Market-Based Management®

Building a Culture

Us humans do not handle complexity well. That's why it is so important that we make things as simple as possible... but no simpler. (HT Einstein.)

If you are a leader wondering how to build a successful culture in your organization, it boils down to some pretty basic stuff: (a) have a few guiding principles; (b) repeat them over and over again; (c) make your actions consistent with those principles (that's why it helps to have only a few of them - like, say, oh I don't know... maybe ten).

Simple. Most of the stuff in life is - from developing character to building a skyscraper. The concepts are basic and relatively easy to grasp. But we all know that simple doesn't mean easy. Fortunately step (a) is already done for you: use the MBM Guiding Principles - they are rock-solid, time-tested and proven.

But here's some of the hard part. You, the leader, must make a "self-modifying act of conversion." (HT M. Polanyi.) You have to commit yourself to understanding those principles so that you know what it means to act in harmony with them. You have to develop personal knowledge by applying them to get results, so you can talk intelligently and with credibility about them to your organization.

This doesn't mean you have to go on a 6 month vacation to study the principles before you can get back to leading your team. If you're in an MBM company (which is the only reason I could imagine you'd be reading this), you've probably been through our two-day session. We have online resources - the Principles CBT is only about an hour.

You just start. Make your actions consistent with the principles. Expect your team to do the same. You will make mistakes - in interpretation, and in conduct. Get over yourself. You are not perfect and you never will be. You have that in common with all the rest of us. This is how we learn and improve. It is a continuous improvement process.

Be committed to getting better, to making real progress. Be upset with yourself when you mess up. Hold yourself to high standards and ask for lots of feedback from your employees and your colleagues - and take that feedback on the chin, without so much as a grimace so it encourages people to be honest with you. Explore the MBM mental models that lie behind the Principles. Continue to dig in and learn and experiment in applying them in ways that create value...

There are other important steps to refine your culture building efforts - but this is the essential place to start: Embrace the ten Guiding Principles, repeat youself a lot in talking about them with everyone in your organization, and do your absolute best to exemplify them in your actions.

Simple (but not easy).

The Good Doctor

Flying out of Hong Kong this weekend, I was seated next to a young, professional-looking Indian man who said he was an "international business guru." (Honest - he really said that. I couldn't help but wonder if he saw the irony.) As intellectual ballast, on my opposite side sat a delightful older gentleman, a medical doctor, who also happened to be Indian.

As the "guru" loudly regaled me with his exploits and espoused his management philosophies (yes, he had many; yes, they were tediously insane; yes, it was my fault for asking), the good doctor finally interrupted in a very pleasant, "I'm about to tell you to go to hell but in a way that makes you look forward to the trip" kind of way:

"Young man, if doctors practiced medicine the way you practice management, we should all be dead." In a huff, the young guru excused himself to sing a song in the happy room (the latest euphemism for using the toilet that I picked up from a tour guide in China - there seems to be no end of these worldwide).

More irony here... for a doctor to be saying such things... After all, it wasn't that long ago that doctors subscribed to a fondness for leeches and bloodletting. George Washington presumably died of epiglottitis - but is actually believed to have died from shock due to dehydration and asphyxia after being "treated" by having five pints of blood drained from his body.

But the good doctor's remark reminded me of something I'd read almost verbatim just before boarding the flight in a recent book by Bob Sutton. I pulled the book out of my backpack and looked it up...

"Business decisions, as many of our colleagues in business and your own experience can attest, are frequently based on fear, what others seem to be doing, what senior leaders have done and believe has worked in the past, and their dearly held ideologies -- in short, on a lot of things other than facts. [...] If doctors practiced medicine the way many companies practice management, there would be far more sick and dead patients, and many more doctors would be in jail. [my emphasis.]"

Unbelievable coincidence. I showed the doctor and we had a good chuckle.

I was feeling pretty smug when a happier Mr. Guru returned to his seat, until the doctor, in that wonderful, soft but strong voice asked, "so, what do you do?" After several attempts at explaining what MBM is and my relationship to it, it dawned on me that perhaps I was just using different words that probably sounded like, "I'm an international business guru." Which I clearly am not. The doctor and I spent the rest of the flight talking about many things - it was one of the most enjoyable travel experiences I've had in a long time... and I was most thankful for the lesson in humility which he probably didn't even realize he'd taught me.

Trade Talks are (GASP!) Political?!

Clive Crook has a nice piece in the October issue of The Atlantic Monthly (subscription required) on the breakdown of the latest Doha Round of global trade talks. Some have said it was a case of "you go first" as in, "I'll get rid of my subsidies when you get rid of your tariffs (and vice versa)." Crook says,

"Whichever side you you take, this kind of explanation only makes the impasse more mysterious. The United States would, after all, be better off if it cut its farm subsidies. Those subsidies cause waste and it is Americans, not foreigners who pay for them. Ditto for the European Union and its farm-import tariffs. Citizens of the EU would be better off if they could buy cheap imported food..."

His point is that unilateral free trade policies make us better off even if other countries don't reciprocate (to their own detriment). He thinks trade talks broke down because of politics (I know, shocking). It's the old story of concentrated benefits and dispersed costs.

"It was a fruitful lie, this idea that gains from trade come mainly from the exports you sell, not the imports you buy. But it was still a lie; the textbook case for free trade really is correct."

Many have eloquently (even humorously) exposed that lie for what it is - from Frederic Bastiat to his more modern incarnations like P.J. O'Rourke The difference between earlier times and today, according to Crook, is that the politicians have forgotten it's a lie and have actually started believing it as a principle.

The article is worth a read if you can get a copy.

Insights on Innovation

Here's a great podcast by Bob Sutton that is a recording of his speech at a recent Entrepreneurial Thought Leaders lecture. If you're interested in innovation, it's worth a listen. Hit this link and then click on his title in the right-hand scrolling box.

The Educators Corner website offered by Stanford University has lots of interesting tidbits and resources - you might benefit from hanging out there and poking around.

The Theory Side of Integrating Theory and Practice

It's not uncommon for some participants in our workshops to say something like, "why do we need to spend so much time talking about the market, economics, rule of law, property rights... It would be be so much more efficient to just start going through the dimensions of MBM. I don't need all this theory, I need practical examples of how apply MBM to my job."

Do you really have to learn about all this "theoretical stuff" about economics, philosophy, history, psychology, and so on, to understand and apply MBM?

To get started? A little. To get better? Yes. To be good? A lot.

John Maynard Keynes famously quipped that:

The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.

Ideas matter. Big ideas (good and bad) from big thinkers seep into your psyche through culture, schooling, parents, friends, TV, books, etc. They feed the mental models, or useful abstractions, you use to adapt and make sense of the world.

How you make sense of the world will ultimately determine how you choose to act in it.

If you are lucky, you work for a company that has compiled a core set of mental models that have stood the test of time and can help you learn faster, communicate with your fellow employees more effectively and stay closely connected to reality. And it is always helpful to read up on, get mentored by, listen to those who originated the ideas underlying those mental models.

For example. You can learn the MBM Guiding Principles. But further, you can learn about why we choose to invest so much in a guiding principles approach to ordering a business. Beyond that it is helpful to connect to the concept of "rule of law" as written about by the likes of Hayek, M. Polanyi, Mises, Buchanan and others, where you will trip across ideas like the focusing on rules rather than outcomes, and concepts like "spontaneous order."

Each spiral deepens your understanding and makes you a better practitioner. It is a necessary journey. But as you know, theory alone is not sufficient - we can't separate theory from practice and hope to really know anything. We learn, of course, by doing - by taking that "book learning" and applying it in our attempts to get results.

It is one thing to study physical chemistry and thermodynamics and read about the properties of sodium. It is another thing entirely to take a small bit of sodium and drop it into water. (This is why we experiment on a small scale - in chemistry and in business ventures). The important point is that both are necessary - the theory informs the practice and vice versa.

MBM, to be understood, developed and applied to create real value, requires the integration of theory and practice.