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- The Globe and Mail
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- Plexus Call July 12 Slides and MP3 Audio
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- Faith in Business – Review by Tim Harle Fall 2014
- Post-Rational Management: The Montreal Review – January 2015
- Cultivating Organizations in Leadership & Change May 2015
- The National Post – June 17 2015
- Changing Our Models of Change: The RSA October 21, 2015
David Hurst delivers multimedia presentations and a range of customized experiences that will inform and inspire your people and help them learn from the past, master the moment and create the future.
In the early hours of Wednesday November 9 2016 I was as bemused as everyone else. Donald Trump had won the presidential election and would be the 45th President of the United States. The last polls I saw had given Hillary Clinton about an 80% chance of winning and none of the commentators had seen an upset coming. As a Canadian, however, I thought that the Americans had an awful choice to make and in the end the man I wanted to lose had beaten the woman I wanted to lose…. After my initial shock wore off I started to think through what had happened and what is likely to happen from an ecological/systems perspective.
Back in March I wrote about the ecodynamics of Donald Trump. I said that it was helpful to look at society and its institutions, not as static systems, but as ecological processes. From this perspective successful social institutions are conceived in passion, born in communities of trust, grow through the application of reason and mature in power. Here they tend to get stuck in systemic traps, structures that conserve the habits that made them successful, but render them inward-looking and insensitive to the changes that are going on outside. In his book, The Rise and Decline of Nations economist Mancur Olson describes how, over time, vested interests and rent seekers clog the system and prevent meaningful change. When this happens, as their familiar narratives break down, societies often reach for outsiders, radicals on the fringes, who offer either new narratives or the revival of old ones. Trump’s narrative is the latter, the promise to “Make American Great Again”, and restore an era of growth and prosperity last seen in the 1950s and 1960s.
Over the decades organizational culture has devoured hundreds, if not thousands of strategies. One of the most recent examples is the case of Wells Fargo, where culture not only ate a long-standing, apparently successful strategy but last week also consumed its CEO, John Stumpf, who resigned under enormous pressure. The headline story in the business section of news in the past few weeks has been that over the past five years the bank has fired 5,300 employees (10% of whom are branch managers or higher) for opening new accounts without the customer’s permission. Apparently this was the unintended consequence of an aggressive strategy focused on cross-selling: if a customer has a checking account why not sell them a car loan together with credit card, mortgage and wealth management services? With the profit margin on straight lending squeezed by low interest rates, cross-selling has become the modern mantra for bankers and even used to justify mergers and acquisitions for the cross-selling opportunities they present. Objectives and targets for cross-selling were embedded into Wells Fargo’s performance management system and ridden herd on by layers of hard-driving executives. At the top was Carrie Tolstedt, Senior Executive Vice President of Community Banking, known to some within the bank as ‘the watchmaker’ for her obsessive concern with detail. An investor briefing on the business reveals a mechanistic model of the economics of retail banking with the profitability of cross-selling on clear display: customers with eight accounts with Wells Fargo are five times as profitable as those with only three (the industry average). The so-called “Gr-eight initiative” was the bank’s internal goal of selling at least eight different financial products to each customer.
“In a multi-layered complex system stability is achieved by having the big and/or slow processes govern through constraint the smaller, faster processes. Sudden change can take place in a complex system when agents at one level escape the constraints usually exercised by agents in another part of the system.” This is a quote from my book, Learning from the Links, a systems perspective on golf and management. I was making the case that in a golf swing the big, slow muscles of the torso should constrain the smaller, faster movement of the shoulders and arms that, in their turn, should limit the even quicker movement of the hands. When the hands escape these constraints, the system becomes unstable and the result is an erratic golf swing over which one has little control.
The same principle applies to all complex systems, including political ones. The Founding Fathers ensured that this was the case in the structure of the American government when they wisely arranged the different branches of government in a systems hierarchy of constraint. The House of Representatives is elected every two years, Presidents every four years, the Senate every six years (on staggered terms) and the Supreme Court is elected for life. For similar reasons James Madison favoured representative democracy and rule by experts over direct democracy and rule by faction. The intent was to create a stable system of checks and balances that could handle only modest change and would not be subject to sudden radical movements. There are similar hierarchies of constraint in parliamentary systems. An elected House of Commons turns over much faster than an appointed Senate (in the case of Canada) and the hereditary House of Lords in the UK. The Canadian Senate is the “Chamber of Sober Second Thought”, whose role is to reconsider and modify the sometimes impulsive actions coming to it from below in the systems hierarchy.
From a systems perspective, when British Prime Minister David Cameron agreed to a referendum on whether to remain with or leave the European Union he was risking that a small fast system might escape the constraints of representative democracy and the sovereignty of Parliament. It has escaped and the result is crisis and chaos. But it is also opportunity for both Britain and the EU.
The Lost Narrative of the European Union
Three years ago I gave a presentation to the International Forum on the Future of Europe in Vilnius, Lithuania. In it I suggested that the problem with the EU was that it had lost its narrative and become an anonymous, rule-driven bureaucracy of technocrats. I used an ecological perspective to show how the EU had been born in the aftermath of the Second European Thirty Year War (1914-1945) as a passionate movement to avoid further conflict among the nations of Europe. After initial success, greatly aided by the rebuilding of Europe’s shattered infrastructure (catalyzed by theMarshall Plan), it became a series of increasingly ambitious economic and political projects. In that process, however, like all successful institutions, it became much larger, more calculative, rule-driven and bureaucratic. The stories told by economists and bureaucrats are rarely compelling and, as the original narrative was lost, means became ends-in-themselves.
Economic attachments are fragile. We may work for money, but we live for story. An ecological perspective suggested that any “buy-in” would be temporary at best and that the resulting tepid commitment would fluctuate with the EU’s economic fortunes. In good times people might mildly favour the European enterprise, but in tough times they would tend to default to their national narratives and identities that are much more emotionally powerful. This is especially true if economic gains are spread unevenly and significant segments of the population feel left out and ignored. The result was widespread euroscepticism that, as Nigel Farage, the leader of Britain’s United Kingdom Independence Party (UKIP) proclaimed, was all about national identity. The Brexit Referendum became a contest between technicians in favour of the status quo and populists promising a return of a Little England narrative. The story won.
With Crisis Comes Opportunity
“Never let a good crisis go to waste” is a quote often attributed to Winston Churchill but never sourced. I think that the idea probably comes from Ancient China and perhaps the I Ching (Book of Changes). In my first book, Crisis & Renewal, I explored the role that crisis plays in the renewal of complex systems. Wind and fire, flood and pestilence clear away old growth in temperate forests and open up patches, where there is equal access to water and light. Here, young organisms fueled by nutrients from a recycled past, can flourish and renew the system.
In Britain it seems likely that the old political party arrangements no longer reflect the new divisions in the electorate. The old bitter arguments about means – varieties of capitalism or socialism – may have been replaced by a sharper disagreement about ends and alternative narratives – Little England or Great Britain? The Labour Party seems to be a “walking ghost”. It performed poorly in the referendum, with many of its members ignoring its call to “Remain”. Its leader, Jeremy Corbyn, now faces a leadership contest that, even if he wins, leaves the party divided and in poor shape to fight a general election. From the Right Nigel Farage and UKIP threaten the Conservative Party. Indeed it was this threat that David Cameron tried to quell by agreeing to a referendum in the first place. Perversely, he has succeeded only in reinforcing UKIP, clearing the way for them to become a political power domestically. So the Brexit crisis may act as a catalyst for the reform and reconfiguration Britain’s political parties, something that would be extraordinarily difficult to do in normal times.
As for the EU, it’s time for its leaders to reflect upon the entire project. Those with direct experience of World War II are nearly gone and with their passing the founding narratives of the EU become a distant memory. The administrative integration of the EU’s members needs to be needs to be slowed and even rolled back. The creation of the Euro was a bold but premature move, freezing the system when it still needed significant wiggle room. All the attention should be on a regenerating the European narrative and the creation of compelling experiences that build and maintain it. It won’t be easy. The challenge was well stated by the late historian Tony Judt in his paradoxical thesis that Europe has been able to rebuild itself politically and economically only by forgetting the past, but that it can define itself morally and culturally only by remembering it. Perhaps it’s time to start the process again with the generations born since 1945.
It’s easy to be critical of business books. What had been a dull cottage industry until the publication of Tom Peters; and Bob Waterman’s In Search of Excellence (1982) became an exuberant enterprise that churns out a vast number of products in many subcategories. Business books, in other words, have become a big business. The motives and abilities of the writers who toil in these segments — self- help, how-to, CEO biographies, corporate narratives, big-picture panoramas, focused functional pieces, to name a few— are as widely varied as the categories themselves. Serious research-based, academic efforts, sometimes well written but often full of impenetrable jargon, share shelf space with ghostwritten executive vanity puffs: sweet confections designed to buff images. There is a steady deluge of books from consultants, for whom business books are, at a minimum, thick business cards and essential to establishing their credentials.
As is the case with every genre, a few of these books are fantastic, some are good, and many are, alas, quite bad. At times, business books can read like expanded articles, bloated blogs, or padded PowerPoint presentations. Many writers assume that success implies capability and we can all become successful simply by studying success. The evidence for this is equivocal at best and riddled with attribution bias (our tendency to take credit for our successes while blaming failures on factors beyond our control). Much business writing poses an even subtler problem: a failure or perhaps a reluctance to recognize that while the “whats” in business — desirable outcomes — are generic, the “hows” are particular, specific to each and every organization. It’s true, for example, that an enterprise’s strategy and organization must be “aligned,” but what that means and how to do it in this organization, with our people, right here, right now is much less obvious. Organizations are complex systems, in which cause-and-effect is nonlinear, path-dependent (history matters), and often unknowable in prospect. Deciding what to do (or not do), and how and when to do (or not do) “it,” is a matter of judgment and experience, as managers try to accomplish short-term objectives while keeping their longer run options open. As a result, consumers of business books that offer simplistic checklist-driven solutions run the risk of being trapped between one-off stories that cannot be replicated and universal principles that cannot be practiced because they are too abstract.
If they can’t tell us what to do, how can business books help in such a world? And how, in the age of 140-character tweets, disappearing SnapChat texts, and highly attenuated attention spans, can we justify spending hours, or a whole day, engaging with a 400-page volume? As a professional consumer (over the years, I have reviewed nearly 150 books for s+b), producer (I’ve written three myself), and avid fan, I can think of three principal reasons.
“There seems to be something wrong with our bloody ships today…” remarked Vice Admiral David Beatty to his Flag Captain. Beatty was commander of the Battle Cruiser Fleet at Jutland, and his cool comment belied the scale of the catastrophe. It was 4.26 pm on May 31, 1916 and from the upper bridge of the battle-cruiser Lion he had just seen her sister ship, Queen Mary, disappear in a shattering blast as both main magazines exploded. Twenty minutes earlier another battle-cruiser, the Indefatigable, had vanished in a sheet of smoke and flame and, although Beatty did not know it at the time, the Lion herself had narrowly missed a similar fate only by flooding her Q turret magazine with sea water.
At the Battle of Jutland, the greatest sea battle of all time, the British Navy would lose three battle-cruisers carrying over three thousand men in less than three hours. It was not bad luck, it was bad management: the result of the Navy’s inability to manage a complex system from design through to execution. For the roots of the disaster lay in the design of the ships over a decade earlier. Thus the problem was systemic and Beatty’s puzzled comment represents one of the more dramatic instances of the bewildered reaction of a CEO to symptoms of systemic problems in the field.