Tuesday, August 1, 2017

Management Lessons from "The Fix"

In his recent book “The Fix: How Nations Survive and Thrive in a World of Decline,” Foreign Affairs editor Jonathan Teppermann lays out ten seemingly intractable problems that the world faces today, such as inequality, poverty, immigration, and Islamic extremism. and then proceeds to detail solutions that some countries and cities have implemented to address these problems. It’s a hopeful book, and shows the importance of such drivers as determination, drive, out-of-the-box thinking, luck, and the power of human spirit and cooperation.

While many large corporations today have continued to enjoy success, there is no executive I have spoken to in the past few years who can deny the many challenges that his or her corporation faces - geopolitical issues, pressures from activist shareholders, ethical scandals, engaging employees, disruptive innovations, changing consumer demands, technological shifts, cyber security, and competitive challenges, to name just a few.

These corporate challenges may not rise to the level of the problems that Tepperman has laid out in his book, but they are nonetheless daunting for most executives. I believe that there are lessons in his book that might be relevant for organizations. Tepperman suggests the following five general lessons for nations; I’ve provided brief explanations for these (since his titles alone are not self-explanatory), and some take-aways for organizations.
1.     The power of promiscuous thinking. From his success stories, Tepperman concludes that nations and their leaders should not hesitate to be pragmatic and to apply good ideas: “… when the stakes were greatest, they refused to let their principles or loyalties get in the way of their search for solutions.” Tepperman does not suggest doing anything unethical or illegal, or what might go against a nation’s core values. Rather, my take-away here is that organizations need to employ “outside-in” thinking, and do their best to eliminate the Not-Invented-Here syndrome.
2.     Embrace extremity. In other words, view a crisis as an opportunity to become unshackled from the past: “…leaders … all saw that their crises gave them a once-in-a-generation chance to turn adversity into advantage and rewrite the rules …”. In his classic Good to Great, author Jim Collins identified successful leaders who were willing to confront the hard facts about their situation. As another example, Andy Grove, when he was leading Intel, decided to walk away from the memory chip business when it became clear that, profitable as this business was, it had no long-term future.
3.     Please all the people – some of the time. Tepperman argues that while many of the successful leaders in his book did compromise on their solutions, they also made sure that no group felt disenfranchised or alienated by their decisions because no one got everything. There were no outright winners and losers. This lesson might not be as relevant for organizations, but one take-away for me is what I have observed when company leaders decide to sell off or shut down parts of their business (as when companies like P&G and GE have done). By explaining their decisions clearly, engaging their teams, and treating employees with respect and fairness, leaders an mitigate the risks to morale and productivity.
4.     Govern with guardrails. For nations, this means having checks and balances as well as creating conditions to minimize unacceptable behaviors, such as corruption. This seems to me like the efforts many governments are establishing to “nudge” their citizens. In their classic work, Thaler and Sunstein (2008) describe choice architecture and how nudges can help. Starting in the UK with the creation of a Behavioral Insights Team in 2010, nudge strategies have been formally implemented in over 50 countries. As reported in The Economist (May 20, 2017), when the UK established its own nudge unit with the help of Richard Thaler, the government made it clear that unless the unit saved at least ten times its running cost (about 500,000 pounds a year), it would be shut down after two years. It saved about 20 times its running cost, and the unit is still operating. Managers in organizations can help make sure that they have policies and practices that make judicious use of nudges, in addition to applying both positive and negative incentives.
5.     Make revolution through evolution. In other words, don’t take short cuts when making changes; make sure you do the hard work necessary and get involved. When Jack Welch and John Reid (former CEO of Citibank) decided to implement Six Sigma as an initiative in their respective organizations, for example, they themselves went through black belt training and taught classes to managers and supervisors.

In addition to the five lessons above, I suggest that there are five other management lessons from his book that could be added to this list.

First, having the right leader is critical. Tepperman describes how in Rwanda, which had gone through a period of genocide when the Hutu majority tried to exterminate the Tutsi minority, President Kagame emerged to unify the country and get rid of ethnic discrimination. For example, government ID cards and other official documents removed all references to tribal affiliations. He and the government also invested heavily in economic reconstruction and institution building. In my experience, leadership matters not only at the C-suite level, but at every level of the organization.

Second, innovations might not always work immediately, or might be counter-intuitive. In Brazil, former president Lula introduced a program called Bolsa Familia (or Family Grant) to address the severe inequality and poverty problems that the country faced. Families that qualified (those who lived in extreme poverty as well as moderately poor families) received a hand-out from the government, and they could do what they wanted with the money. There were a few other conditions: children between six and fifteen years old had to attend school at least 85 percent of the time; children under seven had to get immunized; and all children had to get regular medical check-ups. There was strong pushback at the beginning, from conservatives to progressives, as well as from economists and government officials. Eventually, the program became a success, reducing inequality and even giving a boost to the economy. Take one among many corporate examples. While companies like IBM and HP have been struggling with their PC business, Microsoft has invested in innovations with its various Surface devices. Although not yet hugely profitable, these devices have been earning well-deserved recognition and are now considered competitive with some of Apple’s Mac devices.    

Third, get people involved and engaged. In Botswana, one of Africa’s success stories, its first president Seretse Khama used a practice called kgotla. This is how Tepperman describes this practice:
“In precolonial times, the Tswana used kgotla to work out personal disputes, make financial decisions, and answer other administrative questions. Whenever a kgosi (king or chief) needed to resolve such a matter, he’d convene his tribe in a designated enclosure surrounded by fence posts topped with rhino or cattle skulls. There the Batswana would hash out business. And they would use the meetings to hold their rulers to account, questioning and challenging the kgosi’s decisions.” (p. 123)

President Khama applied this principle in his government. For example, before implementing a policy, the proposal would first “… be circulated to all ministers and their top civil servants. It would also be discussed in Parliament’s all-party caucus and at kgotla meetings held throughout the country. Only after consensus had been achieved would cabinet vote on a measure. And only then would be government act on it.” (p 130) With any major transformational change in an organization, engaging the leaders as well as the troops is critical to long-term success. Lou Gerstner learned this lesson well in his turn-around of IBM in the eighties.

Fourth, emphasize on what can unite rather than on what will divide. One of his examples is Singapore, where its former leader Lee Kuan Yew focused on good governance and getting rid of bribery, graft and corruption as a competitive advantage of this nation-state to attract foreign investment. A few years ago, I worked with an executive who had just taken over a division. What he found were department heads constantly bickering and blaming each other for problems with the business. One of the first actions that Rick (not his real name) took was to have an off-site, where he brought in competitors’ products and commercials to show the external threats that the division faced. He pointed out that the enemy was not each other, but these competitors and that only by working together could they hope to defeat the competition.

Fifth, make sure you have the right team in place. It was fascinating to read Tepperman’s description of how former Mayor Michael Bloomberg created an antiterrorism strategy in New York City following 9/11, despite receiving little cooperation from the FBI or funds from the federal government. But the key to his success was “…his ability to surround himself with brilliant, unconventional thinkers and doers. The mayor consistently hired the best people he could find for any given job, and he rarely worried about whether or not they possessed conventional credentials.” Furthermore, he continues, Bloomberg avoided the problems faced by other government officials: bad management, excessive bureaucracy, and risk aversion. He did this “by giving his lieutenants an uncommon amount of freedom, encouraging them to think big – and then standing by them if and when they failed big.”

Professor Richard Hackman and his colleagues have done extensive research on the effectiveness of senior leadership teams (Wageman et al., 2008) and found that only about a third of senior teams are effective. They concluded that having the right team in place is one of the essential conditions for an effective leadership team. This means ensuring that the team consists of individuals who have the knowledge, skill, and experience required for the team’s work. Beyond technical skills and experience, they argue for selecting team members who have strong conceptual thinking ability, as well as empathy and integrity.

Many of these principles or lessons are not new; they have been discussed by management gurus such as Peter Drucker and Marshall Goldsmith as well as highly-respected and successful business and military leaders. The parallels to governing nations and Tepperman’s examples is further evidence of their broad applicability.

Collins, J. (2001). Good to Great: Why Some Companies Make the Leap and Others Don’t. New York: HarperBusiness.

Tepperman, J. (2016). The Fix: How Nations Survive and Thrive in a World in Decline. New York: Tim Duggan Books.

Thaler, R. and Sunstein, C. (2008). Nudge: Improving Decisions about Health, Wealth, and Happiness. New Haven, CT: Yale University Press.

Wageman, R. et al. (2008). Senior Leadership Teams: What It Takes to Make Them Great. Boston: Harvard Business School Press.