Thriving on chaos while driving process –Leadership in practice

I was asked to talk about leadership as it is practised in industry at the Nanyang Fellows Leadership Series at Nanyang Technology University, (NTU) Singapore on December 16^th, 2009. I am choosing my blog as a venue to develop ideas for this talk on leadership. Many of the readers of this blog are distinguished leaders, and I am hoping that you will contribute with your ideas.
The initial thoughts that I am putting down are with the intention of starting what I hope will be a lively discussion. Victor Mieres helped me articulate some of these initial ideas and I would like to thank him.

Leadership in practice:

Thriving on Chaos while driving process and leading from the middle are the top themes that come to my mind when I think of leadership.
I chose the words thriving on chaos to reinforce the importance for leaders to have a high tolerance of ambiguity and uncertainty. In organizations that are marked by entrepreneurship and innovation, leaders not only need to be flexible, but also must enjoy the challenge of facing the unexpected. At the same time there must be appropriate levels of development of processes, so that the organization is scalable and that every issue does not become an exception to a process. Leadership of this nature is probably not suitable for all organizations. Large transactional organizations or functional process centric functional groups are perhaps successful because of leaders who enjoy institutionalizing processes and discouraging "thriving on chaos". Does this mean that leadership is subjective, depending on the operating environment? My view is that there are some common elements of leadership, and there are many aspects that are based on the operating environment and goals of the leadership.
In an organization which is innovative and entrepreneurial, trust is of essence. The trust of the organization in its leader and the ability of the leader to trust members of his or her team is critical. This is a time consuming process, since trust is earned, and I have not found a way to short circuit this aspect of developing a well performing team. Leadership in practice also of course involves the ability of the leader to attract extremely competent people, because trust with out competence will take you nowhere.
In addition to competence and trust the leaders should be able to motivate the people in their organizations and have the ability to have genuine relationships with members of their team.
An aspect of leadership that is not talked about too much, but what I consider essential for long-term sustainable growth is the ability of leaders to grow a "secure team" ; that is a team in which members respect others and do not feel threatened when other members do well. A team in which members are secure enough to innovate and not fear failure. Growing a "secure team" is probably one of the most difficult aspects of leadership.
The Nanyang fellows are young but experienced managers from industry and government whose organizations have chosen to send them to NTU with the hope that they will grow to lead large organizations in time. So I wanted to spend some time on leading from the middle.
Leading from the middle involves commitment, competence and entrepreneurship. Often I hear people complain about their management, the environment in their organizations, their customers ….. A leader emerges from the middle by taking ownership and being proactive, and taking up the "cause" of change or success. But again this is not enough to sustain an organization. It is then important to be able to groom a next level of leadership by coaching and then delegating decision making and authority. Once again the concept of atomization of the organization helps both in testing the leadership and grooming new leaders.
A few of my colleagues and friends mentioned that using "thriving on chaos " is too strong; maybe "managing chaos" would be more apt. But I continue to think "thriving on chaos " is essential since it highlights the fact that businesses and organizations change rapidly and often unpredictably, so we have to enjoy this change in order to lead a successful team and at the same time be able to drive appropriate processes required for running a good operation.
I hope to hear your thoughts and arguments so that we can all learn and for a selfish reason that I can put together a useful presentation.

Re-emergence of the iron rice bowl will kill innovation

Recently, at a meeting on promoting youth entrepreneurship in SE Asia, I made a comment that the "re-emergence of the iron rice bowl will kill innovation and entrepreneurship". A person from the government civil services asked me if the recent economic crisis taught me nothing. I answered that the economic crisis taught me a lot, especially that there are a lot of people who claim to be economic or financial experts with very little understanding of the economy or finance. Just like the meeting he and I were in, where all the talk about promoting entrepreneurship was done by a group of civil servants who are often the embodiment of the iron rice bowl.

I will not pretend that I enjoy the tumultuous economic times we are in, neither would I want to loose my livelihood at a moments notice, but I am of the opinion that in order to enjoy progress in technology, to enjoy the ability to generate value, wealth and uplift large segments of impoverished society, we can not depend on government hand-outs. We will need to innovate, generate private sector employment and encourage entrepreneurs.
Increasingly young educated college graduates are looking for employment in the government or government linked companies/research labs. In an informal poll with graduating students in Singapore, US, and the UK, the top preference for jobs were government jobs where basically one could never be laid off. Having smart, educated people looking for the safe bet is not going to help progress. Unfortunately many of the schemes used to encourage young entrepreneurs are conceived by the very people who abhor risk and want the safe bet. So how effective are those programs going to be?
Too much risk taking caused many of the problems that exploded on us in the last 12 months. Now nurturing a generation of "rice bowler" could swing the pendulum too much the other way, rendering young professionals unsuitable for employment in the private sector. In effect many of the policies being adopted are leading to diminishing competitiveness of local populations, thereby increasing the need to look for talent elsewhere.

Graduation address at the Monash University Convocation – Sep 2009

I was invited to give the graduation address at the Graduation Ceremony at Monash in Kuala Lumpur. Monash is the largest University in Australia and has a campus in KL, Malaysia. The address was to graduates from the different disciplines including engineering, medicine, arts etc. I used ideas from my blog and really enjoyed delivering the address. Below is the transcript.

Convocation address: Monash Class of 2009

Good evening to the esteemed guests here. Most importantly; good beginnings to the graduating class of 2009.

When I was asked to talk on this occasion, I was wondering what I could possibly say that would be relevant to a new generation of professionals. So here is my attempt at sharing some of my thoughts and a few things that I have learnt.

The theme of my address is: You can make anything happen, and while doing so you enjoy the journey. Often people focus only on the goal, and loose an entire life time trying to achieve their goals and then realize that they missed a life time of enjoying the journey.

Your goals could be about wealth creation but in order for your generation to succeed in tackling the tremendous problems that you have inherited; your pursuits should include adding true value to society.

At this juncture as you move into an important phase of your life, you are inheriting not only great technological progress, great improvements in infrastructure, medicine and telecommunications; but also war, fundamentalism, economic crisis, and to top this all an accelerating change in climate. Many of these problems that you are left to tackle are fuelled by excess consumption and excess greed

As a young graduate you are blessed with naiveté – what I hope is intelligent naïveté. What I mean by this is that you are willing to do what many people think is impossible. You should question every prevalent assumption, understand issues from a historical context, be willing to be outrageous in your approach to solving problems, and most importantly be willing to learn from your successes and failures.

As you learn and progress, make sure that you do not throw away the ladder that you got there. What this means is that you continue the process of sharing your knowledge so that more people can progress by learning from your success and failures.

Another aspect that took me a while to learn and that I would like to share with you is that there is a big difference between determination and stubbornness. Working really hard on a bad idea does not make the idea any better. You must be wiling to learn from your experiences, and make changes in your approach based on pragmatism and ideology. Note I say pragmatism and ideology and not pragmatism versus ideology.

In times of crisis like in today's economy, there will be continuous demands for change. Many of these demands will be justified. Many will not.

As you grow into positions that require you to provide direction to your organization, take a little time and understand the history of your organization; the agenda of the current actors including your own agenda. This will help you make good decisions and to some extent differentiate between determination and stubbornness.

The gift of education that you have been fortunate to receive comes with responsibility.

One of the most important responsibilities is that of having the courage to dissent. As you see practices that are against the core values of human decency, you have to dissent.

Another lesson I have learnt is that most of us are smarter than we think and greedier than we like to admit. A great cause for the economic crisis we see today is due to this. We innovated to create financial tools that made money; and then money beyond belief. Forgetting when to say enough,we succumbed to greed. So the lesson from this is that if something sounds too good to be true – then it probably is not true.

On a final topic I'd like to spend a little time on talking about the economic crisis.

 

Many of you are graduating in a probably the most difficult economical times seen in few decades. . But I would like to emphasize that with crisis comes opportunity.

Financial engineering and unsustainable borrowing by enterprises and individuals fuelled growth in the last decade. Along with the credit crisis the conditions also led to commercialization of technologies that are extremely beneficial.

This helped us commercialize wireless technologies that make our every day life better. Semiconductor technology used in consumer electronic devices has improved exponentially and has contributed to advances in health sciences, transport, telecommunication etc.

So what are the opportunities in this crisis? Here are some thoughts.

• From a financial perspective; add value to your customer. If you are a bank – be a bank, if you are a financial advisor, understand the financial instruments you are selling, if you are involved in synthesizing new financial instruments, then understand the math behind it and be transparent.
  

  
   

• From a technology perspective, there are a number of problems facing humanity that need to be solved, and can create wealth in the process of solving. For example ;
  

1. Over 2Billion people do not have decent roofs over their heads. Just in urban areas alone there are 500M poorly housed people. Yes low cost housing can be a profitable business!
   
2. Businesses that help reduce the environmental impact of our lifestyles – Technologies like Cisco TelePresence On-Stage Holographic Video Conferencing can really make a difference, and be profitable.
   
3. Robotic or autonomous systems to help the increasing elderly populations. Or sensor based technologies that help monitoring the elderly. A great example is the ishoe that could help the elderly from falling.
   

The list is long but the point here really is that there is a lot of wealth to be generated in business that also generates value to the customers in ways that can fundamentally improve ones quality of life. The biggest opportunity in the current crises is to focus your enterprise on value creation.

So friends each of you will have different goals, and different journeys. I hope you enjoy every moment of your journey. I hope you can pass a better healthier word to your next generation.

I wish you the graduating class of 2009, a great future.

Thank you

 

 

 

 

Pragmatism vs. Ideology --> Pragmatism and Ideology

Lord Turner, the chairman of the Financial Services Authority (FSA) in the UK last week proposed a Tax on banks to curb bonuses. My first reaction was that of derision. I immediately went online to see the details. There weren't too many details but there were a lot of derisive comments. Always mistrusting mob intelligence I began to re-evaluate my initial reaction.

In the past I would have taken a more dogmatic approach on such issues based on commonly used presumption "the market knows best". Taking the market knows best approach is actually the oldest approach in the book. It has led to a lot of innovation in the 20^th century, but also a lot of human suffering in Czarist Russia, Medieval India, Africa, S. America etc... The "market knows best" with out regulation, pragmatism, and most importantly focus on development of civilization leads to serfdom in one form or the other.

So what has all this to do with curbs on pay? 2 years ago I would not have even imagined that I would even entertain the thought of accepting mechanisms to regulate compensation in any industry, because of course "the market forces decision is the best".

When we discuss curb on pay there is show of tremendous indignation from many of the well educated, free market followers (me included). But we have to ask ourselves will we have the courage to show the same indignation when we see teachers who are supposed to educate our children being paid very low wages like is happening in most countries (Singapore where I currently live is fortunately an exception to this). Would we show the same indignation when the best minds working on cutting edge technologies in the areas of medicine, renewable energy etc are paid a fraction of what they would be paid if they redirected their work to develop financial tools. Do we show indignation when we see that no amount of profit taking is "enough". Would we have self doubt if we were was paid a Million dollar bonus on a failed project or would we take the money?

The question I guess is what is enough? What amount of regulation is enough? What amount of profit taking is enough? I am inclined to think that having strong intellectual/ideological foundation mixed with a healthy dose of pragmatism is essential. Most importantly it is essential not to be irrationally attached to an ideology. May be this is the essence of creative destruction.

The Power of Intelligent Naiveté

Experience, education and an understanding of history bring wisdom, but an amount of intelligent naiveté is essential to critical reasoning. As I struggled to find a word that I could use to characterise the ability to question fundamental blocks of knowledge and revaluate ones understanding continuously, I choose the expression "intelligent naiveté". As I typed this into Google I saw a paper that referenced intelligent naiveté. I did not download the article since the site allowed down loads at a fee. I decided to go with my definition of this term.

I have for long time regarded capitalism as a preferred system, and until recently with some reservation considered the free market variety as the best kind. Ha-Joon Chang articulates with great impact in his book "Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism" the reasons that many of us have some discomfort and reservations about free market implementation. People like Noam Chomsky and Chang have done a great job in questioning and challenging popular concepts and thoughts that the masses get indoctrinated with. This indoctrination happens at all levels of society, politics, and education and even in companies.

Many companies indoctrinate their employees in "their way". This helps drives people towards a common cause of increasing revenue, profits, adoption of their product, services, etc… But the indoctrination can become counterproductive when organizational attitude and philosophies take precedence over customer needs. It requires the naïve employee to ask the difficult questions, and to point out that the "emperor has no clothes" to ensure that the market needs and expectations are being met.

There are many areas where there is not enough naiveté and the indoctrination seems to have dulled questions. Just to name a few, the collapse of the banking sector, and the bail outs, the functioning of democracy etc.

Working hard on a bad idea does not make it good

The difference between determination and stubbornness is a thin line that can result in either success or failure. Taking a bad idea and working it to death does not make an idea any better. Many leaders talk about the importance of perseverance, the "never say die "attitude. What many forget to mention is that if your idea is consistently not leading to the successful results you expect, then maybe it is just a bad idea.

I was invited by a friend (lets call him Vivek) who is the founder and CEO of a medium sized technology company, to observe their director's review of his organization. Their 2008 annual revenue was about US$300M, and like many companies, Vivek's company has also been hit by the tough economic situation and expects their revenue to be around US$ 220M in 2009. Like everywhere else, people are working overtime to figure out ways to "grow" the company more than it would normally.

As they went over the various changes they were instituting in the organization, I could not but help think of the agendas of the people behind these ideas. Two things struck me as the most obvious, the CEO Vivek was more interested in the technology and products that his company made, than in the company itself. The other was that the changes were being made to the only part of the organizational structure that was consistently successful with hard to argue success metrics.

True to the current theme of "why waste a good crisis" the management team was being restructured. The product development team now needs to go 3 levels deep before people with deep technical or market expertise could be found. The distribution channels were changed to be uniformly efficient globally, but in practice hardly effective in many parts of the world.

When I asked Vivek what he expected to gain from these changes, he was honest that from the products perspective he would continue driving the strategy because his top leaders did not "get it". And from a distribution point of view the people behind the change were unwilling to commit to more than 5% growth over the current estimates. As we talked he admitted than in 15 years this was the 4^th time his product team was reorganized, and the 3^rd time they attempted to change the distribution model. Vivek said that finally it always reverted to the current structure. This time Vivek was determined to make it work, so he did not expect my question "why change the organization" when similar changes did not work in the past. I suggested that maybe his idea was just bad. The clarity of the situation struck me when I saw his face; often in life we mistake stubbornness for determination. May be Vivek's company will be 5^th time lucky! He clearly thinks that his determination will make his new structure work better.

In times of crisis there will be continuous demands for change. Many of these demands will be justified. Many will not. If you are in a position to provide direction to your organization, take a little time and understand the history of your organization, and the agenda of the current actors including your own agenda. This will help you differentiate between stubbornness and determination.

The Green Shoots Brigade

Being in business, talk about green shoots in the economy provides a psychological boost in confidence. However, with trillions of dollars serving as manure for the economy, there better be some green shoots. The stock market rallies, the banks announcing profits, etc. but have the fundamentals really changed ?

Economies that have been overly reliant on some segments like finance, or primarily- for-export manufacturing, grew exponentially when the times were good, and dropped like rocks when the economy faltered. The recovery and hence the green shoots will mean different things in different regions. In India the coming to power of a strong (hopefully) progressive government, together with a fairly large domestic consumption and infrastructure spending could lead to strong green sprouts that can sustain growth. However, the opportunity will be lost if factional politics rules the roost. In Europe, talk of green shoots is still too early. In the US it is hard to differentiate great government (Barack) salesmanship from the facts. The details of return to profitability of banks are still murky. For example Goldman Sachs announces positive results, but then you notice it had shifted its reporting calendar to exclude December 2008 results. Now banks are lining up to repay TARP funding, but under circumstances that are still not very clear. JP Morgan wants to repay $25B of TARP funding, yet in April announced continued and potentially large losses in its credit card and home equity business. China with a large cash reserve and a strong political will to keep its population employed is also showing some signs of the shoots being sustainable. South East Asia with a mix of countries in various stages of development is a curious mix. Thailand is more involved in factional or feudal politics than on tackling bread and butter issues. Malaysia has announced a viable plan, even though it is mired in political infighting, Singapore is trying to continue to focus on areas of the economy that can provide employment and continue the Singapore story of social and political stability. The risk however to SE Asia is that to varying degrees most of the countries are overly dependent on exports. Additionally, some of the differentiators that countries in SE Asia possessed in the past are now easily eliminated with the excess capacity of factories and manpower in China, and with changes in taxation structures in the US. So a turn around in China and India will not necessarily spill over quickly to SE Asia.

The next 18-24 months will continue to be a roller coaster, hopefully with dampened amplitude in the oscillations. In the mean time the adventurous will have many highs and lows in the market, and a majority of the folks will have to concentrate on growing their business by providing products and services of true value to the customer. From a policy perspective, sustained growth should now take precedence over short term growth that is overly dependent on a couple of sectors. Diversification of business and industries will again become popular for a while. In the mean time the green shoots brigade will shout, the markets will fluctuate, the brave will make or lose a lot of money and the rest will continue to be confused!

Losing sight of your vision

Many companies start with vision and a drive to fundamentally impact their chosen areas of products or services that they offer. The one common factor of high performing companies is that they are driven by the passion of the leaders and the employees. Of course many business books try to extract some fundamental commonalities of successful companies. After this round of turmoil many of the companies that are celebrated in these books will be in danger of extinction or severe contraction.
Yet another danger to companies from the current economic turmoil is that many good companies are in danger of becoming ordinary, primarily due to loosing sight of their vision.
In a difficult time the automatic response of the corporate organism is to police or regulate the organization in different ways. Unfortunately in the process of regulating, the regulator assumes tremendous power. And in most organizations, the regulators are not from the core functional units of an organization. Neither are they the vision behind the success of the organization. As the core teams work over time to rescue their companies in these tumultuous times, the regulators attract the lime light of the investors, since the performance of the company are “clearly not “ due to the regulators while the perceived fixes are due to the actions instituted by the regulators. Slowly but surely, the agenda of the company itself changes. Great companies have become mediocre when they got hijacked by the “regulator” managers in the company. After the hijacking the “regulators” become “activist regulators” thereby corrupting the organization and its vision completely. Finally the company turns into an ordinary company.
You know your company is changing when during expansion, issues like tax breaks and employee termination policies of a region take precedence in the decision making over the kind of core infrastructure and people you require developing your competencies and business. You know that your company is being hijacked when the leadership gets excited about expansion of non core areas over core visionary areas. You know your company has lost sight of its vision when a regulator is now running the company.

R2-D2: Recession to Depression II

R2-D2 is unfortunately not about the much loved robot in Star Wars.

In light of the current worldwide economic situation, like most people I know, I have been thinking through the various socio economic scenarios at the global, local, company, and of-course the personal level. One likely scenario is that the current severe recession will in time be called a Depression and possibly the Second Great Depression. The straw that could break the camel's back leading to a full blown depression could be the blowing up of the already brewing currency crisis. When my analysis of the current economic situation took me to the issue of currency, one chain of thought took me down the following process: Currency is one of the “evolution mechanisms” the human species adapted in order to increase the chance of species survival, because currency enables humans to move their wealth and in a way adapt to different environments easily, much like what Darwin talked about 200 years ago. So I googled the term ‘currency Darwinism’ and got about 1.8M hits and at least about 10 articles that in some way talked about the currency as a species differentiator. So once again I am writing about ideas that have been pursued by writers before me.

The current misuse of currency is putting us at risk. Not risk of extermination of species, but at risk of conducting global trade, risk of free flow of ideas, risk of slowing progress in science and technology. I say "misuse of currency" based on the tendency of countries to print more notes when they need money. So you need a couple of Trillion dollars to pull through this crisis, what do you do, you print notes (it doesn’t matter how you package it as debt, bill, bonds, …..). All this printing of notes of little or no value will eventually lead to a crisis. Today we ask the question “how could any body have been so stupid to lend to ‘sub prime’ borrowers and then expect to minimize the risk by securitizing the collective ‘sub prime debt’?”. There is a good chance that about 24 months down we could ask a similar question about currency valuation.

Traditionally the countries or regions that had strong currencies and easily convertible currencies, with fairly open markets and capitalist leanings were the ones that progressed the fastest. Over the last three or four decades most major currencies were delinked from gold. The valuation of currencies was linked in a web of intangible values or models. The artificial strengthening of the US dollar and the disinclination of other countries to weaken the dollar and strengthen their own currencies will deepen the current problems. The perturbations provided by the central banks to the economic system may or may not work, but will surely give rise to a lot of opportunities and some fairly grave consequences. Our endeavours should be aimed at growing the opportunities and reducing the grave consequences.

Bailout, confidence building,...

We have the American, British and French lawmakers talking about “protectionism”, the Chinese and Russian leaders in Davos talking about “free-trade”. These developments left me wondering if I was dreaming. Maybe next we will hear from Mugabe of Zimbabwe talk about good governance! The world is changing at a breathtaking pace.

These confusing times though seem to strengthen many state sponsored economists’ to expound their beliefs that their largely Keynesian route of tremendous government spending is the only way to steer the economy out of a possible depression. Saying now that the financial bubble was obvious is not particularly helpful, but understanding the bad decisions of the past decade is helpful.

Some of the bad decisions that we are currently making include;
• Asymmetric bailout; Bailing out banks using stock buys, guarantees etc, has helped the banks reduce their balance sheets, and has not helped individuals and small businesses reduce their balance sheets. So there should be no surprise in the lack of confidence when this in-equilibrium persists. The bail out of the banks “that are too big to fail” led to a lot of tax dollars being channelled into bonuses, buyout of small profitable banks etc. but did not necessarily increase confidence in the banking system.

• Drowning in more debt to get out of debt: Apart from a few countries that have surpluses many of the countries are on the road to increased national indebtedness. This new debt is created due to excessive current debt in the first place! The net effect could well be that the US and the UK and many of the other countries will be printing currency notes with no real value to back the currencies except the “confidence” of the market.

• Bailing out unsuccessful companies: Will you the consumer buy a product you do not need or value? Then why bail out automotive companies that have not been able to compete effectively even in good times? Will bailing out unsuccessful companies increase your confidence?
Prolonging the economic pain can lead to a depression. This in turn can have serious economic and military implications. Now the question is will the current bailout prolong the pain. Not being in a position to crystal gaze, and having very little faith in government sponsored intellectuals and experts; I conclude that we can choose to minimize the pain at micro level. We can choose to build confidence, find opportunity and commit ourselves to success. Though success will now be measured using a different, more pragmatic yard stick than in the past. The most important choice that we can make (where you have a choice) is to ensure that tremendous increase in defence spending is not the “plan” to steer us out of a recession.

Do you dare to dissent?

I had promised myself that the first blog entry for 2009 would be about technology and how technological progress would enable a better world for humanity. But I woke up to images of children killed in Gaza and rockets into Israel, and leaders on all sides pretending as though more violence will bring peace. The word “collateral damage” rolls of tongues so easily that one would think it is natural for humans to be involved in the act of murder.

Even more disturbing was the statistic that I came across where it showed that young adults who wanted to join the armed forces in a number of countries preferred the air force and navy to the army. Does this mean that they don’t mind the violence as long as they don’t see it close up?

So instead of talking about technology which I know more about, I choose to write about us, and I know much less about us for sure.

Do you dare to dissent, at work, with your leaders, with family, based on few basic principles. Some values across politics, religion and business for instance;

• Life is valuable and we should not kill. Do your tax dollars, your vote, or your religious affiliations endorse killings? Does your comfort and well being depend on others being harmed? If the answer is yes then you need to question your beliefs, lifestyles, and actions. Do you dare to dissent?
• Employee contribution is to be valued. Do you value the contribution of yourself, your colleagues, and people up and down the corporate ladder? If yes then support actions that add value to the employee too, not just share holders, and question lay offs at profitable companies. Some are necessary and many are not. The new Asia CFO of a large worldwide computer company stays at the average cost of about 800 USD a day for over 12 weeks at the premier hotel in Bangalore, while his main goal is to reduce unnecessary expenses through cost savings and lay offs. Many organizations have such inconsistent behaviour. Do you dare to dissent?
• Equality and respect for all human beings. Do you believe we are all equal? If yes then do your actions and life style contribute to you, or your social structure to be better armed than others? Do you believe that you or the system you come from is inherently better, so you are entitled to things like weapons that only you are entitled to? Do yo believe that you are equal to everybody else?

Do I dare to dissent about these and a number of other thing? As I write these musings I am forced to reflect my own beliefs and my own actions and lifestyle. The strife of 2009 will make a lot of us understand ourselves better and will be a good test to our own moral compass with regards business, social obligations, religion, and politics.