Thursday

Assumptions About People

Many of the attitudes that took hold during the Industrial Revolution linger on today, a circumstance brought to my attention by author Bob Waterman, who in our early days at AES had walked us through his Seven-S framework. “Based on what you know about the workplace and organizational arrangements of those businesses operating several hundred years ago, what were the assumptions made by the owner/managers about the workers who labored in their factories?” he asked.


I have asked that same question hundreds of times of people in my company, students in colleges and graduate schools, government employees, and leaders in many other organizations. Here is a summary of their responses:


- Workers are lazy. If they are not watched, they will not work diligently.

- Workers work primarily for money. They will do what it takes to make as much money as possible.

- Workers put their own interests ahead of what is best for the organization. They are selfish.

- Workers perform best and are most effective if they have one simple, repeatable task to accomplish.

- Workers are not capable of making good decisions about important matters that affect the economic performance of the company. Bosses are good at making these decisions.

- Workers do not want to be responsible for their actions or for decisions that affect the performance of the organization.

- Workers need care and protection just as children need the care of their parents.

- Workers should be compensated by the hour or by the number of “pieces” produced. Bosses should be paid a salary and possibly receive bonuses and stock.

- Workers are like interchangeable parts of machines. One “good” worker is pretty much the same as any other “good” worker.

- Workers need to be told what to do, when to do it, and how to do it. Bosses need to hold them accountable.


These assumptions have had a profound effect on personnel arrangements and decision-making structures in large businesses, governments, schools, and other large organizations.

Specialization became the rule. Lines of authority were clear. Workers were told exactly what was expected of them. A curious arrangement of staff and line positions emerged (experts suggest that the Prussian Army was the first to use this approach, late in the 19th century). The paternalistic impulse led to the creation of “benefits” that were provided in lieu of cash (free or cut-rate housing, schooling, and medical care). Most of the systems, controls, compensation criteria, and decision-making and leadership styles that we find in organizations today can be traced to these beliefs about workers.


When I ask people whether they believe the assumptions listed above still apply to modern-day working people, especially in the Western world, almost everyone says no. Most would agree with Max De Pree, a manufacturing executive who was a pioneer in participatory management, that advanced countries are entering a period in which 80 percent of workers will make their living by brainpower.


However, based on my own observations, I suspect that many corporate leaders still hold some Industrial Revolution views. What’s more, many of the approaches and practices in modern workplaces are nearly as demeaning as those used during the Industrial Revolution. Executives are either oblivious to the similarities—or won’t admit them. These are the only plausible explanations for the relative lack of change over 250 years in the structure of work in modern corporations, government agencies, and nonprofit organizations.


In my experience, most people don’t believe that fun and work can coexist. In large organizations, so few executives have experienced a joyful workplace that they have no idea how to create one. The result: Most employees grasp for high pay and benefits, fewer hours on the job, the mindless comfort of routine, less responsibility, early retirement, and job security. All are hollow substitutes for a rewarding, stimulating workplace. If you’re lucky, the workplace created by the Industrial Revolution may put food on the table, pay for your kids’ schooling, and even provide for a comfortable retirement. But “where’s the love, man?” as the old Bud Light commercial asked. Where is the love for work and accomplishment? Where are the other unique traits and gifts and frailties that make us human? Where is the passion to serve?

Maybe these were lost in the race for productivity and profits. I believe, however, that nothing so fundamental to human nature can be lost forever. If that is true, it will transcend even a movement as powerful as industrialization. It remains alive in many of our homes. It is preached in our churches, synagogues, and mosques. It exists in our memories of teamwork and competition in gyms and on playing fields. I am confident that it cannot be long absent from the place where we spend most of our waking hours—at work.

Leading to Workplace Joy

If the key to joy at work is the freedom to make decisions that matter to the organization, then the key to good organizational leadership is restraint in making decisions of importance. This is easier in theory than in practice. From my early childhood I was encouraged to be decisive. My mother helped me start little businesses that honed my decision-making ability. When I was a quarterback in high school, my coach allowed me to call all my own plays. I held numerous leadership roles during my school years. Then I attended Harvard Business School, where the case method teaches students about decision making. I was good at making decisions, and this ability was affirmed many times at school and at work. I enjoyed taking responsibility and living with the consequences.


Then came AES, an energy company with 40,000 employees in 31 countries and revenues of $8.6 billion, and the realization that this enjoyment should be spread around. I came to understand that as co-founder and later as CEO, I had to adopt a leadership style that left most of the important decisions to others. I tried to make my attitude reflect Max De Pree’s admonition that leaders should introduce employees as the “people I serve.” I had to find a way to remind myself daily that giving up many of my executive powers was essential to the goal of creating a fun workplace.


My objective is not to explain what it takes to lead people in a positive direction. Scores of books explain it better than I can. My focus is to show how a leader can make principles and values, especially fun or joy, a significant part of an organization’s definition of success. My views may not get high marks from many top executives. Few embrace the central organizational principles I advocate, especially giving up power.


One of the most difficult lessons I have had to learn is that leadership is not about managing people. People are not resources or assets to be managed. Nor is leadership about analyzing issues and making big decisions. Leadership is about the leader’s character, not his or her skills. Jerry Leachman, a former linebacker for Bear Bryant at Alabama and leader of my men’s Bible study group, says, “Good leadership starts with a person’s character.” The most important character traits of a leader who embraces the principles and values championed in this book are humility; the willingness to give up power; courage; integrity; and love and passion for the people, values, and mission of the organization. Leaders must realize that character is transparent to those around us. People “catch” character, virtue, and values by observing and practicing “right” behaviors and actions, and making them habits. The people who work for us absorb our character in both positive and negative ways. They are not fooled even if we try to cover up our flaws. We are an open book.


Humility and courage in a leader allows for the most important aspect of the leadership style introduced in Joy at Work, letting subordinates make important decisions. The exercise of power validates big titles and high salaries. When executives give power away, they often feel insecure, as if they are not doing their jobs. In fact, they are meeting the highest requirements of their jobs when they delegate decisions to subordinates. Not only are decisions being made by the people who are most familiar with the facts, but the act of making them gives more people a real stake in the organization’s performance. People then feel needed and valued because they are needed and valued. When a leader acts in a manner that assumes he is the best decision maker—in other words, the most knowledgeable and responsible member of a group—everyone else feels extraneous.


It takes courage for a leader to delegate and free his or her people to act, exercising their natural gifts and fulfilling their potential. These Leaders show passion for their subordinates creating dynamic, rewarding, enjoyable workplaces, by loving people, love spending time with them, and love affirming that they are worthy and important.


Integrity is another important characteristic in building joy at work. Integrity implies a reasonable consistency between beliefs and actions. I once worked with a board member who was very bright, experienced, and dedicated. But he was often dismissed by colleagues because he continually changed his position on important issues for no logically articulated reason. For example, he would make a statement to one person and say something totally different to someone else. Leaders who act in this manner are not trusted. They might be tolerated because of their position, but subordinates will most likely follow out of necessity, not out of respect. It is not a fun way to work.

At AES, we chose “integrity” as one of the company’s shared values, but not because it would get us ahead of the competition or improve our image. We chose it simply because it has a moral consistency that carries over to the way we treat our people and operate our businesses. The traits of good leaders—humility, courage, love, passion, and integrity—are essential to the roles they play in the workplace.


I believe that leaders have three main roles. They are responsible for interpreting the organization’s shared values and principles. They are senior advisers to everyone in the organization. And they are the collective conscience, pushing the organization to reach its goals and live up to its ideals.


The idea that top executives or financial experts should make key decisions is so ingrained in our corporate cultures that it is nearly impossible for leaders to delegate important roles and decisions. Leaders who want to increase joy and success in the workplace must learn to take most of their personal satisfaction from the achievements of the people they lead, not from the power they exercise.

The Annual Review

During my first face-to-face meeting with Peter Block, who influenced me greatly with his writing on stewardship, accountability, and empowerment, we got into a discussion of how best to judge the performance of subordinates. He told me he had once been an advocate of “annual reviews” in which the boss would meet with a subordinate and go over the previous year. One day, in a moment of reflection, Block imagined calling his wife into his office at home. “Sit down, honey. It’s time for your annual review.” The absurdity of this imaginary session prompted him to change his mind about reviews. He realized that the relationship between supervisor and subordinate should be closer to a partnership of equals. He suggested a process within organizations that starts with the subordinate doing an extensive self-review. The leader’s role in this approach is much diminished from that of the typical supervisor-led review. The boss becomes primarily a commentator, questioner, encourager, and, to a lesser extent, an evaluator.


I decided to try a variation of this approach with my senior team. Fourteen of us gathered at the home of one of the team members. One by one, each of us reviewed our own performance during the previous year. Most people outlined their successes, failures, and problems, as well as their goals for the year ahead. In nearly every case, four or five would offer a comment or question something the person had said. Sometimes they reinforced the person’s self-assessment; other times they suggested a problem or an accomplishment that had not been mentioned.


We held this type of session annually until I left the company. It became one of my favorite evenings with the senior team. There was not, of course, perfect honesty. Light did not shine on every issue. It was much too general for those who preferred specific quantifiable goals, but it was enormously valuable in other ways. It honored each individual as an important member of the team, regardless of title or status or compensation. It allowed us to show our respect for one another. It brought us closer together as a group. At the same time, I got a good sense of how people thought they had performed—and whether their self-assessments squared with the views of their colleagues.


I was a full participant in these discussions. I reviewed my own performance and chipped in comments about my colleagues. I took notes and afterward wrote a report summarizing the reviews. That report was submitted to the board of directors and to the compensation committee, which found it helpful when evaluating organizational changes and setting compensation. Doing annual reviews in a team setting was far more revealing and effective than having bosses do individual assessments of their subordinates. As Rob Lebow and Randy Spitzer wrote in Accountability: Freedom and Responsibility Without Control, “Too often, appraisal destroys human spirit and, in the span of a 30-minute meeting, can transform a vibrant, highly committed employee into a demoralized, indifferent wallflower who reads the want ads on the weekend. … They don’t work because most performance appraisal systems are a form of judgment and control.”


For too long, organizations have confused accountability with controls. My experience is that no one wants to be controlled but that most people want to know how well they performed. Keeping score is a central part of the competitive experience, and it plays a crucial role in making games enjoyable. It doesn’t seem to matter if the game is Hopscotch, Four Square, Horseshoes, Hearts, Boggle, or the World Cup, we keep score and care about the results. We may lose as often as we win, but at least we can measure our performance.


The key to Joy at Work is the freedom to make decisions that matter to the organization. The extensive self-review and team-based assessment is just one step to creating a fun workplace.

Thank God It's Monday

Below is my Labor Day Op-Ed piece.

On Labor Day, I’m always curious about where people think the “best” places are to work. Magazines typically rank the best by some combination of good pay, benefits and bosses, exercise rooms and flexible hours. But I think the telling items are vacations and paid days off. The rankings indicate that the “best” places to work are the ones where people come to work the least.

That’s not surprising, in view of The Conference Board’s report last year that half of all Americans say they are dissatisfied with their jobs, up from 40 percent in 1995. The study is one of thousands like it, and yet none seems to address the root problem: We haven’t changed our view of work since the Industrial Revolution began, 300 years ago.

A stratified structure of capitalists, managers and workers persists today, and it’s flawed. Managers still tell the worker what to do, when to do it, and how to do it. Trust, decision-making and education are reserved for managers; distrust, service to the machinery and task-training are reserved for workers.

Worker dissatisfaction with this arrangement has led to general strikes, the formation of labor unions, and that famous Tuesday, September 5, 1882, when the Central Labor Union took an unpaid day off work and marched around Union Square in New York, to declare the first Labor Day. Over the next 12 years, it spread state by state to become a national holiday in 1894.

Yet today, U.S. workers labor nearly 2,000 hours per capita each year — more than any other industrialized nation — and half are dissatisfied. How can we break through this Industrial Revolution structure to create joy and fun where Americans spend most of their waking hours?

When I co-founded AES in 1981 — it later would become one of the world’s largest energy suppliers, with more than 30,000 people in 31 countries — it was the beginning of my audacious effort to create the most fun workplace ever, which I continue to pursue as CEO of Imagine Schools, a national charter-school operator.

We realized that finding joy at work is not about how many hours one puts in, but whether or not one has the freedom to make decisions. We were born to work, to use our skills and talents for things that are meaningful and useful to ourselves and others. When employees misunderstand the redeeming purpose of their work, and controlling bosses make all the important decisions, the vitality is sapped out of the whole structure.

People find little meaning in their work if its purpose is solely to make money. Working to make money for someone else is even less meaningful. So at AES, we changed our titles, worldwide, from “workers” and “managers” to “business people.” Using models from other companies, and creating our own, we flattened our organizational chart to reduce supervisory layers (no more than five between the CEO and an entry-level person), and we spun off our headquarters’ departments — HR, purchasing, engineering — to create field teams at our plants and offices across the globe. Each “remote” plant was in charge of all of its decision-making. All information was shared companywide, so, in effect, AES “business people” became “insiders,” restricted by the same stock-trading structures as CEOs and directors.

We created a culture in our company that saw every decision made by a boss as a lost opportunity to create joy at work for others. As CEO, I limited myself to one significant decision a year and asked other leaders in the organization to do the same.

Making even a few important decisions was all it took for employees to have fun at work. For many, it was the first time in their working lives that they had been treated with trust and respect. What separates humans from other species is our ability to reason, make decisions, and hold ourselves accountable. When we experience that opportunity at work or at play, it results in pure joy.

Work doesn’t have to be the drudgery “we have to get up and go do” each day. It can be as much fun as play. All it requires is a meaningful purpose to the work we undertake, and leaders who can restrain their own use of power to let workers make important decisions.

If this could happen, we might hear workers saying “Thank God it’s Monday” on every Monday of the year — not just on Labor Day.

Dennis Bakke (http://www.dennisbakke.com/) is the author of “Joy at Work” and the CEO of Imagine Schools.

"Anti-They" Campaign

In one of my periodic nighttime visits to the AES plant in Pennsylvania, I found Francis in the main control room, operating the facility. He had worked at the plant for 30 years. During the course of our conversation, I mentioned that there would likely be a bonus for everyone at the plant because of the improved performance of the boilers and turbines. It would be the first bonus ever for union members like Francis.

“They’re going to shut it down,” he grunted. “They’re going to do what?” I asked incredulously. “By the way, who is ‘they’ anyway?” But Francis was convinced. “There is no way that they will allow us to get that bonus. The boilers will be shut down sometime before the end of November.” I muttered something to the effect that it didn’t make economic sense to shut the boilers down to avoid paying a bonus and then left. The bonus checks were handed out at a plant celebration a little over a month after my visit. As Francis received his check, the plant manager reminded him of his earlier conversation with me. “The boilers didn’t get shut down, and you got your bonus,” the plant manager said cheerily. Without any hesitation or hint of a smile, Francis said, “Yeah, but they took out taxes.”

It took years to change the victim mentality engendered by Industrial Revolution assumptions about workers. Some people were never able to change. Early in our encounters with people who had worked in industrial settings for more than a few years, we noticed a strong tendency to blame some unnamed and invisible “they” for every decision the employees didn’t understand or agree with. Eventually, that led to a company-wide “anti-they” campaign. Our purpose was to find the “theys” who seemed to be in charge of all injustices in our company and expose them as quickly as possible. The company’s success was evident less than a year later when a reporter visited our Placerita plant in California. “Everyone talks about ‘we’ around here. What a difference from other businesses I visit.”

If employees are constantly using the word "they" to refer to a mysterious person or group that makes all the decisions, it's a sure sign that there is a great divide between management and labor. In fact, with the Joy at Work approach, there should be no separate management people. There is only one category of employee within the organization.

My experience suggests that there are 9 main obstacles to eliminating the "theys" and implementing the Joy at Work approach:

(1) Managers and bosses won’t restrain themselves from making decisions. Leaders believe it is their right to do so. They are “in the best position” to make the call. By a large margin, their refusal to delegate responsibilities is the reason that so many people are bored and unhappy in their jobs.
(2) Leaders have the wrong motives. They may allow subordinates the freedom to make significant decisions, but they do so primarily because they believe it will lead to financial success or serve other objectives unrelated to a fun workplace. Working people aren’t fooled.
(3) The organization’s purpose is shallow or selfish. If employees can’t adopt the mission of a company as their own, and if they can’t see why it’s worthwhile to society, the likelihood of joy at work diminishes dramatically.
(4) Mistakes are often attributed to systems rather than to human error or outside forces. When mistakes are made by lowerlevel employees in decentralized organizations, blame is often assigned to the practice of delegating decisions. The result: a return to the top-down, hierarchical structures of the past.
(5) Information is provided only to senior executives and board members. Sharing information, including financial data, with every employee is crucial to fun workplaces. It makes people feel trusted and important.
(6) Senior executives certify all information required by the government. Unless ways are found to circumvent this regulatory rigamarole—at AES, we would make plant people “officers” so they could perform certifications—lower-level employees are marginalized.
(7) Boards of directors require decisions to be made by themselves or by senior leaders. Board members work part time and typically get to know only a few top executives. Because directors are unfamiliar with people at lower levels, they tend not to seek their advice or rely on their expertise. When excluded from decisions, employees become estranged from the enterprise.
(8) Management and labor are adversaries. Hourly pay, overtime work, unions, perks, uniforms, and numerous other artificial and unnecessary distinctions create a class system in the workplace.
(9) Employees are treated like children. Paternalism and the desire for security prevent people from taking risks andresponsibility.
Many have lost the passion that is both the cause and result of a wonderful workplace. Workplace passion comes from doing something that we believe is important. If only we could all be as passionate about our work as Michael Jordan was when he played basketball. Passion means that no one keeps track of time. No one says “it’s just a job.”

Eliminating the "theys" in your organization is not done overnight. Remember, the key to Joy at Work is giving people (at all levels) the freedom to reason, to make decisions, and to take reponsibility for their actions.

#1: When given the opportunity to use our ability to reason, make decisions, and take responsibility for our actions, we experience joy at work

The World Bank once conducted a study of 70,000 poor people around the world. One of the questions asked of respondents was this: “What is your most pressing need?” The answer was not social services or homes or other material things. What these people wanted most was the freedom and wherewithal to be entrepreneurs. This was not surprising to me. People I have met—regardless of class, income, nationality, and education level—want a chance to make the most of their abilities to meet the needs of their families while doing something useful for society.

Joy at work starts with individual initiative and individual control. Individuals, not a bureaucracy, make the decisions and hold themselves accountable. The process is bottom up, but it is not a loosey-goosey, anything-goes affair. It involves creativity, careful analysis, meticulous planning, and disciplined execution (see chapter 4 on the advice process). The goal is to design a workplace where the maximum number of individuals have an opportunity to make important decisions, undertake actions of importance to the success of the organization, and assume responsibility for the results.

Why is it fun and rewarding to play in a game or work in an organization in which you are given a measure of control and responsibility? The answer lies in the nature of human beings. We are uniquely created with the ability to reason and to develop talents and skills; we are able to apply these gifts when making decisions; and we feel it is natural and appropriate to be held accountable for the actions we take. When all of these factors come into play at the same time, we feel something approaching pure joy.

#2: The purpose of business is not to maximize profits but to steward our resources to serve the world in an economically sustainable way

The goal of meeting a need in society should be central to every organization incorporated by the state. Most firms and the people who work in them acknowledge that their organization exists to do something useful for society. Unfortunately, the current fad of putting shareholder value at the forefront of mission statements has made serving society a secondary goal, at least for many publicly traded corporations.

Some companies seem to exist only for profits. Selling a product becomes the means to that end. In my opinion, a much better case can be made for reversing the means and ends. The end should be selling a product, and the means to keep doing so should be making a profit.

The concept of service is crucial to the creation of a joyful workplace as people want to be part of something greater than themselves. They want to do something that makes a positive difference in the world. Most employees do not consider making a profit for shareholders, or even making money for themselves, sufficient to satisfy this goal. When a company gives a high priority to serving society, its employees are energized.

The most important questions in business are often never asked: What is our motive? What is our purpose? Are they worth-while? Motive and purpose guide behavior, color decisions, and add or subtract joy from work. Keep asking these questions, and use the answers to measure success.

#3: Attempt to create the most fun workplace in the history of the world

Why do people consider sports fun and exciting but view work as boring and burdensome? My longtime love of sports prompted me to look more closely at what made me enjoy playing them so much. Maybe I could gain an insight or two that could help turn work into a much more positive experience. Take basketball, for example. When I ask people what the most fun thing to do is in basketball, a few say “passing the ball.” Most say “shooting the ball.”

“When is it most fun to shoot the ball?” I ask.
“In a game,” is the response.
“When during the game?”
“When there are two seconds left and my team is 1 or 2 points behind or the score is tied.”
“What kind of basketball game?”
“In the championship game, in the NBA finals.”

Most people experience game settings as “fun,” “exciting,” and “rewarding” when they are playing for something important and have a key role in deciding the outcome of the contest. At AES, we set the audacious goal of creating the most fun workplace in human history. We defined fun to mean rewarding, exciting, creative, and successful.

Fun is not about Friday afternoon beer parties. What we meant by fun was captured many years later, in slightly broken English, by an AES employee writing from Kazakhstan: “The common principles of integrity, fairness, fun represent AES culture which are mostly convincing. They are also the basic spirits. I work on the site whether day or night, whether weekend or working days, whether with pay or without. In this kind of working environment, my talent was fully exerted. I felt a lot of fun to use my talent and experiences accumulated throughout years of hard work. I feel I am standing on the shoulder of a giant fulfilling the social responsibilities.”
Not only are these proposals new to most executives; the idea of carrying them out can be downright scary. So, it takes no small amount of courage for an organizational leader to embrace them intellectually and then put them into practice.

Courage is required when senior executives are asked to let others take the last-second shot. When executives give power away, they often feel insecure, as if they are not doing their jobs. In fact, they are meeting the highest requirements of their jobs when they delegate decisions to subordinates. Not only are decisions being made by the people who are most familiar with the facts, but the act of making them gives more people a real stake in the organization's performance.

#4: Eliminate management, organization charts, job descriptions, and hourly wages

I explain in detail what I mean by eliminating management in the book but here are my key points:
--No official organization charts; no job descriptions except those that say “Do whatever it takes” or ones written by the employee.


--No company-wide job descriptions. Every person is considered unique and must build a job around his or her unique skills and passions.


--There is only one category of employee within the organization. There are no separate management people.


--Leaders are mentors, coaches, teachers, helpers, and cheerleaders--not "managers" of people.


When we started to change the AES compensation policy, only 10 percent of our people worldwide were paid a salary. The other 90 percent received hourly wages and overtime. By the time I left in 2002, over 90 percent of 40,000 people in 31 countries were paid a salary, just like the company’s leaders. It was a giant step in breaking down barriers between management and labor and in bringing us together as AES business people. It was a revolution in our workplace—and one of my proudest accomplishments.

#5: Fairness means treating everybody differently

When it comes to "fairness," I often think we chose the right value but the wrong word. In my lectures, I often ask people to complete the sentence. "Fairness means treating everyone _______." Ninety-five percent of the people I ask respond, "the same." I usually respond, "I mean just the opposite." The word "justice" better describes the standard we set for ourselves and AES. I like the traditional Jewish definition of justice: "To each person what he deserves, to each one what is appropriate." If I combine this definition with an assumption that each person is unique, I logically complete the sentence this way: "Fairness or justice means treating everyone differently."

We’ve all heard the story of the sergeant who stands before his troops and announces, "Nobody gets special treatment around here!" What fairness meant at AES was that everyone got special treatment. The interpretation of these concepts gets confused because of another concept we hold dear: equality. The logic of equality goes something like this: "I’m the same person or do the same job as another person, so I should be treated the same as that person." Equality and fairness are not synonyms, however, and neither captures organizational justice the way I use it.

Each individual who works in the organization is unique and special and deserves to be treated accordingly.

#6: Principles and values must guide all decisions

Principles are the bottom line. They are meant to be ends in and of themselves, not techniques to create value for shareholders or to reach other financial goals. They should be a significant part of an organization’s definition of success. Principles should drive and shape the business regardless of its size, complexity, or age.

Principles mean something only when they affect everything we do, every day of the week. If values and principles are to set the tone for organizations and guide their decisions, they must become part of every task, plan, discussion, and operation. We should attempt to live according to a set of unchanging shared ethical principles, because it is the right way to live--not because it works.

Don't be tempted to follow the principles in order to improve your bottom line. There are three things you need to know:

First, living by shared values and principles does not automatically lead to financial success or make a “great” company.

Second, linking values and principles to economic success will most likely lead to eventual rejection of these same values and principles by board members and other leaders of the organization.

Third, linking principles and the bottom line diminishes the company in the eyes of its employees.

We all know the principle of basic logic that says: If A, then B. If not B, then not A. If A (certain principles and values), then B (financial success). If not B (financial success), then not A (it’s time to junk principles and values). In other words, if a company links values to high profits and share price, it should logically reject these values when the stock price or profits fall. Because all companies experience financial fluctuations, this logic would require them to adjust their values and principles every time they experienced a downturn. As I said above, principles should be your bottom line.

#7: Put other stakeholders (shareholders, customers, suppliers, etc.) equal to or above yourself.

Leadership is about humility and serving others. When you put other stakeholders above yourself, you do just that. Humility is at the core of a leader’s heart. Humility is understanding who you really are, regardless of your title or education, your wealth or status. Humility underlies the impulse to make others do better. We all have a tendency toward selfishness and greed. Most of us are tempted by power, money, and fame. Some of us will act in inappropriate ways to get these things. When our mission is to serve others, we don’t think as much about ourselves. Channeling our energy toward worthy pursuits is infinitely more effective in governing behavior than draconian compliance programs.

Apartment Building Example
Creating economic value is a prerequisite to being a viable business, but the value created cannot be limited to shareholders. Shareholders do not “own” a company in the way that I own my house. They are more akin to investors in an apartment building who receive a portion of the rental income after paying for maintenance, heating, security, and other expenses. Other stakeholders in the apartment building—the renters, doormen, and superintendent, for instance—also receive benefits from the enterprise. Likewise, the stakeholders in a corporation deserve returns for the contributions they make to the company’s effort to serve society. Value needs to be created for all major groups that assist the corporation in achieving its purposes. To sustain itself economically, a company needs to generate enough value over the long term to “pay” stakeholders an amount consistent with their contribution to the enterprise. Giving an outsized return to any single stakeholder effectively cheats the other stakeholders.

#8: Everyone must get advice before making a decision. If you don’t seek advice, “you’re fired.”

The advice process is a very simple, although often controversial, concept. It takes the “suggestion box” management approach of the 1970s and ’80s and turns it upside down. Instead of the boss getting advice and suggestions from people below, the decision maker—who is almost always not an official leader—seeks advice from leaders and from peers.

The advice process is my answer to the age-old organizational dilemma of how to embrace the rights and needs of the individual, while simultaneously ensuring the successful functioning of the team, community, or company. I observed that Japanese companies tended to emphasize the group and consensus, while American culture pushed rugged individualism. I believe the advice process strikes a better balance. It leaves the final decisions to individuals, but it forces them to weigh the needs and wishes of the community. Parenthetically, the Internet was made to order for our advice process. The kind of wide consultations that I advocate would not be possible in large, dispersed organizations were it not for e-mail.

Five important things happen when the advice process is used by an individual before making a decision or taking action:First, it draws the people whose advice is sought into the question at hand. They learn about the issues and become knowledgeable critics or cheerleaders. The sharing of information reinforces the feeling of community. Each person whose advice is sought feels honored and needed.

Second, asking for advice is an act of humility, which is one of the most important characteristics of a fun workplace. The act alone says, “I need you.” The decision maker and the adviser are pushed into a closer relationship. In my experience, this makes it nearly impossible for the decision maker to simply ignore advice.

Third, making decisions is on-the-job education. Advice comes from people who have an understanding of the situation and care about the outcome. No other form of education or training can match this real-time experience.

Fourth, chances of reaching the best decision are greater than under conventional top-down approaches. The decision maker has the advantage of being closer to the issue and will probably be more conversant with the pros and cons than people in more senior positions. What’s more, the decision maker usually has to live with consequences of the decision. Even if the decision maker comes to an issue without fully understanding its implications for the organization, that weakness can be overcome by obtaining advice from senior people. As Samuel Taylor Coleridge wrote: “Advice is like snow; the softer it falls, the longer it dwells upon, and the deeper it sinks into the mind."

Fifth, the process is just plain fun for the decision maker because it mirrors the joy found in playing team sports. The amount of fun in an organization is largely a function of the number of individuals allowed to make decisions. The advice process stimulates initiative and creativity, which are enhanced by wisdom from knowledgeable people elsewhere in the organization. The process (of making decisions) is just plain fun for the decision maker.

#9: A “good” decision should make all the stakeholders unhappy because no individual or group got all they wanted.

Profits should have the same priority as paying interest to financial institutions, salaries to employees, taxes to governments, and discounts to customers. Why should enriching shareholders be more important than producing quality products and selling them to customers at fair prices? What logic says that a company should put creating value for shareholders ahead of the economic well-being of its employees? The legendary lawyer Clarence Darrow reinforced this view when he said, “The employer puts his money into ... business and the workman his life. The one has as much right as the other to regulate the business.” Employees should share in the value they create.

As “individual citizens” of the state, corporations are given certain rights and responsibilities in order to serve society. Most modern corporations rely on various groups and institutions to help them meet this goal.

Classical economics suggests that all “residuals” (profits) should go to shareholders or owners. Some students of the modern corporation have used this economic theory as the basis for suggestingthat making money for shareholders is the primary goal of investorowned corporations. Some legal scholars also support this theory, although the courts have not consistently held that the “shareholder is king.”

Margaret M. Blair, the Sloan visiting professor at the Georgetown University Law Center and a nonresident senior fellow at the Brookings Institution, analyzes the legal, economic, historical, and practical issues in Ownership and Control: Rethinking Corporate Governance for the Twenty-First Century. Her book supports the idea that shareholders are only one of many important stakeholders in corporations. “What troubles me most about the shareholder primacy argument is the glibness of it all,” she wrote in The Financial Times in 2002. “Anyone who runs a business on the basis of fundamentals knows that they have to pay attention to human capital, their suppliers, franchise operators, all the different parties involved.” During the past two decades, several states, including Illinois, Massachusetts, New Jersey, New York, and Pennsylvania, have added language to their laws of incorporation that give expanded rights and other considerations to these stakeholders. The shift was evident even in the conservative Board Alert newsletter, which in February 2003 published an article titled “Board Focus Shifts From Shareholders to Stakeholders: Employees, Customers, Communities Become More Important to Directors.” The article stated: “Corporate boards are rethinking whom they represent as they draft governance principles required by new regulations.”

Regardless of the economic and legal issues, however, most CEOs of large organizations know that the classical economic view and a strict legal interpretation of corporate ownership have little relevance to how the modern organization does and should work in reality. Each stakeholder is crucial to a company’s success. Obviously, the company depends on investor capital, but it also needs lenders, customers, productive employees, rights and protections provided by government, and products and services from suppliers. The value created is the sum of the contributions of all these stakeholders. In return, each stakeholder deserves a portion of the value created.

#10: Lead with Passion, Humility, and Love

The most important character traits of a leader who embraces the principles and values championed in this book are humility; the willingness to give up power; courage; integrity; and love and passion for the people, values, and mission of the organization.

Humility is at the core of a leader’s heart. Humility is understanding who you really are, regardless of your title or education, your wealth or status. Humility underlies the impulse to make others do better.

Being a leader is like being a good point guard in basketball. In Pat Conroy’s book My Losing Season, he describes the joyful role of a playmaker who makes everyone else on the team perform better than even the team members thought was possible.“I wanted to luxuriate in the waters of pure and free-floating human joy,” he wrote. Conroy was not the best shooter or the best defender or the best rebounder. He did not make decisions for his teammates. But he was their leader. He served his teammates and made them better.

“Love” is not a word used much in the rough-and-tumble corporate world, perhaps because it sounds soft and sentimental. But as Max De Pree says in Leading Without Power, “We are working primarily for love.” Love prompts us to visit our employees around the world. Love makes us want to work extra time. Love pushes us to do whatever it takes to help others succeed. Love forgives mistakes and binds up the hurt and frustrated.
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