GovernBest

Folks like to lay off poor performance on poor “execution”…the latest catch word in the management book-and-seminar industry. But those who say that business success is all about execution are wrong. The right products, markets, technologies and geography are critical components of long term economic performance. Bad industries always trump good management. In fact, Warren Buffet said that “when a manager with a reputation for brilliant performance meets an industry with a reputation for lousy results, the industry usually wins”. In most basic businesses nearly two thirds of the organic growth can be attributed to being in the right segments and geographies. In my experience, people aren’t inherently bad at execution; they usually execute quite well, thank you, on their own view of reality.

The underlying cause of nearly every business breakdown is a blind spot at the center of leadership’s world view: a seriously inaccurate perception of reality…either among executives or the people who do real work.

• How could Polaroid go bankrupt with more patents to its name than Thomas Edison?
• How could George Sheehan believe that Webvan would set the new rules consumer spending?
• How could Schwinn have let the mountain bike movement pass it by?
• How could Johnson & Johnson have dropped from 90% to 8% share in cardiac stents?
• How could Quaker Oats have paid $1.7 billion for Snapple and sold it for $300 million?
Can these and other stumbles with great Olympian ideas really be blamed on poor execution “at the coalface”?

“Had he never been called upon to exercise authority no one would have doubted his capacity for it”…Tacitus on the emperor Galba

Speakers like to proclaim that “leadership is authenticity”. In my experience, though, leaders often shrink from authenticity…sometimes with the best of intentions: they want to put a positive face on an impossible situation; they want to be loved and think that might be inconsistent with the pain they need to inflict; they want to withold their bouyant enthusiasm or grave doubts until the outcome is clearer. The list goes on. The reality is that leaders are visible…with or without a title; and when you’re visible, you’re vulnerable. We see this in clubs, friendships, families, work settings and boardrooms. So I have some sympathy for Galba and anyone who takes “personal responsibility for collective action”.

What a great time to be reconsidering business models. All the bailout activity seems to be perpetuating, albeit re-regulating, models whose time has past. Consider health care and autos…oh, and rental cars. Two guests recently descended upon us in Zipcars…a no-lot, no designated auto business model that uses technology to let you buy transportation…not specific cars…on an as-needed basis. Some operations research problems for scattered sites and folks who “need their truck for work”, to be sure, but why not explore buying transportation services the same way we buy cell phone services…by the minute; blow up the existing channel system and all the baggage that goes with it. Or how about Zipcare? All the talk about health care reform is only health care financing reform…more money (or less with rate controls) for the same chassis. How about living wills, nurse practitioners, tele-diagnostics, informed mothers and an all-out re-engineering of what we know to be one-third wasteful (in the US). Financial Services, Media, Construction anyone? If this is truly a “strategic infection”, let’s dig underneath the perpetuation strategies and stimulate some yeasty discussion about finding new ways to satisfy the needs for which we “hire” these old business models. Thoughts?

I heard this term used in something of a derisive sense in connection with new proposals by Senator Schumer and the SEC to open the process for electing corporate directors. There are lots of bells and whistles and a number of issues to be cleared up, but “people’s capitalism”? Are you kidding? People…stockholders, specifically…are the owners. Given the performance of the last several months why on earth wouldn’t we broaden the process for selecting who governs? Maybe the attitude behind this cynical label is part of the case for change? Hmmmmm

After his first victory as a “slave” in which he treats the public and his “kill” with arrogance and disdain, Russell Crowe is advised “Win the crowd and you’ll win the day“.  Moral compass aside, isn’t there anyone on the AIG board who saw that movie?

I’m trying to build an inventory of “defining moments in governance” beyond my personal experience: might come from either side of the board table in corporate or non-profit settings. Vintage moment: early Starbucks executives reported proudly to directors that they were dismissing customer requests for special flavors in keeping with their commitment to “pure and natural”. Board comment…”to hell with what the customer wants? Are you #%*!@*## nuts!?” My experience is that just as many go the other way; some are truly “defining” but pass unnoticed; and, of course, many come from the CEO side of the table. Love to hear from you; attribution your call

Welcome to the Governbest blog!

This space will be used to reflect on matters of interest from both sides of the governance table.  The intended audience is all who are involved in leading or guiding corporate, association or non-profit boards in the discernment and pursuit of missions relevant to their respective constituents.  By governance, we mean matters of identity, destiny and fundamental method…the questions that constitute the right struggles between directors and executive leadershim; the few answers that, when clear and appropriate, clear the way for thousands of downstream decisions.  Material will come from the experience of contributors, current events that bear on governance matters and other published materials on governing.  Sign in, read up and “write on…“

The Aspen Institute reports that the non profit sector grew 54% in revenues between 1995 and 2005…a period when GDP growth was 34%. That’s a rise in revenues of nearly 160% of the GDP…governmental sources, charitable contributions, fees or charges and other earned income. So here we are in what looks a lot like 1929; and all sources of funds are under duress. Makes me wonder if the decline is likely to be as comparatively more robust than the climb, and in any event, what kind of “demand bid” this places on the sector’s leadership. Any thoughts? I have some but hey…this is a conversation, right?