The Business Sensei

The Aardvark Principle

In any business, information can be thought of as the organizational equivalent of nerve impulses. Information about the state of the company, the state of the economy, the marketplace, how different parts of the company are functioning, and so forth, is critical to effective decision making. If any aspect of information flow is interrupted, it is like losing sensation in a part of your body: unable to feel, you may suffer serious injury without realizing it; if the nerves are unable to innervate muscles, those muscles will atrophy and not perform when called upon. By the same token, a business failing to receive crucial information about the state of the market can suffer financial disaster when products don’t sell or when innovation and productivity are crippled.

The problem with information flow is that people may not agree on the information, on the meaning of the information, or what should be done with or about the information. Disagreement leads, in turn, to argument or intra-organizational conflict.

Read the rest at AffluentMagazine.com

Mercky Research

Not long ago, an article in the New York Times discussed how Merck created what appeared to be an independent, peer-reviewed journal, and then used that journal to convince doctors to prescribe Merck products.

What is particularly amazing about this story is that Merck is the same company that 20 years ago created a cure for River Blindess, even though they knew that the people most in need of that cure would never be able to pay for it. At the time, the cost to the company was estimated at $200,000,000. Then CEO Roy Vagelos said that he felt that there was really no other choice: he was living up to Merck’s ideals of “health before wealth” and “do good and good will follow.”

As things worked out, the long-term benefits to the company, in terms of prestige, being able to attract top-notch researchers, and access to emerging markets, were immense. Merck did good, and good did indeed follow for the company and its shareholders. It just wasn’t obvious at the time that things were going to work out that way.

So what happened?  How did a company that lived up to its ideals as Merck did come to be the same company that used rather questionable practices to convince doctors to use its products?

Now I have no particular contacts or channels into the brains of the people at Merck, so what follows is purely supposition based on observing similar patterns of behavior in sports and business.

It’s well known in sports that athletes who are solely focused on winning do less well than those who are focused on personal excellence and skill mastery as well as winning. Indeed, a total focus on the outcomes and not the process can lead to a number of problems, including depression, burnout, and reduced enjoyment in the activities. Failure, instead of being a learning experience or an opportunity to evaluate and adjust, becomes something to avoid at all costs.

Ways of avoiding failure might involve only facing easy opponents, or it might involve cheating in various ways. Fear of failure is a very powerful force; the most successful athletes are those who master the art of learning how, and when, to not care if they win or lose.

When a business becomes totally focused on making money, it falls into a trap similar to that of the athlete. Milton Friedman to the contrary, a business cannot be solely about making money. Rather, a business is about producing innovative, or at least useful, products and services. These products and services must, in some demonstrable fashion, provide value to people. Money is how the business knows it’s succeeding.

Like sports, however, when the focus becomes too short-term and too outcome oriented, it becomes increasingly easy to justify behaviors that make money now instead of behaviors that maintain the product pipeline. It’s really no different from the athlete who sacrifices long-term health or career for a victory today. Living up to ones ideals is easy when things are going well; it’s when things get difficult that the real test comes.

Being a successful athlete, at any level, takes a great deal of work and dedication. There are always people who are looking for short-cuts. Being a successful company takes work and dedication as well; staying successful is, arguably, even harder. Over the years, very few have managed it. The tendency to take short-cuts is always there. It’s the businesses that stick to their ideals and are not captured by the fear of failure that last the longest and are most likely to survive the inevitable tough times.

Just as in sports, it’s all about learning how, and when, to not care.

The Volunteer Paradox

A great many organizations are depending more and more on volunteers to help fill the gap created by the economic downturn. Now, one might ask, “So what? That’s nothing new.” 

There’s some truth to that: churchs, synagogues, trade groups, sports clubs, and so forth have always relied on volunteer labor. That hasn’t changed. However, some attitudes have.

Many organizations provide some sort of perks or guarantees to volunteers: this might mean dinner with a guest of honor, reduced rates for events, reimbursement for expenses on behalf of the organization, a chance to win a free vacation, and so forth. Many organizations are being forced to cut back on such things. There is a right way and a wrong way to handle such cutbacks.

The wrong way is best exemplified by a comment I heard recently: “What’s wrong with you people? Don’t you know we’re a volunteer run organization?”

The comment was in response to someone asking why the organization in question was not covering certain volunteer expenses to the level it had in the past, especially after the organization had stated that it would cover them.

Volunteer organizations are being hit, just like everyone else. Fair enough. But acting like the volunteer had no right to ask the question is highly unprofessional, quite possibly unethical. If you’ve agreed to pay a contractor to work on your house, would you turn around and refuse to pay if the work were done according to specs? How about your doctor? I doubt very much that anyone would appreciate having their employer tell them that they were expected to continue working, but that the company had decided to stop paying their salary.

Now, the argument is often made that there’s a big difference between a volunteer and a paid employee. While there are certainly superficial differences, at root, there’s also a great deal of similarity. In fact, one can argue that virtually everyone is a volunteer: it’s just a question of whether they’re paid in cash, benefits/perks, recognition, or some combination and how much.

Fundamentally, the organization is making a deal: in exchange for a certain level of value provided to the organization by the volunteer, the organization will provide some form of recompense or recognition for that effort that demonstrates that the volunteer is contributing to the success of the organization. In fact, that recognition is doubly important: the organization is showing that it appreciates the volunteer’s efforts, and the volunteer is receiving solid evidence that the work they are doing matters to the organization. Let’s face it, no one likes to spend their time doing something that doesn’t matter to anyone.

When the organization reneges on its end of the deal, it risks leaving the volunteer feeling taken. Worse, it’s telling the volunteer that it doesn’t actually care about their contribution: that it’s clearly not all that valuable to the organization or the organization wouldn’t be so cavalier about it.

All in all, not a great way to maintain motivated volunteers during tough times.

So what should the organization do? Optimally, it should honor its commitments. However, if there are real economic reasons why they can’t (an unfortunately likely occurance today), then the organization should be not just open, but preemptively open.

In other words, as soon as the organization knows that it can’t meet its obligations, it should notify everyone affected by that. Lay out the situation; not “due to the bad economy,” but “due to an unexpected drop in enrollment costing the organization $xx, and unexpected expenses in the areas of  xxx” and so forth. The more specific and open the organization is, the more forgiving people will be. In fact, they are likely to work even harder on behalf of the organization: after all, if they’re volunteering it’s probably because they care.

When things are bad, the instinct is to circle the wagons and not communicate. That’s the wrong response. All it does is alienate those who would help. Instead, demonstrate trust by bringing people in and being open with them. Not only will it keep the volunteers motivated, you might just get some unexpected, novel ideas that will benefit the organization.