A Strong Position on Neutrality

May 092012
 

When we visit a grocery store, we can expect Kellogg’s breakfast cereals to be taking up a lot more shelf space than those of its smaller rivals. The big guys tend to have access to the best distribution channels.

On the Internet, though, a start-up website created by a guy sitting at home in his underwear has a real shot at going head-to-head with a much bigger rival, secure in the knowledge that his offerings can show up just as clearly and quickly as a far larger and more established site. This is what Eduardo Porter, who worries today in a New York Times column about the danger of losing Internet neutrality, wants to protect.

Companies offering broadband access, Porter suggests, should not be allowed to discriminate among services online. “If they did, the best service would not always win the day,” Porter writes. Instead, the winners would be those in the best position to cut a deal with AT&T, Verizon, Comcast or Time Warner—in other words, those with the deepest pockets and most clout.

In his book The New Realities, Peter Drucker noted that government regulation is sometimes required to keep the big players from smothering the small ones. Among the most complicated and controversial of government functions, Drucker wrote, is “to maintain what we today call a ‘level playing field.’ Government can set ground rules that are equally binding on everybody.”

In this respect, government “should be a good deal more activist than 19th-century liberals such as Herbert Spencer preached and wanted,” according to Drucker.

But, as we’ve noted previously, Drucker also strongly counseled businesses to rein themselves in. Wherever the elimination of a negative impact to society “requires a restriction,” Drucker wrote, “regulation is in the interest of business, and especially in the interest of responsible business.”

If an enterprise forgets this, it’s liable to generate public outrage—perhaps not immediately, but eventually—that results in punitive regulation. “If our social impacts are not right, it is the responsibility of the company to educate the customer and society so that the negative impact can be eliminated,” Drucker wrote. “The fact that today the public sees no issue is not relevant.”

What do you think: Should companies offering broadband access work to preserve Internet neutrality—for their own good, as well as for ours?

Is There a Little Rupert Murdoch in All of Us?

May 082012
 

Rick Wartzman

In his latest column for Forbes.com, Drucker Institute Executive Director Rick Wartzman considers last week’s stinging House of Commons report on the News Corp. phone-hacking scandal and, in particular, its condemnation of CEO Rupert Murdoch for having “exhibited willful blindness to what was going on in his companies.”

In turning a blind eye to problems, Wartzman suggests, “there may be a little Rupert Murdoch in all of us.”

Wartzman notes that Peter Drucker “saw this inclination among companies that face a growing public backlash to their behavior, whether they’re being accused of polluting the air or making unsafe automobiles.” The best executives, according to Drucker, “get ahead of things by offering up sensible rules and restrictions for their business,” Wartzman explains.

“What happens in too many cases is that managers feel intense pressure not to ‘rock the boat,’” Wartzman adds. “Inevitably, this only leads to legislation that is far more punitive than anything industry would have come up with on its own. ‘To expect that there will be no regulation” and thus fail to be proactive, Drucker wrote, ‘is willful blindness’—words that echo exactly the House of Commons report.”

Wartzman says that fighting a predisposition to stick one’s head in the sand takes, above all, “conviction and courage.” “To wait until the crisis hits is already abdication,” Wartzman quotes Drucker as saying. “One has to make the organization capable of anticipating the storm, weathering it and in fact, being ahead of it.”

What Peter Drucker Would Be Reading

May 082012
 

Peter Drucker

Recent selections from around the web that, we think, would have caught Peter Drucker’s eye:

1.  The Structural Revolution: Is our current recession a down cycle or a grand reset? David Brooks writes in the New York Times that many people on the left think what we’re going through is a deeper-than-normal cyclical downturn. But Brooks believes that’s missing the truth: “The recession grew out of and exposed long-term flaws in the economy. Fixing these structural problems should be the order of the day, not papering over them with more debt.”

2.  Why a Little Pessimism is a Good Thing: Americans are optimists in general. And if they’re not, they get told they’d better be. But Leslie Brokaw makes a good case on the Improvisations blog at MIT Sloan Management Review that pessimism should get a little more respect as a tool in its own right: “For one thing, it’s a good defensive tactic.”

3.  Why Innovation Dies: If you have a wonderful innovation to suggest and want to make sure it goes nowhere, put it into the hands of a committee. That is what entrepreneur Steve Blank writes on his site. Blank offers many reasons why committees are no good for making innovation happen. One of them: “New market problems call for visionary founders, not consensus committee members.”

4.  The Dx Comment of the Week: In response to our question about what it means that, according to new research, the workplace tends to be dominated by a small band of superstars and a large mass of below-average workers—a Pareto curve rather than a bell curve of talent distribution—Scott Kuethen had this to say:

Maybe the true stars are high-performing individuals who are team players. Fewer of those types than the masses to be sure.

Will My Employees Cut My Pay?

Apr 272012
 

Most employees don’t have a say in how much their bosses get paid. When they’re shareholders, however, the balance of power shifts at least a little.

“Traditionally, employee-shareholders have rarely exercised their voting power,” Gretchen Morgenson wrote in last weekend’s New York Times. “But … stockholders of all stripes may be starting to assert themselves more.”

In particular, they’re starting to organize against huge executive-pay packages at companies such as Wal-Mart, Citigroup and Verizon. For instance, a $15-million paycheck for Vikram Pandit, chief executive of Citigroup, drew a 55% no-vote. And though such votes aren’t binding, they can certainly make a board think twice about whether to go forward with such king-size compensation.

“To the degree that employee-shareholders band together to have their say on the boss’s pay, they can be a formidable force,” Morgenson noted. “After years of acquiescence, it’s good to see shareholders starting to flex their muscles.”

Peter Drucker long saw this day coming. When workers own company stock, he wrote in 1986’s The Frontiers of Management, it can “prevent what employees resent the most: top people getting big increases in the very year in which a company slashes blue-collar and clerical payrolls.”

Illustration credit: Kahlil Bendib

Indeed, if Drucker would have been surprised about anything it’s that employees haven’t thrown their weight around even more. “Worker ownership of the means of production is not only a sound concept, it is also inevitable,” he wrote in a 1991 Harvard Business Review article. “Power follows property, says the old axiom. . . . And since property has shifted to the wage earners in all developed countries, power has to follow.”

In Post-Capitalist Society, Drucker explained that pension funds have effectively made millions of American workers into business owners. “If Socialism is defined, as Marx defined it, as ownership of the means of production by the employees,” he wrote, “then the United States has become the most ‘socialist’ country around.”

What do you think: Can employee owners rein in excessive executive compensation—or do they lack the power to make a real difference?

How to Succeed in Mexico Without Really Bribing?

Apr 232012
 

At what point should a company be required to wear an ankle bracelet?

It seems like Wal-Mart, the bad boy of Bentonville, keeps getting called out for some misdeed or another. This weekend, the New York Times reported that it had “found credible evidence that bribery played a persistent and significant role in Wal-Mart’s rapid growth in Mexico.” Moreover, when this pattern of bribery was uncovered by the company’s internal investigators, “top Wal-Mart executives focused more on damage control than on rooting out wrongdoing.”

Now, Peter Drucker did have some sympathy for companies that must navigate different and unfamiliar ethical terrain when they’re in other countries. For instance, in Japan, companies routinely pay retired government officials who have helped the business, and businesses that fail to do this are considered unethical.  That creates an unfair headache for U.S. firms. “The American company in Japan that abides by a practice the Japanese consider the very essence of social responsibility is pilloried in the present discussion of business ethics as a horrible example of unethical practices,” Drucker observed in The Ecological Vision.

There’s also the question of what’s bribery and what’s extortion.  Defenders of Wal-Mart might argue that the company didn’t create the corruption in Mexico as much as adapt to it—by recognizing that absent bribes nothing would get done, or at least not quickly. “No one ever has had a good word to say for extortion, or has advocated paying it,” Drucker pointed out. “But if you and I are found to have paid extortion money under threat of physical or material harm, we are not considered to have behaved immorally or illegally. The extortioner is both immoral and a criminal. If a business submits to extortion, however, current business ethics considers it to have acted unethically.”

Illustration credit: David Simonds

In the end, however, there’s little doubt that Drucker would have disapproved of Wal-Mart’s alleged behavior—above all because of the disconnect between stated principles and actual conduct. “The final proof of the sincerity and seriousness of a management is uncompromising emphasis on integrity of character,” Drucker asserted. “This, above all, has to be symbolized in management’s people decisions.” And what of Wal-Mart’s people decisions? The Times reports that H. Lee Scott Jr., Wal-Mart’s former chief executive, “rebuked internal investigators for being overly aggressive,” and the supposed chief briber got a promotion.

What do you think: How much criticism does Wal-Mart deserve for its alleged behavior in Mexico?

Mastering Motivation

Apr 162012
 

When it’s time to recycle, that regular old garbage pail can look mighty appealing: no rinsing, no sorting, no hassle.

This upsets Canadians, however. So, in a worthwhile Canadian initiative, researchers led by Katherine White of the University of British Columbia have looked at what it takes to persuade people to put things into the right bins.

A report from the Stanford Graduate School of Business summarizes some of the findings. For instance, “if you’re going to keep giving people bad news in order to motivate them, it’s best to offer them concrete steps” about what to do. Otherwise, “focus on good news and pair it with the broader philosophy of why the action is important.”

That last notion certainly would have resonated with Peter Drucker, who felt that employees need to understand why they are doing something and how it relates, in a concrete way, to the organization’s greater purpose.

Illustration credit: Gary Neill

As we’ve noted briefly before, Drucker in his book Concept of the Corporation pointed to the example of a World War II aircraft plant whose employees were displaying “bad morale” and doing “slipshod work.” The problem turned out to be, according to Drucker, that the “workers had never seen any of the planes they were producing, had never found out where the part they worked on fitted, and had never been told how important this part was to the total functioning of the place.”

So a big bomber got brought in for employees to see. “The workers were invited to inspect it, to sit in it and to bring their wives and children along,” Drucker recounted. “When finally they were shown the part they were making in the bomber, and its importance was explained to them by a crew member, the bad morale and unrest disappeared at once.”

In other words, these workers suddenly got the benefits of clarity, concreteness and purpose—all of which are essential to provide if you want something from someone. “Communication . . . always makes demands,” Drucker wrote in Technology, Management, and Society. “It always demands that the recipient become somebody, do something, believe something. It always appeals to motivation.”

What do you find helpful when it comes to persuading people to behave a certain way?

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