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Frymaster

Member Since:
23 Mar 2006
Posts:32

08 Apr 2006 3:46 PM

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This article from the New York Times (4/7/06 -- requires registration [thanks, NYT]) struck me as interesting, to say the least. It reports an agreement between housing advocates and the major mortgage-holders of city multi-family properties to use lending as leverage to force repairs on dillapidated.

While it seems like these are the proverbial strange bedfellows, in fact, they share a common interest -- for different reasons -- in repairing and maintaining buildings. Somebody's economics textbook would say that landlords have the greatest interest in maintaining their investments, but the landlords who would be affected by this program don't see these properties as investments but as cash cows: minimum in/maximum out.

Google has become a dominant force with the motto: do no evil
Whole Foods (WFMI) enforces progressive pay and benefits policies, yet it continues to grow at a double digit clip
Costco (COST) has progressive policies for its employees and suppliers and is growing where WalMart, at least in the stock market, is declining
Organic food, once the province of hippies and weirdos, is the fastest growing segment of the food market, to the point that ADM, Dole, etc, want in (they're trying to change the rules so they can 'compete'
Alternative energy, likewise a hippie deal, is now a part of the serious conversation
Democratic Socialism, already entrenched in Europe, is now sweeping Latin America.

Here's my question: Am I having some kind of a left wing dream?

candocontract
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12 Feb 2006
Posts:8

15 Apr 2006 9:00 AM

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Hello, Frymaster - your dream is not so much left-wing as psychedelic. We are used to thinking in terms of opposites and having to make choices. It is not just left and right, it is also other spectrums such as, consultative v. decisive, innovative v. standardised, practical v. theoretical ... etc. When we see that the extreme positions don't work, we are often led to having to "strike a balance".However this is too restrictive for a modern business having to operate in a complex adaptive environment (i.e. with real people and competition, hostility, hidden agendas etc.).It is my view that modern businesses, operating with turbulence and disruption, will need to find ways increasingly to embrace both ends of these spectrums and not just some balance point. Those that don't do so will not survive. (see my other postings:"Where to from here?" and "What are the essential tasks of managers"

chrismeyer

Member Since:
20 Dec 2005
Posts:33

17 Apr 2006 9:29 PM

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People may get the governments they deserve, but they more certainly get the products they pay for. When shoppers were willing to pay significantly more for organic groceries, whole foods put together an offer (not just the product, but the staff, the display, etc.) that segment liked; when it grew, other grocers and their suppliers moved to cater to it. Perhaps, Fryemaster, there is enough income around that people are willing to select for attributes beyond price, or take jobs for reasons beyond financial compensation alone. That doesn't have to be a left-wing dream, just awakening from the nightmare caused by believing that the "shareholder value" of most business decisions is predictable and measureable.

Frymaster

Member Since:
23 Mar 2006
Posts:32

20 Apr 2006 2:34 AM

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I feel you, Chris; it's supply satisfying demand, no doubt. But demand for what? So I re-assert: some sort of moral-standing-quotient is emerging where a brand's reputation for how it does business will command a loyalty, or even a royalty. If you can trade in permits to pollute, you can trade in permits to exploit.

Cando, I'm not sure what you're saying. Does Google need to do some evil in order to survive? Are you saying that businesses that define themselves along moral lines will ultimately cave in on their principles or fail?

chrismeyer

Member Since:
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Posts:33

20 Apr 2006 2:55 AM

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Frymaster, I think we're aligned--that is, there is a growing demand for that which embodies some moral standing. This can range from organic foods to green energy to philanthropy itself.

NihilObstat
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24 Apr 2006 2:32 PM

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Posted By Frymaster on 4/19/2006 9:34:18 PMI feel you, Chris; it's supply satisfying demand, no doubt. But demand for what? So I re-assert: some sort of moral-standing-quotient is emerging where a brand's reputation for how it does business will command a loyalty, or even a royalty. If you can trade in permits to pollute, you can trade in permits to exploit.

Frymeister, et al:
Greetings. Long time since I read through FM. Nice to see that the ideas continue to flow.

I think the idea of progressive business is an interesting one. But in all candor, I think the moral dimension of enterprise that has been cited in this thread -- Goog's "do no evil," Whole Foodie's self conscious positioning, etc.-- is as much branding and positioning as it is a real moral stand.

Socially responsible business, it seems to me, is too often self congratulatory and promotional. Fair Trade coffee. Ben and Jerry. And all the hemp clothing manufacturers. It's as if they are saying, "watch me! I'm going to do something conspicuously and demonstrably socially responsible!" It reminds me of piety among individuals. And it's easy to have high minded principles in an advertisement. Much harder, of course, is making moral choices when you have something to lose.
I wonder about this: what about taxes? How does a socially responsible enterprise approach tax compliance? Some of those grey areas and deductions might go either way, right? So, does the socially responsible company ensure that it's funding its gov't -- which enforces property rights, resolves transactions and disputes, provides transportation infrastructure, etc. -- or does it take the more customary approach of seeking to minimize the effective tax rate, no matter what? Hmmmmmmm.

+++++++

Got a new iPod last weekend -- as 30 GB fattie with video. It comes with a sticker on it that says, "don't steal music" or "stealing music is bad and wrong." Of course, the iPod is designed for stealing music, and it does so beautifully. Yes, there's plenty of DRM stuff built in that suggests that you're supposed to buy things and not rip off your friends copy of Frampton Comes Alive or Merle Haggard, but the device itself is ideally built to tread the line, winkwinkwink, between legit and actual use. And Apple somewhat shamelessly uses moral arguments to defuse the tension that its product creates.

Again, great to read though all the good stuff on FM.

candocontract
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26 Apr 2006 5:50 AM

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This discussion is leading to consideration of some fundmental issues - morals, value etc. - as this forum should if it is to fulful its function.

My compliments to Frymaster on an insightful comment. While agreeing qualifiedly with Chris' conclusion that we are seeing "an embodiement of moral standing in assessing value, indeed a market in moral positions", my perspectives may differ. Similarly with NihilObstat's views on socially responsible business.

This reply seeks to address Frymaster's enquiry:

Does Google need to do some evil in order to survive?
Will businesses that define themselves along moral lines will ultimately cave in on their principles or fail?

For me the short answer is "Not necessarily"; Google's (and other businesses') need is to to find ways that best embrace and satisfy the diverse (often conflicting) aspirations of its stakeholders.

To explain myself, my comments follow (the reader will determine whether or not these comments enrich the discussion and understanding):

Morals

Private personal agendas and self-interest are not necessarily "evil" (just because they may be inconsistent with one's own moral position). Indeed I consider we should be very careful about commenting on or judging positions taken by business or other entities or institutions as (more or less) moral.

(This is particularly, but not only, the case with other cultures. I have had the privelege of learning a little about working in the east [Central Asia and Southern Asia] over the last few years, and can see some of its contrasts with the west. With this perspective, I can appreciate how poorly my western friends understand why Australian tourists have been sentenced to death for couriering drugs in Asia. All this is relevant to Future Monitor but should be left for another discussion.)

Value

"Value" is complex and fragile, and I endorse Chris' idea of shareholder value not being predictable and measureable.

I like to define value of an endeavour (whether commercial or any other) generally as "the present anticipation of future success".

Value has particular meaning for endeavours operating and investing in uncertain (often hostile) environments.
Value is in the eye of the stakeholder (e.g. investor). All stakeholders have different interests and risk preferences.
Stock price is an aggregate surrogate for stockholders' perceptions of value.

Reputation is a key element of value.

Reputation is a perception held by a stakeholder, or when aggregated is shared by an interest group, such as a customer segment.
Reputation, when interpreted, can be used opportunistically, to influence reputation as perceived by another interest group. For example the reputation of one business as it is perceived by its customers, may be used by competitors to influence their customers, investors, or regulators. etc. This creates potential for escalation in the creation and resolution of issues (i.e. tensions between entities / interests) that can enhance or destroy value.

Escalation, opportunism, complexity, robustness / fragility are all terms used to describe behaviours of Complex Adaptive Systems. I am deliberately using a "complex adaptive systems" explanatory analog here, which I find useful for understanding. In my view, Failue to understand and address complexity and adaptation will expose any business to serious survival and profitability risks.

Management dilemmas

Google (as in Frymaster's example) will determine what products and services it delivers, and its stakeholders will in some complex, adaptive way determine what defines its value. This is a dynamic process.

In the course of the process, all sorts of dilemmas arise for management - e.g. A business' (i.e. Google's) willingness to comply with content management dictates of a foreign (i.e. Chinese) government is an example of a broad "realism v. idealism" dilemma. A business' stakeholders determine whether it has been successful in the way it has resolved such dilemmas. In making this determination, it is the stakeholders (including employees) who assess whether the positions taken by the business best meet their (moral and other) aspirations. Employees, just like customers, investors and other stakeholders can withdraw their stakes (or use their stakes to take other more activist action) if they find the business' positions and their own are inconsistent.

The tobacco, alcohol and gambling industries are other cases in point. The moral impact (or "evil", if we must use that term) lies with those who create demands for, invest in or otherwise support the provision of goods and services that are in some way destructive. Each of them takes their own private moral position in establishing / supporting the businesses that respond to these demands. (In the converse, those who restrict or oppose businesses that add to the public good, are also reflecting a moral position of their own.)

Another recently publicised management dilemma, has been observed in the decision of major corporates' marketing to the gay customer segment, and the opposition this has stimulated in other sectors of the public. In such cases, each opposing side of the argument may believe they are taking the moral high ground, and that the other side is being "immoral". In citing this example, I am not taking a moral position, merely stating that it is the type of issue that management must understand and address explicitly.

So What?

So where does this lead for FutureMonitor. I believe that key issues for management in today's context are:

Accommodation of diverse, conflicting, changing interests;
Customisation of products, services, policies and processes;
Reputation as perceived by the diverse interest groups, its impact on value, and its potential to be used for disrupting the business and enahancing or destroying value.

Survival and success will depend on management understanding and explicitly addressing such issues, particularly as they reflect:

Complexity, and
Adaptation.

Sustaining success in a complex, adaptive environment requires a business itself to move towards operating as a complex adaptive system. Rigid business management styles risk failure in this regard. Typically, rigid management styles are characterised dominantly by features such as:

static organisation hierarchies and "silos";
centralised command and control regimes ruling management of internal resources and procurement of goods and services;
reliance on futures that simply extrapolate the past;
HR recruitment and promotion focused narrowly on technical skills;
inaccessible information;
deficient training and development programs; and
lack of choice in products and service / delivery offerings.

This is not to suggest that business can't survive without taking positions on such matters, but rather that positions taken need to be informed, considered and where feasible, customised to accommodate diverse, conflicting, changing interests, in a way that will enhance (or minimises diminshment of) reputation among those interest groups that influence value.

Some comments on complexity (sorry I can't recall the first two sources):

"I think the next century will be the century of complexity." - Dr Stephen Hawking, Lucasian Professor of Mathematics at Cambridge
"Complex Systems is a new field of science studying how parts of a system give rise to the collective behaviours of the system, and how the system interacts with its environment." - Dr Yaneer Bar-Yam, New England Complex Systems Institute.
For a brief introduction of CAS, see my emerging web site http://www.capl.biz

Even when a position is taken and the best balance of conflicting interests is found, there will be those who will continue to disagree and oppose. Whatever positions are taken, the top trends ("information overload" and "organisation reinvention") identified in the Future Monitor survey, will only increase in their impact on managers.

From this consideration, flows my comments stated elsewhere (see "What are the essential tasks of managers within our businesses?") to the effect that the essential tasks of management are (a) decision making, supported by (b) understanding of the business environment (internal and external), and (c) learning, (all with supporting management competences categorised broadly in terms of relating, analysing, and actioning).

Everything else is subsidiary. At the top-functional level in a business (or business unit) are decisions on how decision-making, information and learning will be deployed efficiently throughout the rest of the business, with the objective of least total cost strategic alignment (i.e. alignment with the overall strategic directions of the business).

More on dilemmas

As if this isn't enough, the "dilemmas" facing and impacting on modern managers are far more than just "moral".

Managing an endeavour (of any type - e.g. whether business, public service, not-for-profit) involves many "dimensions" or broad issues on each of which a manager can take different positions. Examples are:

process dilemmas - where is the best balance of innovation v. standardisation, quality v. throughput, consultation v. decisiveness, flexibility v. efficiency
development dilemmas - how much effort should go into training and development?
action dilemmas - how much effort should go into planning?
governance dilemmas - what is the best the balance between delegation and control, entrepreneurialism and direction, the different elements of reputation, analysis and judgement?
temperament dilemmas - such as balancing cooperation and conflict, motivation and reflection, knowledge sharing and personal performance
And as with the moral dilemmas, so it is with these dilemmas. Sustaining success requires a business itself to understand and apply principles of complex adaptive systems, or in the alternative risk failure or value destruction.

Qualification in this line of argument

The qualification that I must state in this approach concerns the situation in which one stakeholder or interest group can dominate others who have little by way of "acceptable" alternatives. This occurs publicly with monopolies, unaccountable totalitarian government, and many examples in between. It occurs privately, equally where there is a gross inequality of bargaining power. In such cases the private interest of the dominant stakeholder conflicts with the public good (i.e. maximising the private interest returns diminshes social returns). Such examples give rise to arguments for legislating (and enforcing) some limitation of the dominant power to moderate the private interest / public good conflict.

Readers will, I am sure, find other qualifications.

hirubijlani
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28 Apr 2006
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28 Apr 2006 8:36 PM

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this may sound out of context with respect to the ongoing debate, but here goes anyway.
All life forms are self serving--to survive and perpetuate. Organizations being comprised of humans--life forms, mimic life forms and try to fulfill their innate desire to survive and pepetuate. the 'organization life form' sees that 'morality' is becoming increasingly important to succceed so the move to 'do good' to be seen as 'doing good', in order to 'benefit'.
Now to another semingly absurd connection. Recent research in medical sciences shows that acts of charity and gift giving stimulates the flow of seratonin--the feel good chemical in the brain of the giver, thus giving a boost to the 'feel good factor'.
Thus humans at the helm of affairs/decision makers 'feel good' when they 'do good' via company actions and further their goal of survival and perpetuation and of course when and if they suceed shareholders benefit and they feel even better!

Frymaster

Member Since:
23 Mar 2006
Posts:32

02 May 2006 2:32 PM

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In a way, you're closest to what I'm on about which is this:

The companies that will grow into the future, predict I, will be the ones that align their corporate interests with those of the humans who comprise them and who serve and are served by them.

Right now that 'morality' factor -- the humanity factor -- only exists in the non-anthropomorphic organization. That is, in the companies hiru describes, humans recognize their humanity as superior to the organization's needs.

Most big, publicly trading companies are anthropomorphic, IMO. They are so big and so deeply entrenched that they, literally, have a life of their own.

Of course humans make the decisions to pollute, to underpay, to cheat, to bolt closed the fire doors, but typically without the benefit of any humanistic gage. They usually write-off these decisions as 'required by the shareholders' who turn out to be other institutions. Institutional needs outweight human needs.

We call the people who put humanity first unemployed. I mean whistle-blowers.

If corporate executives don't have the discipline to look beyond immediate profits, I call on Government (by, of and for the humans, err, people) to define the human values that need to be a factor in any balance sheet.

Ken Saro-Wiwa wrote "The Fires of Shell are the Fires of Hell." Doing so didn't help him a whole lot, but how's that Nigeria situation working out right about now?

What is that definition? What are those values and how can they be quantified?

chrismeyer

Member Since:
20 Dec 2005
Posts:33

02 May 2006 6:53 PM

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Posted By hirubijlani on 4/28/2006 3:36:35 PM

All life forms are self serving--to survive and perpetuate. Organizations being comprised of humans--life forms, mimic life forms and try to fulfill their innate desire to survive and pepetuate. the 'organization life form' sees that 'morality' is becoming increasingly important to succceed so the move to 'do good' to be seen as 'doing good', in order to 'benefit'.
Now to another semingly absurd connection. Recent research in medical sciences shows that acts of charity and gift giving stimulates the flow of seratonin--the feel good chemical in the brain of the giver, thus giving a boost to the 'feel good factor'.
Thus humans at the helm of affairs/decision makers 'feel good' when they 'do good' via company actions and further their goal of survival and perpetuation and of course when and if they suceed shareholders benefit and they feel even better!

The last three posts seem to me to point to a single, coherent point of view. Adopting the CAS point of view (viz. my book It's Alive), as Candocontract does, leads to the agent-based perspective on how organizations of any scale work--through the choices made by the agents who compose them or interact with them. So what we call "stakeholders" are different flavors of agents, each with rules that govern their behavior. "Customer" agents will buy groceries at Whole Foods for various reasons--some value the beauty of the produce displays, some the availability of organic hormone-free free-range omega-3 eggs--and some like supporting local agriculture over industrial farming. Others want cheap food, and shop elsewhere. The same variety of preference applies to "employee" agents, who value different elements of their work environments, including but not limited to economic compensation.

But none of this need be "moral;" moral is just a waystation on the path to seratonin, or whatever physiological need is being fulfilled. This, in turn, is determined to a great extent by conditioning, which is why abused children get satisfaction from abusing their own. So what constitutes "doing good" is first individually determined; then the collection of agent decisions about this interact to decide whether, for example, we have laws against child abuse or regulations about farm animal abuse, or whether Whole Foods thrives or withers.

(The US Marine Corps has modelled combat this way, using diverse sets of agents, some of whom put a higher premium on saving a fallen comrade and some who prefer to take the enemy objective--they find, consistent with many of the points above, that the fewer rules and structures impede adaptation, the greater the warfighting success.)

To me, the "progressive business" question is really about (a) the tastes of the people who buy from corporations, and what they are willing to pay for in terms of attributes that have what we can call a moral valence; and (b) the people who make choices within corporations--such as whether to work for ones that take only decisions driven by short-term finances. Since in a given society these are the same people, the question for the U.S. is whether as our economic abundance grows (setting aside for the moment issues of inequality) more people think they can "afford" values a little higher on the Maslovian pyramid than calories (as either food or shelter.)

Which gets to the question raised by Frymaster about measurement: it's harder to reward performance (reward=seratonin) that can't be measured. So attempts to create indices to evaluate non-financial performance are aiming at a key leverage point: if enough reward is percieved by the society for non-evil performance, people will start to be incented toward it as they have been by money. Until the public learned that transfats were "evil" and demanded measurement of them, the industrial food providers didn't start eliminating them--now they're adapting.

There is a big question here: corporations do have minds of their own, and in our society we have come to think they should. This is lionized in business publications, but in the (radical) movie "The Corporation," a point is made that corporations often make choices no individual within them would have made. Is this is a good thing? Or should corporations be as much of, by, and for the people as governments?

mkb

Member Since:
05 May 2006
Posts:11

05 May 2006 8:09 PM

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I'm an optimist, and try and see the best in human nature when I can. That said, sometimes I need to apply a microscope....
Here's my thought. I do like Google's motto - it's cool, easy to digest, and of course I don't want to do evil. So, why is Google allowing the Chinese government to censor through their servers? Google Tiananmen Square in the US vs. China, and you get (literally) two different pictures. Guess which one doesn't contain tanks? This is semantic, perhaps, but "no" is a fairly absolute term. Google can get away with the excuse that what they are doing is slipping a pry bar into the censorship door, but it still seems like it's a bit evil.
As for Whole Foods, they make a great point about organics, and eating local. Unfortunately, most of the produce in my local Whole Foods (Newton MA) is shipped cross-country from one of a handful of massive corporate farms in California, even in-season. The amount of pollution that transport (fuel, refrigeration, et al) pumps into the air seems to wipe out the benefit of eating organic. I keep thinking we need a new term -- Resource Benefit Analysis (RBA). If we run an RBA on the organic food I buy at Whole Foods, do I achieve my goal of a healthier earth for my children? Or, am I simply fooling myself into feeling like I've made a difference? I would suspect the latter.
Ben & Jerry's was a great company, very idealistic and good for the world - until you start thinking about all those refrigerated trucks criss-crossing the country. I know they've made a point lately of working with the Chicago Carbon Exchange, but that was only after a lot of activists started pointing out this contradiction.
So, what to do? If all idealists eventually sell out, then maybe we apply the opposite - entice the cynics in the business world to opt in. Provide real, measurable financial incentives to go green and mean it.

melblake

Member Since:
21 Jan 2006
Posts:4

08 May 2006 4:12 PM

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Re the iPod, has Apple (or anyone else!) released any statistics on what percentage of its iPod user base's songs are in the AAC proprietary format vs. the open (ie rippable) MP3 and other open formats? I'd venture to say it's mostly MP3. But seeing the trend line would be very interesting...

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