Organization and Management

V.I.T.A.

30 Nov 2008  

In my last post “Our radar has failed”, I offered the view that the current financial crisis is actually more than that—it’s a crisis in the ways we use information to make business decisions.  We’ve obviously come to another “Where do we go from here?” moment.

So, where DO we go from here?

I’ve identified four guiding principles that I believe frame a way to move ahead in the ways we use information to manage our economy and society going forward.  These are Vigilance, Integrity, Transparency, and Accountability.  (Each is first defined below using Merriam-Webster’s Collegiate Dictionary.)

Vigilance. “The quality or state of being alertly watchful.”  Keeping our “eyes on the prize” has to be a top priority so we can avoid making the same mistakes time after time.  Note that this definition implies that it’s possible to be non-alertly watchful-that is, to look without seeing.

There are books and articles being written about what some feel is the shortening of our collective attention spans, and the collective “dumbing down” of our culture.  We must be aware of this trend and take active steps to counter, or at least adapt to, it.  We have more information potentially available to each of us than ever before in history—yet sometimes it all becomes a blur when actually determining what is happening.

I’ve spent my career advising and teaching businesses to monitor  trends in their environment for clues as to how they can become more successful.  But it’s equally true of families and even individuals—since each of us is, in one sense, a small business.  Continual awareness of, and responsiveness to, our environs is a key part of the adaptability of human life. The ability to see and react quickly to our environment is essentially what defines “intelligence”, at both the individual and organizational levels.

Integrity. “Firm adherence to a code of especially moral or artistic values.”  This basically means that if you say you believe one thing to one person, you don’t say the opposite to another.  If you say you believe something yesterday, you don’t contradict yourself today.

The pressures against integrity are enormous.  There is a kind of “social expediency” that has crept into our social interactions, in which people superficially agree, while withholding their true sentiments for fear of sticking out.  Social scientists have labeled this “groupthink”.

In general, there is an avoidance of discussion and dialogue in our culture, especially where it would result in honest differences of opinion.  This has most recently been glorified as “the wisdom of the crowd.”  Anyone who disagrees with the mainstream opinion is seen as not only wrongheaded, but chronically pessimistic, and even disloyal to the group and its goals.

Integrity is the soil in which grows trust.  There are commercial cultures, the Chinese for example, who largely due business largely based on trust and informal “handshake” agreements.  Americans tend to prefer detailed written contracts.  Is this good business practice—or is it done to compensate for, or even mask, a fundamental lack of trust among the parties?   Trust is the lubricant that makes our whole economic engine run smoothly.   Without trust, contracts are worth little more than the paper on which they’re printed.

Transparency. “The quality or state of being readily understood.”  When people are unable to see clearly what is happening, they cannot make rational decisions.  Keeping things in the open, available for all to see, is a fundamental principle of both our participative democracy and our capitalist economy.  To the extent things are un-transparent, as they too often are in the financial world, there need to be clear, comprehensible explanations.  To the extent they are deliberately made to be un-transparent, people should be punished.  This is why we have laws against fraud.

People who argue against regulation and in favor of free markets typically ignore this distinction.  Free markets work effectively only to the extent there is informed choice available equally to all players.  To the extent that information is not available, that it is distorted (mis- or dis-information), or that it is available to some parties and not others (asymmetrical information), free markets cannot truly be “free”.

Accountability. “The quality of being held responsible.”  The linkage between performance and reward has long been a building block of our commercial culture.  This fundamental mechanism incentivizes people to do better, and helps us develop and improve.

And yet we seem to have dropped this fundamental element from our “social contract”.  There are many recent examples of CEOs who destroy billions of dollars of shareholder wealth, yet are handsomely rewarded with generous exit compensation packages.  The Wall Street implosion is only the most recent example of this.  This is a perversion of common sense, and sends the wrong message to investors and to younger working people.  It gradually erodes the causal relationship between performance and reward.

This lack of accountability has crept like a cancer throughout our culture, in many different ways.   Another example is pervasive grade inflation – if everyone’s performance is judged to be good, how is the outstanding performance defined and measured?

When we lose the meaning of accountability, we lose interest in rewarding excellent performance.  Then gradually we lose our ability to determine what good performance is, and to discriminate between the excellent and the mediocre.  Everybody gets a prize, so no one’s feeling are hurt.  This “we all feel good” mentality makes us all feel good—until one day we wake up and realize we are no longer able to compete effectively in world markets against cultures who still hold people accountable for their own actions.

Vigilance, Integrity, Transparency, Accountability—VITA.  Four simple principles that I believe we must uphold and vigorously defend in order to find our way back to a rational, stable economic system that works for all of us.

What do you think?



1 Response

  1. Great, thoughtful articles Tim!

    When the government can print money at will, hand out trillions to friends, etc., and make promises beyond belief, like social security, do you think having better radar is enough? How about adding some good honest actuarial accounting methods? Otherwise, one has to just hold on because the next big one is coming.

    Cheers, and a happy and healthy New Year to all,
    Alan

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