Managing Precious Time

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I started working on my doctorate at Concordia University January this year.  I realized that full-time finance work heading up worldwide accounting at a $6 billion global high tech company, along with my adjunct teaching (also at Concordia), was probably going to kill me at a relatively young age.

So a month ago I left my corporate job to focus on my doctorate and teaching.  My expectation was that my productivity, at least for the remaining two commitments, should go through the roof.  I was wrong.  I had morphed my corporate job into a place where I could do everything.  I could come in early, stay late, or even come in on the weekends, logging on to my PC and answering company email, doing work, while also juggling the rest of my life.  That office had become my center.

Now, at home, no longer do I use a PC, I have a MacBook Air.  No longer do I have the company’s scheduling software to enable me to multi-task.  One month later and I’m still transitioning to this new way of life.  My calendar is now fully migrated to CalendarMob (Google Calendar), most of my contacts have my personal email address, and I am steadily becoming more proficient on the MacBook!

Yet when my boxer Patton wants to go outside or remodelers are banging away on my new hardwood floors, I still feel unnaturally ill at ease.  Should I get an outside office?  Maybe I should go back to work?

Cyber Challenges – Focus on What Matters Most to the United States

The Internet has enabled a great many benefits, connecting people around the globe, along with the information people share with each other. But just as Albert Einstein discovered the means for splitting the atom, and never intended that this technological breakthrough would be used to eviscerate thousands with an atomic bomb, so too has evil intent emerged as a result of the enabling of the World Wide Web and connectivity.

An ever-expanding array of Internet-based applications has virtually replaced Encyclopedia Britannica, search engines such as Google have placed at our fingertips answers to virtually any question we may have, from the trivial to the scholarly. Yet alongside these virtuous educational tools of the past decade or so we’ve also witnessed a dark side to the Internet. [1]

●     in 2010, out of the million most popular (most trafficked) websites in the world, 42,337 were sex-related sites.

●     from July 2009 to July 2010, about 13% of Web searches were for erotic content.

Besides the preponderance of pornography, other activities of ill intent have cropped up including identity theft, industrial espionage, credit card fraud, phishing, child exploitation – criminal use of the Internet has flourished. The Internet has also been used to great effect by criminals to trade their cyber wares. Investigators have uncovered sophisticated black market operations such as DarkMarket and ShadowCrew who use the Internet to trade cloned credit card data and bank account details, hire botnets (infected networks of computers) and deliver hacking tutorials.[2]

Malicious viruses have made headlines over the past several years, but the economic hardship suffered by American businesses has been almost insignificant, making these attacks more annoying than truly disruptive and costly.[3] A virus in 2000 infected 1,000 computers at Ford Motor Company. Ford received 140,000 contaminated e-mail messages in three hours before it shut down its network. Email service was disrupted for almost a week within the company. Yet, Ford reported, “the rogue program appears to have caused only limited permanent damage.” None of its 114 factories stopped, according to the automaker.[4]

Increasingly sophisticated virus attacks on one or more computers have caused many problems for individuals, companies and public institutions. Stuxnet, Flame, Duqu, Red October, and Iran’s ongoing attacks against the US banking system have brought the phenomenon into the nightly news, but the pattern of attacks includes numerous older and less discussed programs such as Titan Rain, Ghostnet, and the attacks on Estonia and Georgia.[5]

Arguably the most successful known campaign against American oil and gas firms is one dubbed “Night Dragon” by McAfee, the cyber security firm that first disclosed its existence. According to McAfee, Night Dragon was a “coordinated, covert, and targeted” campaign by China-based hackers to obtain confidential data from five major Western energy companies, beginning around 2008 and extending into early 2011. Night Dragon was able to steal gigabytes of highly sensitive material, including proprietary information about oil and gas-field operations, financial transactions, and bid- ding data. It is difficult to tell if and how any of this information was used. One U.S. oil executive interviewed said he believed that on at least one occasion a rival national oil company appeared to know his firm’s bidding plans in advance of a lease auction, which resulted in his losing the bid. Security experts believe Night Dragon is only one of several similar attacks, of which oil and gas companies are either unaware or afraid to disclose publicly for fear of displeasing investors.[6]

On September 11, 2001, hijackers took control of several commercial airplanes, crashing them into the Twin Towers of the World Trade Center (WTC) in New York City, the Pentagon in Washington, DC, and a field in Somerset County, west of Pittsburgh, Pennsylvania. Almost 6,000 people in total were killed. Besides the human toll, the cost of rebuilding was estimated at over $100 billion (CNN Television News Report, October 5, 2001). Since this time the United States has reacted by defensively spending billions and billions more trying to ensure such a terrorist attack on our soil cannot be repeated.[7]

Is it possible that terrorists could develop a Cyber Terror program to attack our power grid, harm our drinking water, cripple our communication capability or neutralize our military? Of all the dark and sinister ways the bad guys have been using and abusing the Internet, combined with future potential doomsday scenarios, how do we determine those that matter the most in order to focus our resources and reduce the affect of real and present cyber dangers? Let’s start by debunking some of the unlikely candidates and myths that matter much less.

Within the United States there are tens of thousands of separate water systems, many operating with their own network infrastructure and software. To impact national water utilities would require a serial attack on each system, not easily undertaken. Physical assaults typically associated with extreme weather, have disabled some water utilities, but only for a matter of days and only to a very limited extent. System problems have not affected water availability to any significant extent.

Some have argued cyber-terrorists could attack and shut down our power grid. In fact the 3,000 or so utilities, public, private and co-operative are highly integrated and connected. But the various electrical power providers use mostly different software and MIS technologies to operate their controls for power generation and transmission. An attacker would have to settle for a few vulnerabilities identified in a minority of the thousands of providers and even then there is no evidence that disruption would be prolonged to any great extent.

Could a hacker get control of one of our commercial or military aircraft? Even though there is a lot of technology and hardware including microprocessors and communication equipment aboard today’s aircraft, the plane is still subject to the pilot’s control of it, so even this fear is unfounded. (One exception is recently Iran did manage to lock into the right frequency in order to land an unmanned US drone in their country).

Another thesis of fear promulgated is how China (for example) could disrupt our banking system (Iran seems lately to be working on this very thing, although thus far without too much damage to banks’ data and data security) and bring about economic collapse in the United States. Possible, but unlikely, and here is why: China holds US$1.3 in United States Treasury Bonds. If the yield on these bonds was impacted by adverse economic conditions in the United States, China’s own sovereign wealth would be severely and negatively impacted. Most large economies around the world are hurt economically whenever the US economy suffers.

Of all of the possible challenges we face with Cyber Crimes, most can be managed, and the costs of the negative impacts are far outweighed by the many benefits our interconnected information superhighway provide to people around the world. But there remains one rather significant issue that we must address with a variety of ways and means, utilizing every possible tool at our disposal. This is the problem of Cyber Espionage. The legacy of the United States is its inventiveness, its innovation, and technological breakthroughs — the “knowledge” that has been created — especially in the past 50-100 years. All of this is protected by a variety of legal sanctions whether trademarks, patents, copyrights, with a huge accretive economic impact in the form of royalties and licensing fees.

If a rogue country is sanctioning cyber espionage in order to glean technology, learn trade secrets, understand and reverse engineer drugs, electronics, or radar-evading aircraft, that country gets an unfair leapfrog jump without having had to pay for it.[8] We measure the costs of Cyber Espionage in terms of direct costs (lost sales and market share), indirect costs (increased competition and related disadvantages caused by competitors learning trade secrets) plus defensive costs (increasing the robustness of the firm’s firewalls and security to prevent a future breach).

It has been estimated that Cyber Espionage costs the United States at least $100 billion per year. But that is only the direct and measurable costs.[9] The indirect and defensive costs are certainly much larger. Companies invest heavily in Internet safeguards such as firewalls and other security systems to prevent an unwanted breach of their company network. Yet, smart hackers continue to upgrade their capability and find ways to circumvent increasingly robust computer systems. This in turn leads to more company investment to continuously improve upon and strengthen and protect the company data.

Knowledge management focuses on capturing and sharing knowledge. Because of this, KM researchers tend to focus on issues related to knowledge capture, storage, and sharing. However, because knowledge is valuable, it is a target needing to be protected. KM researchers and practitioners need to think security and explore how important security skills are to KM practitioners and researchers. Increasingly new KM job postings are showing up and MIS departments are investing in and making knowledge security a corporate priority.[10]

The indirect costs are far greater however. Within the United States companies spend a total of almost half a trillion dollars each year on research and development. This is the investment that leads to new breakthrough technologies, novel, less expensive, and qualitatively superior products, and drugs and medical equipment to treat or even cure various diseases. If a rogue country such as China can glean this technology for themselves and for free, they have an immediate an unfair advantage, gaining knowhow they spent almost nothing to acquire, utilizing this free knowhow as a platform to move their own technology further along.[11]

Recently President Obama has spoken out to directly implicate China conducting Cyber Espionage, going so far as to name the location in Shanghai allegedly housing the prolific hackers: the computer security firm Mandiant, that identified P.L.A. Unit 61398 near Shanghai has been named as the likely source of many of the biggest thefts of data from American companies and some government institutions. [12]

China’s extensive cyber research activities and allegations over cyber espionage have put the United States on high alert.

XI’AN, CHINA—The leaflet posted in the school of information engineering here at Xi’an Jiaotong University was brief but enticing, offering computer-savvy graduates a hefty stipend and the chance to serve their motherland. “I was curious,” says Liu, who asked that only his surname be used in this article. It was the spring of 2007, and Liu, then 24 years old, was wrapping up a master’s degree in computer algorithms. Encouraged by his supervisor, Liu called the number on the leaflet; that summer, he joined an elite corps of the People’s Liberation Army (PLA) that writes code designed to cripple command-and-control systems of enemy naval vessels.

PLA writings call the electromagnetic spectrum “the fifth domain of battle space,” putting cyberspace on an equal footing with ground, air, sea, and space. Cyber conflicts “threaten national security and the very existence of the state,” two scholars with the Academy of Military Sciences wrote in China Youth Daily in 2011. State media regularly tout PLA activities in cyber defense, a catchall term encompassing everything from surveillance and espionage to weapons such as electromagnetic pulse generators that disable computer networks and malware designed to take down power grids or contaminate water supplies. Augmenting PLA efforts is a legion of civilian researchers and hackers whose efforts ostensibly are directed at repelling electronic intruders. In 2011, more than 8.5 million computers in China “were attacked by rogue programs every day,” a 48% increase over the previous year, says Li Yuxiao, a cyber law expert at Beijing University of Posts and Telecommunications.[13]

“Only three months ago, we would have violated U.S. secrecy laws by sharing what we write here—even though, as a former director of national intelligence, secretary of homeland security, and deputy secretary of defense, we have long known it to be true,” write Mike McConnell, Michael Chertoff and William Lynn.[14] “The Chinese government has a national policy of economic espionage in cyberspace. In fact, the Chinese are the world’s most active and persistent practitioners of cyber espionage today.”

“Evidence of China’s economically devastating theft of proprietary technologies and other intellectual property from U.S. companies is growing. Only in October 2011 were details declassified in a report to Congress by the Office of the National Counterintelligence Executive. Each of us has been speaking publicly for years about the ability of cyber terrorists to cripple our critical infrastructure, including financial networks and the power grid. Now this report finally reveals what we couldn’t say before: The threat of economic cyber espionage looms even more ominously.”

What will be needed to combat this seemingly intractable problem? A multi-pronged solution has recently been proposed, providing complete coverage of how to ensure the protection of company proprietary information and assets, including how to develop an effective corporate counterespionage program. Written by a former veteran of the Office of Naval Intelligence, the program provides guidelines to determine the current threat level to an organization’s proprietary assets as well as the physical security countermeasures, policy, and procedures that must be in place to establish an effective counterespionage program. This comprehensive approach is what is called for, a systems approach, multi-faceted to address protecting sensitive data and trade secrets in a corporate security setting, organizations that have proprietary information and assets to protect, businesses that have operations or partner with companies overseas such as China, organizations that work with the federal government on classified projects, security and counterespionage professionals, and university degree programs in Homeland Security and intelligence. [15]

We need to move beyond simply calculating explicit direct costs of Cyber Crime, as mentioned earlier, approximately $100 billion in the US annually and $400 billion worldwide.[16] This is only a relatively small part of the cost involved. A broader more complex solution must be aggressively undertaken to protect our national interests and the knowledge and knowhow our country’s organizations have spent so much time and capital developing. The sense of urgency cannot be overstated and besides the prophylactic systems-approach aimed at reducing the problem, a head-on confrontation demanding rogue states halt their state-sanctioned hacking immediately, must be met with very serious consequences if compliance is not forthcoming.

 

 

 

 

[1] Ogas, O., & Gaddam, S. (2011). A Billion Wicked Thoughts: What the Internet Tells Us About Sexual Relationships. Penguin.

[2] Home Affairs Committee, & Great Britain. Parliament. House of Commons. (2013). E-Crime: Fifth Report of Session 2013-14 [electronic Resource]: Report, Together with Formal Minutes, Oral and Written Evidence.

[3] Axelrod, R., & Iliev, R. (2014). Timing of cyber conflict. Proceedings of the National Academy of Sciences, 111(4), 1298-1303.

[4] Lewis, J., & Baker, S. (2013). The Economic Impact of Cybercrime and Cyber Espionage.

[5] Sliva, A. (2013, August). A Policy Analysis Framework for Cybersecurity Operations. In Social Science, Computer Science, and Cybersecurity Workshop Summary Report (p. 26).

[6] Clayton, B., & Segal, A. (2013). Addressing Cyber Threats to Oil and Gas Suppliers.

[7] McGavran, W. (2009). Intended consequences: regulating cyber attacks. Tul. J. Tech. & Intell. Prop., 12, 259.

[8] Nakashima, E. (2013). US Target of Massive Cyber-Espionage Campaign. Washington Post.

[9] Benny, D. J. (2013). Industrial Espionage: Developing a Counterespionage Program.

[10] Jennex, M., & Durcikova, A. (2014, January). Integrating IS Security with Knowledge Management: Are We Doing Enough to Thwart the Persistent Threat?. In System Sciences (HICSS), 2014 47th Hawaii International Conference on (pp. 3452-3459). IEEE.

[11] Polatin-Reuben, D., Craig, R., Spyridopoulos, T., & Tryfonas, T. (2013, October). A System Dynamics Model of Cyber Conflict. In Systems, Man, and Cybernetics (SMC), 2013 IEEE International Conference on (pp. 303-308). IEEE.

[12] Sanger, D. E. (2013). U.S. Blames China’s Military Directly for Cyberattacks. The New York Times.

[13] Stone, R. (2013). A Call to Cyber Arms. Science, 339(6123), 1026-1027.

[14] McConnell, M., Chertoff, M., & Lynn, W. (2012). China’s Cyber Thievery Is National Policy—And Must Be Challenged. The Wall Street Journal.

[15] Benny, D. J. (2013). Industrial Espionage: Developing a Counterespionage Program.

[16] Anderson, R., Barton, C., Böhme, R., Clayton, R., van Eeten, M. J., Levi, M., … & Savage, S. (2013). Measuring the cost of cybercrime. The Economics of Information Security and Privacy, 265-300.

Rodd Mann, Doctor of Education candidate (Ed.D.) at Concordia University 

Financial METRICS

Five Metrics Every Finance Dashboard Must Include

By Rodd Mann, Adjunct Professor and doctoral candidate, Concordia University, Irvine, CA

Image 29 May 2014

Businesses need to set strategic goals and objectives that form the basis for every aspect of performance that is measured within the organization—most critically, the key ratios and metrics controllers use in finance. A lot of businesses set so many metrics that the most important ones are lost in the mix, but in reality, only five metrics are critical for controllers to include in an effective dashboard for finance.

These metrics are as follows:

#1: Sales. When measuring sales, controllers should keep in mind that all measurements need to be looked at in qualified, not absolute, terms. For example, what is the cumulative annual growth rate (CAGR)? If the market on average is growing at a rate of 20 percent and a company’s sales are growing at only 10 percent, then that company is losing market share.

Controllers need to look at sales in terms of time, trend, and industry. It is impossible to determine a trend without looking at data over at least a three-year period of time. Also it is critical to look at sales data against what is happening in the industry as a whole in order to determine whether this key metric is strengthening or weakening.

#2: Manufacturing costs. These can be expressed as a percentage of revenue, or subtracted from revenue to get the gross profit margin. Manufacturing costs include materials costs along with labor and overhead needed to build the product.

Material costs can comprise up to 90 percent of the total cost of a product. It is vital for controllers to get a handle on these supplier-related costs, as well as their internal labor and manufacturing overhead (utilities, equipment depreciation and supervisory salaries to name a few). It is also important to analyze each of these cost categories separately, looking carefully at variances between the standard or target costs compared to the actual manufacturing costs.

#3. Operating expenses. Controllers that are not manufacturing companies need to take a close look at their operating expenses. They can look at these as a percentage of revenue and also relative to their competitors’ expenditures. Operating expenses include human resources, finance, security, MIS, advertising and marketing, general administrative expenses, as well as salaries of executives.

#4: Profitability. Profitability can be measured in three different ways: as a percentage of revenue, as a percentage of total equity, or if you are a manufacturer, as profitability divided by assets in place. For example, if the company has made a huge investment in machinery and equipment, are those assets generating sufficient profitability?

When calculating profitability, the denominator could be revenue, equity, or assets; this all depends on your perspective. For instance, the COO or general manager would probably track profitability as a percentage of sales. If a manufacturing company has invested heavily in a semiconductor fabrication facility, perhaps upwards of $3 to $5 billion, that company would need to measure the profit-generating capability of those assets in place.

#5: Cash flow. A business can be very profitable and perhaps also growing quickly— yet, somewhat surprisingly, it can run out of cash. Sadly, this has happened to many profitable, fast-growing companies that didn’t see how much cash it takes to increase inventory and accounts receivables.

Why? Businesses can run negative cash flow if they are spending a lot on property and equipment, or have too much revenue tied up in their receivables and inventory, so these are areas that need to be tracked closely. Other areas affecting cash flow that need to be tracked would include total compensation and other people-related costs such as travel.

In addition to tracking these five dashboard items on a predetermined basis, typically monthly, controllers can take the following steps to contribute greater value to their organizations:

  • Help to make sure everyone within the organization is clear about, and on board with, the business’s strategic objectives by translating the goals of the management team into clear, concrete, metrics.(Also make sure the ERP is set up to support measurement and reporting those metrics.)
  • Communicate clearly up and down the management chain how everyone is doing against those performance metrics—for example, by sharing results when the monthly financial statements come out. Controllers can get creative with their dashboard—for example, using a red, green, and yellow light coding system to show areas where metrics are tracking well, where there is trouble, and where remedial action needs to be taken.
  • Focus on finding ways to make employees and suppliers happy (and customer satisfaction and loyalty will naturally follow). For example, work to ensure that employee benefit packages are fair and suppliers are paid in a consistently timely manner.
  • Help design incentive and compensation systems that are set up around performance metrics and goals. This will help ensure that people have the focus and motivation to engage in the right behaviors that will yield the right business results.

While it’s true that controllers have a fiduciary duty to follow U.S. GAAP and close the books in a timely fashion, the modern role of a controller is developing into a person who adds value to the business by helping to establish a sound dashboard and use that dashboard to demonstrate what is and is not working. Controllers need to become an integral part of the business, helping in decision-making about everything from whether to outsource and where to build a new plant to what investments to make. This means being able to pull together a lot of the data that is available now and then converting that data into knowledge and information that will help the business fulfill its current objectives as well as establish effective new goals for the future.

While it’s true that controllers have a fiduciary duty to follow U.S. GAAP and close the books in a timely fashion, the modern role of a controller is developing into a person who adds value to the business by helping to establish a sound dashboard and use that dashboard to demonstrate what is and is not working. Controllers need to become an integral part of the business, helping in decision-making about everything from whether to outsource and where to build a new plant to what investments to make. This means being able to pull together a lot of the data that is available now and then converting that data into knowledge and information that will help the business fulfill its current objectives as well as establish effective new goals for the future.

Editor’s Note: Rodd Mann has many years of experience as a controller, most recently at Kingston Technology. He will be speaking at the IOFM Controller’s Conference and Expo, September 14-16, 2014 in Chicago.

r_mann



Asian American leaders in US businesses

Across America you will find Asian Americans underrepresented in leadership positions. While Asian Americans account for 5% of the US population, only 1/3rd of one percent are corporate officers today. Less than one percent of the corporate boards have Asian Americans as directors, and about 2% of all college presidents are Asian Americans.

The cultural lessons young Asian Americans learned growing up were piety, respect for authority, humility, hard work, harmony, and a willingness to delay gratification, that is, the habit of sacrificing for the future.

So why is it that these seemingly admirable traits don’t translate into newly minted successful leaders, especially in the larger companies in the United States? I submit that the typical American company did embrace such values in the past, but that things have changed. What has changed, unfortunately, has gone in the wrong direction. Chief Executive Officers today must meet current-quarter sales and earnings expectations or their days may be numbered. This focus oftentimes comes at the expense of smart, long-term investments that would in the short run create poor financial results.

In addition, the intense pressure to create instant success has led to the downfall of many CEO’s. Whether accused of insider trading, bribing foreign officials, cooking the books, or selling products known to be dangerously faulty as the recent news about General Motors indicates, character, ethics and honesty are being sacrificed at the altar of financial success.

In Silicon Valley, young, talented and bright engineers and financial analysts are leaving technology companies every two years on average. Their loyalties are no longer to the company but to themselves. Just as soon as they determine a better opportunity has presented itself elsewhere they submit their two-week notice and are gone.

A group called the “Leadership Education for Asian Pacific’s” teaches members how to retain their culture while learning to speak up at meetings, advertise their accomplishments and all of what is deemed today to be requirements for leadership positions. The neutral expression acceptable at home must be replaced with a continuous smile, however disingenuous.

Yet while Asian Americans try to understand and implement all of the strategies necessary to become leaders in large US companies, within Asian American companies we find highly successful business models built around Asian American culture. If the owners and more than half of the employees are of Asian American descent, the business is run consistent with the culture and is run successfully.   Good examples include Kingston Technology, Newegg, Wintec, Vizio and more.

Is it possible that the large US companies could benefit by adopting some of the leadership traits of the Asian American companies? Can we ever return to good long-term business decisions, emphasis on character and ethics, organizational harmony and attracting and retaining talent for the long-term? For the Asian American seeking a leadership role that won’t require him or her to compromise their deeply held cultural beliefs, perhaps consider joining the firms where the culture is already in place.

Servant Leadership

Last week we discussed “Collaborative Management,” an emerging philosophy that describes various management techniques utilized to promote a sense of oneness and teamwork within a business. This style combines strengths across team members in order to offset the weaknesses. It operates to improve efficiencies within all company operations, resulting in positive impacts to employee morale, companies’ supplier partnerships; and this in turn creates a favorable opinion of the company by customers and other stakeholders.

Today we will take up “Servant Leadership,” which together with “Collaborative Management,” forms a sturdy and enduring foundation upon which to build your successful business.

The term is taken from a 1970 essay entitled “The Servant as Leader,” written by Robert K. Greenleaf. Those who have studied this leadership style agree the following are central tenets to the management technique:

  1. Listening to others to learn from them, genuinely seeking as many good ideas as possible from every employee with a viewpoint.
  2. Understanding these viewpoints and the feelings of others, and responding accordingly, politely, with due respect and consideration; appreciating each person for their unique emotional and spiritual well being. If you lack faith, others will be unfaithful to you.
  3. A keen self-awareness of the leader’s own weaknesses, not just strengths, along with the ability to keep his or her own feelings in check.
  4. Honesty, high integrity and character, a good steward of the company’s assets, someone who earns high trust.
  5. Ability to persuade as he or she works toward a consensus solution for any given problem.
  6. Visionary that can discern and forecast trends in order to course correct the ship with plenty of lead-time to make long-term strategic and structural changes and adjustments.

The traditional leadership styles going back to the advent of the Industrial Era, focused on traits, behavioral styles, situational and functional, leaving no room for “Servant Leadership,” although the “Participative Leadership” style is not entirely dissimilar to “Servant Leadership. The evolved American company is generally autocratic, and hierarchical. These companies attempt to clearly structure and define tasks, keeping employees that are able to produce according to measured expectations of management. To an employee this seems to objectify him or her, as no different than a machine, just another asset that once depleted needs replacing. These employees quickly adjust their loyalties to themselves and are continuously looking for new jobs that appear to offer more in terms of compensation and environment.

The servant leaders, on the other hand, carefully select people and attempt to keep them. They do so by addressing aspects of humanity that results in appreciation from the workforce. If something needs to be changed, management makes every sincere attempt to see how (not if) the change can be implemented. Along these lines the servant leader builds lasting, loyal partner relationships with their suppliers. The net result is that the company ends up with loyal employees and suppliers who are all in this for the long haul. Consequently, subject matter expertise gets honed over the many years and the loyalty for the two groups ensure customers get looked after in the manner you hope. Hiring costs, training, turnover, customer dissatisfaction all decline. Innovative and creative ideas, productive and fulfilled employees, all advance.

But you cannot simply decide to ‘become’ a servant leader. It must first be in your heart to do so. You must genuinely enjoy the company and diversity of people; and you need a heart to serve, not to be held in high esteem and the enjoyment of exercising your power. How can you tell if a leader is a servant leader? Examine the results – Are those being served growing instead of bitter and discontented? Are they making the contributions you know they can make, and getting better at doing so over the years? Are they truly autonomous, or are they trying to feign autonomy because their boss demands autonomy? And do they grow into servant leaders themselves?

In summary, if you truly believe you have the personality and the heart to be a servant leader, a vision for the business, and a love of people to help you to get there, by all means this is your leadership style and model. You will be encouraging, supporting and enabling your team members to reach their highest capabilities and potential. You will be delegating responsibility, engaging in participative decision-making.

“Jesus called them together and said, ‘You know that those who are regarded as rulers of the Gentiles lord it over them, and their high officials exercise authority over them. Not so with you. Instead, whoever wants to become great among you must be your servant. And whoever wants to be first must be servant of all. For even the Son of Man did not come to be served, but to serve, and to give His life as a ransom for many.’” Mark 10:42-45

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Organizational Capacity for “Compassionate Management”

Last September 18th Harvard Business Review published an article entitled, “The Rise of Compassionate Management (Finally).” The text alluded to various business conferences, such as the “International Working Group on Compassionate Management,” and “The Changing Culture in the Workplace Conference.”

My interest was piqued since most of the past three and a half decades I’d worked in high-tech global manufacturing companies where of all the things you might accuse them of engaging in, “compassionate management” was certainly not one of them. In fact, my general experience was that if you weren’t doing well on what you were being measured to accomplish, regardless of how well you may have done in the past, you most likely would find yourself being shown the exit.

Traditional organizations are hierarchical, tops-down structures that are continuously pressed to improve on a number of oftentimes-conflicting metrics: Cost, fulfillment, quality, asset turnover, gross margin, top-line growth and profitability. Waste costs were vigorously attacked with a vengeance: Scrap, yield loss, expedite premiums, even second shift pay premiums. And so-called “non-value-add costs,” such as finance, human resources and MIS, were generally under-resourced and under pressure to meet company expectations nevertheless.

Now comes the “Conscious Capitalism” movement within companies such as Container Store, Google, Nordstrom and Southwest Airlines. Their belief is that stakeholders who matter go well beyond returns to shareholders. They have a duty and responsibility to their workers too. In addition, come to think of it, the responsibility extends to customers and suppliers as well.

In eight years of working at Kingston Technology I observed “Compassionate Management” utilized as a leadership style in sincerity. The owners of this $6 billion / year global manufacturer of solid-state memory, both talked the talk and walked the walk. They generally enjoyed people; they treated employees and suppliers alike almost as royalty. Interestingly they didn’t need to pay much attention to customers since the loyalties they built with their supplier base and employees around the world meant that these folks would “fall on a sword” to get done whatever the job required.

Scholars such as Peter Senge have always espoused the value of compassion within organizations, be they educational or business organizations. But the temptation to squeeze the life-blood out of supplier costs, and push your employees to continuously improve, proves too difficult to resist for most managers seeking to improve their numbers.

Which is why a business model of “Compassionate Management” can only be developed within organizations whose leaders are genuinely sincere about its implementation. From here we witness leaders hiring staff with shared values and belief systems and what ultimately evolves is an entire culture of compassionate management, complete with carrots and sticks. The ruthless don’t do well in these organizations while the loyal tend to stay on, perpetuating the compassionate culture and becoming adept in their subject matter expertise since they generally have no desire to bail out and find another company to work for.

Rodd Mann | BBA | MBA | CPA | APICS CPIM | Six Sigma Hands-on-Champion

Ed.D. Doctoral Candidate, Concordia University, Irvine, CA

 

 

 

 

Good Leadership? Really?

According to a December 2012 Forbes article, (http://www.forbes.com/sites/tanyaprive/2012/12/19/top-10-qualities-that-make-a-great-leader/) ten characteristics of good leadership are paramount for success. A brief, albeit somewhat obvious description and meaning followed each trait in the article. Below I challenge each one as I find these descriptors, vague and subject both to interpretation and even to manipulation:

  1. Honesty. Is this transparency? Is this forthrightness to all stakeholders? Or can it also describe a leader who “holds his cards close to the vest,” resists an “open kimono” style and can only be considered honest because he or she has not been caught in a blatant falsehood?
  2. Ability to delegate. No one can do everything and some micromanagers who have the bandwidth will watch every aspect of work detail carefully, course correcting their workers as deemed necessary. President Ronald Reagan was considered a good delegator while President Jimmy Carter more of a micro-manager. But if a leader is noted by his or her ability to delegate they may also be perceived as aloof, a bit lazy and unwilling to roll up their sleeves and dig into the details.
  3. Communication. Every company I worked for had a dominant method for communicating up, down and sideways across the business organization. Some utilized voice-mail distribution lists, other relied heavily on email, and the company I recently left communicated one on one, with each person finding a counterpart to help with what needed to be accomplished. Once again, one form of communication is not patently preferable to another. The mode, the means and the method must fit the needs of the company and the culture of the workers to be the best possible way for communicating efficiently and effectively.
  4. Sense of humor. I have been chastised in the past for not taking problems and work seriously enough. This largely depended upon the “man in the corner office.” If he or she had a sense of humor, others were comfortable and relaxed enough to joke with their fellow workers. But no research, at least none that I am aware of, can tie “sense of humor” to common metrics for business success such as top-line growth and profitability.
  5. Confidence. How much confidence is enough, and what kind of confidence are we talking about? As colleagues moved quickly up the corporate ladder I oftentimes witnessed an arrogance factor moving right up along with them. Certainly they would have called themselves “self confident,” as opposed to arrogant, but how did the workers perceive the individual in the main? Arrogant, cocky, know-it-all. Confidence can be a strong personality trait when it is checked and limited by humility; when the leader knows “that he doesn’t now know what he hasn’t yet learned.” Even “self-assured” can be a slippery slope. The greatest leaders and contributors have generally been the most humble. Billy Graham comes to mind in this regard.
  6. Commitment. Is this faithfulness to the leader’s vision and objectives? If so, the leader does well. If by commitment that means working many hours, traveling and pushing others to carry the same load at the expense of family and outside interests, it is a problem that will create future problems (e.g. high turnover). I’ve had several bosses who trumpeted their “commitment” slogan which all of us were smart enough to discern that this simply meant, “you’re not working hard enough.”
  7. Positive attitude.   Positive and negative are easy to understand in terms of electricity, less so when it comes to desired personality characteristics and behaviors. Some bosses will chastise their subordinate for “not having a positive attitude,” simply because they cannot get behind the boss’s latest idea. The worker may simply want to point up the weaknesses in the boss’s plans, perhaps offer up a better alternative; yet the boss concludes he has a renegade staff member he needs to attend to.
  8. Creativity. In marketing and advertising this is important. In accounting and engineering it must be carefully defined in terms of research creativity or ideas that fit the predetermined rules, framework and logic of these functions. Once again this broad construct can be used to defend perilous pursuits. Consider the creative accountant who found a means of converting a Net Loss into a Net Profit using a completely new, albeit tenuous and questionable, set of accounting assumptions underlying the financial statements. Consider Enron and Arthur Anderson.
  1. Intuition. This isn’t wholly different than Creativity. How do you demonstrate this personality construct? If the big boss is notorious for forecasting the winds of change impacting our business, as my last boss was, this is certainly a valuable characteristic to possess. But this can only be properly evaluated in hindsight; a forecast needs to play forward before the person is declared a prophet.
  2. Ability to inspire. This can be inspiration to create perspiration. It can also refer to “sales-ee” personalities that get new hires jazzed to go after a project with all their might. In the absence of this, your leader should be switched out, he or she has lost their mojo. But I am not sure you can demonstrate a direct correlation between financial metrics’ success and this personality trait.

I have read numerous and oftentimes conflicting research purporting to identify the leadership traits that will make for a successful company. I personally think this is like trying to “boil the ocean.” It is enough of a stretch to try to associate certain leadership characteristics with efficient and effective organizations. But a lot of what is called business success depends upon variables outside of the control of the leader and his or her organization. Disruptive technologies, great recessions and legislation are three of many examples of problems that can overcome the best leader with the best organization and killer products and services. Leadership characteristics are like cotton candy. We read them, we nod approvingly, and then we forget what we read until we read another and entirely different list.