spot.
• This yields a simple, shockingly robust new optimization theory for organizations, at once greatly simplifying and unifying the paradigmatic structure from which we experience all of organizational behavior and daily life. The pattern is pervasive throughout all of nature. Continuous Emergence 139 140 The Superperforming CEO Chapter 16 Epilogue
he ‘Hero’ is a popular archetype in literature and art throughout history. The hero archetype appears in every culture, from the TGreek warrior Achilles, to the Jedi knight Luke Skywalker. Some of these heroes undertake fantastic quests that test their heroic strength and character. Others suffer crushing, inconceivable trials to achieve some greater, noble purpose, some destiny. Heroes usually achieve a certain level of transcendence to triumph over incredible adversity—and their own limitations. Joseph Campbell’s Hero with a Thousand Faces describes the “call to adventure” common to all of these figures: “The first stage—signifies that destiny has summoned the hero and transferred his spiritual center of gravity from within the pale of his society to a zone unknown.” 1 If there is one archetype that fits Superperforming organizations, it is the hero archetype. Superperformers are called to adventure, to achieve something great and meaningful, something indisputably spiritual. But according to these companies, the hero that is called is not the one individual, but the whole organism. In Heroic Leadership, Chris Lowney explains traditional leadership models: 142 The Superperforming CEO
“…that each person possesses untapped leadership potential cuts against the grain of the corporate top-down model that continues to dominate thinking about who leaders are. Although corporate America is experiencing a leadership dearth, its leadership model has slowly insinuated itself into most actions of who leaders are. The stereotypical role models are those in charge—presidents, generals, and coaches.” 2 Superperformers are heroic—but in a different way. Instead of a heroism of one, theirs is a heroism of many. “Let the People Shine” as a simple principle for George Martinez, has proven to be an unfailing prescription for organizational greatness. It has liberated the promise within Sterling Bank and now is at work in Allegiance Bank Texas. The unbroken stream of success he has known provides a powerful witness.
Shared Purpose & Values Create Organizational Spirit
In Spiritual Intelligence in the Workplace, Catherine McGeachy describes a growing body of research that shows how employees connected to their spiritual center outperform their ‘disconnected’ colleagues, and suggests that spirituality may be the ultimate workplace advantage. McGeachy contends that spirituality at work does not mean religion. Rather, in a work setting spirituality is expressed as shared purpose and values—rules and behaviors that enlarge the individual.3 To create Superperformance, these have to be broadly owned. In these highest quality companies, authentically shared company values are a guidepost for individual actions. For Superperfomers, these core values are not just platitudes. Usually they have been identified and established by everyone, not coldly imposed by ‘top management.’ In this sense, they are truly owned by all. In these urgent, complex times, as organizations look for new optimization strategies, distributed management and leadership— everyone owning and growing the whole—is the sure way to an abundant harvest. As George Martinez and other Superperforming CEOs have found, organizations who take these performance-improvement principles seriously will discover a profoundly more rewarding and heroic future. Epilogue 143 144 The Superperforming CEO Appendix 1 8 Simple Rules for the Emergence of Superperformance
1. Process x Culture = Superperformance Superperformers leverage the unlimited potential in this core interaction.
2. Superperformers Superperform Over Time Superperformance is a second-order steady state sustained over time.
3. The Paradigm Shift of Superperformance is from Machine to Organism Organizations are living, complex adaptive systems, not machines.
4. Superperformance is Created by Super Management and Super Leadership In superperforming organizations, management and leadership act as the left and right brain of the organization.
5. Superperformers Transform Flow Process optimization is flow optimization. 146 The Superperforming CEO
6. Superperformers Unleash Passion Culture optimization is liberating the superhero inside every person.
7. Superperformance Requires Metamorphosis The shift to Superperformance requires a critical phase transition, trading old paradigms and habits for new paradigms and habits.
8. Superperformers Oscillate to Continue Superperforming Because they are polar-complements, process and culture live in natural tension, eternally shifting back and forth between two poles. Appendix 1: 8 Simple Rules for the Emergence of Superperformance 147 148 The Superperforming CEO Appendix 2 The Superperformance Executive Advocate
The Role of the Executive Advocate
Superperformance is an approach that everyone working in organizations needs to understand, because everyone has to go work on the transformation. The One Simple Formula, the 8 Simple Rules and the 10 Habits are components that all formal and informal leaders need to utilize and harness. But the 15 Distinctions are a special calling for Formal Leaders alone--Board Members, CEOs and C-level executives with the highest levels of accountability and authority—the people who can advocate for and institute large-scale change. Because of the nature of their roles they must make the fundamental changes required to take process and culture to unprecedented new levels. For small and large companies alike, the capacity of the people at the top to adopt the principles of Superperformance, practice servant leadership, charter the right projects, select and mentor people, and facilitate change is indispensable. Superperformance Advocates are executives and top managers with significant overall business authority and responsibility. It is the individuals with ultimate responsibility for the business that can assure that managers 150 The Superperforming CEO and leaders at all levels have the support they need to succeed. Advocates should understand Superperformance principles and concepts, including an understanding for superperforming management and leadership, as well as have an appreciation for the tools and methods of system and project optimization, emergent change, and servant leadership. They should follow a reliable process for the selection of internal Superperformance Consultants (SPCs) and transformation projects that will make the most difference to the organization for both the short and long-term.
The Superperformance Consultant (SPC)
The control of process and the liberation of culture can be accelerated through the use of an internal agency of Superperformance Consultants (SPCs). SPCs are a new breed of improvement agency, equipped to surf the organization’s left and right brain. They uniquely serve as both a performance execution agency as well as cultural ministry. These are the new, more highly-adapted foot soldiers of Superperformance. These performance masters are different from traditional internal performance consultants in several ways:
• Servant-Leadership The process owners are the customers of the Advocates and the SPCs. Process owners know more about the process under scrutiny than anyone else. The SPC is in place to guide and assist their improvement efforts, not to assume ownership of their process. Credit for any improvements that are made should go to the process owner and the team, not to the SPC or the Advocate. (This is the antithesis of prevailing practice.) The ancient Chinese proverb, “The master craftsman leaves no trace,” is an appropriate guiding principle.
• Knowledge Sharing SPCs are knowledge sharers, not knowledge hoarders. Appendix 2: The Superperformance Executive Advocate 151
Knowledge has power, but it has infinitely greater power (and greater value to the organization) if it is shared. SPCs remain on the leading edge of learning by participating in a community of practice with other SPCs in their company and with SPCs in other companies. This larger community is a living, sharing organism that enlarges its own knowledge capital by promulgating best practices among its members. The SPC should also share his or her knowledge with process owners as they engage in project work, although it is not expected that the process owners will reach the knowledge level of the SPC with respect to the improvement tools.
• Cultural Ministry The Superperformance Consultant is not only a technical specialist, but also a model of civility, integrity, and emotional intelligence. SPCs model positive interpersonal interactions, which are evident in their success in engaging and enrolling others, and their expert use of relationship skills, team skills, and creativity skills. The SPC teaches this new way of being to others. SPCs understand the science behind Superperformance, including elements of complexity (CAS) and biology.
The Executive Advocate Charter
The charter of the Executive Advocate for Superperformance is to foster the transformation of process flow and the liberation of culture within his/her organization. In the transformation, the Executive Advocate must keep in mind the good of the organization as a whole, and avoid the pitfalls of improving one function at the expense of another. The Executive Advocate will also recognize that his/her role is one of serving, continuously learning and sharing. 152 The Superperforming CEO
Capabilities of the Executive Advocate
The Executive Advocate operates from an Organism View of organization to transform process and culture. As such, the Executive Advocate must be capable of operating with the mental model of manage process, lead people, and be capable of the actions necessitated by this mental model. The following are the capabilities of the Executive Advocate for Superperformance: • Adoption of Superperformance as a business strategy • Adoption of the Superperformance principles • Selecting and developing Superperformance Consultants • Selecting projects that will have the greatest short and long- term impact • Removing barriers and ensuring Superperformance Consultants, Project Teams, and Process Owners receive the support they need • Ensuring SPCs are 100% dedicated to their Superperformance projects and customers • Coaching for Superperformance • Provoking emergent cultural change • Syndicating best practices • Tailoring organizational infrastructure for the long-term sustainability of Superperformance Appendix 2: The Superperformance Executive Advocate 153 154 The Superperforming CEO Appendix 3 The Superperforming CEO Inventory
This Inventory of Executive Advocates for Superperformance was developed based on the 15 Distinctions of The Superperforming CEO. Respondents are asked to rate themselves and other executive on a five point scale, ranging from Very Much Like Me to Not At All Like Me. Consider your own or this person’s effectiveness in the following areas. How satisfied are you with the way he or she (or you)…
Has an Uncommon Approach to People
Believing in the Unlimited Potential of People
1. Treats people like there is an unexpressed “Superhero” inside. 2. Creates a space for the growth and emergence of others. 3. Thinks of him/herself as a servant to the people he/she oversees and to others in the organization. 4. Creates opportunities for others to interact and learn. 5. Is personally fulfilled through the growth of others. 156 The Superperforming CEO
Sharing the Wealth
1. Believes that all employees should share in the company’s prosperity. 2. Actively and measurably shares the wealth and is an advocate for purposefully sharing the wealth across the enterprise. 3. Advocates for employee ownership through stock options or other forms of equity sharing. 4. Advocates for the best benefits package possible for all employees. 5. Believes that sharing the wealth is the highest form of self- interest.
Treating the Community as Stakeholder
6. Believes in giving something back to the community. 7. Actively seeks out and participates in community initiatives. 8. Actively encourages employee involvement in community initiatives. 9. Promotes company adoption of a particular cause or philanthropy. 10. Believes the organization should take a leadership role in the community.
Making Sure All Stakeholders Win
11. Believes that an ecology of stakeholders must be successfully served in order to achieve maximum success. 12. Purposefully establishes and monitors the organization’s performance in serving employees, customers, community, shareholders, and suppliers. Appendix 3: Superperforming CEO Inventory 157
13. Works to balance the competing interests of stakeholders.
Fulfilling Life’s Purpose through Work
14. Is personally fulfilling his or her life’s purpose through the work. 15. Actively encourages others to ask themselves if their work is in integrity with their life’s purpose. 16. Has established or supports a core company value that all employees fulfill their personal and professional aspirations through the work. 17. Promotes the self-expression of every individual. 18. Has established or supports the routine use of metrics to gauge employee fulfillment and personal growth.
Has Uncommon Practices in Place
Taking the Long View of Business
19. Has instituted or supports a long-term rather than a short-term vision. 20. Emphasizes performance and financial data over time. 21. Rewards performance improvement that is sustained over time versus short-term gains. 22. Has instituted or supports a robust retention plan. 23. Has instituted or supports a meaningful succession plan.
Staying in the Sweet Spot
24. Has identified and has a clear understanding for the organization’s sweet spot. 25. Actively communicates and promotes discipline in the 158 The Superperforming CEO
organization’s sweet spot. 26. Actively seeks to strengthen the core through continuous improvement in the organization’s sweet spot. 27. Can provide evidence of opportunities that were not pursued or were divested because they were outside of the organization’s sweet spot.
Use of Coaching
28. Believes that an outside view is essential and can reveal hidden opportunities and risks. 29. Currently uses or has hired an executive coach in the past. 30. Actively seeks a view from the outside / intervention as required 31. Has established or supports use of coaching in the organization. 32. Has adopted or supports a particular coaching model in the organization.
Measuring Things Hardly Measured
33. Believes that the organization’s intangible dimension (culture) is as important as the tangible dimension (process.) 34. Has instituted or supports the use of ‘soft’ measures on the organization’s performance scorecard. 35. Has instituted or is an advocate for a balance between intangible measures and tangible measures of performance. 36. Has instituted or supports incentive systems that reward for employee engagement, interdependent cooperation, and values alignment. Appendix 3: Superperforming CEO Inventory 159
Open and Honest Communication
37. Clearly demonstrates a commitment to open and transparent communication. 38. Actively seeks out the opinions and involvement of others. 39. Believes that fear at work destroys performance. 40. Has instituted or is an advocate of the use of 360 assessments. 41. Makes available or supports the dissemination of transparent financial data to all employees. 42. Conducts or supports the use of town halls, focus groups, management councils, and employee advocacy groups. 43. Actively and regularly communicates with all employees.
Has Uncommon Paradigms at Work
The Superperforming CEO: Tacking
44. Believes that tacking between management and leadership is the pattern of optimization. 45. Actively integrates process and culture in every undertaking. 46. Recognizes that many problems are actually polarities. 47. Purposefully emphasizes the equivalence of both tangible and intangible dimensions.
Making Responsibility a Choice
48. Actively enrolls others in a culture of chosen responsibility. 49. Believes that self-motivation is a trimtab for the emergence of Superperformance. 50. Actively supports the view that values alignment is significantly 160 The Superperforming CEO
more important then skills alignment. 51. Believes that it is possible to create a system where people behave responsibility without the burden of extrinsic control systems.
The Superperforming CEO: Context as Lever
52. Appreciates that context is a powerful lever. 53. Has instituted or supports goals and values as a lever for transformation. 54. Believes that change can only be sustained when it is pulled instead of pushed.
The Superperforming CEO: Distributed Being
55. Believes there is “something for free” that emerges from operating as a team. 56. Actively fosters the intrinsic motivation of process owners and bottom-up ownership of initiatives. 57. Believes that conversations, interactions and relationships are the fulcrum of successful initiatives. 58. Actively promotes interdependent cooperation between all parts of the enterprise. 59. Actively pushes decision rights down to the lowest possible level, as close to the customer as possible.
Continuous Emergence
60. Operates in the border of what is real and what is possible. 61. Operates on the edge of process and passion. 62. Views the organization as alive and continually emerging. Appendix 3: Superperforming CEO Inventory 161
Written Comments
What are your strongest gifts or strengths? Or if you are evaluating someone else, what does this person do that you particularly appreciate? (Please be specific and list two or three specific items.) How do these correlate to the work that you do? Or if you are evaluating someone else, how do you see these gifts expressed in the work of this person? 162 The Superperforming CEO Appendix 4 The Superperforming CEO Resources
The Superperforming CEO Seminar for Executives
Superperformance is an optimization approach that everyone working in organizations needs to understand, because everyone has to go work on the transformation. The One Simple Formula, the 8 Simple Rules and the 10 Habits are components that all formal and informal leaders need to utilize and harness. But the 15 Distinctions are a special calling for Formal Leaders alone—Board Members, CEOs and C-level executives with the highest levels of accountability and responsibility—the people who can institute large-scale change. Because of the nature of their roles they must make the fundamental changes required to take organizational performance to breathtaking new levels. What makes the difference? What is it that makes systems sing and spirits soar? What keeps some organizations in the winner’s circle year after year? The Superpeforming CEO provides further evidence that the underlying, astonishingly simple patterns of Superperforming companies are universal. It is also a call to action. For executives and organizations, it is a call to a new way of being—one that can achieve and sustain previously unimagined new levels of performance. It takes a 164 The Superperforming CEO step beyond what we already know about Superperformance to closely examine a variety of uncommon practices, paradigms, and people policies that redefine the executive’s role. For more information or to schedule a Superperforming CEO Seminar for Executives go to: http://corpusoptima.com/seminars/the-superperforming-ceo/
Executive Coaching
Corpus Optima Executive Coaching Services are designed to coach executives who want to enrich their lives and transform their organizations by learning more about Superperformance and Servant Leadership, and who want an outside view to help them apply the principles of Superperformance in their organizations and critical projects. Contact Dave Guerra, Ben Dilla, Ph.D, or Craig Boewe to learn more:
Dave Guerra Ben Dilla, Ph.D. Direct: 281.673.8514 Direct: 214.477.3510 [email protected] [email protected] Craig Boewe Direct: 918.200.4524 [email protected]
Corpus Optima Superperformance Advisory Services
Corpus Optima’s special advice and integrated approach to business performance optimization leverages the discovery of superperformance and the intrinsic motivation of people to drive unprecedented outcomes, measurably improve performance, and revolutionize management and leadership. For more information visit: http://corpusoptima.com/ Appendix 4: Superperforming CEO Resources 165
Corpus Optima Seminars
Corpus Optima seminars are designed to equip leaders and managers at all levels with a deeper understanding for Superperformance, the science that underlies its principles, and a new set of tools for revolutionizing performance. In these highly interactive and immersive seminars participants become firmly grounded in the principles and practices of Superperformance so they can be responsive to opportunities anywhere in their organizations. For more information visit: http://corpusoptima.com/seminars/ 166 The Superperforming CEO Notes
Chapter 1: Believing in the Unlimited Potential of People 1. Deming, W. Edwards. The New Economics. (Cambridge: MIT Center for Advanced Engineering Study, 1993) 92. 2. Greenleaf, Robert K. Servant Leadership: A Journey into the Nature of Legitimate Power and Greatness. (New York: Paulist Press, 2002) 27. 3. Gallup Corporation. Q-12 Survey, 2003-2008. 4. Conference Board Research Center, Conference Board, Manhattan, NY, U.S. Job Satisfaction Keeps Falling, February 28, 2005. 5. Campbell Soup Company. 2007 Annual Report. 6. Hillenbrand, Laura. Seabiscuit: An American Legend. (New York: Random House, 2001) 101-102.
Chapter 2: Sharing the Wealth 1. Walton, Sam. Running a Successful Company, 10 Rules that Worked for Me, The Book of Business Wisdom. (New York: Wiley, 1997) 225-230. 2. Ibid., 226. 3. Mercer, William M. Stock Options Move Beyond Companies Executive Suites, New York, William M. Mercer Company, Press Release, December 1997. 168 The Superperforming CEO
4. National Center for Employee Ownership, Research on Employee Ownership and Corporate Performance, Article, 2004. 5. World at Work, ESOPs. Broad-Based Stock Options, and the Stock Market, Research Study, January 2003.
Chapter 3: Treating the Community as Stakeholder 1. Brooke A. Masters and Yuki Noguchi, Washington Post, “Corporate Titans Create a Colossal Charity,” June 27, 2006. 2. Toyota Motors Corporation, Toyota Guiding Principles, Sustainability Report 2008. 3. Southwest Airlines, Southwest Cares Report, 2008. 4. Harley-Davidson, Harley Davidson Community Investment Report, 2008. 5. Johnson & Johnson, Robert Wood Johnson Foundation, Robert Wood Johnson Assessment Report, 2008. 6. Microsoft, Microsoft Corporate Citizenship Report, 2008. 7. Wal-Mart, Wal-Mart Good Works Program Report, 2008.
Chapter 4: Making Sure All Stakeholders Win 1. Herb Kelleher, Southwest Airlines Inc., Herb Kelleher, 1990. 2. Harley Davidson Inc., Harley Davidson Vision Statement, 1981. 3. Johnson & Johnson Inc. Johnson & Johnson Credo, 1943. 4. Hood, John M. The Heroic Enterprise: Business and the Common Good, (New York: Simon & Schuster, 1996).
Chapter 5: Fulfilling Life’s Purpose through Work 1. Maslow, Abraham, The Farther Reaches of Human Nature. (New York: Viking, 1972) 34. 2. Csíkszentmihályi, Mihály. Finding Flow: The Psycholog y of Engagement with Everyday Life (New York: Basic Books, 1998) 29. 3. Drucker, Peter F., Landmarks of Tomorrow, (New York: Harper, 1959). 4. Haag, S., Cummings, M., McCubbrey, D., Pinsonneault, A., & Donovan, R. Management Information Systems For the Information Age (3rd Canadian Ed.). Canada: McGraw Hill, 2006). Notes 169
5. Drucker, Peter F. Management Challenges of the 21st Century. (New York: Harper Business, 1999) 157. 6. Von Franz, Marie-Louise. Shadow and Evil in Fairy Tales, Part II, (Zurich: Spring Publications, 1974) 185. 7. Campbell, Joseph, The Power of Myth, (Doubleday and Co., New York, 1988) 117. 8. Taylor, Frederick W., The Principles of Scientific Management, (Cambridge: Harper Brothers, Harvard University, 1919) 9. 9. Gallup Corporation. Q-12 Survey, 2003-2008. 10. Society for Human Resources Management, Alexandria, VA, 2006 Job Retention Poll, December 19, 2006, Society for Human Resources Management.
Chapter 6: Taking the Long View of Business 1. Chris Zook, Bain & Company, “Looking for Profitable Growth? You May Need a Map,” Bain Briefs, February 2001.
Chapter 7: Staying in the Sweet Spot 1. Saint-Andre, Peter, “Good to Great II,” One Small Voice, January 22, 2003. 2. Zook, Chris and Allen, James, Profit from the Core, (Boston: Harvard Business Press, 2001). 3. Guerra, Dave, Superperformance: New Profound Knowledge for Corporate Leaders, (Houston: Old Live Oak Books, 2005). 4. Zook, Chris and Allen, James, Profit from the Core, (Boston: Harvard Business Press, 2001).
Chapter 8: Use of Coaching 1. Deming, W. Edwards. The New Economics. (Cambridge: MIT Center for Advanced Engineering Study, 1993) 92. 2. Luft, J. and Ingham, H. (1955) “The Johari window, a graphic model of interpersonal awareness,” Proceedings of the western training laboratory in group development. Los Angeles: UCLA. 170 The Superperforming CEO
3. Eric Schmidt, “The Best Advice I Ever Got,” Fortune Magazine, Interview by Adam Lashinsky, July 8, 2009.
Chapter 9: Measuring Things Hardly Measured 1. The Economist , Measuring Intangible Assets, The Economist, June 12 1999, 72-74. 2. Financial Accounting Standards Board, “Proposal for a New Agenda Project, Disclosure of information about intangible assets not recognized in financial statements,” FASB: August 17, 2001. 3. Accenture White Paper, Study: Managing Intangible Assets is a Top Issue for Senior Executives, Accenture, New York, 2004. 4. Kotter, John, and Heskett, James, Corporate Culture and Performance, (New York: Free Press, 1992). 5. Barrett, Richard, Liberating the Corporate Soul, (New York: Butterworth-Heinemann, 1998). 6. NIST Web Site, Baldridge Stock Studies, Tenth NIST Stock Investment Study, April 2004 & Ninth NIST Stock Investment Study, May 2003. 7. Denison, Daniel, Linking Culture to the Bottom Line, Denison Research 2007, Denison Consulting, Zurich, Switzerland, 2006. 8. Wolf, Jason, Healthcare Heal Thyself: Seven Simple Truths that Drive Performance, High Performance Research Project, Hospital Corporation of America, 2006. 9. Guerra, Dave, Superperformance: New Profound Knowledge for Corporate Leaders, (Old Live Oak Books, Houston, 2005). 10. Corpus Optima Cultural Assessment Tools (CAT), Corpus Optima, Inc. Houston. 11. Barrett, Richard, Liberating the Corporate Soul, (New York: Butterworth-Heinemann, 1998). 12. Deloitte Consulting, “In the Dark: What Boards and Executives Don’t Know about the Health of their Businesses, a survey by Deloitte in cooperation with the Economist Intelligence Unit,” October 2004. 13. Caruso, Denise, “When Balance Sheets Collide with the New Economy,” New York Times, September 9, 2007. Notes 171
Chapter 10: Open and Honest Communication 1. Walton, Mary, The Deming Management Method, (New York: Perigree Putnam, 2001) 72. 2. Aguayo, Rafael, Dr. Deming: The American Who Taught the Japanese About Quality, (New York: Fireside, 1991) 78. 3. CFO Magazine, Edward Teach, Suspicious Minds, CFO Magazine, June 1, 2006. 4. Ibid. 5. Ibid. 6. Society for Human Resources Management, Alexandria, VA, 2006 Job Retention Poll, December 19, 2006, Society for Human Resources Management.
Chapter 11: Tacking 1. Johnson, Barry, Polarity Management: Identifying and Managing Unsolvable Problems, (Amherst, MA: HRD Press, Inc., 1992).
Chapter 12: Making Responsibility a Choice 1. Wall Street Reporter® Magazine, Downey Bridgwater Interview on Sterling Bancshares, August 28, 2003.
Chapter 13: Context as Lever 1. Brown, David J., Mavericks of the Mind, Interview with Rupert Sheldrake, September 15, 1989.
Chapter 14: Distributed Being 1. Kelley, Kevin, Out of Control, (New York: Basic Books, 1995). 2. Fisher, David Hackett, Washington’s Crossing. (Oxford: Oxford University Press, 2004). 3. Senge, Peter, The Fifth Discipline, (Doubleday, New York, 1990). 4. Hardin, Garrett, The Tragedy of the Commons, Science, 162 (1968) 1243-1248. 172 The Superperforming CEO
5. Reynolds, C. W. (1987) Flocks, Herds, and Schools: A Distributed Behavioral Model, in Computer Graphics, 21(4) (SIGGRAPH ’87 Conference Proceedings) 25-34. 6. Warren Buffet, Chairman’s Letter, 2002 Annual Report, Berkshire Hathaway, Inc. 7. Herb Kelleher, Testimony before National Civil Aviation Review Commission, May 28, 1997.
Chapter 15: Continuous Emergence 1. Collins, Jim, Built to Last, (New York: Harper Collins, 1997). 2. Collins Jim, Good to Great, (New York: Harper Business, 2001). 3. Guerra, Dave, Superperformance: New Profound Knowledge for Corporate Leaders, (Houston: Old Live Oak Books, 2005). 4. Kelso, J.A. Scott, The Complementary Nature, (Cambridge: MIT Press, 2008). 5. Deming, W. Edwards. The New Economics. (Cambridge: MIT Press, 1993). 6. Paul Hertz personal conversation with author, March 25, 2006.
Chapter 16: Epilogue 1. Campbell, Joseph, Hero with a Thousand Faces, (Princeton: Princeton University Press, 1968) 30. 2. Lowney, Chris, Heroic Leadership, (New York; Loyola Press, 2005), 16. 3. McGeachy, Catherine, Spiritual Intelligence in the Workplace, (Lancaster, PA: Veritas Press, 2001). Notes 173 174 The Superperforming CEO Index
A context (as attractor), 115–119 Csikszentmihaly, Mihaly, 42 accountability, 105 culture attractor, 115–116 as capital, 77–78 distributed, 127–128 B Barrett, Richard, 77, 79–80 D barriers (removal), 107–108 Deming, W. Edwards, xvi, 4–5, 46, 67, Berkshire Hathaway, 4, 18 85, 133, 137 blind spots, 68–69, 73 distributed (being), 121–131 Board of Directors, 55, 86 Douglas, Mary, 127 boids, 128 Drucker, Peter, 7, 42, 46 Buffett, Warren, 25–26, 129 Built to Last, 133 E C empowerment. See Responsibility Campbell, Joseph, 44 Campbell’s Soup, 7–8 F Caruso, Denise, 81 coaching, 67–73 fear, 85–88 Collins, Jim, 54, 60, 62–63, 129, 133 Fortune’s 100 Best Companies to Work communication (honest), 85–91, 105 For, 79 community (as stakeholder), 25–33 fulfillment (of employees), 46–48 complex adaptive systems (CAS), 121 Fuller, Buckminster, 118, 122 176 The Superperforming CEO future (planning for), 133–138 knowledge capital, 7 knowledge worker, 42–44, 46 G Gates Foundation (Bill & Melinda), L 25–26 leadership. See distributed being Goldstein, Jeffrey, 116 localness, 124–125 governance. See Board of Directors long-term view, 54–58, 99 Greenleaf, Robert, 6, 129 Lowney, Chris, 141–142
H M Hardin, Garrett, 126 Maslow, Abraham, 42, 46 Harley-Davidson McCauley, Dan, 89 community activity, 29 McCullough, Bambi, 72, 78 vision statement, 36 McGeachy, Catherine, 142 wealth sharing, 17 McGregor, Douglas, 46 hero archetype, 141–142 measurement tools (for intangibles), Hertz, Paul, Dr., 137 79–80 Hillenbrand, Laura, 9 Microsoft honesty. See Communication and Fear community activity, 31 Hood, John M., 36 wealth sharing, 17
I O inspiration, 6 oak tree, 53 intangibles (measuring), 75–81 optimization integrity (three levels), 43–44 duality of, 135–180 sustaining, 98 Orsini, Joyce, 85–86 J Johari Window, 68–69 P Johnson, Barry, 95–96, 98 Johnson & Johnson, 30 polarity, 95–96, 98 community activity, 29–30 possibility Credo, 17, 36 living in, 3–4, 41 wealth sharing, 17 versus reality, 134–136 Johnson, Robert Wood, 30, 36 potentiality (of individuals), 10–11 Jung, Carl, 43 purpose (life’s), 41–50
K Q Kelleher, Herb, 29, 35–36, 130 Quality Function Deployment (QFD), Kelly, Kevin, 121 60, 64 Index 177
R W Rarey, Brenda, 75, 81–82 Wal-Mart, 25, 63 responsibility, 5, 103–112, 104 community activity, 31 wealth sharing, 16 Walton, Sam, 16 S Washington, George, 123 Sam’s Way, 16 Schmidt, Eric, 70 Scientific Management (Taylorism), Z 45–46 Zook, Chris, 60–61 Seabiscuit, 4 story of, 9–10 self-limitation, 8, 11 Senge, Peter, 124 Servant Leadership, 6 sharing the wealth, 15, 16, 17, 21, 22 Sheldrake, Rupert, 115–116 Southwest Airlines community activity, 28–29 wealth sharing, 17 stakeholders, 35–39 stock options, 18–20 Superperformance Formula (S=PxC), 135–136 sweet spot, 59–65 SYSCO, 18
T tacking, 95–100 Taylor, Frederick, 45–46 Tiffany & Co., 17 Toyota community activity, 26–28 wealth sharing, 18 transformation individual, 4–5, 70–72 organization, 87
V von Franz, Marie-Louise, 43 About the Author
Dave Guerra is the originator and leading exponent on the theory and practice of Superperformance and the founder of the Superperformance movement. Dave regularly addresses and consults with executives from some of the world’s leading companies, and conducts Superperformance seminars for a wide variety of corporate audiences. He is also the founder and CEO of Corpus Optima, a consulting, coaching and education company specializing in Superperformance. Corpus Optima leverages the best of improvement and complexity science to help organizations leverage process and culture together. As the firm that pioneered the practice of Superperformance, Corpus Optima is the leading authority for the implementation of Superperformance-based business transformation initiatives. The firm’s clients include many of the world’s leading companies. Over several decades, Dave has consulted extensively in the areas of servant leadership, continuous improvement, lean, and the use of complexity principles to transform corporate culture. He speaks passionately and frequently about the association between amplified process and culture and long-term industry outperformance. As the principal investigator and promulgator of Superperformance, he has discovered that its principles can be successfully applied to both organizations and individuals. He has authored numerous white papers and is currently at work on several additional books on the subject. Dave and his wife Jodi and five children live in Houston, Texas. To learn more about Superperformance and the Superperforming CEO, visit the Corpus Optima website at www.corpusoptima.com. THE SUPERPERFORMING CEO
Management/Leadership U.S. $14.95 Canada $18.20 U.K £ 8.50 The Superperforming CEO Uncommon Sense for Uncommon Results
In his latest book, Dave Guerra introduces 15 unconventional strategies for executives who seek to achieve Superperforming levels of organizational performance, stakeholder engagement, and shareholder return on investment. Through a multi-year conversation with Superperforming CEO George Martinez, CEO of Allegiance Bank Texas and former Chairman and CEO of Sterling Bancshares, Guerra elucidates 15 Distinctions for today’s executives that any leader can use to turn organizations into places where systems sing and spirits soar.
Liberating the Promise Within Replete with both hard-hitting statistics and illustrative anecdotes, Guerra explores the uncommon people, uncommon practices and uncommon paradigms that reveal the fully expressed right brain of a Superperforming CEO. Drawing on new science principles including complementarity, emergence, and increasing returns, Guerra demonstrates why dramatic change is possible and how it can occur. The real-life experiences and the penetrating insight that Martinez offers clearly provide credence, and his enthusiasm for people, processes and performance is contagious.
To learn more about Superperformance and The Superperforming CEO visit www.corpusoptima.com or call 832-497-1283.
LIBERATING the PROMISE WITHIN
Cover Design by Axiom, Houston