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Saturday, February 1, 2014

Corporate Social Responsibility at Walmart

Is it not an outright oxymoron for a company such as Walmart to pinch pennies when it comes to its non-supervisory employees even as it is oriented to the social good of society through its "corporate social responsibility" (CSR) programs? Leslie Dach, a former executive at Walmart who had been behind several such initiatives liked to make the point that striving to make a dent in societal problems can dovetail with a company’s own financial interests. The two need not conflict. I submit that this is not good enough for a company's management authentically into "giving something back." Specifically, the social-good initiatives should be integrated with company operations. Walmart can indeed be criticized from this standpoint, particular since Sam Walton's sons cut non-supervisory employee sickness and vacation days. I suspect that the illusion foisted on the general public is likely to burst one day as the bones of the stores' operations are laid bare (i.e., the curtain is pulled back to reveal for the public the proverbial man behind the curtain). Let's hope that other companies can learn from, and thus improve on Walmart's dual strategies.

Strategic Leadership: Disentangling Strategy and Leadership

Strategic leadership relates an organization’s differentiated core competencies to its ideologies, identity, mission and view of the macro environment system. Relates implies that strategic elements are not identical with a vision containing values. In fact, a tension can be involved, as interest applies one way to core competencies and another to the social reality that a leader promotes in line with an organizational mission (and identity). For one thing, the basis of a competitive advantage can be rather limited temporally, due to technological changes, for example, while values espoused are presumably long-lasting in their validity and thus not easily changed. 

Ethical leadership as a means of managing strategic leadership (Worden, 2003a and 2003b)   

 Material from this essay has been incorporated into The Essence of Leadership: A Cross-Cultural Foundation, which is available in print and as an ebook at Amazon. 

Sun Tzu's Art of War: A Recipe for Leadership in Business

According to Master Sun in The Art of War, “Leadership is a matter of intelligence, trustworthiness, humaneness, courage, and sternness.”[1] Although Sun Tzu is referring mainly to military (and related political) leadership, lessons can be learned for exercising business leadership.

1. Sun Tzu, The Art of War: Complete Texts and Commentaries (Boston: Shambhala, 2003), p. 44.

Material from this essay has been incorporated into The Essence of Leadership: A Cross-Cultural Foundation, which is available in print and as an ebook at Amazon. 

Friday, January 31, 2014

Google Jettisons Motorola: A Jack of All Trades Is a Master of None

Managers tasked with the overall management of a company may thirst for additional lines of business, particularly those that are related to any of the company’s existing lines. Lest it be concluded that an expansive tendency flows straight out of a business calculus, the infamous “empire-building” urge, which is premised on the assumption of being capable of managing or doing anything, is often also in play. Interestingly, this instinct can operate even at the expense of profit satisficing or maximizing. In this essay, I assess Google’s sale of its Motorola (cellular phone manufacturing) unit.

The full essay is at Institutional Conflicts of Interest, available in print and as an ebook at Amazon.

Wednesday, January 29, 2014

The State of the Union Address: The Presidency as Visionary or Bureaucratic Leadership?

Just after President Obama’s 2014 State of the Union Address, CNN found that among the Americans who had watched the speech, 76 percent had a “ total positive” reaction, 44 percent of which being “very positive,” and 22 percent had a negative reaction.[1] What is left unsaid can be even more useful than what is reported. In this case, the poll does not reveal the criteria used by the respondents to assess the speech. The devil lies in the details here, in not only the actual criteria used, but also the very content of the speech. In this essay, I investigate the suitability of the criterion that can be labeled “extent of detail in the speech,” given the purpose of the speech as laid out in the U.S. Constitution and, moreover, the presidential office.

In his 2014 address, Barak Obama stayed largely away from “the vision thing.” This point is significant to the extent that “presiding over the whole” is an important feature of his office. Even realistic bipartisan legislative items, such as immigration and trade reform, received only cursory mention. This is understandable, given the gridlock that had made 2013 one of the least productive Congresses in U.S. history. Under the circumstances, the president could have done worse than lean on his constitutional obligation “to give to the Congress information of the state of the Union.” Pursuing this tract may have given the president (and the office) more reputational capital (e.g., standing above the fray; not being partisan). Sadly, he truncated that duty to sell his executive actions to a weary citizenry and Congress. In other words, like presidents before him, Barak Obama chose to make the speech fit almost exclusively within the second part of the constitutional obligation—to “recommend to [Congress’s] consideration such measures as he shall judge necessary and expedient.”[2] To be sure, he did push a few “incrementalist” legislative proposals, such as increasing the minimum wage a few dollars and extending unemployment compensation three months. Unfortunately, the public seemed to recognize the partisan nature of these “agenda items.”

Perhaps the main thrust of the address fell on announcements of, and justifications for executive actions, including tightening industrial carbon-emission limits, increasing the minimum wage that federal contractors would have to pay their workers as a condition of accepting contracts in the future, and providing a new retirement-savings device for any employees without an employer-based plan. The White House readily admitted the diminished returns afforded by executive orders relative to legislation. “I wouldn’t tell you that executive action is a substitute for major bipartisan legislation; it’s not,” Dan Pfeiffer, a senior advisor to the president, admitted.[3]

The implication that the state of the Union hinged on such “micro” measures somehow escaped the notice of viewers, the media, and the political elite. By the time the president got to his “achievement” in having secured the voluntary agreement of several CEOs not to discriminate against the long-term unemployed, he was past even the encroachments of the recommendations part. The showcasing of hand-picked people in the gallery entirely bypasses the constitutional purpose of the report and recommendations.

To be sure, Barak Obama was hardly alone among U.S. presidents in steering the address toward partisan recommendations. In fact, by the time of the 2014 address, most Americans probably expected a partisan list of proposals. His contribution may have been in moving the de facto standard for what counts as a State of the Union Address even further along in terms future expectations of presidents using the address to sell their respective agendas. In the context of legislative gridlock and perhaps even a media-fomented general sense that the stuff of visionary leadership must finally bow down to American pragmatism in the era of managerialism, the president’s addition of executive actions took the address even further from the “big picture” inherent in the condition of the Union itself—that is to say, further away from transformational and visionary leadership and closer to bureaucratic and politicized management. This is bad news for the presidency if the presiding role of the office (e.g., looking out for the good of the whole systemically) is as much a part of the job as are commanding the military and acting as chief executive.

Burns’ distinction between transactional and transformational leadership may shed some light here. Burns classifies both types under moral leadership in his definitive work, Leadership.[4] The transactional leader takes the followers’ needs as given and attends, via particular (i.e., incrementalist) transactions with the followers, to the extant lower needs already preoccupying the followers as well as the leader (e.g., raising the minimum wage). In contrast, the transformational leader raises, or transforms, the needs that the followers consider the most important to higher, distinctively moral, needs that would transform both the followers and the leader, even if merely in looking at a problem in a new light (i.e., through the lenses of a novel paradigm). It should come as no surprise that “the vision thing” and charisma have great value in transformational leadership and none at all in the transactional sort. For example, the president could have inserted his recommendation for a raise in the minimum wage within a vision of sustenance as a fundamental, and thus unconditional, human right. The transformation would involve raising the perceived need at issue from that of negotiating a new conditional set of terms for domestic food aid (“food stamps”) and a maximum in unemployment compensation to replacing that mindset among leaders and followers alike with one that is rooted and justified in basic (i.e., unconditional) human rights.

In conclusion, the gradual shift in emphasis that has gone virtually unnoticed at the societal level as Americans have critiqued State of the Union addresses is “the canary in the coal mine” already letting us know that both the presiding and related non-partisan leadership roles of the U.S. presidency are well on their way to extinction. Unfortunately, many Americans seem to have been pegging their assessment criteria to what the address itself has become—even if this means validating successive presidential lapses. Lest shirking the presiding and “big picture” leadership roles of the office in favor of getting as much of a partisan agenda put into law as possible is not sufficiently narcissistic, the presumptuousness involved in feeling free to “tweak” the office in a more convenient direction surely suffices. Yet such gradual moves effectively evade notice as if by stealth.

I submit for your wise consideration, therefore, the following question: Is democracy unknowingly susceptible to death by increments? If so, republics may be destined by the fates, or, more likely, inherent design to unwittingly suffer a prolonged decline without any awareness that the anchors are being gradually moved down the hill. The lack of recognition that the markers have been moved means that the new positions are taken to be the old default. Accordingly, no serial decline is discerned; no “big picture” vision that is historically as well as idealistically informed breaks through the ice, as the marker on what counts as leadership has shifted too over time. It is difficult to follow the bread crumbs if they are being eaten by birds. By yet another analogy, the state of the Union might include the point that we are skiing downhill in “white-out” conditions, utterly clueless as to where we, the self-governing people (ideally), are going until it is too late.

See "The State of the Union Address: The Presidency as Presiding or Partisan?" in The Essence of Leadership, which is available at Amazon in print and as an ebook.

1. Ariel Edwards-Levy and Mark Blumenthal, “State of the Union Poll Gives Obama Positive Marks,” The Huffington Post, January 29, 2014.
2. The U.S. Constitution, Article 2, Section 3.
3.Susan Page, “Speech-wise: What a Difference [a] Year Makes,” USA Today, January 29, 2014.
4. James M. Burns, Leadership (New York: HarperCollins, 1978). 

Tuesday, January 28, 2014

The State of the Union Address: The Presidency as Presiding or Partisan?

On The O’Reilly Factor on the evening of Obama’s health-care “summit” at the White House in 2009, Bill O’Reilly told Laura Ingrahams that the president had done an adequate job in moderating the discussion.  Laura replied, “He is not a moderator; he is the President of the United States.”  O'Reilly provided his own perspective, in admitting that “moderating is not enough in the long-run because the country wants leadership.” The host was only partially correct.

Material from this essay has been incorporated in The Essence of Leadership, which is available at Amazon in print and as an ebook.

Monday, January 27, 2014

The Mammoth Indoor Mall: A Dinosaur or a Reusable Shell?

One of the pitfalls in maintaining a general gaze at the long-term trend toward e-commerce at the expense of "brick-and-mortar" stores lies in missing or overlooking other changes in the business environment. The weight of such changes can fall largely within the "brick-and-mortar" world, impacting some of its neighborhoods more than others. Not all change impacting commerce in 2013 stemmed from the internet. The fate of the indoor mall is a case in point. Taking into account the obvious impact of online purchases does not explain why stand-alone stores and outlets were doing so much better than the noisy, sterile malls. 

Anticipating further detrimental impact on in-person transactions from increasing online purchases, Michael burden, a principal with Excess Space Retail Services, predicted after the Christmas season of 2013 that the retail sector would likely see an average decrease in overall retail square footage of between one-third and one-half within the next five to ten years. He cited fewer mall visits and less inventory needing to be stocked in the stores.[1] Less retail space not only includes smaller stores, but fewer as well. As regards store closings, the question of whether the indoor mall is to stand only as an artifact of an earlier society or a structure that can adapt to ever-changing societal mores begs for a definitive answer. 

One big shift in store closings underway already by 2014 stemmed from retailers shying away from indoor malls, favoring instead outlet centers, outdoor malls, and stand-alone stores. "There's no question that mall stores are closing quicker than the open air [variety],” David Birnbrey of The Shopping Center Group said.[2] Although new retail construction completions were at the time at an all-time low, the supply of new outlet centers had picked up in recent quarters according to Richard Ellis of CD.[3] Meanwhile, no new indoor malls were being constructed. Rick Caruso, founder and CEO of Caruso Affiliated, was unaware of any indoor mall being built in the U.S. since 2006. "Any time you stop building a product, that's usually the best indication that the customer doesn't want it anymore," he said.[4] Sometimes what is not done (or said) is more important than what the attention-getters are doing (or saying).

What exactly lies behind the impending demise of the shopping mall? E-commerce cannot be the whole story, for otherwise the outlets, outdoor malls, and stand-alone stores would face an equally dismal prospect. Rick Caruso declared at the 2014 National Retail Federation convention that at one point, the indoor mall “may have met the developer's needs—and even for [a while], the consumer's needs—but it has outlived its usefulness."[5] Without a major reinvention, traditional malls would soon go extinct as though a species unwilling or unable to adapt to rapidly accelerating climate change. 

Unlike the sort of experience that coffee shops off, the amusements here at Mall of America in 2005 are only indirectly linked to the products. (Image Source: Jeremy Noble)

Specifically, mall retailers must figure out how to get back in sync with people’s daily-life rhythms by creating a satisfying atmosphere for customers to experience. Many coffee shops had already achieved as much by offering wifi, good smells, particular styles of music (or none), and comfort (e.g., nice chairs, no fear of getting kicked out for hanging out too long, etc).[6] The comfort factor is subtle though significant nonetheless. Just weeks into 2014, news broke of yet another “mall shooting.” Malls and schools were already becoming associated with guns and death in the psyche of the general public. The managers of malls themselves and the particular stores therein faced the daunting task of finding and implementing novel experiences in line with a “modern-modern” society while facing a stiff headwind manifesting as an increasingly bad reputation in the broader society.

1. Krystina Gustafson, “A ‘Tsunami’ of Store Closings Expected to Hit Retail,” CNBC.com, 22 January 2014.
2. Ibid.
3. Ibid.
4.  Ibid.
5. Krystina Gustafson, “Without Rebirth, Malls Face Extinction: Developer,” CNBC.com, 13 January 2014.
6. Interestingly, a Starbucks store manager approached me on one occasion as I was setting up my laptop just after sitting down to demand that I buy something or I’d have to leave. I pointed out that I had just arrived and was waiting for the line to shorten, and that Starbucks’ policy permits people in the stores without making a purchase, but he dismissed both points and continued to bark his order as though I were an alien insect. I left rather than made the purchase I had intended, and called Starbucks’ customer service to complain of the manager who could not be wrong. After a bit of fake sympathy and affirmation of the policy as I had understood it, the “customer service” employee impotently said, “Unfortunately I cannot call that store manager to correct him on the policy.” I mention this because I have not since felt as comfortable surfing the net while enjoying a coffee in a Starbucks store. In fact, I stopped going to Starbucks stores and not soon thereafter gave up coffee as a regular drink because of its negative effects on the body (such as hard stools, headaches, and a general sense of nervousness while on the drug). 

Sunday, January 26, 2014

Online Sales: Breaking the Egg

Was the 2013 holiday season really a turning point in terms of online purchases? Can a business environment change so drastically from one Christmas to the next? If not, what can we say about a commercial system that buckles, at least at its weakest link, under the pressure of a moderate change in buying habits? Put another way, does such buckling necessarily indicate or point to the existence of a threshold point that has suddenly and unexpectedly been crossed? Alternatively, the system itself may be weak.

During the November-December holiday season of 2004, online sales revenue in the U.S. increased 25 percent from the year before.[1] CNN Money reported the increase as 29.5 percent—almost a third of total holiday sales.[2] This healthy numbers can be deceiving, however, if the base is low relative to the total. That is, if the online holiday sales figure as a percentage of total holiday sales is around 2 percent, an increase of 25 percent from the prior year’s online sales is immaterial in terms of the change in the percent of online sales to total from the prior to the current year. As shown below, fourth quarter percentages-of-total (rather than of increase) increased from roughly 1.7 in 2003 to 2 percent in 2004. This change is hardly earth-shattering.

Estimated Quarterly U.S. Retail E-commerce Sales as a Percent of Total Quarterly Retail Sales
4th Quarter 1999 to 4th Quarter 2004[3]

So let’s look at percentage-of-total figures specifically for the combined (November and December) season of Thanksgiving and Christmas, two of the major national holidays in the United States. In 2012, the season’s online sales revenue accounted for 19.3 percent of the total retail sales.[4] Keeping in mind the magnitude of the changes shown in the graph above (0.6% to 2.2% over five years), the change from roughly 20 to 25 percent in 2013—from just one Christmas to the next—seems relatively dramatic. Yet a shift from 20 to 25 does not in itself seem very significant. Even so, it was enough for journalists to label it a “sea-change,” “threshold,” “turning point, “and “major re-alignment, capable of unleashing a virtual tsunami.

One business practitioner interviewed on CNBC in mid-January, 2014 made the startling claim that the turning point had come quite unexpectedly in just one year. I contend that conclusion is overly dramatic, though I readily concede that the five-point difference was oddly too much for a part of the system. Specifically, “an unpredictably large number of packages overwhelmed UPS,” with thousands of Christmas presents left undelivered by Christmas Eve.[5] Natalie Godwin, a spokesperson at UPS, explained. “The volume of air packages in our system exceeded the capacity of our network, as demand was much greater than the forecast.”[6] The network’s capacity itself became transparent as a constraint, as a result of demand having been much greater than anticipated. The words “capacity” and “much” point to, or intimate, a systems-level problem not just for the package-delivery company, but also for the U.S. (and perhaps global) system of commerce.

Crucially, that a percentage change of just 5 percent of total sales revenue represented as increased demand can pierce the capacity of a major link in the commercial chain from manufacturers to customers suggests not a pivotal year, but, rather, a system too (i.e., artificially) inflexible or hard. Rather than being able to adapt to changes in the environment, as any fit species does through the evolutionary process of natural selection, the American system of commerce lacks the built-in ability to stretch (and contract). By implication, reaching a threshold point, such as in demand for products sold online, is in terms of the system and behaves as a wall rather than a semi-permeable membrane. It is worth pointing out that a threshold point concerning the system of commerce also no doubt exists in terms of society (i.e., changes in daily life) and even in terms of products (i.e., transformative products as mainstays as a result of ecommerce). Just as the loud kids tend to get disproportionate attention, a rigid and complacent system gets noticed (i.e., becomes transparent as a system) more than its share. Relying on such a system warrants the warning: Watch out for the “big one”—a major earthquake of sorts capable of a truly dramatic land-shift.
1. Jennifer LeClaire, “Online Holiday Shopping Soars 25 Percent to $23 Billion,” E-Commerce Times, 4 January 2014.
2. CNN Money, “Holiday Online Sales Surge,” 5 January 2004.
3. US Census Bureau, The Department of Commerce, “Quarterly Retail E-Commerce Sales 4th Quarter 2004.”
5. Donna Leger, “UPS System Overload Delays Holiday Packages,” USA Today, 24 December 2013.
6. Ibid.