Changes At Apple

The price of Apple stock has plunged from $702.10 per share to $604. With Apple shares dropping almost $100 per share, one needs to pay attention. Thus Tim Cook took action and fired two executives. With this event we now see the birth of the Tim Cook era at Apple.

There are some very important elements of Steven Jobs’ leadership style that, based on Cook’s actions, were probably very distasteful to Cook. Employees were subject to Jobs’ whims and fancies. He was the typical entrepreneur, driven and impulsive. He was a type A personality to the nth degree, but Cook has “deviated from Jobs management tack and style.” Cook has approved a charitable giving program that Jobs previously opposed.

Where we really see Cook’s stamp on the company is the recent dismissal of two leaders that previously flourished under Jobs management style. These key individuals, Scott Forestall (initiator of the new Map App) and John Bowett (in charge of retail stores), did not fit in the new Apple.

A recent event demonstrated this fact. Recently Tim Cook apologized for the Map App failure. He asked Forestall to sign the apology and he wouldn’t. This was a career decision. Soon afterwards he was dismissed. It appears that Jobs management style was such that executives would clash, and expect Jobs to make the final decision. Jobs created a highly political organization, relying on him for the final decision. As long as the emperor liked you you were fine. Cook’s style appears to be more participative, as indicated by the shakeup. “The shake-up demonstrates Mr. Cook’s resolve to tackle thorny personnel issues that Mr. Jobs would let fester. Mr. Jobs long kept the strong personalities at Apple in check by always casting the winning vote or by having the last word.” Jobs forceful control of the culture would not allow the underlying problems emerge. The problems were there, just not acknowledged or solved.

Decision-management theory argues that this type of decision style does not allow for the most creative solutions. This anti-dialogical communication structure was held together simply by the power of one man, Jobs – the creative genius behind Apple. The last time Jobs was kicked out of Apple it floundered. However, this time, I don’t think that will be the case. Cook is a forceful leader who knows when to watch and when to act. He has been the CEO at Apple for over a year now and is placing his stamp on the company. The WSJ reported that “people inside and outside Apple said Mr. Cook is trying to steady the ship. They have expressed relief that the Cupertino, CA company is run more smoothly than under Mr. Jobs, when employees lived under constant fear of falling victim to Job’s tirade or a whim.”

As it stands right now I am a Tim Cook fan. Any time a leader can rid him or herself of individuals who are only in it for money and personal benefit, the organization is better off. I think Apple is in good hands, I hope I am right.

And that is my thought for the day!

China Is Changing

Over the last couple of years we have seen an escalation of debate concerning the concentration of wealth in the hands of a few. This debate is usually focused on the top 1%, and how the wealthy in the United States are getting wealthier while the rest of us are not keeping pace. However, the numbers I saw this morning coming out of the centrally planned country of China helped me to remember that the “ism” is not the issue, it is human responsibility.

It was reported this morning that Chinese Premier Wen Jiabo and his family have assets worth $2.7 Billion. This includes his 90 year old mother, Yang Zhiyun. “The details of how Ms. Yang, a widow, accumulated such wealth, are not known, or even if she was aware of the holdings in her name.” But, it is known that she accumulated the wealth after her son became premier. Jiabo’s family are not the only leaders in China to become rich. “Bloomberg reported that the net worth of the 70 richest delegates in China’s National People’s Congress rose to 565.8 billion Yuan ($89.9 billion) in 2011, a gain of $11.5 billion from 2010.” This averages out to about $1 billion per delegate. Not bad for a year.

We complain about cronyism is this country, but it appears that rent-seeking and kleptocracy is alive and well in China. George Orwell said it best, “Some people are just more equal than others.”

On the other hand China has a growing middle class. “China is used to following an emperor or strong man.” When the Communists took over the country, Mao Zedong became the strong man who led the Chinese people. As Fred Zilan states in the WSJ, “that was the old China. Because of the tremendous double-digit growth China has realized during the past two decades, the country’s middle-class has grown to more than 300 million people today from under 100 million.” This middle class is sending its children to the United States for education. They are studying here and then taking Western ideas home.

China is a country in flux. The leaders are getting richer, and the people are becoming more affluent. Therefore, the country will eventually change its focus from “rudimentary physical and security needs to self-expression values such as freedom of speech and assembly, representative government, and free and fair elections.” I don’t think I will see this in my lifetime, but it is interesting to think about. I did not ever think I would stand in Red Square in Moscow, Russia either talking about Jesus with the Russian people.

I love our country. We can debate taxing the rich without being put in jail. Maybe China will evolve to that some day. We have to wait and see.

And that is my thought for the day!

The Triunity of Success

I am involved with a new program at WPC, the school where I teach. It is an exciting program dealing with Social Entrepreneurship. This program recognizes the importance of free enterprise and creating both economic and social profit. It will offer students a solid business, entrepreneurial, and social education. This will allow the student to have tools needed to act as an entrepreneur, or an intrapreneur. I am quite excited about the possibilities.

I am always looking for real life examples that demonstrate how the process of social entrepreneurship works. The latest is what is called the “Pernambuco Model.” It appears that a small region in Brazil has figured out how the community, business, and government can partner together to create economic growth. I am not a big government person, but I do believe in this triunity’s ability to create a structure that allows people to be successful.

We can see how this partnership works in a small Brazilian state known for its absolute poverty. Nancy Scheper-Hughes studied Timbauba, a small town located in what is called the sugar belt of the Pernambuco state in Brazil, in the 1980’s. “She described a place seemingly resigned to absolute poverty.” Today, however, this region is much different that what Ms. Scheper-Hughes described.

An economic revival began via several steps. The market determined there was an opportunity, and a new port was build very close to Timbauba. Now this area has a “sprawling industrial complex.” People are working in the shipyards and oil companies located there. The port was created via community effort, industrial policy, federal money, initiated by Luiz Inacio Lula, and local government led by Eduardo Campos. This economic area has brought with it “a host of smaller food, textile, and shoe factories,” which are setting up in the Brazil’s poor interior. Obviously there must be a benefit for business to locate in the interior, probably wage levels, but the partnership of the community, government, and business is working there.

According to the Economist this area is now considered at full employment. However, all is not rosy. “The refinery is years behind schedule, as is the shipyard’s order book, partly because illiterate former cane-cutters make poor welders.” To deal with this problem another partner has arrived, the Institute for Co-Responsibility in Education (ICE). ICE is a private educational foundation that is working to reform middle school education. The first step taken was to create programs within these schools that run eight hours rather than four. This will improve the opportunities for students to learn and be prepared for the work force. The government also raised teacher’s salaries, while adding bonuses based on student performance.

The Pernambuco model is working, but it is far from perfect. There are still slums in the area, which obviously create lagoons of untreated sewage. But give the market a chance. Maybe someone will figure out how to change fetid untreated sewage into profit.

Anytime we have collaboration, the result will be positive. It appears the triunity in Brazil has found something that works. I think we can do the same thing here in this country. At least I hope we can.

And that is my thought for the day!

Why Organizations Fail!

I had an epiphany the other day. I was a manager at Boeing for over fourteen years, and I have been studying organizations and leadership since 1988, almost twenty-five years. I have been at this for a while. When I was younger I had a hard time committing to anything, except having fun, and that was usually not the right kind of fun. Therefore, discussing the question of why organizations fail seems, for me, to be quite natural.

To do this I’d like to look at some characteristics of government failure, then demonstrate how it applies to all organizations. Some think that larger government is the solution to all of our social ills, however larger government is often the problem. Over expansion of government that cannot be paid for is a classic lesson in failure, which also applies to business. Companies that expand too quickly may not have the infrastructure or skill to meet the higher demand for product or service. This will lead to a failure of product quality or delivery problems.

Anyone that has read my blog knows that I despise cronyism. As Boskin relates in his article on the anatomy of government failure states, “Programs become entrenched, develop powerful constituencies, and are hard to shrink but easy to expand.” This usually reflects cronyism and pork, which is required for the maintenance of these subsidy programs. The pork programs are often counterproductive, and reflects an escalation of commitment to a bad decision. Bad decisions decimate organizations. Managers are notorious for not listening to those who are more knowledgeable on a subject. There are many examples of companies that have gone out of business due to the inability to listen and an over adherence to the divine right of management.

Boskin gives five tendencies within government that will cause failure. The first is, “wait until forced to act, often too late with great harm.” There is always a certain amount of gap between the market is going where a company positions itself, which means the company needs to be flexible. The shorter the time gap between environmental change and company reaction to the change, research has shown that there is more of a chance of continued company existence. If there is prolonged existence of a discontinuity, then there is more of a chance for company failure.

Two, “Systematically ignore long-run costs to provide short-run benefits.” One of the biggest differences between eastern and western management tendencies is this one element. Western managers focus more on the short-run, while eastern managers focus on the long-run. This is a huge generalization, but one that can lead to company failure if not mitigated.

Three, “ignore economic principles.” Supply and demand are what they are. I think this is self-explanatory. Four, “ignore the laws of arithmetic, selectively counting some effects while excluding others.” I have to tell you creative accounting has been around for a long time, and it usually produces the same result. Has anyone heard of Enron.

Last, Over spending. “Nobel Laureate James Buchanan observed, politicians hide the true cost of spending from citizens by deficit financing. Recently, deficits have run 30-40 cents of every government dollar spent. But interest will have to be paid on this on this debt, sooner or later.” I cannot ignore the problems looming on the horizon associated with the size of debt we have incurred as a nation. However, any organization that does not manage its debt well will fail.

Running an organization takes many types of skill. The modern manager, or politician, needs financial, operational, informational, and human skills to be successful. For the most part our business leaders do a pretty good job of this. But when it fails, it usually has a huge impact.

And that is my thought for the day!

Do The Humanities Need Rescuing?

I love mornings when there are many interesting articles in the newspaper. Boeing is dealing with its production problems, and as a result, delivering more airplanes. The election is moving forward, and analysts are deliberating who is ahead. But the article that caught my attention this morning reinforces my belief that teaching business in a liberal arts setting produces the best result.

Enrollment in colleges and universities have decreased recently. In fact, this is first time in decades that this has happened. For profit colleges are getting hit the worst. Promises made and not followed through on, as well as cost, are the drivers for this reduction. However, this is not the purpose of today’s blog. “A half century ago in his famous two cultures speech, C.P. Snow defined the growing riff between the world of sciences (and the commercial world) and that of literary intellectuals (including the humanities).” The future of this polemic is changing, simply because the world is changing.

According to the WSJ parents of college students are asking if their child will be able to get a job after spending many dollars on tuition to earn a degree. As a result, “There are parents that are telling their children that they will only pay for a business, engineering, or science degree.” Is that an accurate concern? It may not be due to the current needs of business.

What type of skills does business want, and can the university provide these skills? Does business want a highly trained accountant who has no people skills, or does business want a more well rounded individual that knows how to think and can relate to human beings, not that all accountants can’t?

The article I read this morning written by Michael Malone discussed how to avoid a bonfire of humanities. His article demonstrated the importance of cross discipline collaboration of the sciences and humanities. This reinforces my belief that teaching business in a liberal arts environment will produce the best result. “A few months back I [Michael] invited a friend to speak in front of my professional writing class, Santosh Jayaram is the quintessential Silicon Valley high tech entrepreneur.” Malone who teaches writing asked his friend not to convince people to change to studying business, but Jayaram told Malone, “Are you kidding, English majors are exactly the kind of people I am looking for.”

Today business is about human connection and stories. You tell stories about your product, and how it will be used. These stories are about meeting human need. As I read this I remember what I told my students last week. We were discussing human resource management and why it is so strategically important now. The way we do commerce today is different than in previous decades. We have moved from a production philosophy to a service mentality. This is a critical step. Production deals with efficiency, and effectiveness and efficiency is still important, but by moving to a service mentality we have gone to a more relational paradigm. Service doesn’t happen to machinery, service is provided to people. Thus the importance of writing to tell a story, oral communication becomes critical, and don’t forget the importance of ethics. Parents keep sending your students to liberal arts colleges. They will be prepared for the new world.

And that is my thought for the day!

Global To Local Leadership

This week marks the fiftieth anniversary of the Cuban Missile Crisis. Usually when anyone talks about bad decisions that managers make the discussion will migrate to the concept of groupthink. When one explores groupthink they will usually talk about the Bay of Pigs fiasco and then compare the decision process for that catastrophe with the superior process used by the Kennedy administration to deal with the Cuban crisis. Khrushchev, the Soviet leader at the time, had worked out a deal where Russia would supply missiles to Cuban. The missiles had the ability to hit strategic sites deep within the United States. This was not conducive to our national security. Our government responded in a firm manner, and the world was close to nuclear warfare.  When pressed about having missiles on his island, Castro lied by assuring “other governments that he would not do such a thing.”

Don’t get me wrong, I think all politicians lie, it is part of the job description, but the best leaders are able to minimize this deficiency. Fidel Castro was and is a leader that was not above hurting his people to maintain power. Recently a human activist in Cuba was killed in a car accident. A prominent Spanish politician was convicted in a Cuban court of manslaughter for this death. Angel Carromero was driving a car with Oswaldo Paya (human rights activist) as a passenger. Carremero’s car veered and ran into a tree killing Paya. The only problem with the story is the involvement of a Cuban security vehicle that was trying to run Carromero off the road. “The family [of Carromero] was prevented from attending the trial.” They are calling for an international investigation.

The question I have in my mind this morning is if you can’t trust your government what security do your have? Obviously, as a Christian, my security lies somewhere else, but from civic perspective government plays an important role in a person’s life. If that government has moral lapses on a consistent basis, then the people have a right to question the validity of said government.

Regardless of the moral lapses of government, it is also known for being notoriously inefficient. The state of Washington is attempting to do something about it. Governor Gregoire has taken the initiative to implement a LEAN Management system. The Columbian newspaper stated this morning that “If our state government can become more lean with LEAN, or any other management system, we’ll lead the applause.”

The Columbian is saying this because of the success LEAN has produced for Toyota and Boeing. “If the introspection and training [associated with LEAN] produces the same benefits for state government that were recorded by Toyota and Boeing, then the taxpayer will have reason to rejoice.”

Good government, just like good leadership, has utilitarian and deontological morality associated with it. Government has a duty to ensure its constituency is safe, secure, and has the ability to pursue well being. Castro was/is not doing that, but it appears the State of Washington is attempting to get better at its responsibility.

Rob McKenna, in his role as Attorney General, running for governor in the state of Washington, has already used lean to save Washingtonians almost a half of million dollars. He is on board with LEAN, and just may make a good governor.

Global to local – good leadership will make life better, not worse.

And that is my thought for the day!

Russell Means And Change

At the end of each school year I usually take students to the Pineridge Indian Reservation in South Dakota. We visit and spend time with people, and try to making a difference. Last year we almost had the opportunity to hear Russell Means speak. It was supposed to occur at the Pineridge Casino on a Saturday so we left Allen where we were staying, and headed into Pineridge. We arrived at Bats, a little market and gas station, and ran into some of the folks that told us about the Russell Means event. They told us the event had been moved to Monday, but we were already busy on that day so we could not hear him speak. I would have liked to hear what this Native American Activist had to say.

Russell Means died yesterday, but not until he had raised awareness about the plight of the Indian in the United States. Means led the occupation of Wounded Knee in 1972 where two natives were killed and a federal agent was severely wounded. Means climbed Mt. Rushmore to highlight the many failed treaties between Natives and the US government. The American Indian Movement, started by Means, led many protest events, many violent. Eventually he renounced violence, but his purpose was still the same, create positive change for the Native American.

Obviously I don’t agree with violence, but reading about Means motivated me to think about how one should initiate change? As a person who has a degree in Organizational Systems I think that change is the most crucial element of organizational success.
Each organization has a macroenvironment that affects it. If the discontinuities between the external environment and the organization becomes too great, then the organization has a greater opportunity for failure and extinction. Therefore, knowing when to change, how to change, and when to stop changing are critical skills for organizational leadership.

I know of an organization that has been around for several decades, and is now going through some interesting changes. The macroenvironment that this organization has positioned itself is changing rapidly. Thus, being a dinosaur within a changing environment is not an option. If the dinosaur does not evolve it will become oil. The question then is how do you introduce the required change to ensure continued existence?

The leaders of this organization need to constantly talk about the changing environment and the institution’s vision. This needs to become a shared vision. Communication is another critical element of this change process. The more structural the change the more difficult the change becomes. Thus, the need for more communication. Another critical part of change is the creation of a guiding coalition. Respected individuals who have captured the vision and believe it and can sell it.

Ultimately, the execution of change takes time and many starts and stops. Organizational change is not for the faint in heart. It requires tenacity. If someone thinks that change occurs over night, then they will fail. The change that Russell Means wanted is a complex structural change.
The American Indian’s plight is still problematic. Therefore the change that Means started needs to be continued, but the fight will not be won just by the native. The change required is much more systematic and inclusive. The change will require a commitment from the Native Americans, educational systems, local and federal governments, the people within the surrounding communities, and the business community.

You would think that when something happens frequently we would learn how to do it well. The fact is, with change we still struggle with the process. Hopefully, one day we will get it right.

And that is my thought for the day!