Jan/101
Who are your anti-clients?
If you’re in any kind of business, you’ll know who your clients are: you deal with them every day. And serving their needs will no doubt take up much of your attention, too.
And you, or someone in your organisation, will know who your prospects are – the people who aren’t clients yet, but who could or should be at some time in the future. Finding them, relating with them and paying attention to their present and future needs will take up a lot of someone’s time and attention, even if it’s not your own.
But do you know who your anti-clients are? Are you even aware that they exist – or how much impact they can have on your enterprise? Because if you don’t – and you don’t pay attention to their needs too – you could well find yourself out of business…
To make sense of who or what those ‘anti-clients’ are, and why they’re so important, you may need to think sidewise for a while, perhaps taking in a more expanded view of ‘the market’ and a broader-than-usual understanding of ‘enterprise’.
The enterprise and the market
The quick summary is that every market is the intersection of at least three very different ‘economies’: transactions, attention and trust. (The trust-economy is also known as the reputation-economy, because reputation is a kind of secondhand trust that we garner from others.) For much of the past century, most organisations focussed almost exclusively on transactions, sometimes barely even recognising the existence of the other economies – or else assuming that they didn’t matter, because large organisations could monopolise attention through mass-media, and ignore customers’ concerns by sheer dominance in the marketplace. But in the past decade or so, ubiquitous access to the internet and mobile-media have changed the game completely. The old days of control and the one-way one-to-many broadcast have gone: welcome instead to a new age of business transparency, where your products, your prices, your customer-services, your mix-ups and mistakes, your honesty (or lack it), your everything, is almost wide open for everyone to see – and you have no control over any of it at all. So that means that the attention-economy and trust-economy come right to the fore, as almost the only choice you have in this. Which means that you now must pay real attention to your anti-clients – or they’ll crucify you. With glee… whether you deserve it or not…
The other key to this is to recognise that the enterprise is always greater than the organisation. Once we understand this, it becomes useful to categorise the people beyond our organisation in five different ways:
- clients
- prospects
- ex-clients
- non-clients
- anti-clients
Clients and prospects are straightforward: they’re people who’ve done business with you, and/or who probably will do so in the future. Every business knows how to work with them, or it wouldn’t be in business – that’s what CRM systems and shops and service-centres are for, for example.They matter a lot, obviously, but we can skip over them for now.
Ex-clients are people who’ve been clients at some point in the past but who, for a wide variety of reasons, no longer engage in transactions with the business; non-clients are people who’ve never done business with the business, and are never likely to do so. They’re not prospects, and they’re not clients – hence in terms of the transaction-economy alone, of no apparent value to the business. Hence many businesses either ignore them, or else try to demand their attention via the scattergun strategies of mass-marketing – those dreaded seven-o’clock-in-the-evening calls that consist of nothing but pre-scripted spiels from the commission-driven klutz at the call-centre. Which is extremely dangerous, because either way it’s a quick way to convert ex-clients and non-clients into anti-clients – and that’s not a wise move in the internet age.
Anti-clients are people who are the active opposite of clients. Your ex-clients and non-clients are merely not-interested: they’ll reject your organisation, but only in the form of a passive non-engagement. But anti-clients are different: not only will they not engage in transactions with you, they will actively reject engagement with your and your organisation – and incite others to do the same. In some cases – such as environmental activists, for example – you may have no direct contact with them at all. Even if you’re not aware of them, they can still destroy your reputation before you know what’s happened. And if you lose your reputation, you’ve lost people’s trust; if you lose trust, you’ve lost people’s attention; if you lose people’s attention, you’ll have lost their transactions, which in turn means you’ve lost any possibility of profit. Without trust, your prospects evaporate, your clients become ex-clients – and unless you’re aware of your anti-clients, you’ll have no idea why.
But the worst part of this is that we convert ordinary people into our anti-clients, through our own actions or inactions. For example, many marketers think that using call-centres and the like is just a numbers-game – which it is, but not in the way that they might expect. Call-centres might make profit if just one cold-call in a hundred converts into a real transaction; with online spammers it can be as low as one in a million. But what they do in the process is annoy a vast number of people who are not interested at all and don’t like having their attention stolen by the spammers – which can turn them into active anti-clients. Would you buy double-glazing from someone who rings you up whilst you’re in the shower? – or are you more likely to avoid doing business with them in future? If the time-wasting phone-calls become more than just annoyance – the seventh time this evening, for heaven’s sake! – aren’t you likey to become an active anti-client for that firm, seeking to do anything you can to stop those darn calls coming in? Now imagine that happening hundreds, thousands, millions of times a day: that’s a lot of anger building up there, and at some point someone is going to cop the lot… That’s what happens when we create anti-clients.
A real example: ‘United Breaks Guitars’
Musician Dave Carroll had been an ordinary everyday client of United Airlines, until the day that careless baggage-handlers broke his very expensive guitar. Quite reasonably, he asked for compensation to cover repairs; but as he explains in a statement on his weblog, just about everyone in United, at every level, gave him the run-around, for almost a year:
At that moment it occurred to me that I had been fighting a losing battle all this time and that fighting over this at all was a waste of time. The system is designed to frustrate affected customers into giving up their claims and United is very good at it. However I realized then that as a songwriter and traveling musician I wasn’t without options. In my final reply to [United's Customer Service representative] I told her that I would be writing three songs about United Airlines and my experience in the whole matter. I would then make videos for these songs and share them on YouTube, inviting viewers to vote on their favourite United song. My goal: to get one million hits in one year.
The first song, complete with catchy chorus and happily satirical video, was duly posted up on YouTube a few months later: United Breaks Guitars. Someone in United Airlines finally realised they had a significant PR problem by the time the video had already had 50,000 hits – barely an hour or two after it was first posted. And there was nothing that United could do to stop it: it was on a popular public website, with no libel or anything else that any lawyer could reach. Three days later, the video had already gone well past the million-hits mark, and had appeared many times on national and then international TV news – with United left floundering in full-on damage-control, their vaunted reputation visibly in tatters. Not trivial at all.
In reality, United’s complicated buck-passing games to avoid paying a customer’s entirely reasonable claim would almost certainly have cost them more money overall than if they’d paid up-front in the first place – a good example of a failure to understand whole-of-system costs. But in this case those games to ‘save’ the relatively small sum of $1200 ended up costing the company untold millions of dollars in many different ways, both direct and indirect. That’s the amount of damage that just one committed anti-client can do to a very large, very powerful corporation: just how much damage could your anti-clients do to yours? And what could you do to prevent that from happening?
Take action
Step 1: Recognise that anti-clients will always exist, and that they can cause very serious problems for your organisation.
Step 2: Recognise that your anti-clients are never going to be under your control. (This is where distinguishing between ‘organisation’ and ‘enterprise’ is helpful: an organisation is bounded by rules, and you can control within those bounds; but an enterprise is bounded by shared-commitment, where control doesn’t work – but honest negotiation can.)
Step 3: Recognise that your anti-clients’ grievances are real to them – and that’s all that matters in practice. Whether or not those grievances seem real or fair to you is almost irrelevant – and arguing about it is not going to work.
Step 4: Recognise equally that ‘giving in’ to every complaint is not going to work for you. (Or, ultimately, for the anti-clients either, but they may be too angry to understand that at first). You need to establish common ground where negotiation can take place – preferably before it gets to the level of active anti-client action.
Step 5: Establish the common-ground by identifying the ‘vision‘ and values that provide the common-cause for every player in the extended-enterprise. (See ‘Vision, Role, Mission, Goal‘ for more on how to do this. Note that this is not a marketing exercise! In United’s case the Vision would be something like “safe, convenient, reliable travel”, with United taking a Role of “provider of medium- to long-distance travel by air”.) In effect, these define what quality means within the enterprise – and hence within your own organisation too.
Step 6: Compare and review the organisation and its procedures against those values and the vision – starting with any customer-facing activities, but eventually extending throughout every aspect of the organisation. This needs to be understood as a quality-review in the most fundamental sense: any improvements here will improve quality within the whole organisation and in its relationships with the broader enterprise – which should reduce the risk of creating anti-clients through carelessness.
Step 7: Use the vision and values as a rallying-point to connect with all of the organisation’s stakeholders on their terms, via the various ways in which they they themselves engage with the same vision. In general, this will not and should not be linked directly to the organisation’s marketing. (For an excellent example of how this can work, see The Responsibility Project, created and sponsored by US insurance company Liberty Mutual [more detail here].)
Step 8: Maintain an active watch on social-media, and wherever practicable engage respectfully with all actual or potential anti-clients. One of the most useful tactics to help you in this is to view your anti-clients as allies who can assist in keeping you ‘on track’ towards the ‘vision’ of the enterprise.
Repeat indefinitely. Doing this will not only help to pre-empt any potential anti-client problems, long before they cause serious damage, but will also improve your overall quality – and your bottom-line as well.
Jul/091
Where have all the good skills gone?
[to the tune of "Where have all the flowers gone?"]
Where have all the good skills gone?
Long time passing
Where have all the good skills gone?
Long time ago
Where have all the good skills gone?
Gone to robots every one
When will they ever learn?
When will they ever learn…
This one’s really a corollary or implication of the previous post – 10, 100, 1000, 10000 – on how long it takes to learn real skills.
We hear frequent complaints about skills shortages, in almost every industry. Talented, experienced people are hard to find, it seems. Yet few people seem to be considering the possibility that we’re actually creating that skills shortage by the way we design and ‘engineer’ our businesses. From a sidewise view, it seems likely that the skills shortage isn’t something that’s ‘just happened’, but is a direct consequence of the current fad for ‘re-engineering’ everything, converting every possible business process into automated form. ‘Lean and mean’ and the like will seem great ideas, in the short term especially – but without care, and awareness of the subtle longer-term impacts, they can easily kill the company. Not such a great idea, then…
There are ways to deal with this – but to do so needs a better understanding of skill – and especially of how skills develop, and where they come from.
The first key point is that not every process can be automated. If you read the sales-pitches of some of the proponents of business process re-engineering, for example, it might seem that every aspect of the business can be converted to automated web-services and the like. But the reality is that simply isn’t true: the percentage will vary from one industry to another, but the bald fact is that on average, less than a third of business activities are suitable for automation. The remainder are ‘barely repeatable processes‘ that are not only unsuitable for automation, but require genuine skill to complete.
Which brings us to the second key point: any process which requires genuine skill can never be fully automated. The inverse of that statement is possibly more accurate: an automated process cannot implement the range of skilled decision-making. Automation can do a subset – sometimes a very large subset – but it cannot do it all: which means that if we rely on automation alone, the business process will fail whenever the automated decision-making is not up to the task.
To understand why this is so, look at the Cynefin model, also referenced in that previous post on skills. Cynefin covers the whole scope of decision-making. Given an initially unknown context – which is what we have whenever we start a business process – we have four classic ways to resolve the ‘unknown’: rule-based, analytic, heuristics, principles. In effect, as in that “10, 100, 1000, 10000″ post, they’re a hierarchy of skill-levels, from minimal (rule-based) to extreme (principle-based). Most automation – especially in physical machines – is rule-based: the exact same decision-path is followed, every time, regardless of what else may be in play. IT-based systems can also handle varying levels of analytics, requiring more complicated or calculated decision-paths, and often at very high speed. But everything there is still dependent on the initial assumptions: and if those assumptions no longer hold – as they often don’t in true complexity, let alone in the subtle chaos of the real world – then automation on its own will again fail. Hence the need, in almost every conceivable business process, for ‘human in the loop’ escalation or intervention, to make the decisions that cannot or should not be made by machines alone.
But as machines and IT-systems take on more and more of the routine rule-based and analytic decisions – the ‘easily repeatable processes’, the ‘automatable’ aspects of business – a key side-effect is, almost by definition, that the skill-levels needed to resolve the ‘non-automatable’ decisions will increase. But because it seems so easy to automate some parts of processes, it’s easy to ignore the non-automatable decisions: at best, they get shoved to one side, tagged with the infamous label “Magic Happens Here”. And because the automatable parts of the process can be done ever faster with increasing compute-power and the like, the pile in the ‘too-hard basket’ just keeps growing and growing, until it chokes the process to death, or causes some kind of fatal collapse. Worse, the more simulated-skill we build into an automated system, the higher the skill-level needed to resolve each item which can’t be handled by the automated parts of the overall system. In short, the more we automate, the harder it becomes to resolve any real-world process.
To give a real example, consider sorting the mail. It all used to be done by hand, at the main sorting office and at the local branch post-offices. Sorting staff developed real skills at deciphering near-illegible scrawls; local delivery-staff used their local knowledge to resolve most of the mis-addressed mail. But manual processes like that are slow; so to handle large volumes, two key components were introduced: machines, to read the more easily-interpretable addresses; and post-codes, both to make it easier for the machines, and to pass more of the routing-decisions onto the person or system writing the initial mail-address.
The machines ‘succeed’ because they only have to make a subset of the decisions within the overall sorting process. Anything they can’t handle on their own is handballed to a human operator to resolve. But we now require two different skillsets in human mail-sorters: machine-operators, who can handle another subset of decisions at high speed, to keep pace with the machines; and the expert interpreters, who have somewhat more time to do the best they can with the really indecipherable scrawls. In Cynefin terms, the machines do rule-based decisions (simple interpretation of printed post-codes) and analytics (algorithmic interpretation of handwriting); the operators tackle much of the complex domain (heuristic interpretation, plus decision to escalate to the experts); and the experts, who deal with the complex and chaotic domains.
But there’s a catch: how do those ‘humans in the loop’ learn the skills needed to do the job? By definition, they’re doing difficult work – too difficult for the machines to do their own. To put it the other way round, the machines do all of the easy work, and (usually) do it well: but that means that all the hard work is left to the humans. (That it often isn’t even acknowledged as skill is an interesting point in itself – a common cause of failures in classic Taylorist-style assembly-line process designs, for example.) But the way that humans learn skills is in a hierarchy of levels: first the rules, then the more complicated analytic versions of the rules, then the heuristic ‘exception that proves the rule’, and then finally a full almost intuitive grasp of the principles from which those apparent rules arise. If we try to skip any of those stages, everything falls apart: it’s possible to use principles straight off, for example, but without that firm foundation of knowing how and when why the rules exist, in order to ‘break the rules’, we can’t trust it in the real-world. Maybe in an emergency, perhaps, but not on a production-line – and it’s the latter that we’re concerned with here.
So people learn the skill by learning the rules, then the more complicated rules, and so on. The ’10, 100, 1000, 10000 hours’ rule tells us roughly how long it’ll take: a trainee will take a day to get started; at least a couple of weeks to make some degree of sense of what’s going on; and six months or so to even begin to be able to make contextual heuristic decisions that are better than the built-in ‘best-practices’ of the machines. If we don’t allow them that time, and don’t give them access to the decisions that are embedded within the machines, there’s no way that they can learn. On top of that, if we don’t make it safe to learn – if there isn’t a ‘safe-fail’ practice-space in which people can safely learn from their mistakes – there’ll be a serious disincentive to learn the needed skills. And business-specific skills can only be learnt on the job – they can’t be hired in from elsewhere. All of which can add up to serious business problems, especially in the longer term.
So what to do about it? The simplest way, perhaps, is to focus on questions such as these:
What decisions need to be made within each aspect of the business? What skills are needed to underpin each of those decisions? What level of skill – rule-based, analytic, heuristic, principle-based – is needed in each case?
What guides each of those decisions? Are the rules imposed from outside – such as via regulations, industry standards or social expectations – or from the business’ own principles, policies, procedures and work-instructions?
By what means are decisions escalated? Rules are always an abstraction of the real world: there’ll always be situations where they won’t work. The same applies to analytics, and to heuristics: at the end – as typified in so many business stories – everything can depend on principles. But how is each decision escalated from one level to the next? What skills are needed to understand how and when and why to escalate in each case? What mechanisms are used to signal such escalation, and pass the decisions up and down the skills-tree?
If decisions are embedded within automated systems, how may people learn the means by which those decisions are made? Machines and IT-systems can handle rule-based and algorithmic decisions: but people who need to take over those decisions in business-continuity and disaster-recovery need to know what those decisions are, and how to make those decisions themselves. These first- and second-order skills are also the foundation for higher-order escalated decisions: we need to know what the rules are, and why they are, before we can be trusted to break them. We also need to people to be able to take over when the machines fail, or simply when they’re overloaded – as occurs every Christmas in the mail-sorting context, for example. This is one key reason why disaster-recovery planning is a good place for trainees to start to learn the business – and business-continuity a good place to put that knowledge into practice.
What incentives exist for people to learn the skills the business needs? For that matter, how can we make it safe for people to learn? Most people learn by learning from their mistakes, so if it’s not safe to make mistakes, no-one will dare to risk learning anything. If people are to learn the higher-order skills, they need safe ‘practice-space’ where their inevitable mistakes will have minimal impact on the business and its clients; and they need time to learn, too. All these can work if the right incentives are in place – or, perhaps more important, if there are also no serious disencentives to learning.
Where have all the good skills gone? Lost in automation every one, if we’re not careful. But sidewise questions such as those above can help to retrieve the skills that we need – and keep improving quality and value throughout every aspect of the business.
Jul/093
The relationship is the asset
“Our people are our greatest asset.”
How often have you heard that phrase? How often have you used that phrase yourself? But how often have you stopped to think about what it means? – and what it implies in real business practice?
No doubt it’s intended as a compliment, a statement of collective pride and purpose. Yet this well-meant platitude can conceal a fundamental flaw in business reasoning – a flaw so serious that it can easily destroy an entire enterprise. The key is that it all depends on what we mean by ‘asset’ – which in turn depends on what we mean by ‘ownership’.
An asset is an item of value that is owned. But as described in the previous post on “What do shareholders own?“, there are two fundamentally different concepts of ownership: possession, and responsibility. In most common usage – especially in business – it’s the former meaning that applies: to ‘own’ something is to possess it; “possession is nine-tenths of the law”, and suchlike expressions.
Which is a problem. If ‘our’ implies possession, and we then say “Our people are our greatest asset”, it becomes all too easy to view people as assets that we possess. Objects – or subjects, perhaps – that we have an inherent, inalienable right to exploit in any way we need, just as with any other asset. That way madness lies…
The only time that people are ‘assets’ is when they are slaves. So to describe people as ‘assets’ is not a compliment: it’s more like an insult, an overt declaration of intent to enslave. Not exactly a wise move in present-day business – especially if we need the continued commitment, collaboration and cooperation of those people in the collective enterprise. People are not assets. Repeat it again: people are not assets – ever.
Yet there is a real asset there; and it’s one that does need our active promotion and protection, just as with any other business asset. To get there, though, we need to do some serious sidewise thinking.
First, drop the idea that ownership equates to possession: in this context at least, it doesn’t, and it can’t. The only kind of ownership that works here is responsibility-based: to ‘own’ something is to acknowledge and act on one’s personal responsibilities to, toward and for that ‘something’.
Next, we move back up one step. The person is not the asset: it is the relationship with that person that is the asset.
The relationship is the asset. Or rather, there are two distinct forms of relationship here that are ‘the asset’: the links between people and the collective – the enterprise, the corporation, business-unit, department, work-team – and the specific person-to-person links between individuals. (One illustration of this distinction is the phrase “people join companies and leave people”: they create a relationship that is an asset they share with the company, but leave because person-to-person relationships with others in the company – an overly-demanding manager, for example, or a bullying co-worker – have changed from positive-value assets to negative-value liabilities.)
These assets are fundamentally different from physical assets (conventional ‘property’) and virtual assets (‘intellectual property’). Not only can they never be ‘possessed’ as such, but they actually exist only as responsibilities, in the sense of ‘response-ability’. In both cases, they’re strongly dependent on feelings – probably far more so than anything concrete, in fact. The relationship with the collective is an odd kind of ‘one-way’ link from the person to the company or whatever, which depends on abstract feelings about reputation and ‘belonging’ and the like; there is nothing that we within the company can do directly to change that (though a great deal that we can do indirectly to change it – especially if we’re not aware of the relational impact of what we do and don’t do). The person-to-person link is more direct, often literally visceral, and importantly depends on the responsibility of both parties to maintain it: if either party drops their end of the relationship, the link is lost.
People only become ‘our’ people when those relationships exist: abstract links with the shared enterprise, and personal links with the other people in the enterprise with whom they interact. The connection with the enterprise – and hence the ability to engage in and contribute to the enterprise – depends almost entirely on the strength of those relationships. Physical presence may mean almost nothing: ‘presenteeism’ is endemic in most large organisations. Likewise virtual presence: as the dot-com debacle demonstrated all too well, ‘eye-balls’ do not automatically equate to actual sales. It’s only when people are emotionally present that things start to happen: and they can only be emotionally present if the relationships exist to enable them to do so.
The relationship is the asset.
So treat it as an asset. Exactly like any other business asset:
- how do you measure the value of the asset?
- how do you convert a liability (negative-value) to an asset (positive-value), and prevent an asset from becoming a liability?
- how do you monitor depreciation, wear, and other forms of erosion of value of the asset?
- how do you maintain the asset itself, in order to maintain the value of the asset?
You already do much of this in a sales-development process, from prospect to contact to pre-sales to sales-point to after-sales to maintenance and follow-up. A continuing sales-relationship is a high-value asset, as long as it remains of value to both parties. (That last point is where many so-called ‘customer-relationship management’ systems will fail: they only check the value from the company’s perspective, not the clients’, and hence pester ‘high-value’ clients to the extent that the latter will drop the relationship from their end – a fact that will not, however, be noticed by the system, because it has no means to do so.) Note though, that this only works if we take a responsibility-based approach to the asset: the moment we think that we ‘possess’ the customer is where it all starts to go horribly wrong…
The same is true for employee-relationships. People are not assets: the assets are the relationships through which employees feel themselves to belong as ‘our people’. To be ‘our’, to be a member of ‘us’, is a relationship with and as one of ‘us’. The relationship is the asset through which we connect with ‘our people’, through which employees are ‘our people’. So how do you measure that asset? How do you measure its value? – because if you don’t measure the value, from both directions, you have no means to identify when that asset is at risk of becoming a liability. How do you monitor changes in that value? How do you monitor potential and actual depreciation and wear? What actions do you take to maintain the asset, and the value of that asset? Much as for virtual-assets, how are these relational assets created, reviewed, updated, destroyed? – and why and for what purpose would you do each of these actions?
And there are other, more subtle issues around those two different types of relational assets: person-to-person, versus person-to-collective. The purpose of a brand, for example, is to provide an anchor for the latter type of asset: without the brand, or some other means to identify (and identify with) the collective, the only relationships that people can have with a company or other collective will be person-to-person. A key concern of personal-service firms, for example, is to link customer-relationships with the company rather than with the person providing the service – otherwise if and when that person moves on, the company’s nominal relationships with clients will move with the person, rather than remain with the company. In a similar way, if a manager or co-worker damages or destroys a person-to-person relationship with an employee – such as through bullying, for example – the employee probably move on; but whilst the person-to-person connection then ceases to exist, the company is left with an active liability in terms of damage to reputation and other aspects of that person’s relational link with the collective – which may well fester and infect others’ relationships with the company if nothing is done to repair the damage. The opposite is true, too: good reputation extends itself, virally, automatically helping to create high-value relational-assets without additional direct effort by the company and its representatives. Relationships are assets; relationships matter.
So make a habit, perhaps, to view relationships as assets, in exactly the same way as any other asset. Employees, customers, shareholders, everyone else: no person is an asset. Ever. But every relationship with those people is an asset. And if we fail to take care of that asset, it risks becoming a liability that can drag us down – just as with every other type of asset. The asset is the relationship – and, as an asset, it’s always our reponsibility to maintain it.
People are not assets: it is the relationship with each person that is the asset.
The asset is the relationship – not the person.
[Topic suggested by comments in an article on business-storytelling by Peter Bregman, on the Harvard Business website: "A good way to change corporate culture".]
Jul/092
10, 100, 1000, 10000
10, 100, 1000, 10000. A lot of things those numbers could apply to, of course, but in this case they’re ballpark figures for the number of hours it takes to develop specific levels of skill.
The thousand-hour level is quite well-known – the point at which we recognise the skill as skill. It should be obvious that it’s part of a continuum; what’s not so obvious, perhaps, is how that continuum works and what each level means in practice.
Skill-levels in part determine how we deal with an unknown world, so it’s useful to compare skill-levels against the Cynefin framework for sensemaking, as used in business and elsewhere:
Cynefin framework and skills-levels
In some ways, Cynefin’s four ‘domains’ also represent a classic two-axis matrix: a horizontal axis of unordered or ‘value’-based versus ordered or ‘truth’-based; and a vertical axis of available time for response, from real-time to assessment and response at one’s leisure. But it’s not quite as simple as that, because it’s also a hierarchy – cross-mapped to the layers of the ISO-9000 quality-system, for example – or a cyclic process such as the scientific-development sequence idea / hypothesis / theory / law. Each domain is also structurally different from the others in what is seen and observed, the way that decisions are made.
10 hours: Trainee: ‘learn by rote’, the typical outcome of a day’s-worth of training, or a weekend workshop – knowledge of at least the basic terminology of a skill, plus competence to at least do something useful in that context. Since there’s no real skill here – it’s just actions in response to given assumptions – this skill-level will always need to be supervised by someone or something that does have a higher skill-level, in order to ensure that what is done will actually work as intended in real-world practice. (That supervising ‘someone’ can be the same person, by the way – and often is, for real people in everyday business practice.)
- decision-making: rule-based – rapid real-time decisions on simple basis of true/false or either/or
- decision-process: sense / categorise / respond
- driver for development: unconscious incompetence – the need for competent action
- ISO-9000 layer: work-instruction
- emphasis on: physical action
- suited to: machines or IT; real people can work at this level, but usually become less reliable the more often the task is repeated
This skill-level solves a single defined problem by a single predefined method in response to a single set of narrowly-constrained assumptions. We use this level wherever conscious decision-making is either unnecessary or undesirable, or there’s no time to think about what to do: stick to the rules, ‘the law’, keep the focus only on the task at hand, just do it, and do it fast. This is the basis of all real-world action: everyone will have thousands of competencies of at least this level by the time they leave school, and many thousands more over a working lifetime, but will develop only selected competencies to higher levels of skill.
100 hours: Apprentice: the typical outcome of a two-week training-course combined with real-world practice, or working one’s way through the whole of an instruction-book – there’s awareness of some or most of the key factors in the context, and what the trade-offs are between them. It describes and operates within an analytic ‘theory’ or interlinked set of predefined algorithms and assumptions about how some aspect of the world works.
It’s crucially important to understand, though, that this type of skill depends on its assumptions: it is reliable only where those assumptions are valid, but it has no means within itself to test the validity those assumptions. Typical business software application encapsulate this level of skill, but in practice is suitable only for easily repeatable processes – not for true complexity.
Hence, as in the old fable of the Sorcerer’s Apprentice, this is perhaps the most dangerous of skill-levels: just enough knowledge to give oneself the delusion of competence and ‘control’, but not enough awareness of its real-world limitations – enough knowledge to get into serious trouble but not enough to get back out of it – hence it’s essential for there to be ‘practice-fields’ where the inevitable mistakes may be safely made. Further skills-development should also be supported by some form of cyclical review-process such as the Deming/Shewhart ‘plan / do / check / act’ sequence – often including structured feedback such as the After Action Review – or, for skills embedded within ‘intelligent’ machines or IT-systems, an iterative ‘Agile‘-style development process.
- decision-making: analytic – decision by ‘scientific’-type analysis using calculated algorithm or true/false comparison across many factors
- decision-process: sense / analyse / respond
- driver for development: conscious incompetence – realistic appraisal of current skill
- ISO-9000 layer: procedure
- emphasis on: calculation, analysis, thought
- suited to: IT systems and real people, also some types of machines with IT or algorithmic support
Over a working lifetime, most people will develop dozens or even hundreds of competencies at this level. Specialists will tend to collect competencies within a specific domain – system-developers, for example, will learn and use many different programming languages over time – whilst generalists will be more eclectic, often learning just sufficient about each skill to be able to converse meaningfully with the specialists yet build bridges between them.
1000 hours: Journeyman: the skills developed in a semester subject at university, a longer technical study, or just through routine practice over many months. By this stage there’s sufficient skill to work with the complexities of the real world – rather than only the abstract assumptions of IT-type logic – and to understand how to use guidelines and patterns, developing and testing hypotheses to interpret the inherent uncertainties and sheer messiness of most business practice. Unlike the ‘apprentice’ level, the ‘journeyman’ will be capable of doing unsupervised work – though there is still much to learn in terms of adaptability, ingenuity, precision and, especially, speed.
- decision-making: emergent – decisions based on experimentation, patterns and heuristics
- decision-process: probe / sense / respond
- driver for development: conscious competence – the need to challenge and extend one’s skill
- ISO-9000 layer: policy
- emphasis on: relationships, interconnections
- suited to: real people, also certain (expensive) types of ‘semi-autonomous’ IT-systems, and specific ‘self-adjusting’ components in certain types of machines (e.g. governor in steam-engine); IT usually only in a decision-support rather than decision-making role
Most people will develop a fair handful of these, as the secondary-level skills of working life: for example, the old office classics such as typing, shorthand and bookkeeping – or more updated versions such as spreadsheet design. As before, generalists will tend to collect more of these, across a broader, more eclectic scope; specialists will tend to keep their focus on a central skillset.
10000 hours: Master: the skills developed during the entire of a university course to pre-doctorate level, or of a full trade-apprenticeship – the latter traditionally ending with a skills-demonstration referred to formally as a ‘master-piece’. The knowledge and experience here is sufficient to know exactly how and when and why to bend or even break ‘the rules’, though this has now returned full-circle to working with the real world again in real-time. The classic description of this is the Chief Engineer in CS Forester’s novel The Ship: he stands on the deckplate, feet astride, hands behind his back, a still point in the centre of the action, silently watching everything going on, apparently doing nothing – yet takes action instantly when something crucial has been missed by others.
- decision-making: principle-based – real-time decisions from intuitive grasp of the whole context
- decision-process: act / sense / respond
- driver for development: unconscious competence – the need to apply skill in real-time
- ISO-9000 layer: vision
- emphasis on: principles and overall purpose
- suited to: real people only
Some people never reach this stage with any skill; and whilst many may have more than one – reflecting a change in career, perhaps – the number of such depth-skills for each person will always be few.
In principle at least, there is also the 100000 hours level, representing fifty years’ full-time commitment to a single skill. Almost by definition, this would be relatively rare, but certainly does occur, especially amongst artists, musicians and scientists. One business example would be Peter Drucker, who spent a working lifetime of more than 70 years observing and commenting on the social structure of business organisations.
10, 100, 1000, 10000 hours; a couple of days, a couple of weeks, half a year, five years; trainee, apprentice, journeyman, master. A useful rule-of-thumb to describe four different and distinct layers of skill.
[Article-topic suggested by Shawn Callahan of Australian narrative-knowledge consultancy Anecdote.]
Jul/094
What do shareholders own?
“The shareholders are the owners of the company.”
Really?
Let’s be blunt about this: if you’re in business and you still think that statement is true, you’ve already lost the plot.
Yes, I know it’s what the business schools assert, and even what the law asserts in some countries. But it’s always been a questionable claim, and in functional terms, in most industries, it hasn’t been true for centuries – if it was ever true at all. Which is a problem for business – to say the least…
To see why it’s a problem, we need to look more closely at what’s meant by ‘own’.
‘Own’ has two fundamentally different meanings:
- to be responsible for something
- to possess something – usually without responsibility for that ‘something’
Within a business, we’re clear what ‘ownership’ means: it’s about responsibility. A ‘process-owner’ is someone who is responsible for the execution of a process; likewise for ‘project-owner’, for ‘business-rule owner’, for someone who owns a business role or a business information-source, and so on and so on, almost ad infinitum. More to the point, the moment that someone thinks they possess that item is when it all goes wrong. Responsibilities are core; clean handovers of responsibilities are core; muddled ideas about ‘possession’ are very bad news indeed.
So why on earth do we think that it’s any different with shareholders?
What responsibilities do shareholders have? Well, none, really. They front up with a certain amount of money, and expect – demand – that the company change its ways to maximise the return to them. In many countries, corporate law will back that demand to the hilt, too. But in their role as shareholders, they don’t do any of the work of the company; they’re not responsible for any of the actions that the company takes; by law, they have little or no liability beyond the risk of perhaps losing their money. That’s it: no responsibilities. By law. A bit tricky, that.
No responsibilities. But they do possess the company, says the law. Shareholders provide capital. Capital buys assets. So the shareholders own – possess – the company’s assets. Which entitles them to all the profit from use of those assets. Yet what do we mean by ‘assets’? This is where it gets trickier still…
This does sort-of make sense for physical assets – physical things, machines, land, materials. All property-law is based around rights of possession – specifically, the right to exclude others from access to those resources, which is an interestingly back-to-front way of defining it. Those rights of property include rights to exploit the resource, without any reference to others, either in the present or elsewhen: any social responsibilities – environment, pollution, wastage, even disappropriation and dispossession by deceit – must all be managed via other law, separate from property-law itself. Shareholders’ ‘limited liability’ means that those responsibilities are always someone else’s problem: but the rights for those physical assets belong to the shareholders alone. And we can maintain ‘accounts’ for those rights in terms of valuation of those physical assets, allowing for depreciation, exploitation and the rest.
All fair enough – probably. Possibly. But the ‘shareholder-value’ – the price for which shares are sold, and the financial return from the use of assets – isn’t based only on physical assets. In fact, these days it’s very unusual for a company valuation to be based only on physical assets: for some companies the physical assets barely register in the accounts, and may even not exist at all.
So in those cases, what do shareholders own? For these, we’ll usually hear phrases such as ‘intellectual property’, ‘goodwill’ or ‘brand’. And this is where it gets really tricky…
What is ‘intellectual property’? The shortest answer is that it’s an attempt to apply the physical rules of possession – specifically, ‘alienability’, the right of physical exclusion – to a context where, by their nature, those rules cannot apply. Ideas and information are ‘non-alienable’: if I give it to you, I still have it – which certainly doesn’t apply to a physical object. For its legal justification, the physical-property system depends on trails of provenance, in which property-rights of some kind – usually the right to be paid – accrue at each stage at which value is added, and to each person (individual or collective) who added that value. But this principle can’t apply to ideas or information: David Bohm and other physicists have long since proved that since knowledge-generation is always collective, and that there is no identifiable initial-source for ideas, there is no means to establish a valid trail of provenance in which all appropriate parties may be appropriately paid. The only way it can be made to look like the physical-property system is if someone arbitrarily asserts exclusive possession, defining an arbitrary start-point for a trail of provenance, but disenfranchising every other party in the item’s history. In other words, what in the physical-property system would and must be called theft. In short, there is no ethical, legal, philosophical or scientific basis for any of it: the entire ‘intellectual property’ concept is a delusion – or, arguably, a fraud – dependent entirely upon belief and lawyers’ bluff. And in essence, any valuation based upon that bluff is likewise a delusion. Which means that a very large chunk of ‘shareholder value’ is also likewise a delusion. Ouch…
To make things worse, applying physical-property notions to ideas and information makes no practical sense. ‘Possession’ of an idea implies a right of exclusion, a right to prevent others from using that idea: yet the idea only has functional value when it’s used. A physical resource – a machine, for example – can often be exploited without any change to its ownership; but that simply does not apply to intellectual-property, because usage in effect is extensional transfer of ownership. Exclusion prevents use – defeating the entire object of the possession in the first place, because if the idea is not used, it may as well not exist. The result is incredibly wasteful: not merely having to reinvent the wheel, but reinvent even the concept of wheel, constantly having to create alternatives just to get around pointless, petty, pathetic intellectual-property ‘rights’. Perhaps useful for certain types of innovation, but that’s about it: in any other sense, it’s about as uneconomic and ineffective a system as it could possibly be. Ouch indeed…
But wait – there’s more. Yes, it does indeed get worse: because the moment we start to look at that blurry concept of ‘goodwill’, we’ll see that we’re really in trouble, because shareholders’ ‘rights’ of possession come into direct conflict with just about every other form of law.
The clue here is that otherwise well-meant phrase “Our people are our greatest asset”. There’s a subtle catch in that phrase, and a big one at that: the only time when people can be described as ‘assets’ is when they are slaves. Which is supposedly against the law: very much against the law, in almost every country. (Though quite a bit of contract-law gets dangerously close to it…) There is an asset here, but it’s not the person: the asset is the relationship with the person, without which we don’t have access to the person, or to any of the means via which those people add value to other assets. The exact same is true of customer-relations: customers add value, but customers in themselves are not assets – the asset is the relationship with each customer, via which that customer may add value in transactions or trade. And one of the quickest ways to destroy a relationship is to try to possess it: it only works when each party takes responsibility for their side of the relationship. So if we try to apply a physical-property model – possession – to those assets, we’re likely only to destroy them. Which means that the current concept of shareholder-value will automatically destroy the shareholder-value, unless we merely pretend to apply that concept but don’t actually do so in practice. Which means that, at present, the directors of every company must necessarily lie to their shareholders about their method of valuation, in order to preserve the ‘shareholder-value’, and thence the interests of those shareholders. Which is kind of interesting in terms of current corporate law…
And yes, it actually gets even worse than that – even more complicated and, for that matter, legally-indefensible – when we get to brands, or morale, or reputation or other ‘aspirational property’, because the company must preserve an abstract relationship that exists only as a belief, yet has direct impact on the company’s ability to do work and on its relationships with every other stakeholder in the enterprise. The only approach that will protect reputation is responsibility, in every possible sense: in these abstruse realms, delusions of ‘possession’ invariably lead to disaster.
So here we have, in law, the notion that the shareholders ‘possess’ almost everything, and have responsibility for almost nothing, when in reality the only way that works is the other way round. Kind of frightening to realise that we have an economy, an entire legal system, based on assumptions which simply cannot work in practice. And this isn’t a matter of the woolly wishful-thinking of politics and the like: we’re up against real, absolute constraints of physics and physical reality here. There’s no way round it: it does not and cannot work. End of story. Ouch…
But, whether we like it or not, and despite the fact that it simply does not work, in present-day business we’re still stuck with this farcical fiction of shareholder-ownership. So what can we do about it?
First, perhaps, is to put shareholders in their place. They’re nothing special: providers of a particular type of finance, who perhaps take a slightly higher level of risk than banks would (or should) be willing to offer. Their only ‘responsibility’ is to provide funding, and keep it there, to maintain the commercial credibility of the company – and given that stock-exchanges enable shares to change hands in milliseconds or less, that responsibility doesn’t stretch very far. To be blunt, their ‘rights’ in law are massively disproportionate to their risk or responsibility – but that’s a matter for politicians to debate and decide, not us. What we can do to put them more in their place is to be a darn sight more honest about the real level of assets of the enterprise, and about what they can and can’t ‘possess’. Physical assets they can ‘own’ in their own questionable way, but for everything else they can only – must – leave the responsibility-based ownership in the hands of the company itself.
And the way we do that is by being clear about where our responsibilities truly lie. If we really want to be responsible to shareholders, the last thing we should do is pander to their whims – especially those such as stock-analysts who have little or no grasp of responsibility in the first place. Business-guru Michael Porter is utterly blunt on this point: the obsession with placing shareholder-value as the highest priority is, he says, “the Bermuda Triangle of business strategy”.
Instead, we need to focus on what does work. And as business commentators such as Charles Handy documented decades ago, the priorities that do work are very well known. For example, the health-products group Johnson & Johnson summarise their own priorities as follows:
- service to customers comes first
- service to employees and management comes second
- service to the community comes third
- service to the shareholders comes last
There are many variations on this schema, of course, but the basic principle is sound: shareholders necessarily must be at or close to the bottom of the priority-stack – not the top. Self-centred shareholders will always demand to come first: but that isn’t what works. They’re no doubt quick to demand their ‘rights’; but if they really want shareholder-value, and real returns, they need to get real about responsibilities, and where those responsibilities really reside.
Shareholders’ rights are based on possession, and possession alone. But there’s very little in a present-day company that can be possessed: everything else exists only as responsibilities. In practice, shareholders own the company only to the extent that they accept and act on its responsibilities. The less responsibility they have, the less they can actually own.
As simple as that, really.