$$$ A financial crisis is making headlines but the financial mess is the fallout; not the real crisis. The financial crunch is not likely to be the most significant fallout; the real crunch is a trust crunch.
The financial foolishness is clear. In a drive to continuously increase profits, banks lend more and more mortgage money to people who can least afford to pay. They lend more than the underlying assets are worth, they lend more than people can afford to pay and they structure the lending with low initial rates that rise quickly. Then they sell these mortgages to financial institutions (Bear Sterns, Lehman Brothers, et al) who, in turn, repackage them, call them high grade investments (as confirmed by the rating agencies), and sell them to their clients. Some of the documents describing these investments and the associated risks run upwards of 700 pages.
The repackaging included “credit default swaps” that in turn were traded on the market. Purchasers are led to believe that this credit default swap protects them — pays them, if people default on the underlying loans. We might be tempted to think of this as insurance, but these are sold as “swaps” not “insurance”. If these were sold as insurance, the seller would be regulated and have to demonstrate sufficient financial reserves to pay in the event of a default. Because it is called a swap and not insurance, there is no regulation and no need for the seller to demonstrate that they could actually pay in the event of a claim.
It doesn’t take a genius to recognize the house of cards: risky mortgages rapidly churned out in a fantasy of a never ending increase in property values, repackaged in obscure ways, subsequently rated as low risk, combined with illusory insurance and sold to “trusting” clients by institutions with insufficient resources to withstand a crisis of trust.
We will never really know but their financial modeling likely indicated they could withstand market slowdowns or the odd hiccup in cash flow. Clearly, and tragically, they did not factor in a crisis of trust.
TRUST AND TRANSPARENCY DETERMINE YOUR LEADERSHIP CAPACITY
The lesson here is clear. Trust is essential to leadership; trust is essential to accomplishment; trust is essential to staying in business. If there is insufficient trust — with colleagues, “bosses” or those to whom you would provide leadership — not much of significance will get accomplished. Insufficient trust with clients, others in your industry or suppliers can mean the end of your business — even if you have been in business for decades and previously enjoyed a good reputation.
Lehman Brothers had been in business for 158 years, but folded because clients didn’t trust them, investors didn’t trust them and others in the industry didn’t trust them enough to lend to them.
Bear Sterns clients didn’t trust that the funds Bear Sterns was selling were as safe as advertised. Bear Sterns clients lost billions, their shareholders lost billions and their employees lost their jobs as Bear Sterns, who had been in business for 85 years, was forced into a merger with JPMorgan Chase.
Billions in write-downs drove Merrill Lynch into the hands of Bank of America when potential investors didn’t trust that Merrill Lynch knew what it was doing.
Insurance behemoth AIG was taken over by the U. S. government when it couldn’t be trusted to honor the $441 billion of credit default swaps tainted with subprime mortgages. And private equity investors didn’t trust that AIG management knew the quality of the assets they owned or the risk of the swaps they owed.
Transparency is irrevocably twinned with trust. Never be bullied by “don’t you trust me?” Bet on knowing what’s knowable, wisdom and prudence.
Faced with an arcane 700 page document you will either have to read it, have your lawyer read it or trust your advisor to be looking out for what is in your best interest. Blind “trust” isn’t trust at all. It is willful blindness. The leadership in these organizations took themselves down; personally and corporately they invested their own money — foolishly; unwisely; imprudently.
On the one hand we could argue that it would be foolish not to demand full disclosure and better transparency. But, if you have been doing business with someone for years, or with someone whose reputation you respect, you may feel like you are faced with a dilemma. Insisting on detailed examination and analysis may lead to a false assumption of mistrust, rather than prudence.
When you defer to someone else’s judgment and recommendation alone, you are risking both the value of the transaction and the relationship that has been built up over time. If someone plays the, don’t you trust me? card when due diligence is called for, it actively undermines trust. Never let others make something an issue of trust that is really an issue of competence, understanding or insight.
You are either taking action to honor and protect the trust that has been built in your relationships or you are risking it. Risk that trust at your peril. When people stop trusting you they stop believing what you stand for and what you have to say. When you gamble with your credibility you are gambling with your future and the future of your company.
Trust can take decades to establish and be vaporized in an instant.
Giving advice is more harmful than helpful. It kills people.
But before we go further let’s distinguish the type of advice we’re talking about here. There is a world of difference between advice on how to deal with non-living objects (a hammer, software, processes, etc.) and how to deal with people. Here we’re talking about giving advice on how to deal with other people. This ranges from advice to a friend on how to deal with someone in their life or a colleague on how to deal with their boss, to advice on leadership, communication or collaborating with others.
YOUR STRENGTHS ARE NOT OTHERS’ STRENGTHS
Two primary problems arise in advice giving. First, we can’t help but give advice from our strengths. If you think about it, for a minute, it would be hard to give advice on any other basis. Common sense would have you want to give others the best advice you can. You would recommend to others what you have found works best — for you. Unfortunately, in a sense, what works best for you is in your area of strength. It’s actually not unfortunate for you — it’s just unfortunate for others if they take your advice and try to resolve or accomplish something with someone else out of your strength. They are highly unlikely to be successful trying to operate out of your strength. Others, like you, will be most effective operating from their strength — not from trying to emulate someone else’s strength.
Your greatest strengths are unique to you, and others don’t have easy access to your strengths. In fact, most of the time even you are blind in your area of greatest strength. In the area of your greatest strength you have never seen the world differently; there are some things you have always been impatient with, or patient with. Some things you find easy and don’t understand why others don’t find those things as easy as you or some things you seem to struggle with no matter how hard you try.
One way of gaining some insight into your greatest strengths is to become aware of what annoys or bothers you; what seems obvious to you that others don’t seem to notice of appear to struggle with; the common sense you see that is frustratingly uncommon. When any of these occur you are in an area of your strength. And, at the level where others are blind to what appears as obvious to you, you have access to a strength — a way of relating — that others do not have your access to.
PEOPLE ARE NOT THINGS
The second difficulty arises when we do not see that there is a tremendous difference between giving advice about how to deal with physical things or performance and advice on how to communicate, lead, manage, collaborate, or resolve issues with other people.
The Excel expert can give us good advice on using Excel pivot tables and the golf coach can give Tiger Woods good advice on improving his swing. With good Excel advice we can manipulate the data into a pivot table, but another level of judgment is required to determine which data and how to interpret the results. Similarly, Tiger can improve the mechanics of his swing but tremendous judgment is required to determine which club to swing and where to aim in the particular conditions of the day.
Advice about relating with others can be thought of either as recommendations about principles or advice about how to do something or what to say and when to say it.
There is less risk in giving advice at the level of principles like the following: Start where you are — with yourself, others and the situation — not where you think you or they should be. Be willing to earn sufficient trust in each new situation and relationship. Do not mistake your view for the truth. At the level of principles, people have the opportunity — indeed a demand — to bring their own strengths to it.
The trouble starts when you start telling others what to do or how to do something at the level of specific actions:
- “The next time he says that, I’d say, “What were you thinking!?’”
- “You need to tell them that their performance needs to improve.”
- “The next time that happens, call a meeting of the whole team.”
The two main problems with this type of advice is that it ignores or assumes a tremendous amount and following through relies on the skill and strength of the person giving the advice.
For example, it does not take into account the history, strength and nature of the relationship between the people involved, the current circumstances for you, for them, and the larger context of the organization, team or family.
Additionally, it does not take into account your strengths and way of being and their strengths and way of being. For example, if you were the one giving the advice, “You need to tell them that their performance needs to improve”, it is very likely that you would be entirely capable of engaging with “them” regardless of their answer. Alternatively, while you are giving that advice now, you would be discerning enough in the time leading up to telling them their performance needs to improve to pick the right time to do it, or to hear that something else is called for.
Your advice is offered from your strength and predicated on your ability to discern appropriate action and handle the situation you are giving advice about.
When others try to emulate your strengths, or try to do what you recommend without your discernment and judgment in the area, that’s when your advice kills their development and their confidence in their own strengths and their ability to actually implement what you’re suggesting.
ADVICE FOR YOU
So now here’s my advice for you.
Discover your unique strengths and develop others in your strength. Engaging with others to contribute your strengths to them will develop you in the area of your strength.
Develop your ability to “hear” others unique strengths and help them develop ways to put their strengths to work to accomplish what they intend to accomplish.
It’s far more effective and far less painful for everyone than trying to get them to do it your way!
Best Practices have considerable undeserved cachet. There is an embarrassment of unexamined assumptions embedded in the myths surrounding best practices.
There is no clear, common understanding of what is meant by “best practices”. Does it refer to the practices of the “best” companies; or to practices of some of the best known companies, or the best known publicly traded companies? Or is it the most common practices of a selected set of some of the best known, you get the point.
And who says those practices are the “best”? Or even that they are the specific practices that have led to that companies (presumed) success?
America’s Test Kitchen is an organization that tests kitchen equipment and recipes. The point here is that they test them — they have a panel of people who test them. They don’t publish the “best” recipes without having their panel test them at home and then rate them for the results they produce. Often, the “best” kitchen equipment does not come from the best manufacturer (biggest market cap) or the best known brand. And, it’s seldom the most expensive.
The best practice for scrambling eggs is determined by people scrambling eggs in different ways and tasting the results. The best chocolate cake practice is determined in a taste-test bake-off.
Nobody bets millions on the best way to scramble eggs and those practices are tested! Organizations bet tens and hundreds of millions on best practices all the time without any testing! With scant evidence of the effectiveness of the practices — without a bake-off that determines that some particular practice is best for them.
And of course, there’s the rub. How would you know if some practice — some way of doing things — is best for your organization? Let’s bring just a dash of thoughtfulness to this issue before running off half-baked to the next conference or workshop purporting to tell you about the best practices in some particular area.
AN EFFECTIVE DISTRACTION
Best Practices are an effective distraction from the real source of power in creating competitive advantage. That’s why smart organizations are so willing to share them! They distract others from noticing what really makes the difference. Distraction — the best magicians have mastered the art. They tell you what to keep your eye on to keep you from noticing what they are really doing.
Think about what it would take for a practice to be “best” for you and your organization. First, it would have to integrate with other practices. Even the most simplistic thinkers would be hard pressed to suggest that there is any one practice in an organization that has no relation to other practices: that the part of the organization employing that practice has no effect on the rest of the organization and the rest of the organization has no effect on that part. Impossible! Separate and disconnected is the primary source of organizational difficulty; not a solution.
The organization that develops a particular practice does it in some particular circumstances, at some particular time, to address an issue that those people, at that time, saw needed to be addressed and who determined an effective way for them to address it given their unique strengths, background and relationships with each other.
Well of course that practice ought to work for you and your organization! You’re just like them! Or more insidiously as the thinking goes, if we act like them in this particular area we can become as successful as them.
Rubbish! Your thinking; your orientation is a more fundamental source of power for improving organizational performance than your practices ever will be. What is required for your organization to be successful at this point in time, facing these challenges with these people? Did you make this up or discern it from listening deeply for something fundamental that is missing and available?
Develop practices that fit what is called for now and evolve them as your organization develops and as circumstances change.
COOKING UP BEST PRACTICES FOR YOUR ORGANIZATION
(An untested recipe but that shouldn’t matter)
Gently mix several “good eggs” until integrated. Do not separate. Be careful; we just want them folded together, not beaten.
Place over high heat and stir gently with a significant accomplishment required by a specific deadline.
Add the spice of fresh thinking; whip up inspiration, listen for practical solutions bubbling up.
Reduce over the inescapable heat of reality.
Serve developmentally.
Consensus: A colossal waste of time and energy; a sell-out of what’s valid and fitting; concern with protecting an image. Consensus does not even deliver what it promises — everybody on the same page — let alone what would have real value — everybody on a page worth being on.
One popular working definition of consensus has to do with getting a group to the point where people can say, “I understand and I agree”. Understand and agree with what? The validity; the appropriateness of the direction or decision is not at question — just the degree of acceptance among those participating in the conversation. Consensus is a lowest-common-denominator approach. What can we decide or what action can we take, that everyone can agree with. Or, is willing to say they agree with.
Gee, if the boss wants this it sounds like a consensus to me. What’s it worth for me to say I disagree? Is it worth my next bonus, or risking my acceptance within the group, or making a fuss? Well, I guess we have consensus then.
Think about it. The aim of consensus is agreement yet agreement is tragically over-sold. Of what value was the flat earth consensus? There was certainly a tremendous cost when bold, thinking people dared to question the consensus and lost their life as a result. What was the value of the consensus that the sun revolved around the earth… or that some particular food is bad for you…oops now it’s OK… oops, sorry it is bad for you. There was a consensus among some at Enron, World Com and Tyco about what decisions or actions were appropriate. But those actions were judged as illegal and cost thousands of people hundreds of millions of dollars, including both their livelihood and their life savings.
Arriving at consensus view does not require you to engage in a conversation that reveals some fundamental validity — something more valid than an opinion that we can all agree to agree with; or to support. Consensus is concerned with personal opinions and points of view. It seeks a position that is a balance between “most acceptable” and “least objected to”. It is a question of what people can “live with and support”; not what’s best for the company as a whole.
Consensus does not require an integrative solution or decision that serves what’s best for the whole company. It is designed to minimize upsets and disagreements without requiring a resolution of them. Consensus helps people find a way through issues, that they can live with; that they don’t find too objectionable.
As children we’re taught to share, to compromise, to play nice. That often translates into “go along with”. Consensus requires people to give something up. They give up having a conversation that reveals a fundamental issue in favor of agreeing to reduce the effect of a symptom. They give up conversations that discern what’s appropriate in favor of what’s agreeable. They give up what they can see as having some validity, or engaging in conversation listening for what resonates for everyone.
They stick to their opinions and points-of-view until a particular view begins to emerge as the dominant view, then they go along with that. They capitulate. They agree that they have had a say and that they can “support” what others have found agreeable, for whatever reason. But what does “support” mean? Does it mean, “I will mobilize all my resources behind making it happen”? Or does it mean, “I will not actively work against you, for now, if you go ahead with that”? (I, on the other hand, am clear about the best course of action for me or my part of the organization.)
The experience of giving up something is what allows people to say, after the meeting, “Well, I didn’t really agree”, “that didn’t apply to me or my department”. Or when the agreed action or decision turns out to be a poor one, “I didn’t agree with that in the first place.” Expediency trumps alignment. Agreement out-votes what’s fitting, appropriate and feasible.
Of course, one dreaded alternative is that people appear to give up nothing. They don’t listen for what’s fitting and feasible; they stick to their point of view, by turns righteously bludgeoning and cajoling others to agree with them until “consensus” emerges. But it only appears that they give up nothing. What they really give up is communication that would produce increasingly powerful results.
Consensus is well-meaning yet appallingly misguided. The willingness to settle for consensus avoids the real conversation. It provides the illusion that people are on the same page while getting there in a way that encourages harboring resentment; holding out, and settling for what they can agree on; not necessarily what’s best for the organization. It exalts appearing to agree, to avoid the messiness of a real conversation. It is as if people are saying, “This is the best we can do — at least we’ve agreed on something and we’re not arguing,” and believing that this has tremendous value.
Puh-leese! Abandon consensus and start listening for what really needs to be addressed, resolved or accomplished for the whole organization. Then serve that. Develop yourself, and others around you, to become or to do whatever fulfills what you are up to together. Forsake merely getting by the current circumstances or getting through the issues in favor of generating a conversation in which you can hear together what would resolve something fundamental while developing the organization to the next level.
A recent Harvard Business Review article on cooperation and change caught my attention. It provides an interesting illustration of what alignment is and is not. The headline of the article states:
“Managers can use a variety of carrots and sticks to encourage people to work together and accomplish change. Their ability to get results depends on selecting tools that match the circumstances they face.”
This brief statement raises several issues related to causing alignment in organizations. Some of the issues are raised by what is said, some by what is not said.
Not Carrots, Sticks and Tools
Alignment is not created by carrots and sticks – carrot and stick thinking makes it impossible to achieve real alignment. Those wielding the sticks and offering the carrots, by the very nature of the implied threat and bribery, create disconnection and separation from those they are seeking cooperation with.
“Selecting tools” is not the route to alignment. Tool selection places the focus on the tools and risks turning those you are seeking to align with into tools as well. It is difficult to cooperate with a tool; it is easier to learn how to use a tool. The level of engagement with those you are using as tools, or using tools on, is generally not high – leading to a low level of uncoerced compliance.
“Matching the circumstances” is also problematic unless one includes people and what they could accomplish together in their understanding of “circumstances.” If one matches only the circumstances they miss consideration of the current relationships among people and between them and what they are out to accomplish together.
Conversations Generate Alignment
Getting people to change is a very weak basis for working. The real issue is having people work together powerfully to accomplish what is required. Alignment is essential to accomplishment, to developing people and teams to produce greater outcomes, and to providing more powerful leadership. It is grounded in a fundamentally different relationship with people than the relationship of “getting them to do what you want”.
People-in-conversations is the territory of generating alignment. It is a relationship that is fundamentally different than trading opinions, consensus or compromise. It is a relationship in which people have a commitment to each other, to serve what is called for next in their organization. To serve what is missing and available to be fulfilled or accomplished.
Alignment has occurred when people, in conversation together, can come to hear a fitting and inspiring direction for their work group or organization. Trust and mutual intention are the foundation of alignment – deeper levels of trust provide a solid base for greater levels of accomplishment. Listening for what is called for next, and honoring and serving that, begins to reveal a basis for trust: people realizing there is something they are up to together.
Alignment is a question of what is fitting. It has to do with hearing a fitting direction for the organization or work group – where the fitting direction is not “made up”; it is heard by people in conversation together recognizing what it will really take to realize the promise and potential of what they are up to together.
Alignment is neither agreement nor consensus. People can agree on things that are not “fitting”. Examples abound where people in organizations have “agreed” on a business direction or strategy that was soon revealed as not fitting. The business press is full of these stories: back-dating options, acquisitions that immediately drive the stock price down and other bone-headed moves. Leaders in these organizations could get others to agree or they could reach a consensus but they could not hear that it was not fitting or not a fit for their organization.
Leadership has to do with initiating and following through with the conversations from which alignment can emerge – establishing trust and mutuality and opening up new directions. With alignment there is resonance and inspiration. Inspired people working together in a fitting direction are way beyond carrots, sticks and tools to force cooperation.
1 Armstrong, Lorne. The Tools of Cooperation and Change. Letter to the Editor, Harvard Business Review, March 2007, pp. 136, 137.
2 Christensen, Clayton; Marx, Matt; and Stevenson, Howard. The Tools of Cooperation and Change. Harvard Business Review, October 2006, Boston, MA. pp. 73.
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