What COVID Told us About Business

 

Even though the economy and nature have had a symbiotic relationship throughout human history; and business markets and cities have had a symbiotic relationship for 12,000 years; how we see business today is more of a function of our cultural orientation to the ideas of business.

The cultural rationale of our business – the reasoning and logic we use to drive action – is shaped by the evolution of our culture, which is a function of our understanding of the business world. Education, training, and experience are three big contributors to culture. From our education we understand “why” business works. From our training we understand “how” business works. From our experience we understand “when” business works.

The COVID-19 pandemic exposed the cracks in our thinking and the decay in our 12,000 old ecosystems. As business owners and managers, how we treat our customers and our employees during the pandemic was a direct reflection of our cultural rationale – thus the ultimate tell of how we perceive the purpose of business.

Those with more of a community mindset see the purpose of business as a community service. With their cultural rationale they quickly adapted and evolved to safely fulfill the purpose of serving the community and thus continued to thrive. Those with more of an investment mindset see the purpose of business as a vehicle for the extraction and accumulation of economic wealth continued to put customers and employees at risk.

The Great Jigsaw Puzzle - Society

The road to understanding is like the layers of an onion. Each layer we add is based on the content of the previous layer.

We all start out as infants, but we are not the same. At birth, we are uniquely configured individuals, not different.

Therefore - we are not comparable. We are born with the ability to feel, we are not born with judgment. From birth, we learn through our common senses, but judgment is not something that is self-taught. We are raised to judge based on differences that don't exist.

75% of the people born to this planet have a natural gift of perception focused on the "depth" of reality - but not the breadth. Their perspective is like a snapshot with a narrow window, and layers of detail.

The other 25% of the people have the gift of perception focused on the breadth, but not the depth. They see the high-level arc of reality. They can connect the past to the present and project the future.

There are cultural bridges that connect the two sides - religion and science.

The bridge of religion once explained the mysteries of life in terms of magic and then by miracles. It has evolved with the bridge of science, which seeks to transform mysteries of the unknown into understanding the known.

Because we are so unique as individuals, not two people share the same exact perspective on religion or science. On one bridge we are asked to trust the interpretation of an individual preacher; on the other bridge, we are asked to trust the findings of individual scientists. Even if we think we agree, we discover we don’t when we discuss it in depth. Thus, the world is highly fragmented.

Nature designed us to complement, not replicate each other. We evolved to collaborate, not compete. Those who feel they are better than others have lost their way. Divided we are myopic, blinded by our unique perspective of reality. Together we connect our perspectives and see the bigger, richer picture. That is why a civilization divided onto itself will always fall. We cannot respect the uniqueness of individuals because we don’t see it when we only see them as different.

Noah May Have Built an Ark, But Moses Built an Economic Arc

For many who look to the possibilities of the future, the Star Trek economy is the ultimate stage of economic development. A time when humans built a space age version of the Garden of Eden. Unlimited energy and automation provide capacity and capability for limitless production – and money again is no longer needed, and the fulfillment of needs is as simple as asking.

I can’t help but think the connection to Moses and the book of Genesis and the story of the Garden of Eden is extremely important. It represents a time when the technology of nature produced all that was needed for a human community to survive and thrive on the planet. The Garden of Eden is the symbolic description of the first livable economy. Which could indicate the ultimate livable economy has been between 2 and 4 million years in the making. Its evolutionary stages are driven by technology – the sum of knowledge, experience, techniques, skills, methods, and processes used in the production of goods or services or in the accomplishment of objectives.

For this blog I have borrowed from an organization known as the Partners for Livable Communities the definition of “livability” and modified it slightly. Livability is defined as the relative sum of the factors that add up to a community’s quality of life—including the built and natural environments, economic prosperity, social stability and equity, educational opportunity, and cultural, entertainment and recreation possibilities.

The first livable economy evolves when the efforts of our ancestor’s population fulfilled what Dr. Maslow called physiological needs of the population – these are biological requirements for human survival, such as air, food, drink, shelter, clothing, warmth, sex, sleep. The economy is a symbiotic part of the community. Fulfillment of the physiological needs means a community will grow. Fail to fulfill the needs and the community fails to survive.

This first liable economy was also a caloric economy, long before markets, money, wages, and wealth. A time when the value of effort is equal to the value of fulfillment. A time when a day’s effort harvested a wage that paid for everything needed to live for a day. The average cost of food, clothing, and shelter.

There is an important distinction the Partners for Livable Communities makes in their principles of livability. A Livable Economy is molecular – or local and cultivated organically. Because it is the efforts of the population fulfilling the needs of the population it adapts to the environment and conditions of the population.

When an economy is functioning normally, the efforts of the population easily fulfill the needs of the population. Common cause variability in the efforts or needs of the economy tend to be random and exists within the processes of the economy. However, special cause variability tends to be the result of influences outside the process. Over time, four ideas are gradually introduced into our thinking about economics – markets, money, slavery, and wealth. These become the factors that ultimately lead to the technology that forms the Star Trek economy.

Markets of course are core to the formation of larger collective societies, like towns and cities. The diversity of markets eventually fuels the need for trade between markets. Money represents ways to capture, store and transport value. Slavery includes the ownership of humans and the intentional manipulation of wages known as economic slavery. The invention of wages creates a way to form two separate markets, one for the value of effort and one for the value of fulfillment. By separating effort and fulfillment, the arbitrage of wages is possible and economic slavery and be used to accumulate wealth.

To counter, labor organizes and strikes for livable wages. Capital then invests in technology to eliminate labor. Without the efforts of labor spending in the market, the economic variation of expansion and contraction increases. Economic swings become longer and deeper – until the need for markets, money, slavery, and wealth are eliminated with the artificial intelligence and nano technology of the Star Trek economy.

Small Business and 12,000 Years of Lessons Learned 

Successful business owners make running a business look so easy. Make no mistake, no one was ever born with expert business skills. Success is a science, learned by mastering its formulas and the constructs of its many systemic relationships. Until recently, it was thought there was only one business science.

Attempting to fuel economic growth, government has been easing requirements for starting businesses and increasing access to resources. The result has been surprising as the small business economy keeps shrinking. Research discovered that small businesses are not struggling to start, they are struggling to survive, after they start.

To understand the cause, we needed to answer the question – why after 12,000 years of evolution of economic evolution were local businesses now struggling. Little did anyone realize that the development systems that evolved with business markets and organized the apprenticeships that educated and developed business owners had slowly vanished.

With the emergence of what we call “big” business in the 1860’s, there was also a new science with new formulas. Old “smaller” business was a local economic entity that evolved around processes mastery, skilled labor, and economies of scope. The new “bigger” business, was a regional and then national economic entity, growing from smaller local business, was evolving around process factoring, arbitraged labor and economies of scale.

From the very beginning, the paths of the two business economies were divergent. Following the development of business schools 150 years ago, the system for developing business talent, once comprised of craft guilds, merchant guilds and chambers of commerce, was completely disrupted. Today, with more than 400 business schools in the United States, the average annual cost of a business education $20,000. Unfortunately, local business owners are rarely able to take the time get a two-year degree, let alone spend four years to become experts in the science and formulas of big business before launching their entrepreneurial endeavor.

So, it is not surprising that data from the U.S. Bureau of Labor Statistics, indicates 20 percent of small businesses fail within their first year. By the end of their fifth year, roughly 50 percent of small businesses fail. After 10 years, the survival rate drops to approximately 35 percent and after 20 years only 20 percent of the original businesses remain.

Survey after survey of failed business owners list lots of reasons for their failures, in depth research indicates that 90 percent of business failures were due to the owners’ lack of knowledge, skill, and experience.

Business owners that were re-exploring and re-discovering on the job, the principles and practices of business success, burned through their capital before they learned the formulas and mastered the science of success. In other words, they don’t know what they don’t know.

In support of this findings, independent research by the United States Small Business Development Center concludes that 90 percent of small businesses getting assistance from an established source of expertise were still in business after five years.

We can turn around the failure rate. Because small business success is more about working smarter, not harder, the completion of a fundamentals of business program must be central to permissions granted to operating a business. It must include information the business owners and managers need to understand their rights, authority, responsibility, and accountability to the public, before the business is licensed to experiment on an unsuspecting public.

Because such a program will advance the health, fitness and resilience of businesses and the economy, it should be developed in collaboration with those resource providers who will benefit from working with more informed business owners and managers. The successful completion must demonstrate understanding and be recognized by public and private institutions on state and local level.

It's not what we don't know - it's what we don't understand.

As individuals, we are born socialist, raised capitalists, and in the end, die as socialist. Unfortunately, most people have no idea what either of those terms really means.

In the United States, our political battles are over what we "feel" it means, "believe" it means, "think" it means, and through common sense, "know" it means. Yet survey after survey indicates that very few American citizens actually "understand" what it means. The result is cultural friction and fragmentation.

Generally, we tend to accept that capitalism and socialism emerge when they are given their names in the 1800s, however, the practices of what we call capitalism and socialism were actually born thousands of years before. 

As a species, our economy begins with the currency of calories. As gatherers, we grow our families, clans, and tribes by sharing the excess of what we find with the intent of developing and growing the population.

Even though we evolve to be hunters, herders, farmers, and makers, we continue to feed our children, educate them, develop their capabilities as individuals - before we send them to work. We share with our neighbors and care for them when they need it. This investment in human capabilities of our population is what we call socialism. It has always centered around the basic physiological needs of food, safety, health, and education.

The investment in the growth of the economy - beyond the physiological needs - is what we call capitalism. It was the child of a maturing practice - local markets. As villages began to trade with other villages, it was the investment of the population's excess production that was used to grow the economy.

Even today, investing in the capacity of the economy and investing in the capability of the economy are two very different things. Increasing capacity is economic growth. Increasing capability is economic development. 

With the fight to end slavery, our social perspective changed. In the late 1800s, the emergence of big business was the child of both capitalistic growth and socialistic development. When a technological breakthrough, like railroads, electricity, automobiles, airplanes, radios, television, and telephones, occurs - it gives birth to a new industry - born without a supply chain. To survive the industry must build it. 

Not only investing in new businesses but also investing in new capabilities. As a nation, our understanding was changing. University-based business schools advance our understanding of management; Medical schools advance our understanding of medicine. Agricultural schools advance our understanding of farming and ranching.

History has shown as monarchs, oligarchs, and dictators extract wealth from the economy, investment in development stops (food access, schools, healthcare), and investment in growth stops (local business). As hunger and homelessness increase and the basic needs of the population go unfilled. The economic resources of the population are redirected to both internal and external conflict.

The difference between the old world civilizations of Europe and the new world civilizations of the United States, they have lived through this before and discovered that capitalistic growth and socialistic development are two sides of the same coin.

Beware, teacher provoking thoughts - While it is clear to me that earning an MBA is powerful accomplishment for any student, it is indeed important to consider the images that others may hold regarding the MBA.

That realization raised a business question in my mind - do MBA programs represent a philosophical brand for a school of thought? In business, satisfying any client or customer is a matter of meeting or exceeding their expectations. Do educators manage expectations well? Is it really clear what the MBA is about? Is education like the business world of promises and agreements, where whoever created the ambiguity carries the burden of its loss?

Then like a waterfall of ideas, a flood of related questions filled my mind. 
What do I represent?
What does is a school "brand" behind an assortment of MBA programs?
As a school of business though, what do we really believe? 
Stand for?  Principles?
Fight for? Character?
When a student writes their resume do they put MBA or Harvard, Stanford, etc. MBA?
In other words, what theory of business does the my school's MBA represent?
Do we subscribe to a theory of competence or completion?
Do we subscribe to a theory of economic value creation or a theory of economic value extraction?
Do we subscribe to a theory of employees as stakeholders providing a service or employees as natural resources?
Do we subscribe to a theory of management as responsible decision making agents or elite privileged sovereigns?
Do we subscribe to the theory of business as a social partner or as a social exploiter?
Are we a culture united by a philosophy with a set of principles and practices or are we academically divided by institutional silo’s?

Finally, by trying to answer these questions, what have we learned?

When theory and reality collides, what happens? Learning!

Michael Paul Ervick, MBA, Adjunct, Seattle University

Usually on the first day of a graduate course I often ask my students if they have learned how to learn.  Most think they have.

Already knowing the answer, I ask those students from India and China how many hours a day they study.  They share that they are tutored for two hours in the morning; they attend classes for eight and then tutored for another two in the evening.  That is a total of twelve hours a day when school is in session.  While most of my American students are often confounded by the idea that students would study so hard; when they hear that it’s the best way to get a job with the best companies in the United States, a big light bulb goes on.

I often share a Jan L. A. van de Snepscheut quote with my students and ask them to tell me what the author means.

“In theory, there is no difference between theory and practice. But, in practice, there is.”

After reading the quote for one class, a lively debate ensued and took us down the usual rabbit trails and then it ended with an unusual question.  What is the difference between a fact and a theory.  I then shared the views of Stephen Jay Gould, who wrote:

“Facts and theories are different things, not rungs in a hierarchy of increasing certainty.  Facts are the world's data.  Theories are structures of ideas that explain and interpret facts.  Facts do not go away while scientists debate rival theories for explaining them.”

After some additional debate, a student declared the following conclusion –

“it sounds a theory is how we hope things work and reality is how they actually work”.

After a pause, I looked around the room and asked the students if they found any irony in the statement made by their fellow student.  After some discussion, they concluded that this view represented what the student thinks a theory might be, and thus it is the student’s theory about theories.

A student from across the room then asked, “if a theory only explains an individual’s perspective of reality, why do we need to study it?”  Again the debate raged as individuals began to run out of answers and offered up guesses that might please the instructor.  I brought the debate to a close and shared the insight of the late, great Dr. W. Edwards Deming once summed up theory as follows:

"Rational prediction requires theory and builds knowledge through systematic revision and extension of theory based on comparison of prediction with observation.  It is an extension of application that discloses inadequacy of a theory, and need for revision, or even new theory.  Again, without theory, there is nothing to revise.  Without theory, experience has no meaning.  Without theory, one has no questions to ask.  Hence without theory, there is no learning."

In very simple terms, our theory is our most current interpretation of reality. 

We cannot begin to understand the importance of theories until we find ourselves willing to openly put our theories to the test in light of new facts and information; even though we feel the discomfort of our own cognitive dissonance; and we realize we are engaged in the learning process.  It is not until our willingness to discard our own ideas and incorporate elements of another’s theory into our theory that we have an indication that learning has indeed occurred.  But the transformation is complete until we have accepted the notion that because our perspective on reality is never perfect, that our theories never stop evolving, and lifelong learning never stops turning on the light bulbs.

Go Figure

As with law and medicine, management is a practice, not a religion.  Every situation is a unique opportunity.  Therefore, all relevant theories, methods and techniques must be considered to effectively plan, execute and control the making of effective decisions and the creation of desired value.

All managers please take note, the "benefit of value" and the "burden of cost" does not represent opposites in the functional spectrum of business; they are simply factors in an equation of short-term profit.  Real profits are the premiums paid by patrons for the performance of perceived promises.  Therefore, profits are a function of value alone, not cost.  Cost is the organizations speculative investment in its understanding of the consumers needs and its commitment to delivering the value it promised.

If it is true that great organizations under promise and over deliver.  Then it is equally true that great managers never manage profits by manipulating costs.

The Wisdom of Workers

Before I became a management consultant, I started my professional life as an electrician.  Developing from an apprentice to the level of journeyman in a little more than four years, I learned that craft unions are not the same as labor unions.  Craft unions add value by developing a balance of knowledge, skills and experiences of its members.  

Indeed there is a great deal management can learn from a little experience with a craft union.  For example, it is broadly accepted in the crafts and trades that a journeyman can do far more with old tools, than an apprentice can with the latest tools.  Most managers believe the opposite is true.

The relationship between management and workers has a long standing conflict that begins with the rationalization of slavery.  But times have changed.  Because workers bring knowledge, skill and experience to an organization, logically, the relationship with the organization must be that of a stakeholder providing a service partnership.

In 1995, both China and India, began investing in the development of the most powerful economic forces in history.  According to current IMF projections posted on Wikipedia, five short years from now, by 2017 the GDP for the world’s third largest economy, India,  will double; and the GDP for the second largest, China, will pass the United States as the world economic leader.  While this may seem extraordinary to some, it is not to those who study history.  In fact, it is the essence of what the United States did to come out of the Great Depression, win the Second World War and help rebuild the world economy following the war.  From the insights of famed author Malcolm Gladwell, we even know how to do it.  If we look close and we can begin to see a recurring cultural pattern – currently India and China have higher rates of capitalization on human potential than the United States.  That is a fancy way of saying they are developing their people.  It turns out, from small business to large nation, developing human capabilities is a must for entrepreneurial cultures, regardless of size.  However, if the culture has transitioned from entrepreneurial to bureaucratic, developing human capabilities is an economic burden on society.  True entrepreneurial cultures profit by adding value, bureaucratic cultures profit by cutting cost.  The powerful economic leverage of a capable value adding workforce is data that is often over looked by the bureaucracy of economic leaders.   Throughout history, economic leaders at the top do not focus on what is needed to get to the top or stay on top, they focus on the rewards from being on top.

There is another economic twist in the dichotomy of these two culture types.  For the sake of simplification, let’s convert our model of an economy from currency to calories.  Now let’s assume the average person needs 2,000 calories to survive each day.  If the average person only needs to work two hours a day produces 2,000 calories, as long as they remain able, they will survive without a problem.  However, if they wish to raise a family, they will need to produce extra calories for those who cannot produce their own calories.  So, a family of two parents and two children will need to produce 8,000 calories per day.  Some families will have more children and some may have none.  By pooling their capabilities, families discover that working together in teams they can produce 15,000 calories per worker.  So, in the name of survival, families join together to form social groups called clans.  It is safe to say the total economic output of any clan will be based on the number of able individuals that have developed the capabilities to produce calories and the capabilities to work in teams.  Individuals not capable of producing enough calories on their own are welcome to consume some of the excess calories produced.  As technology is introduced, we begin to see the power of tools (technology to enhance the human efforts) and machines (technology that replaces humans).  With tools, individuals can increase results by another 2,000 calories and teams increase their results by 5,000 calories.  A machine that consumes 2,000 calories and will produce 20,000 calories can be built to replace two productive individuals who will join the ranks of the unemployed population that draws on the excess calories produced by the clan.  As we add more and more machines, we send more people to live off the excess calories.  Humans are able to renew themselves developing and improving capabilities with new knowledge, skill and experience; machines are not.   Over time, as the machines age, they consume more and more calories, while producing less and less.

Today, in the United States, our cultural constraints limit our capitalization of human potential.  We manage our affairs by the subjective rules of accounting.  Therefore, we would rather invest in machines than in humans.  So we create social and economic constraints to education, training and opportunities to gain experience.  By restricting the development of individuals, we limit our collective their ability to contribute to the growth of the greater economy.  Because individuals with potential are not developed, they fail to become an economic benefit to the clan and are by default, condemned to be an economic burden to the clan.  For example, in the United States, women comprise more than 50% of the population and their contribution to the economy is hidden.  They represent the largest segment of the acting voting population, yet, they represent a small percentage of our government representation and our business management.  Yet, in a time of critical need, during World War II, it was a workforce of women that filled the economic void created when 16 million men left the workforce to fight in a two front war. 

As a fledgling nation we benefited from two very powerful forces, the new ideas generated by a vast cultural melting pot of immigrants and the growing development system of human potential.  As a culture, we are cutting off the flow both of those forces and becoming a closed culture.  If we are successful in converting to a closed system, cultural and economic entropy will continue.  The only way to reverse the process is to believe in collective development of human potential and economic capabilities.

The Wake-Up Call!

Throughout human history, the only economic force that has spanned the entire four million year spectrum of social development is labor – people working.  Labor has moved from tribes and clans, to various forms of slavery.  In less mature cultures it has evolved from a status of property, to that of resource.  In more mature cultures, labor is recognized as a stakeholder and partner.  The bottom-line, the oldest and most powerful economic force on this planet is not management, capital or technology; it is the combination of knowledge, skill and experience known as wisdom.  Within the next decade, China and India will pass the United States as the world’s economic leader.  These two economic powers will not accomplish this by inventing new technology; they will do this by investing in an education system that develops people.

A different kind of Viking leadership

Historically we have seen the work of great leaders – like Abraham Lincoln – who are inspired by a broad, macroscopic vision to do the right thing.  We have seen the work of great managers – like Alfred P. Sloan – who are driven by proven principles to do things right.  While either can impact the world, the ability to see the big picture or to be driven by proven principles is a function of an individual’s temperament.  Many individuals are happy with the preferences gifted them at birth.  Many practices evolved to these differences.  For example, by law, a manager must work within the constraints of a given organizational culture and purpose.  A leader tries to re-invent the law, the culture and the purpose.  Therefore, for a great leader to also become a great manager requires an amazing effort of human development and transformation.

For just a moment, let’s look at a big picture view of a subject that has plagued cultures since the beginning of humankind – slavery.  A slave is a human who has – by custom of culture – transitioned from a state of a person with rights into a permanent or temporary state of property to be owned by another person or entity.  When in a slave state, the results of all work and effort performed by the slave are considered the property of the slave owner.

Slaves could be held against their will from the time of their capture, purchase or birth, and deprived of the right to leave, the right to refuse to work, the right to perform certain acts or the right to demand compensation for their efforts.  Slavery was institutionally recognized by many societies; in more recent times slavery has been outlawed in most societies but continues through the practices of debt bondage, indentured servitude, serfdom, domestic servants kept in captivity, certain adoptions in which children are forced to work as slaves, child soldiers, and forced marriage.

It is important to know that slavery has been around for a very long time.  Long before the creation of money, slaves were individuals captured as the result of a conflict.  The vanquished people paid for the conflict through the labor of slavery.  Slavery has known no racial boundaries because it was an economic issue that produces discrimination.  From the beginning of humankind to this very day, slavery has grown because it was a byproduct of a cultural belief.  In the United States, from the advent of the industrial revolution and the birth of the factory system, our nation struggled with two facets of labor economics, slavery and employment.  Even free men, women and children worked 14 hour days, seven days a week.  Many American have no idea that our cultural attitude before the outlaw of slavery also recognized the relationship of employment as a property relationship.

The modern labor movement was born of the forces of economic slavery.  Economic slavery is a system under which the actions of labor and not the product of the labor are treated as property to be bought and sold.  The evidence of economic slavery can be found with people who are forced to work for substandard wages and compensation while their employer is earning fair market rates.

To understand the big picture relationship we must consider the ripple effect of the pre-American history of slavery and social evolution.  Many other cultures experienced the economic power of slaves.  For example, 780 AD marks the beginning of the Viking Age of colonization that lasted until the early 1100’s.  Following colonization, a process of social adaptation in the colonies begins a cultural transformation.  As the process of transformation reaches a level of maturity, the Nordic countries themselves begin to transform and as a result they begin to outlaw slavery.  First it was the Scandinavian colony of Iceland in 1117, followed by the Scandinavian countries of Denmark and Norway in 1274 and finally Sweden and Finland in 1335.

History repeats itself 400 years after the end of Viking Age of colonization in Europe, as Europeans began to colonize the aboriginal lands of the new world.  The European Age of colonization began in the 1500’s and lasted until the early 1900’s.  Then, 400 years after the Nordic countries outlawed slavery, the European countries began to outlaw slavery; France in 1794, Spain in 1811 and England 1834.  The United States, which socially represented many colonies of Europe, did not follow until 1865.  Partially as the result of colonizing the rest of the continent and finally as a result of a Civil War fought over the issue.

Parts of the discoveries in the Scandinavian transformation are the humanistic principles of cultures built on social-systems of pre-industrial age.  Parts of the discoveries in the main-land European transformation are the economic principles of cultures built on social-systems during the great monarch age.  The British and American transformations from slavery, also built on economic principles, were cultures built on technological-systems during the emergence of the factory age.

In cultures built on pre-industrial social-systems, economic profits are premiums paid for the performance of promises; in other words economic profits are a function of adding value, not opportunistic timing.  Humans add value through “techne” or knowledge, skill and experience.  Value added by the “techno” or technology is recognized more for “tool” value as an enhancement to human effort, rather than for “machine” value as a replacement for human effort.

With each economic crisis of a passing generation, each new generation carries forward the wisdom of experience.  Yes, from a macro perspective American culture is transforming.  We are opening to the realization that the concept of “united we stand, divided we fall” is not just a concept of rebellion, but a concept of social unification with economic ramifications.  The economic crisis of 2008 showed how much more we need to mature.  Sweden, a culture built of social-systems recovered from the event in six months.  Countries once colonized by Sweden are still struggling.

The big picture is shaped by major events over long periods of time and great leaders see those patterns.  The ability to plan and organize is not a function of great leaders; it is a function of great managers.  The progress of a nation, a culture and a people will require either teams comprised of great leaders and great managers working collaboratively; or it will require programs that help great managers develop leadership skills and great leaders develop management skills.

Women Know - Leadership is Only Part of the System

Michael Paul Ervick, MBA

“You don’t manage people.  You manage things.  You lead people.  We went overboard on the management and forgot about leadership.”

Navy Rear Admiral Grace Murray Hopper, 1986

The amazing wisdom of Grace Hopper is often lost in the misapplication of this quote.  It is the back story that provides the context that allows the audience to appreciate what she was sharing.  There are few individuals today that doubt the discovery, exploration and understanding of leadership is critical to the guidance and governance of groups.  This is true whether dealing with the endeavors of a family, a business or our planet.  In order to better understand such concepts, there is a very natural tendency of the general population to analyze by isolating and reducing the concepts.  Unfortunately, this process requires that we disconnect the concept from the context of the greater system; and it is here that our understanding begins to unravel.  With that said, history has demonstrated that to focus only on leadership in the context of collective endeavors is a dangerous mistake.

Since the early 1970’s there has been an abundance of quality literature published claiming leadership and management are two very different things.  In essence, leadership is about relationships and action; management is about responsibility and accountability.  Together they form our system of organizational guidance and governance.  The authority of a manager is given by law, and it is limited to the assets and resources.  The authority of a leader is given by followers, and it is limited by trust and respect.  Sacrifice one for the other and our system of guidance and governance fails.

While the practices of leadership are as old as humankind, the practices of management are relatively new.  Today, the rights and responsibilities of management are recognized and defined across the categories of commercial, corporate, agency, contract, and tort law.

The words and concepts of “managers” and “management” evolved from the much older word “manage”.  Manage is originally derived from Latin.  In fact, in Spain, Italy and France, the local version of manage still means to train or handle horses.  Originally the act of managing focused on using animals to get work done.  The transition of the term from animal work to human work evolved in two phases.  Slaves were considered property like animals, so it was common to manage slaves.  Managing craftsmen and artisans on the other-hand was not at all common.  That is because they developed their capabilities through apprenticeships in the guild system.  Once the apprenticeship was completed, workers became known as journeymen, which indicated they could travel and work without supervision or management.  It is not until the emergence of the English factory system that term and concept of managing workers emerges in its modern sense.

Since the end of the Civil War, the concept of management has been transformed by intense social forces.  Prior to this period, our nation struggled with slavery and employment; even free men, women and children worked 14 hour days, seven days a week.  Before the outlaw of slavery, our culture recognized the relationship of employment as a property relationship whether freeperson or slave.

With the end of slavery, our social system evolved rapidly on views of work, labor and family.  By the end of the Great Depression, our system of guidance and governance was the envy of the world, and Frank Abrams of Standard Oil was the poster-child for the power of “stakeholder” relationships.  As the Second World War ended, we were exporting the idea of balance between leadership and management through a program called “Training Within Industry”.

When the war was over, we found ourselves in a new role as a world leader; rebuilding the nations and cultures of friend and foe.  While teaching the combined principles of good management and leadership to the rest of the world, the American industrial system was inconsistently sacrificing the very same principles.  For eight decades following the Civil War, we learned that leadership was about doing the right thing, and unfortunately that interfered with goals of increasing capacity, economies of scale and lowering cost to feed and supply a world destroyed by war.  Because we stopped focusing on the discipline, competency, systems and people, from 1950 to 1970 the United States had diluted leadership training in the name of management training.  Almost overnight, management shifted from being “stakeholder” oriented to being “shareholder” oriented.

The imbalance between leadership and management sent the US economy on a journey of cultural destruction.  The stakeholder relationships between management and labor – 80 years in the making – were shattered in the name of short-term cost savings.  But labor was not the only stakeholder relationship sacrificed; relationships with suppliers, lenders and even customers all suffered in the name of lowering costs or increasing prices to find more profit for the bottom-line.

As a culture we failed to appreciate that management was a system built on a foundation of leadership.  After the Second World War, to strengthen our management system, we undermined the leadership foundation.  The imbalance of a nationwide system of guidance and governance is devastating.  No one knew this better than the software pioneer and Navy Rear Admiral Grace Murray Hopper quoted at the beginning of this paper; she understood that managers and leaders are different sides of the same coin.

By the end of the 1980’s, Jack Welch had proven Admiral Hopper to be right.  Following the success of his famous turn-around at General Electric, leadership development became very popular.  Now, more than 20 years after the business culture of America embraced the notion that we had fallen behind in our capabilities of developing leaders, we find another problem.  Between the years of 1990 and 1995, a wave of major organizations around the country began investing in leadership development.  Based on their culture of cost control, they assumed that GE replaced their investments in management development with programs in leadership development.  By trying to imitate GE, many organizations only compounded their problems.  They failed to realize that GE was actually trying to correct past mistakes by re-balancing by adding investments in leadership to the existing management development program.

As a result, today the average American managers know as much about the principles of management as their predecessors did in the 1920’s.  The lack of responsibility, accountability and authority of management for the performance of promises is a major issue in all organizations.  The tremendous tools of management, developed since the end of the Civil War, have been disregarded for the last 20 years.  The management processes of planning, organizing, directing, coordinating and controlling the assets and resources of the organization have been completely forgotten.  The management directives of purpose, mission and vision have all been reduced to meaningless window dressing.

When considering the current state of the world, our social and cultural evolution has come a long way.  The progress made by other nations following the Second World War can be linked to the fact that we taught the principles of TWI around the world.  As each nation embraced and adapted these principles to the strengths of their culture, we saw them in a whole new light.  We can see the breakthroughs from thought-leaders in Japan, Israel, Greece, Germany and Sweden, and all have demonstrated that in a system of guidance and governance, the role of leadership is necessary but not sufficient by itself.  Great leaders must also be great managers.

In the early 1980’s the United States was hit by a major wake-up call.  Three phenomena separated by thousands of miles totally shook the foundations of modern American business thought.  The first was airing of the documentary “If Japan Can, Why Can’t We?” about the recovery of post-war Japan, W. E. Deming and quality.  The second was the writing of the book “The Goal” about the idea of process improvement by an Israeli professor named Eliyahu Goldratt.  The third was the writing of the book “Moments of Truth” about the famous turn-around success of SAS airlines by Jan Carlzon.

Though very low profile, each event was so powerful that three schools of thought soon emerged.  The Asian School of thought offered concepts that became Six Sigma. Lean and Just In Time.  The Eastern School of thought produced the Theory of Constraints.  The Nordic School of thought produced the Information Technology Infrastructure Library (ITIL).  In the United States, the Asian School and the Eastern School of thought became very popular with the manufacturing sector; while the Nordic School became popular with computing and service sector.

Here we had what appeared to be three unrelated cultures giving birth to ideas that were international game changers all at the same time.  The Asian culture, oriented to discipline and honor developed a school of thought deeply rooted in competency and quality.  The Eastern culture, oriented to logical and independent thinking developed a school of thought deeply rooted in process and systems.  The Nordic culture, oriented to community and collaboration, developed a school of thought deeply rooted in relationships.

Though the schools of thought appear unique, many of the ideas found in these schools were from seeds planted in the post war recovery efforts led by the United States.  In an effort to help the world recover, we shared the secrets of our manufacturing success during the war.  The notion of practices moving between cultures and morphing is very common.  However, in this situation, this body of management secrets was developed in the United States between the end of slavery and the start of World War II by blending ideas from immigrants.

So imagine – during the latter half of the 1800’s and the first half of the 1900’s – the practices and ideas from around the world came together in one place, the United States.  Now add the pressure of a culture being transformed by the end of slavery, the end of child labor, the First World War, the great depression and the Second World War.  Then, take 80 years of refined management secrets and share them with the rest of the world, and at the same time abandoning each and every one of them.  Then, 60 years later, bring them back together into one body of management knowledge, three schools of thought, brought together to form an International School of thought.

In some areas, such as technological innovation, the United States leads the world.  Unfortunately, understanding people is not one of those areas.  Yes, it is true, the collective culture of the United States is not as mature socially as more established parts of the world.  The Nordic counties tend to lead in social maturity.  A look at history would support the trend.  

The Viking Age of colonization began in 780’s and lasted until the early 1100’s.  Following that period the Nordic countries began to outlaw slavery.  First it was Iceland in 1117, then Denmark and Norway in 1274 and finally Sweden and Finland in 1335.  400 years after the end of Viking Age of colonization in Europe, Europeans began to colonize.  The European Age of colonization began in the 1500’s and lasted until the early 1900’s.  Then, 400 years after the Nordic countries outlawed slavery, the European countries began to outlaw slavery; France in 1794, Spain in 1811 and England 1834.  The United States, which socially represented many colonies of Europe, did not follow until 1863, after a Civil War was fought over the issue.

The Nordic School of thought is breaking out as the new thought leaders of the western world.

Have you noticed that we know enough about the dynamics of weather systems, such as hurricanes, that we can predict their behavior?  Like hurricanes, we understand enough about the dynamics of human systems, such as individuals, that we can predict their behavior.  In fact we can even account for some of the variation in their behavior - just like the projected cone shaped path of a hurricane.

However, the accuracy of our predictions of the behavior of any given individual is dependent on that individual being isolated from external forces.  That’s because variation of behavior has two sources.  The variation that occurs in isolation, which is due to causes within the individual and is called common cause variation; and the variation that occurs with interaction with the outside world and is called special cause variation.  This part we cannot predict.  When a predictable individual interacts with another predictable individual, collectively they become unpredictable.

We have been studying and quickly learning about the dynamics of larger human systems commonly called groups and the ideologies that guide their behavior.  We have known for some time that personality greatly influences individuals in isolation and we now know that culture is what influences group behavior.  Like the personality of the individual, culture does not change from the outside in; it evolves from the inside out.  The transition and transformation of a human system is a response to changes in the environment.  In the cases of both personality and culture, if the environment is maintained by delusion, no change is perceived and no transition will begin.

I for one am amazed at what we as a nation don’t understand.  When we look at all the factors - inputs and variables that make up an economy, there is one factor that has remained constant throughout the history of humankind - labor.  There is only one element older than labor - land.  Without the element of labor, land will feed some.  With labor, land will feed all.  As a business activity, labor represents the techne of work, value added by the human.  Labor is older than technology, which represents the techno of work, value added by tools and machines.

Long before money ever existed, we traded the value of our labor; valued in terms of experience, skill and knowledge.  Take away labor and the value of land is little.  Labor has always been and will always be the heart of economics, not money.  The value stored in currency, metals and fuels are derived from labor.  Since we cannot eat gold or build a house of oil, without labor they lose their value.

We send workers home and export work to less developed nations to save money.  We send workers home and import workers because we stopped investing in our school system.  Without work, the people we sent home cannot afford to buy anything.  Reversing the patterns of the last 40 years is not easy, but it has been done before.

Happy Holidays

Is our issue really between Democrats and Republicans?  I know so many people on either side who really want to work together to solve the problems of this country.  Or is this more about the extremes of either side.  Lets look at the result.......   posted on About.Com

Possible Effects of the Fiscal Cliff

If the current laws slated for 2013 go into effect, the impact on the economy could be dramatic. While the combination of higher taxes and spending cuts would reduce the deficit by an estimated $560 billion, the CBO estimates that the policies set to go into effect would cut gross domestic product (GDP) by four percentage points in 2013, sending the economy into a recession (i.e., negative growth). At the same time, it predicts unemployment would rise by almost a full percentage point, with a loss of about two million jobs. A Wall St. Journal article from May 16, 2012 estimates the following impact in dollar terms: “In all, according to an analysis by J.P. Morgan economist Michael Feroli, $280 billion would be pulled out of the economy by the sun-setting of the Bush tax cuts; $125 million from the expiration of the Obama payroll-tax holiday; $40 million from the expiration of emergency unemployment benefits; and $98 billion from Budget Control Act spending cuts. In all, the tax increases and spending cuts make up about 3.5% of GDP, with the Bush tax cuts making up about half of that, according to the J.P. Morgan report.” Amid an already-fragile recovery and elevated unemployment, the economy is not in a position to avoid this type of shock.

Does life need to be managed?

The role of management as agent of the organization is critical in keeping the role of organization as a social and economic entity.  Management has one primary duty – decision making.  The elements of responsibility, authority and accountability are granted by the power of law, not ownership – ownership does not matter.  The processes and practices have been derived from two hundred years of practice.

The sole proprietor is not liable for the actions of the organization because they are the owner, but because the owner has been granted the power to be responsible for making the decisions.  The same is true for the partnership and the corporation.

To assume the role of a manager without having the knowledge or understanding of the responsibility, authority, accountability, practices or processes of management is like accepting an assignment as a surgeon after taking a first-aid course on the internet.

In time, all great managers discover the wisdom of profits.  Profits are the premiums paid for the performance of promises.  Real profits are not a function of predatory speculation or buying low and selling high.  Real profits of course are the result of adding value.  In fact, it is the same lesson we learned from the late great Viktor Frankl when he talks about success being like happiness.

For success, like happiness, cannot be pursued; it must ensue, and it only does so as the unintended side effect of one’s personal dedication to a cause greater than oneself or as the by-product of one’s surrender to a person other than oneself. Happiness must happen, and the same holds for success: you have to let it happen by not caring about it. I want you to listen to what your conscience commands you to do and go on to carry it out to the best of your knowledge. Then you will live to see that in the long-run--in the long-run, I say!--success will follow you precisely because you had forgotten to think about it.


"Theory" is how we think something should behave without external manipulation.
"Reality" is how we see something behave with external manipulation.
"Practice" is the study of controlling external manipulation.

Business Liberal

As many of my students know, I am a diehard business professional; therefore, I do not come by my more liberal opinions easily. For many of my students, my opinion of the Citizens United ruling by the United States Supreme Court in 2010 has been confusing. The ball is in my court to rectify this.


Our legal recognition of corporate entities as artificial persons, with the host of rights normally given to a natural person, dates back to 1816, and was based on the principles that management would be the decision making agent of the corporate entity. Management’s authority to make all decisions regarding the control of assets, on behalf of the corporation, is granted by the state government where the entity incorporates, not the shareholders. Shareholders consent applies to the control of equity, not assets.

For management, authority granted by the state comes with strings attached. These strings, known as RAA, can be defined as 1) responsibility as liability before the fact; 2) authority as the legal right to commit; and 3) accountability as liability after the fact. The relationship between the three is symbiotic. Effective delegation from state to management, from board to executive, from executive to front-line managers transfers the RAA as a package together. To manipulate the delegation by separating or limiting one element of this symbiotic relationship renders the others ineffective.

At the time the principles of corporate artificial personhood were developing, management had a long competent history. From the end of slavery in 1863 to the beginning of its involvement of World War II, the United States contributed most significantly to the establishment of management as a science and the breadth and depth of the current management body of knowledge.

Though there is little doubt that management is a professional practice as decisive as the practice of medicine and as complex as the practice of law. The business culture of the United States has failed to recognize and apply the same rigor demanded of medicine and law.

Our greatest management thinkers, including Drucker, Deming, Ackoff, Porter, Chandler, Senge, Argyris, etc. have presented differing perspectives of the same problem – the actions of a corporation are the actions of management – and the competency of management in general is growing dangerously thin. If we want corporations to be responsible and accountable, we must demand that our management be held to the same professional standards of rigor as our doctors and lawyers.

I had the good fortune to meet an amazing educator named Rita Mulcahy.  In her text, she published the results of a study that changed how I look at Organizational Change Management (OCM). 

She said, “When it comes to taking a professional certification exam, the most common reason individuals fail, is because they pick the answer that matches what they do it at work, not the professional standard."  

In other words, it is not mastering the tasks that are asked of you in the workplace, but mastering the generally accepted principles and practices of any given profession; and being able to apply them appropriately, that make the individual a certified professional.

At that moment, I realized that all the leading software manufacturers based the design of their applications on the same the generally accepted principles and practices.  So, more often than not, what really happens at work will be in conflict with the software.  It turned out to be true.  Over the years, as an OCM practitioner, I have learned to help clients adopt the generally accepted principles and practices of the profession, before they pick their software.

Is it me?

Or are the vast majority of managers working in the United States amazingly under qualified to fill the positions they hold.

Facilitating Change........

Looking at it purely from a legal perspective, when it comes to decisions, a manager will always be responsible (liable before the fact) and accountable (liable after the fact) for the decision.  That is the purpose of a manager; to make decisions.  Culture on the other hand could care less.  So, managers often look to a group for advice and even consensus, even though that does not dissolve either responsibility or accountability.  So building consensus with a group is an important process to master.  Real consensus is difficult because no matter how hard we try, individuals cannot support ideas they do not accept; and they cannot accept ideas they do not understand.  So an employee I know at the Boeing Company, Dr. Jennifer Sumner, developed a process known in as UAS.   I have used it and taught it for many years and have never experienced or been told of a single failure with the process.

First Seek Understanding.  After presenting an issue and a solution, test for understanding by asking all the group members to rate their understanding.  Have them place a post--it note on a scale drawn on a white board. The scale should run from 1 to 10, with 10 as complete understanding.  Notice if there are any mid-range or low numbers.  Find out what questions the person with a low number has.  Work through all the questions, providing simple answers.  Often, they are questions that will inform the whole group.  Test for understanding again until you are satisfied with the level of agreement.  If it turns out that a large group cannot move beyond mid scale, this issue is either too complex, the idea may be wrong, or the group maybe wrong.  It is important to know that individuals who cannot understand the issue or solution, should not be involved in the follow on steps.

Next Seek Acceptance. When it is time to move on and test the group’s general acceptance of the direction, repeat the ranking process with 10 indicating full acceptance of the direction.  This might mean there are bits with which the person disagrees, but that she or he is willing to accept the approach in order to move forward.

Finally Seek Support. Once you have decided to go forward with something, the questioning turns to support.  Support means full-hearted application of position, relationships, influence, resources, and time as needed, given one’s role in the solution necessary to get the job done. Too often, leadership groups agree to a solution and silently leave one person holding the effort.  Again, rate willingness to support from 1 to 10, with 10 meaning you will fully support the effort personally.

Each phase will surface concerns that if resolved properly help improve the quality of consensus and the effort to move forward.

Change agents are guardians, guides and facilitators.  They tend to see the concepts of change, transformation and transition as different terms.  Change is seen as a different state of existence – changing from day to night.  Those who manage change focus on leaving and arriving.  Progress is in the outcome.  Transformation is seen as the journey to different – living life.  Those who manage transformation focus on the plan.  Progress is in action, not result.  Transition is seen as the mental state of traveler – wisdom.  Those who manage transition focus on understanding, acceptance and support.  Progress is in the individual developing.

Organizational change management (OCM) is a framework for managing the effect of change such as new business processes, changes in organizational structure or cultural changes within an enterprise.  A systematic approach to OCM is beneficial when change requires people throughout an organization to learn new behaviors and skills. By formally setting expectations, employing tools to improve communication and proactively seeking ways to reduce misinformation, stakeholders are more likely to buy into a change initially and remain committed to the change throughout any discomfort associated with it.

While the transition effort can be reactive, post-change (after we buy the software) or proactive, pre-change (before we buy), the transition effort is necessary.  Organizations using post-change efforts tend to direct negative energy to the cause of change.  Organizations using pre-change efforts tend to avoid negative energy by developing buy-in and support in anticipation of the change.

The Service Oriented Organization

In our discussions there have been many questions regarding the concept of service oriented software.  A great deal of the confusion is rooted in our everyday notion of service.  In lay terms, services are often contrasted with products.  However, in business terms, products are things that are produced through a process, which means services are a technically a product, which is why in business, service is contrasted with goods.  The difference between the two is that goods are tangible services are intangible.  The easy way to remember the difference is a producer of goods “makes” something for you and a producer of services “does” something for you.  In either case, it is the benefit provided by goods and services that are consumed and valued.

Based on the notion that people do things for other people, you can begin to imagine that within most organizations, service relationships are all over the place.  For example, we could say that the human resource department provides staffing services to management.  This notion actually began to emerge right after World War II.  It formed a school of thought that became known as the Nordic School.  By the 1970’s the school of thought was extremely mature and the application of it was producing results.  In the late 1970’s this concept of service relationships was made globally famous by the dramatic turnaround of Scandinavian Airlines.  Quickly the idea expanded to the United Kingdom which developed the concept of managing IT as a service.  In the early 1980’s the practice of Information Technology Service Management (ITSM) was born and the associated standards were captured in the Information Technology Infrastructure Library (ITIL).  Today, ITIL is the global standard for managing IT.

It is important to remember, when the organizational service concept began as a chain of service roles, technology was not a factor, which means the first 40 years of evolution was dominated by processes and practices.  Service Oriented technology has emerged over the last 20 years.

In software engineering, a service-oriented architecture (SOA) is a set of principles and methodologies for designing and developing software in the form of interoperable services.  These services are well-defined business functionalities that are built as software components (discrete pieces of code and/or data structures) that can be reused for different purposes.  SOA design principles are used during the phases of systems development and integration.

SOA generally provides a way for consumers of services, such as web-based applications, to be aware of available SOA-based services.  For example, several disparate departments within a company may develop and deploy SOA services in different implementation languages; their respective clients will benefit from a well-defined interface to access them.  Extensible markup language (XML) is often used for interfacing with SOA services, though this is not required.  Java Script Object Notation (JSON) is also becoming increasingly common.

SOA defines how to integrate widely disparate applications for a Web-based environment and uses multiple implementation platforms.  Rather than defining an application programming interface (API), SOA defines the interface in terms of protocols and functionality.  An endpoint is the entry point for such a SOA implementation.

Service-orientation requires loose coupling of services with operating systems (OS) and other technologies that underlie applications.  SOA separates functions into distinct units, or services, which developers make accessible over a network in order to allow users to combine and reuse them in the production of applications.  These services and their corresponding consumers communicate with each other by passing data in a well-defined, shared format, or by coordinating an activity between two or more services.

SOA can be seen in a continuum, from older concepts of distributed computing and modular programming, through SOA, and on to current practices of web mash-ups, Software As A Service (SaaS), and cloud computing (which some see as the offspring of SOA).

Service oriented technology is nothing without people.  Today, service oriented organizations have the benefit of almost 70 years of evolving thought, proven processes, practices and technology.  We know that the heart of a service is a relationship, which means that people need to build and maintain them.  Which means the most important part of becoming a service oriented organizations is developing service oriented people and relationships.

During my graduate studies, I had a professor who helped me frame a new mental model of budgeting.  The basic idea – when thinking of budgeting as a management tool – is to think about a budget in the context of “predictive” accounting.  As a manager looks into their Chrystal ball of planning work, what expenses do they expect to incur and how should those expenses be recorded for accountability.  Then budget accordingly.

When budgets are used as controls, they are a management tool.  They serve as part of an agreement between two levels of management.  While all contracts are agreements, not all agreements are contracts, so you can’t take your fellow manager to a court of law.  However, what they do share is a meeting of the minds and a commitment.  Therefore, in determining the level of effective planning and budgeting, it is important to first recognize the RAA or Responsibility – before the fact; Authority – for the fact; and Accountability – after the fact.  Thus, trying to hold a first level manager accountable for a budget developed at a high level of management dissolves the symbiotic relationship of RAA and therefore entirely unproductive and intuitively unwise.

When budgets are used as constraints, and imposed by a higher level of management upon a lower level of management, the lower level manager should align expectations and plan out the work that can be accomplished within the budget.  This establishes a meeting of the minds and a commitment between managers.  Therefore, performance can be measured based on the agreement, and unplanned work items should be funded outside the budget.

You know that I intentionally work in two very different worlds.  As a consultant by day, I live in the business world, rich with the knowledge of practice and experience.  As a teacher by night, I live in the academic world, rich with the knowledge of theory and concepts.  I work in both worlds intentionally.  That is because a quick scan of opinions about theory and practice often finds these worlds in a philosophical conflict.  No doubt you have heard the old saying “Those who can – do; those who can’t – teach”.  This conflict arises because; for the most part we invest our beliefs in one world or the other.  Unfortunately, less than 30% of our population has attended at least one course from an institution of higher learning.  That means the majority of our population has not had the opportunity to explore and discover that we as individuals cannot really “understand” one without the other.

The late, great Dr. William Edwards Deming once wrote - "Rational prediction requires theory and builds knowledge through systematic revision and extension of theory based on comparison of prediction with observation.  It is an extension of application that discloses inadequacy of a theory, and need for revision, or even new theory.  Again, without theory, there is nothing to revise.  Without theory, experience has no meaning.  Without theory, one has no questions to ask.  Hence without theory, there is no learning."  In the most fundamental of truths, theory and practice are partners that form knowledge.  Without knowledge there is no learning.  Without learning there is no wisdom.  Without wisdom there is no progress.

Because of theory, we have evolving models of systems and their behavior; which includes weather systems, economic systems, and even organizational systems.  These models help us predict future behavior and therefore, outcomes.  As with the recent hurricanes, while what actually happens in a system may not happen exactly as predicted by the model or the theory, what does happen is very important.  Over time we learn to embrace the quote from Dr, Olaf Isachsen – “For whatever happens, all the conditions were present”.  That is because; a well developed theory often includes variation common within the system, but we cannot include variation from causes outside the system.  Even though there may be influence from the outside, we can analyze what happened and we can evaluate the quality of our theory and improve it.

We don’t intend to change the people – we try to change behavior.  If the behavior won’t change, then we change the people.- Unknown

First, culture comes from the word cultivate.  Culture is a group phenomenon produced by the cultivation of many personalities, which is an individual phenomenon.  The personality of an individual is comprised of many attributes such as attitudes, feelings, norms, values, ideas, beliefs, knowledge, tastes, style, etc.  A group which is comprised of two or more individuals, will come together to mix and blend attribute.  Just as personality drives the behavior of the individual, culture drives the behavior of the group.  So, group behavior is cultivation.  Not surprising, the products of the culture are the results of group behavior; these include shared attitudes, feelings, customs, norms, values, language, ideas, beliefs, knowledge, tastes, style, etc.

Second, it is important to understand that because culture guides the behavior of the group, just as personality guides the behavior of the individual, the greater force will always influence the lesser force.  Most individuals will behave one way inside the group and a very different way outside the group.  Individuals who transform themselves to comply with the behavioral norms of the group are followers.  Individuals who challenge the behavioral norms of the group are leaders.

Third, it is important to understand that every culture believes itself to be the center of the right world.  They believe other cultures are either less right or wrong.  Rationalizations help support these beliefs.  When a culture comes to believe itself to be less right, it will learn, self-direct and self-correct to be more right.  Right or wrong is a theoretical perspective commonly known as the truth.  It is important to grasp that humans do not believe in facts, they believe in truths.  Facts are used to support or challenge the truth.  Think in terms of children who believe in Santa and how much their behavior is influenced by that belief.  In the mind of the child, the truth of Santa is supported by the facts that gifts magically appear under a Christmas tree.  As a consultant, I investigate the facts in order to understand the truths that are held by the culture.

Everything has a purpose, even budgets.

The purpose of management is to act as the decision making agent of the organization as a legal entity.  This is not the same as leadership.  Management, the administration of decisions, has become a science; leadership, the administration of direction, is still an art.

Every day, managers in organizations make decisions that affect the performance of the organization.  When evaluated in hindsight, decisions can be good or bad.  However, over the last one hundred years, a science has evolved to evaluate decisions in foresight.  This science has greatly improved the effectiveness of decision making and the coordination of decisions across the enterprise.  Enter the concept of the “plan”, also known as a body of premade decisions.  A plan has two primary sections, the “action” plan and the “cost of action” plan, which is also known as the “budget”.  Budgets are usually for a specific period of time and expressed in a measure of currency.  The financial budgets should directly tie to the actions related to the work planned.

An organization that does not have a plan or budget will make far more bad decisions than good because managers lack a clear understanding of the cause and effect relationship between the goals of the organization and the work of the organization.

The science of management is not limited to planning and budgeting.  It also includes organizing to the plan and budget (resources); directing to the plan and budget (communication); coordinating to the plan and budget; and controlling to the plan and budget (monitor, evaluate, correct)