Category Archives: Management and Strategy

Hindsight is Foresight Foregone

It’s not that we can’t see the future; it’s that we don’t bother.

Granted, none of us can predict it, nor do I presume that some magic algorithm applied to some special pile of Big Data can ease the Fog of the Future.

In part, it’s laziness. Here in the USA, we’re predisposed to the here and now and me, and the rest will sort itself out.  As indeed it does.  But often not as we hoped.

In part it is because we know from abundant experience that too many pious prognostications by proselytizers of progress have turned to sink-holes of time, effort and money.  So why bother.

In management we have evolved the discipline of ‘risk management’ which is part institutionalized experience and part pseudo-science.  ‘Risk management’ is somewhat of an oxymoron like ‘military justice’, ‘artificial intelligence’ and ‘virtual reality’. It trades on a figment of truth to create the illusion that it is more than it is.

Risk management has some level of foundation in its effort to deal systemically with known and knowable risks, but today’s world is increasingly subject to unknowable risks for which there is no statistical basis of quantification of either loss, cost of prevention or remediation.   But that’s not the real problem.

Many in my profession of accounting and auditing gravitate to the  ‘risk management’ mantra, and strive to incorporate it into their mission statement. After all, if you can’t be a ‘risk taker’, being a ‘risk manager’ or a ‘risk something’ is the next best thing. It’s sexier than mere accounting and auditing.  And besides, there’s plenty of precedent for the need for ‘risk management’ given the losses that businesses have incurred for themselves, and more frequently for others in their carefully contrived relationships.

But, truth be told, even the growing cadre of risk management acolytes have trouble peddling their wares to the C suite where hype and hope too often trump (no pun intended) reality and even the crudest calculations of probability.

Let’s take a few examples out for a test drive:

  •  Does anyone see any problem with Jeff Bezos and Elon Musk and Larry Paige and the other space cadets filling the skyways and byways with their latest magical brain-farts without benefit of adequate regulation and incubation for proof of concept within laboratory controlled settings, much less in the free-fire environment of that freaky place we call the ‘real world’?
  • Is the latest episode of the Theranos melodrama really a surprise?  Or was it the highly probable outcome of a flaky premise sold to incredibly greedy people willing to believe and suspend critical judgment?
  • And let’s not beat unduly on Theranos. It’s just one of a number of Unicorns in the magical kingdom of Silicon Valley and other tech redoubts where people with more money than brains can throw it at the wall, hope that something sticks in the lottery of high-tech chance,  and praise themselves that their failures are really essential tuition and down-payment for future greatness.  In their magical kingdom, failure is virtue.  In the real-world, failure gets you fired.
  • Where is China going, and where is it taking us?  The West lost that gambit four decades ago with an essential, but ill-conceived opening of relations.  The drive of corporate greed for access to a billion consumers overtook any attempt of western governments to modulate the normalization in a manner that would minimize the foreseeable disruptions we have experienced economically and strategically.  Accordingly, China has grown into an unruly adolescent (in modern world terms, its considerable historical lineage notwithstanding).  Given its desperate economic and environmental constraints, and it’s likely belief that its salvation is in expansion, military conflict with its neighbors and the West seems inevitable in the near to intermediate term.  Trump and China should easily understand each other: a coercive bully that believes he\it has a right to dominance on its terms without obligations to others. I suspect that this is in part an act China has found it can get away with because, unlike with Trump, no one has yet drawn a firm line in the land, the water or the air that they are prepared to defend (although we are beginning to with questionable allied support). Corporate executives are now marveling at how they could possibly have lost their technological edge (which they often willingly gave away in many cases for access to that one-billion consumer market)  and now are losing the market itself in a tightly controlled totalitarian environment where the ‘rule of law’ is more a farce than even a mere political fig leaf of cover.  Who’d a thunk?
  • Was the Shell Oil retreat from the Arctic really a surprise,  or merely unfettered stupidity colliding with reality?  When we have so much evidence of failure to properly engineer and install  and monitor and regulate and mitigate such ventures in much less hostile and much more stable environments, what would make any prudent executive or government think that Arctic exploitation would be just another hole in the ground?  Did BP’s experience give anyone in Shell’s HQ pause for concern?
  • How about them GMOs?  Scientists are complaining that the average clod on the streets is unjustifiably suspicious of the risks of GMOs.  But when we look at the recent history of our ‘conventional’ food supplies, the engineering of obesity, the evisceration of regulatory oversight and quality control, is there not reasonable cause for concern by the public of what will next be foisted upon them in the guise of progress at their ultimate risk and cost?  This is actually a case of the person on the street exercising ‘risk management’ in the suspicion that those in the Corporate suite will not. At least, not in the consumer’s behalf.
  • And then there’s fracking; a mindless grab for resources beyond any exercise of prudence, with costs to society measured only in financial terms to date, with studied ignorance of the collateral environmental, social and economic costs beyond the measure of defaulted securities.

There are a number of simple questions that executive management could ask itself and save a lot of grief when contemplating a new venture or circumstance, or coping with an existing or intractable situation  (like Palestine):

  • Has the situation ever happened before, and what can we learn from it.
  • Are there any parallels, if not direct precedents, to this situation that can give us a clue of dynamics and outcomes?
  • Do we understand the context (historical and present circumstances) of our intended act, and do our assumptions take that context into account?
  • Have we tested our assumptions about what should happen if we take this action?
  • Have we defined performance standards for our expectations that will give us quick feedback if we’re going off the rails of our expectations.
  • Have we asked ourselves how the opposition/competition/stakeholders/regulators are likely to respond, and have we taken appropriate steps to address reasonable concerns.
  • What could possibly go wrong, and what’s the worst that could happen….?
  • ….and if it does, what are we prepared to do about it?

These are so simple, they don’t even deserve to be sexified as ‘risk management’.  They’re basic management, or even common sense.  Yet the frequency with which they are ignored and often even disdained by the supposedly educated meritocracy has numbed us of any sense of amazement.  Rather, it has implanted a cynicism and contempt and suspicion of all forms of authority: legal, moral, scientific, political, religious, social that accounts more for the rise of Trump, Sanders and Br-Exit than any conventional political explanation.

We could go on, but I’ll trust the point is made, if not accepted.  In the corporate, government and personal world, risk-taking trumps risk management more often than not, and often with predictable consequence.

It’s not that our capacity for foresight is so bad.  It’s that we don’t bother to seek answers we know we’re probably not going to like. And when they’re thrust upon us, we often find ingenious ways to ignore them rather than to deal with them.

So, to say that hindsight is 20/20 because we have the benefit of knowledge that is not previously available is at best half the truth.  As often as not, we just don’t give a damn.

*  *   *

Word of the day:  de-escalate.

Onward

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But What If I’m Wrong?

“But what if I’m wrong?”

A novel question, don’t you think?

This seems to be a preposterous question to many experts and people of authority. Their degrees and titles are accumulated like armor to shield them from such questioning by others, and our narcissistic society of recent decades does much to program high levels of ‘self-esteem’ and ’empowerment’ to fill in any gaps in credentials. Can you picture Larry Summers or John Boehner or Larry Ellison or Marissa Mayer asking this?

As an auditor and consultant who has spent much of my time questioning the wisdom of others, I am exposed to the occupational hazard of turning those weapons of critical inquiry on one’s self. Fortunately, it is rarely suicidal, and it can sometimes have the benefit of alerting one to one’s own foolishness before it is brought to one’s attention by others, ….generally not gently.

I engage this question most often, which is generally daily, with the subjects of climate change and energy transition. A recent article on the protracted drought in the western US brought the question to the fore. At issue is whether the western US is undergoing a cyclical drought that has happened before in various cycles and various levels of severity for various extended periods of time, or whether this is the systemic effect of climate change that will not manifest as a cycle, but a trend.  If we wait for a definitive answer, the consequences could be dire for those directly affected.  If we rush to act on either assumption, we stand a risk of wasting precious resources or precious time. In the moment, one bears a significant risk of error, with consequences, one way or another.

The specific manifestation may be drought, but the contextual question of cause is by no means unique to this piece of geography or this particular natural phenomenon.  Climate skeptics and climate change adherents can each marshal arcane data to support their position, or alternatively poke holes in the credibility of the other side’s argument.  Often, neither side can prove or disprove their argument, because neither side has sufficient bullet-proof information. Much of what climate change advocates rely on for climate history is inferential evidence drawn from proxies: tree rings, ice cores, soil cores, etc.  And the more direct and current evidence is either insufficient in time span or insufficient in breadth and depth of accumulation (e.g. ocean temperatures, atmospheric readings at higher altitudes over the entire globe for completeness and uniformity) to be able to have a lock on an argument. The skeptics’ preferred route is divide an conquer: cherry-pick the data that supports the premise, and narrow in on a particular arcane facet to the exclusion of everything else that’s happening.  A recent article on divergent approaches to storm surge and sea level rise further illustrates the dilemma.

The scientific community, which we are told is 97% supportive of the premise that Climate Change is a) real, and b) subject to human influence, is somewhat schizophrenic as a group on the subject of climate change.  On the one hand, some significant chorus of the community is warning us in breathless tones of the impending point of no return in climate system dynamics that will seal our fate.  On the other hand, with each new report on ice sheets, or tornadoes or ocean acidification, or monsoonal rains, or new high temperatures, or whatever, they demure to make a direct connection to climate change because “we don’t yet have enough data to state the case conclusively”.  That may be valid from a perspective of scientific methodology, but it does not sustain the thesis that we “must do something NOW”, even though the apparent trend of events that we all can observe suggests that we probably should. And, it does not sustain the proposition of exactly what we should do now to what attainable effect.

There are four reasons why I can sustain commitment to the hypothesis of climate change in spite of science’s struggle to bring coherence to seemingly disparate facts or conundrums in modeling:

1)  Something’s going on, across a broad range of phenomena with some level of consistency and apparent escalation that it cannot be responsibly dismissed as just another day in paradise, even if we can’t explain it definitively now. (multiple data points)

2)  Even if the science remains somewhat muddled and inconclusive within the straight-jacket of its empirical methodology, the anecdotal evidence from that unruly place we call The Real World is sufficiently diverse in nature, and congruent in basic direction to give comfort that a trend of some kind is developing to which we must pay attention, because the consequences could be such that we cannot afford to ignore.  (Multiple perspectives)

3)  While the scientific community is by no means immune to herd mentality, the breadth of professional specialties and institutions and vested interests who have come to consensus defies credible belief that the consensus is merely herd mentality orchestrated by some world-dominating cabal. (Checks and balances)

4)  So many of the arguments hurled at consensus science by the outliers and their camp followers are predicated on such apparently flimsy logical and factual constructs that they beg dismissal from serious consideration. (Logical fallacy)

But still one must allow that even the minute minority may be right for the wrong reasons. Scientific progress has often been built on destruction by renegades of conventional wisdom of the moment. They cannot be summarily dismissed.

Is the sun a factor in global warming? Quite likely, although current scientific methodology has given it modest influence. Are greenhouse gases the major cause? Quite probably because we know the chemistry of burning carbon fuels beyond question, and we know the physics of their effect.  Unfortunately those physics are not the only physics to be considered in understanding climatic evolution.

So, an open mind is essential, and the question: “But what if I’m wrong”, is a vital tool of self-assessment and intellectual integrity for all players.  But too few seem to use it.

The Question (BWIIAW) becomes particularly important when one’s responsibility for decision-making impacts the well-being of others; their lives and livelihood, their health, their wealth. People who are clueless about climate change are keenly aware of their personal circumstances, and understandably distrustful of those who pronounce with obvious disregard for personal consequences. The manifestation of arrogance and indifference on both sides of  the climate debate is troubling, and explains in large measure why humankind has not progressed sufficiently on this issue.

Nor is The Question exclusive to climate change.  It might be nice for both sides of the fracking issue to try it out.  And genetic engineering. And nano-technology. And technological displacement. And Big Data Analytics. And economic policy. And foreign policy. And medical efficacy. And data privacy. And right to life. And death with dignity. And interventions of all kinds for all the best of intentions. And the list goes on. In a time when Big Data has yet to vanquish great uncertainties, and when judgments in a nanosecond can yield regrets that ‘keep on giving’, we can all afford a moment to ask ourselves ‘The Question’.

Asking The Question doesn’t necessarily give me answers, but it does inject a minimum daily requirement of humility. And as long as a voice in my head does not whisper ‘Sid, you’re probably wrong, or at least on really thin ice’, I can inch forward for another day, and ask again tomorrow.

Onward.

20131215

Timing Isn’t Everything, But It’s Critical

One of the critical elements in defining a controlled process is to specify the performance standards under which it will be judged. Among the basic performance standards are:

–  Quantity (how much to produce, how many transactions to process)

–  Quality (how good)

–  Cost (at what value)

–  Time (due date, elapsed time to completion, incurred time to completion)

These all play off one another. They do not exist in isolation.  You want it now? It’ll cost you more.  You want it now? I can’t make that many. You want it now? Not at the requested quality.  The imperative of ‘now’ has important ramifications for any process.  And today, more than ever, the constraint of time and the imperative of ‘now’ is the performance criterion that seems to trump all others.

*   *   *

Obama clearly understood the strategic imperative of time with respect to health care reform, but not the tactical implications of time in system implementation.  He understood that to avoid the long-term debt threat (not the faux short-term one) he must bend the health care cost curve, and he must begin now.  To improve the economy, he must get people back to work, and to do that, he must bend the health care cost curve, and he must begin now.  To avoid erosion of his initiative from relentless political attacks, he must advance it into reality so that it cannot easily be undone, and he must do that before he leaves office, and he must do that sooner before its intangible promise fades from public commitment under the withering fire of political assault; and the passage of time is not his friend.

What he and his team obviously did not understand, or would not acknowledge, was the tactical reality of producing a systemic platform to quality and quantitative standards within the time constraint of strategic considerations.  And here we are.  In such cases, time is not a destination, but a marker on a journey.  Best understood and communicated in that perspective. Too many CEOs fail to understand the limits of compressing time in the real world.

*  *  *

Meredith Whitney misunderstood time in her failed prediction of collapse of the municipal bond market.  She may yet be right for all the wrong reasons, but she blew it by being specific about timing, and without caveating the prediction on critical collateral factors that would be necessary for the result. Two factors which probably contributed to blowing her timing were the ARRA program which pumped money into municipalities and in many cases did more to prop up sagging budgets than prime the economic recovery; and Quantitative Easing (QE) which propped up the stock markets and inflated pension portfolios that might otherwise have sunk further in value and forced more municipalities to the wall sooner.  The imperative of continuing QE likely has less to do with keeping Wall Street happy than with keeping fresh lipstick on the pig of state and municipal finances.  In this case, the injection of value has ‘bought’ time, but not necessarily results.  It may only delay the inevitable.

*  *  *

I have previously written about timing and Clim-Ergy, the interplay of climate and energy issues. CO2 emissions and their consequences are moving on one time line.  Energy resources relative to economic and demographic drivers are moving on another time line. Renewable energy deployment is moving on a third timeline that needs to bend the first timeline before the second drives it beyond tolerable standards, and before the second plateaus and drives cost beyond tolerable standards.  Currently, there is no credible prospect that the third timeline will meet quantitative, qualitative and cost/benefit  performance standards within the necessary time standards, although that could change, but at the moment and in the foreseeable future, the odds are somewhere between slim and none.

*  *  *

I recently convened a meeting in my community on the subject of affordable housing. A private developer has stated that a new apartment complex he is completing could never offer rentals at the comparatively low prices he is offering if he had to buy the land at today’s prices rather than its cost thirty years ago.  Interestingly, while he is attuned to the influence of inflation over time, he is apparently unaware of the time value of his sunk invested dollars over that same period of time, particularly at market rates of return.  That proves to be a major impediment in attracting private investors to affordable housing projects, because their need for return is greater within a specified time frame.  An alternative that I proposed is for the Town to buy the land and lease it, because it can be ‘patient capital’, and enhance the economics of the overall project, bringing in much-needed diversity to the Town’s demographics and economy.  That idea is a bit foreign in our community, but again it speaks to different perceptions of time and its value in monetary terms and collateral benefits.

*  *  *

How soon do you need that ‘special something’?  The Big Box wants you to have it right now, if it’s worth your time and gas.  Jeff Bezos wants you to have anything in two days.    Why wait til Black Friday for those once-a-year Christmas sales when you can be thankful for them on Thanksgiving Day, assuming of course that you’re not a ‘sales associate’. In these instances, how much does time really matter, and what is it worth?

*  *  *

How long is a ‘long’ war? Some would say any war is too long. The US public seems to think ten years is too much in Vietnam and Iraq-istan (a.k.a. Vietnam Too) . The Taliban thinks it’s just another day in Paradise. It’s more than willing to let the clock run out.  For the US military, the calendar has run out between those two competing perspectives.  Job not done.

*  *  *

Time and education is a critical issue. Think about it. We have in our children a product that takes from 13 to 23 years to manufacture through formal education factories to a productive ‘resource’, depending on application. If one is preparing for a forty-year career, that is a reasonable investment, with hopefully a beneficial return on investment.  But if technological and economic and social uncertainties significantly truncate that timeline of application, it has significant impact on the choices and wisdom of the investment.

*  *  *

Should Elizabeth Warren run for President and in possible primary opposition to Hillary Clinton?  For Hillary, time is running out.  For Liz, as for Barach before her, the time might not be right because she may not be ready with a broad enough portfolio or a sufficiently diverse and competent team to make ALL the right moves. But also, as with Barach, she faces a window of opportunity for her perceived critical issues that might not afford her the luxury of time to ‘ripen on the vine’ until ready.  Alternatively, she might be able to ‘borrow time’ by running with the ripened Joe Biden as his VP, pressing her finance issues while broadening her portfolio for a subsequent run.  Can women wait til 2020 for the first woman president in our exceptional society which has taken longer than most to advance a qualified woman to that position?  Or is it more important to sacrifice quality for time?

*  *  *

Do you want to live to be 100?  It’s not just a question of time, but also a question of quality of life and cost/benefit (to me, not to the medical-insurance complex).  Maybe in twenty years my perspective on those two factors will change, but right now I’m gunning for 85 and out!

*  *  *

And let’s not forget time and love.  Diana Ross sang that you can’t hurry it.  Mike Jagger (the taliban-ista of love) opined that it was on his side. The Outsiders sang it won’t let them wait that long. It’s all a matter of perspective.

*  *  *

The value of time is not the same for everyone, but it must be understood, and the understanding must be communicated clearly, whether it is with an employer, a client, an investor, a society, a lover, or one’s self.

Thank you for giving me your time.

Onward

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Resilient, Sustainable or Unsustainable?

I have a bone to pick with academics regarding the hijacking of common words in the English language (or probably any other language for that matter) for their own arcane purposes.  There seems to be a tendency, as in other cases in our narcissistic society, to take something of common property and twist it to make it one’s own.  Being an accountant, and therefore trained in the art and science of splitting hairs on seemingly mundane issues, I take offense to this and feel compelled at times to say ‘Enough!‘.

The issue at hand is the discussion of responsive strategies to storm surge and sea level rise, in which the terms ‘resilience’ and ‘sustainability’ have taken on prominence, and are too often used as synonyms for each other, which they are not.  But the mangling of meaning is not only relevant to storm surge, or other facets of climate change, but business continuity, healthcare, the military, technological evolution, the economy in general, life itself.  So, maybe it’s worth taking a few moments to split a hair or two.

First, let us acknowledge that the English language in particular is a living thing, which means that it is also an evolving thing (for those who believe in evolution in all its forms). That means that change is inevitable, if not good, in meaning.  But the point of language is to communicate, and to that end, each word, each little vessel of meaning, should hold reasonably constant over some period of time, or we have babble.

In the context of sea level rise and storm surge (and let’s throw in drought and water depletion and wildfires) the terms ‘resilient’ and ‘sustainable’ have been used interchangeably to define the goal of public policy to move a condition of exposure beyond current vulnerability to a status of future safety and endurance.  The goal is good. But the criteria for attaining that goal require a parsing of the two terms.

In general usage by us common folk of modest educational attainment (and ratified by Merriam-Webster and various and sundry other chroniclers of lexicon) resilience means the ability to bounce back from adversity of some kind, to return to prior form.  Sustainability refers to the ability to maintain form or status or state of being over time and against opposing forces or influences of degradation. Not the same things.

Because we live in a world of competing forces, sustainability generally requires a component of resilience, because all beings or entities face attack in various forms by hostile forces of nature.  In the human analog, I sustain by eating and sleeping well, properly clothing and housing myself against the elements and educating myself in the proper use of language so as to communicate my needs, wants and value to others.  But when my normal mode of function is impaired by illness, my body reserves, my immune system, my health insurance and my family support system, (my various resources of resilience), return me to a state of sustainability…if I have any and all of these necessary to the particular threat.  Unfortunately, short of the end-game of death, there may become situations which are unsustainable, in which no amount of resilience can RETURN AND MAINTAIN me to sustainable health and function.

It is the alternative state of unsustainability which makes the distinction between resilience and sustainability vital, as we are now seeing on the New Jersey and New York shores in the aftermath of Sandy, or the mountain-sides of California and Arizona and Colorado in the aftermath of wildfires, or in little Texas towns run dry by fracking in competition with drought, or in communities on the Elbe and Danube which have had their third ‘100 year flood’ in twenty years, and are finding their resilience to the frequency of such events eroding; or the ability of Microsoft and Apple to fend off disrupters of their various business models from beyond the borders of the hegemony they have long enjoyed; or the US military being drafted for another misadventure when it has not fully recovered from our past mis-adventures.  The list can go on.

Sustainability must include a capacity of resilience because we live in a world of uncertainty and much of that uncertainty poses risks to our status quo.  Resilience often means conserving some portion of resource (cash on hand) or expending some portion of resource (insurance premiums, redundant and distributed operations) or deploying some capacity (distributed operations, the internet) or forming mutual alliances/dependencies to guard against known and unknown hazards that would otherwise render us unsustainable.   Resilience inevitably involves a cost of some kind, a diversion of effort or resources from activities that we might prefer to do with those resources, activities that might further advance our primary purpose/mission rather than merely guard our flanks.

Sustainability is about keeping the enterprise going in a preferred direction or state of being.  It is rarely static, despite to our antipathy for change, because the environment around us is constantly changing and demands response. It is in the nature of that environmental response, whether natural or social or economic or technological, that the distinction between the sustainable and the unsustainable is ultimately determined.  As we know on a human scale, when a cancer metastasizes beyond the capacity of medicine to contain and the body to fight, no amount of resilience by any definition will sustain the unsustainable.  The same is true of parts of the Jersey Shore and perhaps the cotton fields of West Texas, and our involvement in the Middle East, etc.

Stated differently, but hopefully without adding confusion, sustainability is about pro-action to advance primary goals; resilience is about pro-action to position one for reaction and recovery, if necessary.

A simple example may illustrate the distinction.  In a low-lying shoreline area vulnerable to storm surge and eventual sea level rise, purchasing flood insurance for a residential property provides an element of resilience against damage from storm surge.  Raising a residence to FEMA standards enhances sustainability of the basic living areas and critical utilities against storm damage.  But when sea level rise inundates the property and adjoining land on a regular basis, rendering the property unsustainable by norms of public health and safety, no amount of resilience can sustain its status and value.

In the aftermath of Katrina, many voices criticized the Army Corps of Engineers for only rebuilding levees to a Category 3 hurricane standard, when it is reasonable to assume that New Orleans is an ideal and highly probable candidate for a Cat 5 at some time in its future. Separately, but related, when the Connecticut Task Force to Preserve Long Island Sound asked the Corps what standard of projected sea level rise the Corp plans for, the respondent said that it generally looks in the range of one to two feet over several decades, because beyond that the costs of defense escalate tremendously.  It should be noted that the US Navy has chosen a probable global sea level rise projection of three feet by the end of the century.

The point of the above is that, implicit in the Corp’s decision to build only to a Cat 3 specification, is likely the judgment that construction of a stronger levee system would be irrelevant to collateral circumstances that would render such defenses inadequate in themselves, and New Orleans unsustainable. Sea level rise is likely an element of that judgmental calculation.

But if that is the case, it is important for many other parties to understand that, including the energy sector and Midwest farming and manufacturing sector that depend on facilities in New Orleans directly, and their broader respective markets.  If a Plan B is needed for the day when the CAT 3 storm levees no longer sustain New Orleans, and the damage done by sea level rise or storm surge is beyond the capacity of resilience, particularly in the face of repetitive major loss, somebody had better start working on alternatives now, because New Orleans is by no means alone, and there will be many others lining up at the teller’s window to borrow on an uncertain future.

To summarize the above succinctly: No amount of Resilience can Sustain the Unsustainable. Hence the imperative for distinction between Resilience vs. Sustainability, and Sustainability vs. Un-sustainability.

Or, to borrow from the wisdom of the great philosopher, Kenny Rogers, ‘you gotta know when to hold ’em; know when to fold ’em; know when to walk away; know when to run’.

Splitting hairs?  Perhaps.  On the other hand, once you’re bald…end-game.

Meanwhile, I urge academics to respect common language for its broadly shared meaning, and pick a dead language like Latin (or Greek, in keeping with the status of its economy) to re-purpose to their special needs.

Onward.

20130919

What’s Your End-Game

We will begin today’s offering with a paraphrase of Shakespeare’s famous quote on greatness:

Some are born to the future;

Some achieve the future;

Some have the future thrust upon them.

End-game.  A fascinating and often overlooked concept in personal life strategy and organizational strategy, and an extension or, more appropriately an immersion, into a specific facet of last week’s more general exploration of anticipating and planning for one’s future.

At the end of a personal or business venture, including life itself, how do we expect to conclude affairs before we turn the lights out for the last time? This question has presented itself to me in a number of scenarios recently, but an opinion piece of fracking motivated me to pull all the disparate snippets together.

Defining one’s end-game is somewhat like drafting a prenup for a strategy; before you become wedded to it, consider under what circumstances you may choose to divorce from it.

End-game does not necessarily define ‘The End of it All’. It could define the end of a job, a career, a relationship or commitment on a personal level.  It can define the end of a product line, a facility, a research program, or conditions for liquidating the entire entity.  It can be defined by parameters of choice, parameters of historical experience (life cycle for similar technology) or parameters of necessity (contractual covenants, declines in market share, loss of stakeholder support).

End-games are best contemplated and defined at or near the start of a venture, and preferably while there are still options.  Zero based budgeting and sun-setting provisions in contracts and legislation are examples of tactics to stimulate end-game strategic thinking.

All of this sounds obvious, and yet it is often ignored on both the personal and professional level.

Let’s take Obamacare and the notorious ‘death panels’.  We’ll ignore for the moment that the insurance industry has already been running those on a non-elective basis, and that the fear-mongers who ranted about Obamacare’s so-called ‘death panels’ were among the most aggressive in seeking to cut benefits of any kind and thus hasten the inevitable.  The premise in Obamacare was to give people the information and opportunity to make informed decisions about how to approach an event none of us will avoid (Ray Kurzweil’s fondest hopes for the Singularity notwithstanding), and many of us have not adequately prepared for.

The future financial plight of many Boomers is also an example of individual end=games not considered, but with considerable collective consequences for society.  Even those who diligently planned an end-game for their retirement years have found their assumptions savaged by an economy built on treachery and deception.  Even the best end-games must be revisited and revised, but they are better than no end-game at all.

The end-game of quantitative easing is on many minds, but with little clarity. At least it’s on the radar. Even when Bernanke tried to clarify the criteria, the audience managed to muddle them with some degree of concerted ignorance.  Denial is not among the ten best tactics for end-game strategy development.

What are Microsoft’s and Apple’s end games? Does Microsoft have one for its Office line?  Does Apple have one for a pincer movement between Samsung in hardware, and Amazon in content and distribution?  Did Polaroid or Kodak have end-games? Should Exxon-Mobil?  What is Obama’s?

What is Williston and North Dakota’s end game for the decline of frack?  A long way off, perhaps, but inevitable? Are they studying those who have gone before them? Are they conserving today’s budget surpluses for tomorrow’s infrastructure repairs and retrenchment and social fallout from the economic frenzy?  Or do we just let the good times roll?

What are the electric utilities’ end game for a grid that is physically decaying and a distribution model that is being disrupted by renewables?  Will they dig in their heels, or adapt?

What is Detroit’s end game from bankruptcy? Is it unmitigated disintegration, or are there seeds of rebirth to be nurtured, and by whom?

As I monitor the evolution of climate change, with specific focus on vulnerable coastlines and their populations, I observe the end-games that are playing out in New York and New Jersey, as some people struggle to cope with a reality that has been thrust upon them, and others struggle to deny the same reality.  In Connecticut, which was comparatively brushed, but not battered, we remain largely in denial, especially in the halls of government.  We are going through the motions, but we are not really coming to grip with the future.

Stephen Covey famously advised: “Begin with the end in mind”.  Once you have defined your destination, filling in the blanks between where you are and where you hope to be (or may have to be) becomes much easier.

Not easy, but easier.

Onward.

20130728

What’s Your Future?

We all have one. Some longer than others. Yet it is odd how little time most of us spend preparing for it, and how ill-conceived our preparations tend to be.

Our most typical mistake, as noted by researchers Daniel T. Gilbert and Jordi Quoidbach of Harvard,  and Timothy D. Wilson of the University of Virginia, is to see our future as an extension of our past. They call this the ‘end-of-history illusion’.    A recent article describing their research suggests why we so often fail in our thinking about our future, if we think about it at all. The article speaks to the personal level of experience. It cites a scientific study which concludes that at a personal level, we are more aware of the changes in ourselves that we have experienced than we are capable of anticipating the changes that are likely to evolve.  In other words, we appreciate how much we’ve changed, but tend to see our present state as static, and projected into the future. ‘Freeze-dried’, if you will. That truth on an individual level is also often the case at the organizational level, our strategic planning fetishes notwithstanding.  Kodak, Polaroid, the auto industry, the oil industry?

This difficulty, or perhaps reticence, to project our evolution as individuals is possibly attributable to a keen awareness of how rarely the future evolves as we expect.  We therefore decide not to invest personal energy charting a destiny that is beyond our control.

Organizations are more inclined to plan ahead as a matter of necessity, but are not necessarily much better than individuals in getting the future right. What is true of individuals is often true of organizations, with some variations on the theme. Although the mythology of modern management is based on the assumptions of pro-action, future-orientation, and anticipating where markets will be, in truth we are still very much wedded to our past, both in business and in government, and see the future in terms of what we know or may wish rather than what may be.

Even organizations that try to project a future different from the present, and invest heavily in its proactive execution fail to meet their objectives as often as not.  Exhibit A for this bold statement? The failure rate of corporate acquisitions; a prime strategic tool of ‘repositioning’ for the future. Also, the failure rate of new enterprises.

So, if we are so incapable of predicting, planning for and effectively executing to a future, why bother?  Is it possibly the case that we expect too much of planning, and perhaps the wrong result?

I will offer three reasons that I have observed for frequent failures in planning:

1.  The ‘experts’ who devise the plan build it on known historical precedents (consistent with the researchers’ observations of individuals).

2.   The organization devises a ‘blue sky’ scenario largely reflective of executive aspirations, and substantially ignorant of the existing organization’s capabilities to execute to it, or the challenges of creating a new organization from scratch.

3.   Management does not understand, or anticipate changes in the ‘market’ or the broader environmental context in which they are planning their specific future.

Experts in general, and planners specifically, often suffer from three flaws:

–  Their ‘expertise’ is founded largely on historical experience.

–  They are over-confident in that experience as a basis for projecting a future.

–  They are generally lousy at ‘anticipating’ the future.  (Note that I used the word ‘anticipating’ rather than predicting, in order to set a more reasonable bar.)

This leads us to the third item which is perhaps most challenging for individuals and for businesses for reasons noted by Prussian Field Marshal Helmuth Graf von Moltke, and oft cited by others: “No battle plan survives first contact with the enemy”.  In the battlefield of life, this recognizes the oft ignored truth that we do not exist and plan in a vacuum.  If our planning fails to anticipate and recognize the possible changes occurring around us by competitors, customers, suppliers, key facilitators, regulators, sundry stakeholders with often misunderstood influence, we are destined to fail. But knowing and incorporating the relevant changes in our environmental context is equally impossible (even for the NSA) so why bother, particularly long-range planning?

A plan is both a road map and a measuring device and should be used as such; not as a fixed blueprint of destiny.

Just as a map has mile markers and alternate routes that may be taken along an intended route, a plan should map decision points and contingencies as well as the preferred path to the primary destination. It should be a living document; not a fire-and-forget-until-next-planning-cycle document.

To cite an example when I was a finance director for a non-profit research and community service organization, we grew 300% over a three-year period through a variety of grants and contracts from a variety of sources in a very competitive academic and governmental market.  Each planning year, we began our year with a known operating deficit which was reflected in our budget.  We had obligations to staff specific grant requirements, and then had excess professional capacity which needed to be absorbed through entrepreneurial marketing to opportunities that would appear on the radar.   The recognized deficit was an unambiguous target in our plan, not obfuscated by aspirations. When opportunities arose, we would often have to adjust staffing assignments to align the right mix of expertise with the combination of grants and consulting contracts that would evolve.

The frequent changes in our budget in the course of the year would drive our auditor crazy, not because it was wrong, but because it was an uncharacteristic way of running a non-profit.  But we ultimately demonstrated to him that it was a proactive means of assuring that we met our grant and contract staffing accountability obligations, AND adjusted our resources to evolving circumstances.  The concept of flexible budgeting is now becoming more broadly accepted by more organizations as a replacement for the rigid annual exercise that is more ritual than management tool.

As a measurement tool, managements and individuals should not see deviations from plan  as indications of operational failure, though that may be the case. Deviations may be indicators of two other factors:  failure of the planning process to understand the operating context (factors and influences external to the organization which may be changing and unknown to the planning process); and failure in the planning process itself to incorporate internal and external information that is knowable. These deviations should be seen as indicators to drive positive change, and not as evidence to invoke an executive inquisition.

To understand and accept the limits of intelligent planning is the first step to making it an instructive and agile tool.  To regard it, as we too often do, as an inflexible mandate of unquestioned wisdom and authority is to condemn the organization to suffocation by stifling creative and innovative thinking.

A plan, whether for an individual or an organization, is a guide; not destiny.  Changing a plan that is not working is not a sign of failure, but of wisdom.

And the aphorism holds: ‘Those who fail to plan, plan to fail.’

Onward

20130720

Dissecting the Skills Gap — The Sequel

Pop quiz.

Q.  What is the job of Management?

A.  To manage!

And yet, in the area of human resource development, managements of big and small companies alike have failed to manage what they profess to consider a strategic threat to their sustainability.  They are not without options in addressing this problem; primarily they are without vision. And to a large degree, they have created their own problem.

Sometime in the ’90s (you remember, that prior century. How quickly they seem to pass these days), I became aware of the growing meme that the labor force of the future would have eight to twelve careers in the course of their working lives. This is the kind of nonsense that routinely flows from hip thought fountains like Fast Company and similar self-styled orifices of cutting edge management wisdom.

One must then ask what constitutes a ‘career’ by that definition.  Take a 40 year work life and divide by 8 (to keep the algorithm conservative and simple) and you’ve got 5 years plus or minus for a ‘career’.  Except for the exceptional, most people are only reaching their competence and optimum productivity in the first five years, and ready to move on to the next level of ‘Career 1’.  So the meme suggests one of two pathways:  1) we’re talking about truncated expertise and productivity among ‘career’ moves; or 2) we’re really talking about job moves for the most part.

I am an accountant.  I’ve morphed into many forms with multiple companies over my career, but I remain fundamentally an accountant by career definition and SKILL SET, which has also morphed over time.

If we’re talking about job changes, we’re talking about tactical changes in our preparation and decisions as CEOs of our personal careers.  But if we’re talking about planning for a future of major ‘career changes’, we’re talking about strategic decisions of much greater import.

Back in the good old days of the Last Century, major corporations would hire a careerist by some definition, and mold him/her through various means of career planning, investment in education, job rotation, etc. to meet their long-term needs.  Corporations invested in advanced degrees and credentials, and acquired individuals who expected advanced compensation and who in too many cases were expert at ‘doing the drill’, but often susceptible of ‘missing the point’. Hence many organizations, bloated with expertise, notoriously missed opportunities/risks presented to them in the tumultuous  events of the ’90s.

But in our current management environment where management regards people as plug-and-play commodities, to be available exactly when needed with exactly the needed skill-sets, we’re running into a problem.  Not surprisingly except to the executive corp, supply is not meeting the demand. Embedded in the corporate mentality is the convenient, if utterly unrealistic, assumption that ‘the workforce’ will self-manage itself to management’s needs. It will intuitively divine the constantly shifting, A-D-D driven expectations of the E Suite and reprogram itself to need.  It’s not working.

This was reinforced this week when I attended the 18th International Festival of Arts and Ideas in Yale, Connecticut (also known as New Haven).  On the particular day of my attendance, the theme of ideas was innovation, at various levels of the entrepreneurial food chain.  I attended a panel discussion in which representatives of four innovative organizations spoke of how their organizations endeavored to promote innovation and economic growth.

During the Q&A, I did what I so often do at these events and threw them a curve ball.  Acknowledging the obvious benefits of their various contributions to innovation, I asked if their organizations ever consider what is often the intended consequences of innovation: the displacement of people from their positions.  The answer was not surprising, and telling.  The collective response was the recognition of the reality of my question, but the belief that many of the people who are displaced in one instance will transfer their skills to other promising opportunities.  In essence, they were speaking to a small segment of highly creative, highly skilled, highly motivated individuals who are on the cutting edge of innovation, but not the vast majority of the workforce, many whom have been or stand to be displaced by future innovations.  The panelists were unknowingly trapped in their own philosophical bubble.

My question was somewhat unfair, because it is not necessarily the role of any given corporation to plan for the collateral labor consequences of its strategies, particularly beyond the boundaries of its corporate mission.  But if not business, who should be concerned? The implied answer is the labor force.  It should pack its own parachute.  It should be ready to bail at a moment’s notice into the unknown and recover instantly without need for unemployment compensation, government sponsored re-training or damage to their credit ratings and impairment of their ability to sustain consumption.  Neat trick if you can do it.  Statistics suggest it’s not working.

Over the years and with the ever-increasing demands for maximum growth,  US business in general has relied on growth by acquisition over internal, organic growth. The results have generally not been good for a variety of reasons, suggesting an overall lack of executive competence in effectively managing this strategy, and resulting in investor cynicism when presented with this proposition.

Similarly, corporations have revealed equal challenge in effectively managing R&D reliably to support organic internal growth with some predictability.  Thus, they have again turned to external acquisition, looking to small start-ups who can furnish what the biggies cannot conceive.  It is an option to be sure, but an opportunistic one; not a strategic one, and filled with risk for all involved.  Imagine if we tried to go to the Moon with such a strategy.

*   *   *

In 2005, I was researching the issue of technological displacement which I had concluded trumped outsourcing and off-shoring as threats to economic stability in the US.  In the course of that research, I came across an article that reported a decline in the number of US students considering a career in computer science.  Eschewing the rising paradigm?  How foolish! Do they not see the future? Quite possibly at the time, the future was obscured by the fog of the present.  Seeing on the one hand what was happening to their parents in their respective fields, and hearing the propaganda in the background about 8 to 12 careers in a life time, they may well have wondered what was the point in investing intensively in a demanding career that would likely render them obsolete by forces they could not anticipate before that career made them secure.  Good question.

*   *   *

Two weeks ago I attended a conference on transit oriented development. An intern joined our table. When I asked her background, she indicated that she was currently studying at an Ivy League university.  I asked her career interests. She replied that she was pre-med, but also considering career options in community engagement.  It struck me as a somewhat strange combination, and she seemed of equal mind on both.

Last week at the Arts and Ideas Festival, I made a stop at a small business incubator. On one of our stops through the facility in a recently re-purposed commercial building of some vintage, a young lady described her services with the incubator in facilitating programs to inspire and nurture would-be entrepreneurs.  At the encouragement of our program guide, she also offered that through her primary efforts, she was developing her own small business to sell cupcakes, samples of which she offered to us.  I wrestled with concurrent feelings of cynicism and sympathy.

My feelings of cynicism sprung from a sense of the triviality of what I was observing, and the high probability of failure.  It was tempered only by the realization that, for all I know, her cupcakes could be the next Mrs. Fields success and go viral.  But the sympathy came from a sense that these were acts of semi-desperation in an economy that offers her and her  cohorts little more of substance at this moment, and perhaps for many moments to come.  I respected the dignity of her effort, even if I questioned its probable success.

In both cases, these young people seem to have arrived at the atrium of adulthood without clear direction leading to a sustainable future.  They are joining older cohorts who previously had a sense of clear direction, only to be derailed by circumstances they did not anticipate, and in many cases could not have foreseen.

*  *   *

US society has learned to recycle waste.  It is gradually learning to recycle the electronic refuse of our digital era.  But we are doing a genuinely lousy job of recycling people to beneficial purpose, and that is the ultimate waste.  In that human ‘waste’ is the future sustainability of our obsessive consumer economy, and all the marvelous innovation that presumes to support it.  It also holds the fate of our democracy.

Onward

20130624