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Archive for September, 2009

We’re Not Running Out of Whistles - Part 1

Tuesday, September 29th, 2009

The whistleblower. A conduit to justice or a path to humility and dispair? What rights and protections should a whistleblower have? Is the role of the whistleblower gaining or declining in importance? Is the whistleblower the villain, or the victim?

From my perspective, the whistleblower exists for one reason, and one reason alone - to expose and make visible a silent problem. Yes, the silent problem type that is being intentionally silenced (as noted in my book, Without Warning). I write in the chapter,” The Whistleblower,”

In most stories, a major character is confronted with a dilemma, often the challenge between “Doing what’s right” and “Doing the right thing.” The tension between these two is real and visible, and while the desired outcome is clear, the means to the outcome is sketchy and treascherous at best. And the dilemma often feels bigger that life itself. Such is the contentious landscape of the whistleblower.

In a world that has been thrown upside down in the past year, the whistleblower is slowly gaining stature and credibility, because the laws protecting the whistleblower are slowly gaining strength. And this is important, because without laws protecting the whistleblower, the risk/reward ratio is simply too great. This perspective is gaining strength, which is illustrated over at the Whistleblowers Protection Blog. Here are but a few of the captions that illustrates the role and importance of whistleblowers.

Stephen M. Kohn, Executive Director of the National Whistleblowers Center (NWC), is in Montenegro this week calling for enactment of whistleblower protections as a key component of transparency. 

Attorney Dean Zerbe, senior counsel to the National Whistleblowers Center, told Reuters and the ABA Journal that he hopes publicity of this settlement (Pfizer’s Bextra) will encourage other whistleblowers to come forward with information about fraudulent marketing. “The use of whistleblowers has really opened up the keys to the kingdom in terms of what’s going on in these companies,” 

I’m convinced that whistleblower protections and rights will continue to gain in stature and strength under this administration. I believe the whistleblower will become a primary tool for law enforcement in the future. Let me state it again, the whistleblower will become a primary tool for law  enforcement. Think about it. In an era of exploding budget deficits, the whistleblower becomes law enforcements low cost means to enforcing the statutes and laws already on the books. In effect, the whistleblower becomes the low cost alternative to the investigative task force. And organizations that have silent problems will be at risk of the whistleblower in the future.

Bottom line: The whistleblowers role of exposing silent problems in organizations will grow in importance in the future. How organizations guard against this risk is critically important, and will be discussed in Part 2.

ADM and “The Informant”

Tuesday, September 22nd, 2009

In the 80s and 90s, I was actively involved in the agribusiness arena, and ADM was a big name in the marketplace. They were respected and always, just a little bit mysterious. Their footprint was worldwide; everything from grain origination, to grain processing, to global merchandising activities. Plus, the Andreas family was powerful, with political connections around the globe. ADM was a powerhouse for a multitude of reasons.

One of the reasons they became so powerful was the way they played the game we refer to as business, which is the basis for the just released movie, “The Informant.” I have to admit, its a little scary to say I knew many of the participants in the movie. I met them at tradeshows and I helped sell their products into the marketplace, willingly. What a story and quite an education. Yes, ADM at the time was an organization built on silent problems.

Today, ADM has recovered from their silent problem missteps of 2-decades ago. And possibly more interesting, ADM was supportive in the making of the film, “The Informant.” Here is one of the answers ( FAQ )about the movie.

How does the Company feel about “The Informant!” movie?
When we learned that Steven Soderbergh would be making the film, we met with him and his team.  We gave them tours of our facilities and allowed them to do some filming on our property. We understand that “The Informant!” is a movie, and while it isn’t pleasant to see ADM associated with past illegal activity — however much the events and people depicted may reflect only a very narrow part of the past — we are confident that our customers, colleagues and communities understand that ADM, then and today, is made up of ethical, hardworking people.

Due to their past, ADM understands and has lived inside the chaos and harm silent problems can create. They understand how silent problems can disrupt anything and everything. They know the impact silent problems have on everything from corporate culture to business performance. So what have they done about it? ADM has implemented a comprehensive plan to bring silent problems out into the open. And here it is

We rely on you to help us by speaking up whenever any situation threatens our values and our reputation. When you do, you provide us with the information necessary to remedy the situation. Such situations may pertain to:
Ethics and compliance issues, such as financial reporting, insider trading or antitrust regulations.

  • Employee relations and human resources, such as harassment, discrimination, scheduling/time abuse or disciplinary action.
  • Loss prevention and asset protection, such as threats and violence, alcohol/drug abuse, workers’ compensation fraud or internal theft.
  • Environmental, quality, health and safety, such as OSHA violations, hazardous waste disposal or product tampering.

When it comes to any of those issues, silence doesn’t help. It hurts. Select from below to submit a report, follow up on a report that has already been submitted or read our Business Code of Conduct and Ethics, “The ADM Way.” Be assured that you will never be retaliated against or punished in any way for reporting your concerns in good faith.

Bottom Line: Silent problems destroy companies! Read my book, Without Warning, it provides the critical overview of silent problems, and how they impact organizations. ADM’s missteps should be a lesson to everyone and what can happen if silent problems aren’t dealt with proactively, and eventually escape.

The Fog Factor

Monday, September 21st, 2009

communicationHave you ever wondered how communication impacts organizational performance?

Well if you haven’t, you should, because recent studies by Rittenhouse Rankings indicates there is a direct connection. For over 10 years, Rittenhouse has evaluated approximately 100 CEO shareholder letters of Fortune 500 companies.  And the research reveals there is a direct correlation between stock performance and communication clarity. For instance:

Companies with CEOs ranked low in candor tend to articulate less coherent strategies and therefore, undermine execution in producing desired results. Given the value-building benefits of authentic and clear CEO communication, boards of directors have a duty to select new candidates that set an example for candor throughout the corporation.  Rittenhouse Rankings President, L. J. Rittenhouse

Rittenhouse Rankings Inc. released results of its 2008 survey of CEO Candor (www.RittenhouseRankings.com) and confirmed today that only 16 percent of CEOs offered reasoned and balanced outlook disclosure in their letters to shareholders. In addition, the researchers reported that points deducted for corporate Fog, including jargon, clichés, spin and confusion, increased 17 percent from 2007. The toxic component of this Fog, a measure of highly confusing statements, increased to 80 percent of the total, up from 68 percent in 2007. L.J. Rittenhouse, President of Rittenhouse Rankings, said, “These findings reveal that CEOs are less able or willing to credibly communicate an understanding of their businesses.”  Rittenhouse Press Release

Although Rittenhouse’s research is focused on Fortune 500 companies, I believe her findings in general apply to every organization, big and small. For instance I was recently asked to write an article for another web site, I titled it, “Your Toughest Race.” In business, the toughest race too often ties back to communication.Consequently, it should be of little surprise that “communication” is one of the five areas where silent problems reside. And therefore, one of the biggest and most effective means of moving your organization forward as this economy rebounds is to work diligently on making your communication more candid and effective. This means:

  • Candid communication is better than communication that has been candied over.
  • Be clear, concise and get to the point.
  • Avoid generalizations and fog where the communication message can be easilty lost or misunderstood
  • Speak in plain English (or whatever language is communicated). Avoid jargon and other words and phrases that diminish the clarity of the message.

Clarity of communication is a leadership and management tool that must be embraced. Each of us understands this, yet I’m constantly challenged by how ineffective communication can become - even from the leader of the pack.

Bottom Line: Communication is the cornerstone of organizational performance and effectiveness. If your organization is a little weak on the performance scale, communication is always a good place to start your undercover work.

Silent Problem - Lehman Style

Friday, September 18th, 2009

 It’s been a year since Lehman Brothers fell - hard. Now the stories are beginning to surface, many of the “silent problem” type that I present in my book, “Without Warning.” What is now surfacing is not a surprise, nor is it surprising. The story is simple. Smart people were “locked in” to pursue a path of increasing risk as a means of increasing profits and revenue. And individuals that didn’t buy in were asked to leave or shut-up. For instance, a recent article over at the New York Times titled, Tales From Lehman’s Crypt tells part of the story.

He recalls vividly the days in early 2007 at Lehman when his financial models began to throw up more warnings showing delinquencies and defaults, and he remembers colleagues on his desk raising questions about loan quality. But he said the firm’s ranking as the top loan originator on Wall Street, not to mention the pressures put on the desk by Lehman’s growth-obsessed leadership, made it difficult for even the most senior executives to raise questions, even a senior vice president like Mr. Linton. He says he has no qualms about his work at Lehman or its economic aftereffects. “Anyone at our level who had a different view from senior management would find themselves going somewhere else quick,” he says. “You are not paid to rock the boat.”

In effect, Lehman and everyone that worked for the organization was “Locked In” to a strategy that was laying golden eggs, at least up to the point when the goose died. What are a few of the key learnings from Lehman’s fall? I’ve come up with three.

  1. If an organization is structured for compliance, in essence, it’s structured for failure.
  2. Arrogance is a dangerous attribute - for any leader. See my previous post Do They Believe Money Is Silent
  3. Previous business success is a weak predictor of future business performance.

Today, Lehman is history. Billions lost. Careers failed. Families decimated. Yes, Lehman had a multitude of silent problems inside their organization. A real leader would have encouraged these silent problems to be surfaced, heard, and possibly acted upon. Instead, they were discouraged and squeelcheed.  And eventually, it was the silent problems that eventually became a Without Warning event that killed Lehman when it was at the height of its power and influence.

Bottom Line: The lessons from Lehman’s rise and fall is applicable to any business, large and small.

Customer Feedback Dissatisfaction - Web 2.0 Style

Tuesday, September 15th, 2009

dissatisfiedIn a recent post titled, “The Customer Service Satisfaction Gap” I presented that the key to customer service is getting as close as possible to a customer’s expectations. Well yesterday I became very dissatisfied with the store location search at Pizza Hut.com. Here is what happened and the reason for my displeasure.

I had a full day of coaching and returned home without a plan for dinner, so I asked my son what he wanted. Well, he wanted to try the new take home pasta dishes he’d seen on TV from Pizza Hut. I quickly opened up my laptop, looked up Pizza Hut’s home page and then clicked on their location tab. The page had an entry form for my street location and zip code. Well I put in my zip code and it demanded that I enter my street address. I thought to myself, “why do they need my street address?” And, what if I were traveling down the road and trying to find a location for let’s say Woodbury, do I put in, “I’m traveling 70 MPH down I494″ - find a location. So here is the first lesson of Customer Service:

Lesson #1: Keep it simple - the less information a customer needs to provide to complete the service request, the better.

After being turned off by their persistance to provide my street address to them, I decided to check out their customer complaint form. Guess what? They wanted more information to process my complaint - aka. advice. What did they need now. First, they wanted to make certain that I was at least 13 years old (not certain what that was for) and now they required that I provide them my full name, my address (street address - they must like street information), city, state, zip code, phone number and email address - I was somewhat surprised that they didn’t also require credit card information for me to process my complaint. That is probably coming in the next version. So I asked myself, “Why would they want all of this personal information just to process a customer’s feedback?” The only thing I could surmise was that “Marketing” interfaced with “Customer Service” and the two created a hybrid. So here is lesson #2.

Lesson #2: Customer Service is customer service, and Marketing is marketing. Keep them separate, because marketing’s input will simply complicate and hinder effective customer service.

Well, when they demanded more information, I simply input B.S., with an email address. And here is the computer response I received.

Dear Customer,
Thank you for taking time to share your feedback with us. We are continually looking for ways to improve your online experience and we value your input.
We appreciate your business!

- Pizza Hut Customer Service

In the end, Pizza Hut did not provide customer service, even when I took the time to provide them customer feedback. Secondly, I did not place an order with Pizza Hut, and therefore is facetious for them to state that they “appreciated my business.” I actually took my business elsewhere. And lastly, this leads to lesson #3.

Lesson #3: Customer feedback is a valuable component of the customer service equation. Make the customer service interface as simple and uncomplicated as feasibly possible.

Bottom Line: In today’s marketplace, customer service is more important than ever, and therefore, the value of good customer feedback is also heightened. Don’t allow customer feedback become a reason for Customer Dissatisfaction.

What is your customer dissatisfaction story?

You Have A Problem

Sunday, September 13th, 2009

Companies are shunned in the courtship dance all the time. Part of the time, it’s about positioning so as to extract more money for their shareholders. At other times, it’s about lack of fit or simply a lack of interest. It’s a high stakes game that is played out across the marketplace every day, and across all sized and types of business.

In recent weeks, the stories surrounding Kraft Foods unsolicited takeover offer of Cadbury PLX, the world’s second largest confectionary company is interesting, and telling. Cadbury’s Chairman Roger Carr said in a letter on Septermber 12 to Kraft’s CEO Irene Rosenfeld (posted on company’s website here ):

In my letter of 31st August, I informed you that the Board had rejected your unsolicited proposal on the grounds that it is unattractive and fundamentally undervalues Cadbury.  Under your proposal, Cadbury would be absorbed into Kraft’s low growth, conglomerate business model, an unappealing prospect which contrasts sharply with our strategy to be a pure play confectionery company… Your proposal is for Cadbury shareholders to exchange shares in a pure-play confectionery business for cash and shares in Kraft, a company with a considerably less focused business mix and historically lower growth

The story around Cadbury, Kraft and other potential suitors is just beginning. However, Cadbury’s Chairman Roger Carr has just created a huge problem for Kraft by stating it was a low growth, conglomerate business model with considerably less focus. Now that has to hurt. So what can we surmise from this?

  1. Cadbury’s Roger Carr has little respect for Kraft Foods, nor Kraft’s CEO Irene Rosenfeld.
  2. Cadbury views itself as being in the drivers seat, and is willing to be highly vocal and transparent in the process.
  3. Cadbury’s Richard Carr must be respected and feared by Kraft going forward.

In my opinion, from this point forward, Kraft has a problem. First they have a huge credibility problem. After all being referred to as ”low growth” and “less focused” doesn’t add value in the marketplace. In fact, I expect the Kraft brand could lose significant value in the marketplace. Secondly, Kraft’s internal problems have just been magnified and they will begin to filter out into the marketplace. Yes, their silent problems will no longer be silent.

Bottom Line: Acquisitions are always tricky business, and more often than not, they underdeliver. In this case however, Kraft has just been delivered a Without Warning event that they didn’t see coming. Kraft in my opinion has been a challenged business for years, now their challenges have just become significantly greater as their silent problems will now be exposed.

The Customer Service Satisfaction Gap

Wednesday, September 9th, 2009

Customer Service and Customer Satisfaction go hand-in-hand. Or maybe I should restate that. Too often customer service and customer dissatisfaction go hand-in-hand. Yes, great customer service equates to strong customer satisfaction and vice-versa. Every business leader knows this, yet too often, we get it sooo wrong.

Why does this occur?

The answer to this question is simple. We don’t quite understand how to make a customer happy. Oh there are lots of formulas. There are surveys and questionaires. And of course, there is the customer service scripting 101 that many customer service agents receive. However in 90+% of all cases (okay I made that number up, but I believe its close), the difference between a happy customer vs. a dissatisfied customer following a customer service interaction can be determined by this simple formula.

The Customer Service Satisfaction Gap is the difference between what an individual expects and what they receive.”

Consequently, the holy grail of great customer service is to simply get as close to a customer’s expectation as feasibly possible. If they want a quick conversation with a service agent and there placed for minutes on music-pause, I’m likely to find a dissatisfied customer. If they expected a new replacement for a defective product and instead had to sedt it in for service with no replacement, I’ll likely find a dissatisfied customer. So to achieve great customer service satisfaction, the customer service agent simply needs to identify the desired outcome up front, and get as close to that outcome as feasibly possible.  Instead, this is what typically happens. The customer service agent has a manual. The agent identifies the problem. They go to the manual for what they can offer, and then try to sell (tell) the customer on what a lucky person they are for the prebaked solution. This is a recipe for customer dissatisfaction, so here is the magic quotient, a second time.

Identify the desired outcome (this is what they believe to be fair and would earn their future business) early in the customer service conversation. Then work to get as close to this outcome as feasibly possible. It’s that simple.

Bottom Line: In most customer service interactions, a Customer Service Satisfaction Gap exists. By understanding what it will take to eliminate or minimize this gap is important in a company’s overall customer satisfaction/loyalty score. And as most business leaders understand, loyal customers are the most important customers of all. Therefore, it’s important to do what you can to earn a customer’s loyalty. This is the easiest and most effective means is to positively change your customer service/satisfaction scores.

Boeing’s Silent Problem Challenge

Tuesday, September 8th, 2009

Boeing 787 Dreamliner

Outsourcing is an integral part of most businesses. For instance, small companies routinely outsource their payroll processing, accounting, distribution, and many other important functions. Others might outsource their IT needs, their logistics needs, or even their needs for temporary employees. For many however, outsourcing relates to the sourcing of key components for the manufacturing of products and services. It could be anything from buying a simple wire assembly, or in the case of Boeing, sourcing an extremely complicated wing assembly for the new Boeing  Dreamliner.

If you’ve been following the news over the past couple of years, the Dreamliner - an engineering marvel, has experienced repeated and costly delays. A recent article in the NYT titled “A Dream Interrupted at Boeing“ details many of the challenges Boeing has been facing, and how it is costing them. Here are but a few of the points mentioned in the article.

The company’s chief, W. James McNerney Jr., concedes that Boeing lost control of the process by farming out more design and production work than ever and not keeping close tabs on suppliers. He says the company is retaking control.“You ultimately get to the question: Is it worth it?” Mr. McNerney says. “And my answer is yes. And that is why you take the risks. But could we have done it smarter? Yes…” With the Dreamliner, Boeing aimed to expand its longtime outsourcing efforts, which had mainly focused on manufacturing parts, to a risk-sharing program in which the suppliers would also be Boeing’s partners. “The idea was to get the risk off their books and get other people to do the heavy lifting for them,” Mr. Aboulafia said. “But the flaw was that led to a kind of ‘engineering light’ approach, and the problems on the 787 can be traced to that.” For instance, Boeing contracted out the design and construction of the wings — one of the most exacting parts of the aircraft — for the first time ever. It also let other companies wrestle with the complicated task of baking and shaping the plastic composites.And instead of being paid when they shipped parts, the partners agreed to wait and recover their capital — and receive a share of the profits — once Boeing delivered the planes to the airlines. But Boeing officials now say that this left the whole process vulnerable, should any part of the chain face delays.

Outsourcing is a viable and oftentimes, an essential business practice. However, outsourcing can complicate a business’s strategy - exponentially. Such is the case of the Dreamline project. While the NYT does an excellent overview of the many challenges the Dreamline is currently facing, it comes up short in one area. Who and where are the internal naysayers that pointed out the potential shortcomings of the Dreamliner strategy? Have they left the company? Have they been demoted? Or, has their voice finally been recognized and heard?

I’ve followed the Dreamliner project for many years. I’ve also pondered about the many silent problems exist inside the Boeing organization and Dreamliner project. We are just now beginning to understand what they are, and the impact they are having. But more importantly, what is happening is indicative of Boeing as an organization, and I expect it will continue to hinder their ability to perform into the future.

Bottom Line: Boeing’s ability to design and build the Dreamliner is a huge project. Now the cost overruns and fingerpointing are frontpage news. I’m concerned what we’re now seeing is but the tip of the iceberg. Their real challenge will be to identify and act upon the numerous silent problems inside the organization.

 

 

 

Blinded by a Dim Light

Thursday, September 3rd, 2009

How long does it take to catch a Ponzi scheme operator? Well, according to the report released yesterday titled “Investigation of Failure of the SEC to Uncover Bernard Madoff’s Ponzi Scheme,” 16 years!!! And that’s 16years from from the date the first red flags were raised about Bernard Madoff.  During those 16 years, the SEC opened five inquiries, and hundreds of red flags were raised.

Okay - I’m Mad!!! I just read the report. It is possibly the most troubling report I’ve ever read. In fact, it reads like a novel, but then, there’s a difference. Fiction has to make sense, the truth often doesn’t. Here are but a few of the SEC blunders captured from the report.

One of the few points that was made in a conference call between the offices was a comment by a senior-level Washington D.C. examiner reminding the junior NERO examiners that Madoff”was a very well-connected, powerful, person,” which one of the NERO examiners interpreted to raise a concern for them about pushing Madoff too hard without having substantial evidence.

In September 2005, NERO prepared a closing report for the examination that relied almost entirely on information verbally provided by Madoff to the examiners for resolution of numerous “red flags.” One of the two primary examiners on the NERO examination team was later promoted based on his work on the Madoff examination.

 The OIG investigation also found the Enforcement staff was skeptical about Markopolos’ complaint because Madoff did not fit the “profile” of a Ponzi scheme operator, with the branch chief on the Madoff investigation noting that there was “an inherent bias towards [the] sort of people who are seen as reputable members of society.”

As the investigation progressed; in December 2005, Markopolos approached the Enforcement staff to provide them additional contacts and information. However, the branch chief assigned to the Madoff Enforcement investigation took an instant dislike to Markopolos and declined to even pick up the “several inch thick file folder on Madoff’ that Markopolos offered. One of the Enforcement staff described the relationship between Markopolos and the Branch Chief as “adversarial.”

During an interview with the OIG, Madoff stated that he had thought he was caught after his testimony about the DTC account, noting that when they asked for the DTC account number, “I thought it was the end game, over. Monday morning they’ll call DTC and this will be over … and it never happened.” Madoff further said that when Enforcement did not follow up with DTC, he “was astonished.”

When Madoffs Ponzi scheme finally collapsed in 2008, an SEC Enforcement attorney testified that it took only “a few days” and “a phone call … to DTC” to confirm that Madoff had not placed any trades with his investors’ funds.

Now here is the damning part, and excuse me for be self-serving on this part. In my book Without Warning I present a list of “7 Yellow Flag” symptoms that a silent problem might exist. For instance, here are two of the seven yellow flags.

  1. When the risk of making a decision for employees inside the organization is considered to be greater than the benefit of making one. Symptom: Slow and indecisive decision making.
  2. When information that should be readily available is difficult to access, appears incomplete or doesn’t make sense. Symptom: Information is delayed or incomplete, and parts often held in secrecy.

Actually when I examined the report and the list of seven symptoms, all seven yellow flag symptoms applied to the Madoff case. This is telling on several points. For instance, if silent problems aren’t caught and resolved early, they will morph and become more toxic over time - in this instance, $65+ Billion toxic. Secondly, it’s imperative that businesses and public agencies (like the SEC) become knowledgeable about silent problems, how to identify them, and how to act on them. Lastly, the book Without Warning should become required reading.

The Madoff Ponzi Scheme is a story about what can happen if the warning signs of silent problems aren’t heeded. If you don’t, it’s amazing how dim a light can be, to be blinded by it.

Contrasting Leadership Styles - Brett Favre

Tuesday, September 1st, 2009

I’m not a huge football fan, but being from the Twin Cities, the addition of Brett Favre to the Minnesota Vikings squad two weeks ago has repeaked my interest. Last night, Favre quarterbacked the first two quarters, and a little bit of the third before backup quarterbacks Jackson and Rosenfels finished out the third and fourth quarters. As expected, Favre’s second return from retirement has created the potential for numerous story scenarios. 

So last night, I watched and listened and thought. And then it came to me. Favre epitimizes the role of quarterback, and the leadership responsibilites associated with that role. Bottom line - this guy has charisma!!!  He is a leader, and just what the Vikings needed.

  • Favre has the rythem and pacing down - on and off the field
  • Favre is engaging with his team mates - the individuals that really count
  • Favre is decisive, and his team follows his lead willingly
  • Favre is a leader with extraordinary talents

And as a leader, Favre elevates the potential and performance of every player around him.

If Favre can stay healthy and injury free, this will be an interesting season for the Vikings. However for me, it will also be an interesting tast case about leadership in action - at least on the field.

Be the one to see it coming!

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Without Warning - Rondey Johnson

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