What CEEMAN Could Do About It

Keynote presentation before the Central and East European Management Development Association (CEEMAN) 2009 annual conference, in Riga, Latvia, on Sept. 23, 2009.

Published in Proceedings of the 17th CEEMAN Annual Conference “Local Responses to Global Crisis”

“Business schools … teach their students to … analyze data, write reports, and know how to present them well. But do they teach people how to work with each other? No! Maybe we should change our name to the School for Autistic Management?”

I have been asked to talk about how business schools, and specifically those in CEEMAN, should react to the current crisis.

Let me start with a story.

When I was a kid, my mother would say that I should not go outside in the wind after a hot shower, because I would catch a cold. I wondered why I would catch a cold after a shower, when people in Finland – and I hear the same is true in Latvia – like to sit in a sauna and sweat, and then jump into cold water. They do not catch pneumonia. They do not die. Rather, they feel invigorated.

Why do I get a cold just by sticking my nose out the window, whereas another person can roll in the snow and feel invigorated?

What is the difference between them and me?

I have also noticed that I catch most of my colds during the summer, when the weather outside is hot but I have the air-conditioning on inside. I go in and out – and I get sick.

What is going on?

It is not the cold, or the wind, or the air-conditioning, that makes me sick. It is my body, which is not capable of dealing with change. If it were strong and used to change, I could jump from a sauna into cold water and even enjoy it.

The problem is not out there. It is in here; it is within us. When you are healthy and used to change, change is invigorating. But if your immune system is weak, a change will get you into trouble.

We usually try to see a problem as something out there that is giving us trouble and causing a crisis. But the truth is that we are the problem.

Not every person, company, or country has problems in times of change. It depends on how healthy the system is. And what does “healthy” mean? What does it mean to be a healthy organization or a healthy country?

The system is healthy when it can deal with change without falling apart.

And what makes a system healthy?

***

Change causes disintegration because all systems are composed of sub-systems, and sub-systems do not change at the same speed. With change, systems fall apart (disintegrate).

Change causes disintegration, which is manifested in what we call problems.

Now, if all problems stem from disintegration caused by change, what is the antidote?

Integration!!!

When a person is in serious trouble, we say that s/he is “falling apart.” A family or a country can also fall apart.

When a person is in prime condition, we say, “This guy has it together.” We also say that a country “has it together.” When you are integrated, you are “together.”

And what does being “together” mean? Are modern companies “together”?

Based on many years of experience with companies worldwide, my answer is: No, they are not. And that is why many companies got into trouble when faced with the current crisis.

What has “fallen apart”?

Owner/management disintegration

The capitalist system is based on the presumption that capital produces value. You invest money, and your money will work for you. You yourself do not have to labor.

But since you rely on your capital for your well-being, it is normal that you will want to control what your capital is doing.

At the dawn of capitalism, owners did control their capital. Owners were the managers of the companies in which their capital was invested. In modern capitalism, ownership is separated from management. You buy shares of stock, and someone else manages the company for you.

This bifurcation, created by the stock market, is credited with the creation of tremendous wealth. However, it has also produced side effects. It has created disintegration. Owners have lost control of the companies that use their capital: If you do not like the way the company is being run, you can sell your stock – but that is all you can do.

What about the boards of directors? Don’t they represent the owners and supervise management?

Granted, boards of directors are supposed to represent the owners and supposed to supervise management. But do you really think that boards of directors know what is happening in the company? They do not. How can they know what is going on in a company that employs 20,000 people? All they really know is what they can learn by reading the company’s financial statements.

But it is not only the board that is detached. Chief executive officers can also be quite detached from the day-to-day reality of a company. There is “management by walking around,” but just try to walk around a multinational company and meet the employees. It can’t be done, can it?

Don’t managers and boards know what is going on from the reports they get, from the financial statements? No. Financial statements should and do tell you something about the condition of the company, but by the time you find out there is a problem, it is too late to prevent it.

And what is wrong in managing by reports? It is management of outputs rather than inputs.

Allow me to explain what is wrong with that, with a joke.

At an international medical convention when the Soviet Union was under Stalin’s regime, the South African representative stood up and said, “We transplanted a heart.” Applause. Then the French representative announced, “We transplanted lungs.” Applause. Then the Soviet representative stood up and proudly declared, “We extracted a tooth.” Silence. The audience was bewildered. During the break, people asked him, “What do you mean, you extracted a tooth?” The Soviet representative explained: “Oh. You do not understand. It was a major achievement. We extracted a tooth from the rectum, because nobody dares to open his mouth.”

Managing by financial reports is managing from the wrong end. It is managing by financial statements, rather than managing the people and their interactions, which produce those statements.

Management/worker disintegration

The first disintegration is ownership from management. But there is another disintegration: management has become detached from the workers.

When companies were small, owners/managers knew every worker. They had to take care of them, because they depended on the workers as much as the workers depended on the owners. Owners/managers also had their names on the door, and took responsibility and pride in how their companies treated the community in which they operated.

Now the companies are behemoth, spread all over the globe. Employees are a name on an employment list and a statistic under “labor costs” in the P &L report.

What many do not realize is that employees are an asset, not just an expense.

Do you know who knows the company – its problems and uncapitalized opportunities – the best? The employees. They can tell you what is going on in the company better than anybody else.

But does management listen to them? Sure, there are suggestion boxes, but they usually collect cigarette butts. There are open-door policies, but how many workers have you seen walk through the open doors of the president’s office to talk to him/her?

So what are we talking about? We are talking about a flat-Earth theory – except in this case the earth is not horizontal; it’s vertical. Energy flows only from the top to the bottom, and that is it. It is management by reports. It is elitist managers, who are not listening to the people they manage.

Management disintegration

There is disintegration among managers, too.

In a typical executive committee session, the lights are dimmed and a PowerPoint presentation appears on the screen. You see a succession of tables and charts. Tables and charts, graphs and tables. And how much open sharing and discussion is there? How much time and energy does management spend to nurture transparency, openness, and integrity among their subordinates? A very small percentage of their time is spent with that purpose in mind.

Is there teamwork? No. And how easy is it to make changes in a company where the people are interdependent but non-cooperative?

To illustrate this situation, allow me to tell you a story from my teenage years. When I was in high school, my class took a night train from Biarritz to Paris. Like typical teenagers, we all tried to sleep in the same compartment. Some of us were on the seats and some were on the floor. A foot was sticking out here and a body was sprawled over there. It took us an hour to fall asleep; then somebody had to get up and go to the bathroom.

That caused a total commotion. We started quarreling – “You idiot, why didn’t you go before?” “Don’t step on my hand!” “Watch my head!” – and so forth.

In organizations, many managers prefer, metaphorically, to pee in their pants rather than make a commotion by requesting some change. I often joke that that is why people in many aging companies wear dark suits – so that it doesn’t show. Eventually, they all pee in their pants, and people start complaining, “This company stinks!” For sure, it does.

To achieve change, which is essential for successful management of any company, you need an organization that can change easily. For that, the organization needs teamwork: cooperation and mutual trust and respect. Managers need to talk more, share more, be open with each other more, and support each other more. But who takes care of it? Management is too busy watching PowerPoint presentations …

The solution

If the cause of all problems is disintegration, it follows that the antidote is integration. We need to manage the integration horizontally and vertically. We need to manage togetherness.

But we do not teach future business leaders that, do we? Business schools are proud of their computer lab. They teach their students to sit in front of a computer, analyze data, write reports, and know how to present them well. But do they teach people how to work with each other? No! We are training autistic managers! One manager once said to me, “Dr. Adizes, I like to manage; it is people I can’t stand.” But what did he think he was managing? Oh, yes. I just remembered: The financial reports.

Successful leadership training

Management is about working with people. That is what we have to teach. Instead, we are training people who will eventually become consultants and investment bankers, people who know how to analyze reports and make presentations. We are not training leaders of change.

Even when we try to teach leadership, what do we teach? To know Maslow’s hierarchy of needs? That is fine, but it is not even remotely the extent of what our future leaders need to experience if they are going to lead.

So how should we train leaders?

Put the students in a room and give them an assignment in which there is a conflict. Teach them how to resolve it. Teach them how a leader behaves.

And how does a leader behave? With a small mouth and big ears – not the other way around. A leader is a thumb. What does a thumb do? It works with all the different fingers to create a hand. A leader knows how to integrate diversity of opinions and styles, how to help people disagree without being disagreeable. A leader is capable of building and nurturing a culture of mutual trust and respect – a culture in which people are not afraid to speak their minds.

Without a thumb, you will not have a hand. Without a leader, there is no teamwork – and without teamwork, the cart will be stuck in the mud.

Let me share with you something from an article in the Aug. 17, 2009, issue of the Financial Times. It is called “The Capital Gained from Culture”:

Gordon Nixon makes a point of escaping Canada’s frigid winter each January for a Caribbean cruise. But the excursion is more work than pleasure for Royal Bank of Canada’s chief executive. His 700 fellow passengers are RBC tellers, administrative staff, junior employees, and middle managers who are being rewarded for superior performance.

“Mr. Nixon joins the cruises to put into practice the teamwork and mutual respect he has tried to foster among RBC’s employees …

“As he sees it, that culture has played a crucial role in RBC’s ability – rivaled by only a handful of other large banks – to ride out the storms that have battered the financial services industry during the past two years.”

Organizations are like fish tanks. Unless you supply them with oxygen, from the top to the bottom of the tank, the fish will die.

Quo Vadis CEEMAN?

We have to change what and how we teach. When Professor Danica Purg founded CEEMAN, she said to the leading business schools of the West: “Give us the best and keep the rest.”

You have borrowed too much. You have copied the flat-Earth theory of management. That is wrong. Clean the dust off the books on industrial democracy. It is time to revive this old idea. Teach future leadership to listen to the workers and to each other, to manage more by pride of teamwork and less by worshiping numbers. We have to be “together.” Integration is the secret of a healthy organization, and that is how we will turn a crisis into an opportunity and succeed in the future, and leave behind those that are fighting among themselves to catch the cold.

Thank you and God bless.