Market-Based Management®

The Great Maslow Debate

Running through some old notes, I stumbled upon what I've come to think of as "The Great Maslow Debate" around the office. I must admit that I have no idea, so I am just going to put it out there and see what you think about how  "Safety" translates into the firm.

On one hand, some folks think that "safety" on Maslow's Hierarchy of Needs translates into the firm as job security. I'm not worried about getting fired all the time, so I move up the hierarchy. Another set of folks thinks that "safety" is physical safety even within the firm. I'm not worried about being seriously injured or killed, so I move up the hierarchy. I set up a little poll below, so please weigh in on this.

Hey, Let's Create a New Language!

I've been reading up on a special case of spontaneous order lately: language. Hayek's conception of spontaneous order--order that is the result of human action but not human design--is a fundamental explanation of how markets work, and it's application is an interesting (if not hard-to-apply) aspect of "Vision" in MBM.

A recent article from Discover Magazine Online explores a unique phenomena, the creation of an altogether new language in the form of Nicaraguan sign language.

"In the 1970s, a group of deaf Nicaraguan schoolchildren invented a new language. The kids were the first to enroll in Nicaragua’s new wave of special education schools.... Its child inventors created it naturally by combining and adding to gestures that they had used at home. Gradually, the language became more regular, more complex and faster."

This new way of communicating grew spontaneously as the children adapted and learned from one another.  But what about well-established languages?  The Lexicographer's Delemma, by J. Lynch, describes how the English language has evolved without the guidance of intellectual elites imposing grammar dictates from the top down (the same is true for France, despite their efforts to the contrary).  Rather, the author quotes a grammarian as saying that the "'the spirit of English liberty will hinder or destroy ' any such scheme" of command-and-control language planning (pg. 107).

Sorry grammar freaks; your services aren't needed, according to Mr. Lynch.

Are the formal rules of grammar needed to keep language useful, or does spontaneous order suffice?  As managers, how do we balance letting employees go "laissez faire" vs. providing active, detailed guidance?

Value Creation

I've reached the point in my intellectual journey where I cannot think about value creation without squirming a little. Sometimes the words "value creation" are said lightly, but value creation is an abstract concept that can be hard to clearly think about. Often, I have to step back and ask myself a two questions before I can get close to identifying value:

1. Who is the customer?

Creating something of "importance" or something "good" for its own sake is not creating value. There has to be the person who is going to get the joy, removal of discomfort, utility or whatever you want to call it. Sometimes, when I have multiple customers, this starts to become an interesting and complex question. For me, it has become my anchor when I think about value creation.

2. When will the value be created?

I give the Associates a simple example that has allowed me to get my mind around this question. Say you run a lemonade stand. When is value created? For most, the instant answer is: when the customer gives you the money. This was my initial reaction as well. However, think for a bit longer about this. I think the value is created when the customer uses the lemonade and gets the joy from it. It doesn't matter if they are drinking it for the taste or holding the cup for the coolness of it and never actual drink it. The money a customer pays is for the value they expect to get out of it. Usually answering this question uncovers the assumptions about the nature of the value to the customer(s).

Once I have answers to these questions, they usually pave the way to more questions. My experience has been that until I answer these two questions, the other questions are difficult to answer.

Do you have shortcuts that help you think about value? How do you help others work through the abstract concepts of value and value creation? Do think I'm out in left field here?

Friday Links

Here's Bob Sutton's follow up to his post on swearing in the workplace .

Interestingly enough, I led a debrief about the movie "Enron: The Smartest Guys in the Room" yesterday. The same day, my colleague Danika sent me this link about how the "High Court Sides with Skilling, Black." It was strange timing from my point of view.

So, I am not really into wine, but this chart about the origination of wine is interesting. I guess it's the nerdy-economist in me that thinks data about production is awesome!

The Consumerist post about "Consumers have more trust of companies that tweet" made me pause. I wonder if people just look for companies they trust on Twitter/Facebook. I don't even know what companies I frequent are on Twitter or Facebook!

I always enjoy when Tyler Cowen does his "Markets in Everything Posts."

Business Pundit has a neat way of seeing what people are talking about. They see what the drop down on the Google front page reads. Here's the post. It's a neat idea.

Cool Video?

So, I haven't had a chance to watch this all the way through, but it's a TED video called "Let's raise kids to be entrepreneurs." The beginning of it is excellent. He has a narrow view of entrepreneurs (people who starts a business), but I like the theme of valuing entrepreneurship. Let me know what you think!

Welcome Andy

I'd like to welcome Andy Gillette. He'll be writing a Tuesday morning post for the blog. I'm looking forward to seeing what he'll write! Welcome Andy!  

Swearing at Work

I've worked in places where swearing was regular, even expected. I've worked in places where it was explicitly against the rules. Since I've been thinking about management, I've been wondering about the effects of swearing. What does it say about a workplace culture? Even if no one is offended by it, does it have a place?

Starting with this post by Bob Sutton, I followed a series of links on the topic of swearing in the workplace. This HBR article talks about leaders swearing. This study found "positive effects" of swearing. There are lots of articles that about how swearing "boosts morale." And of course, there are lots of opinion pieces, like this one, about "swearers" at work.

I don't know the "right" or "best" answer here. Maybe it's an "it depends" situation? I do want to point out that MBM calls on us to take a long-term view, which is something the articles I looked through weren't really explicitly considering. Many of the studies talked about "stress release" in the moment or fitting in with the workplace culture and such. What if using a swear word shocks people in the moment to be more productive, but sends out tiny cultural waves? What's the tradeoff?

Bob Sutton's article talks about how swearing levels might be different in closed team meetings versus public venues. The idea of split norms bugs me a bit. I've been in a closed meeting where a leader has said something a bit disparaging when referring to another that s/he would never say in public. This made me wonder what that leader was saying about me when I wasn't in the room. It also made me wonder if the public face of the leader was genuine; it literally devalued the praise of that leader in my eyes.

In short, I don't know what level of swearing is optimal in the long term. I do know words matter and contribute to culture, and the Guiding Principle of Respect calls on us to be sensitive and encourage team work. After haplessly typing on this subject for 30 minutes, I think would recommend being conservative in your language, especially as a leader. You never know who is listening and what messages you are sending.

Leave a comment about how you feel about swearing in the workplace. How does it contribute to culture? What are the long term consequences of swearing? Am I being stodgy?

Friday Links

The Wall Street Journal Blog discusses how the BP oil spill may actually raise GDP. Whenever I read this type of article, I'm reminded that measures (and metrics) are not perfect. Understanding how GDP is constructed is important to understand what it is indicating. (If you ever want to talk about GPD, shoot me an email.)

Sometimes, it's cool to see markets respond to wants and needs. If you've been watching the World Cup, then you've probably been as annoyed by the horns that sound like giant bees as I am. So, Lifehacker brings us cool software that filters the noise out.

Bob Sutton has a cool post about "The Best Bosses Are the Most Self-Aware."

Donald Marron bring us (brace for it) a song about the history of legal tender.

Forbes has a neat interactive map called "Where Americans are Moving."

If you have a cool link, leave it in the links or send me an email at ann.zerkle (at) cgkfoundation.org.

Personality Conflicts

I once had an Associate ask me what MBM brought to the table when it comes to personality conflicts or dysfunctional relationships. He asked because he had a personality conflict at work that seemed insurmountable. I responded by pointing to the Guiding Principles and tried to make the point that if folks act in accordance with the Guiding Principles, personality conflicts could probably be worked through.

Of course, the Associate did not like this admittedly unsatisfying response. I didn't mean it this way, but he basically heard me say that personality conflicts don't exist where the Guiding Principles are upheld. What I meant was that people can work together without personally liking each other.

What do you think a more satisfying response to this question might be? How should I handle this question when it comes up in the future? Moreover, does MBM have a stance on personality conflicts?

Being Careful about Sunk Costs

I find that when a person understands a concept deeply she can start to take shortcuts in the language used to express that concept. This is usually okay if everyone in the room has a depth of understanding to handle the shortcut. However, when I am teaching economic thinking concepts, usually I'm interacting with people who are not deeply versed in the concepts. 

My mental/verbal shortcut with respect to sunk costs thinking is "ignore sunk costs." But that phrase really is a shortcut for "don't consider sunk costs when making a decision going forward." Put yourself in the shoes of someone who has never thought about sunk costs before. "Ignore sunk costs" probably seems pretty ridiculous. Somehow, we're supposed to completely forget the blood, sweat and tears put into a project? We're supposed to forget that the past hasn't happened?

I think "ignore sunk costs" is sloppy because we don't want people to forget what they've spent their time on. We want to learn and be more productive by analyzing our actions. Secondly, I've NEVER been able to "not consider sunk costs when making a decision going forward" without explicitly paying attention to exactly what is a sunk cost, articulating it to myself and decision makers, and being mindful of sunk costs while analyzing a situation. This is exactly the opposite of ignoring the sunk costs.

Lately, when I've been teaching concepts around sunk costs, I've been trying to be more careful and realistic with respect to the application of sunk costs. The anecdotal result has been an improvement over past because the conversations and questions have reflect practical and real situations instead of just silent head bobbing.

What examples or real life applications have you used to teach or think about sunk costs? I'm always looking for new ways to express these ideas.