70 NACD Directorship May/June 2013
The Power of Culture
By Jeffrey M. Cunningham
Charles D. Ellis’s insightful ne...
May/June 2013 www.directorship.com 71
books, and the founder of one
of the most successful financial
services businesses in...
72 NACD Directorship May/June 2013
By Judy Warner
The hype around Facebook as it grew ex-
ponentially along the t...
Digiphrenia. Technology allows—
and encourages—people to be constantly
connected to events happening all over the
globe si...
of 4

NACD Social Inc Abstract

Published on: Mar 3, 2016
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Transcripts - NACD Social Inc Abstract

  • 1. 70 NACD Directorship May/June 2013 Readings The Power of Culture By Jeffrey M. Cunningham Charles D. Ellis’s insightful new book, What It Takes, brings the reader into the inner sanctum of five of the world’s leading profes- sional service firms to learn what’s in their DNA. An alternate, if somewhat cumbersome, title might be In Search of Excellence While Overcoming Market Up- heavals, Management Turnover, Scandal, and Societal Change. Because board directors rely so heavily on professional service firms in the fields of law, account- ing, and compensation consult- ing, Ellis’s cogent book will be sure to drive some very useful boardroom debate. Ellis begins with the argu- ment that great businesses are driven by the need to satisfy cus- tomers more so than the not so great. The firms that rank high- est in this distinction, according to Ellis, are McKinsey & Co., the law firm Cravath Swaine and Moore, Goldman Sachs, Capital Group (in investment manage- ment), and the Mayo Clinic. What sets these firms apart is not pay scale or mere perfor- mance, but how they embed seven very different and difficult business disciplines into their corporate culture: mission, cul- ture, recruiting, people develop- ment, client focus, innovation, and leadership. Heard this mantra before, right? But Ellis goes one step further. First, he offers that the key to success is making sure the priority is in the order list- ed. Second, it’s not simply con- templating the issues, but the way in which these five firms have managed their brilliant execution. For instance, Mayo Clinic is world-renowned for its medical research as well as patient care. Why? Because, as Ellis points out, its mission is “the needs of the patient come first,” and that mission is reinforced in every aspect of its culture. Mayo’s vaunted “salary” sys- tem for the doctors on staff (rather than circulating as many patients as possible like the turn- stile that is known as a waiting room in the typical hospital) is the secret cure for health-care business morbidity. Recruit- ment also is done with the Mayo touch. Each doctor spends years being groomed in the Mayo sys- tem, allowing a careful screen- ing for those who, although qual- ified, may not be suited to the culture. What remains after this lengthy medical boot camp is not only the best and brightest but the most appropriate. AnotherexampleEllissharesis the way Cravath trains its associ- ates: in small groups, for months at a time, with only a few senior partners who stay alongside the trainees the entire time—not the “usual pools,” where associates are rotated through their paces. Similarly, at Goldman Sachs, the firm has an impressive re- cord of partner deliberation on all strategic decisions, especial- ly leadership decisions. While outsiders can be critical of the firm from time to time, that criticism is largely based on the firm’s unique suc- cess and penchant for secrecy, which might lead to some being misinformed about what is real- ly happening. Yet even here, its worst detractors aren’t a match for Goldman Sachs’ own introspective abil- ities, which always allows the firm to adjust behavior—useful as a market maker and as a lead- ing global financial services firm. Ellis also examines fail- ures—from Arthur Andersen to McKinsey’s turn in the tub with Rajat Gupta. In these cases, the individuals made the fatal mis- take of ignoring the legacy cul- ture in the name of greater prof- itability. Once they shifted their internal compass, they became woefully misdirected and lost their way. Ellis himself is a much vaunt- ed and quoted investment man- ager, the author of more than 12 Wiley, 2013 American DNA A slew of new books offer valuable looks at issues as diverse as what makes Mayo Clinic great to how the social technology revolution should be embraced.
  • 2. May/June 2013 www.directorship.com 71 books, and the founder of one of the most successful financial services businesses in America, Greenwich Associates. No arm- chair business pundit, his dis- tilled wisdom about running and building great businesses is de- rived from personal experience in the trenches. Manifest Destiny Steve Forbes, chair and editor- in-chief of Forbes Media, is a “moral philosopher” with a common touch, an appropriate sobri- quet for a guy who can recite the re- cent Federal Open Meeting Commit- tee minutes as well as the New York Yankees’ batting av- erages. Directors will find Freedom Man- ifesto, which Forbes co-wrote with Elizabeth Ames, a wise and eminently readable economic history that gets at the heart of how American culture promotes and at the same time discourages innovation and pro- ductivity in business. Forbes be- lieves that free markets work and are not inherently unstable; it is the perverse if “well-intended” government interventions, as Forbes refers to them, such as the Depression-causing Smoot-Haw- ley Tariff Act or the Fed’s debt crisis money supply remedy, that gums them up. With, of course, business taking the fall. Forbes—like his forebears in the moral-philosophy business, John Stuart Mill and Jeremy Ben- tham—is a true believer in the gospel of capitalism when prac- ticed with a moral imperative. He believes ingenuity, especially in the marketplace, is the product of well-placed incentives, a high moral standard, and an absolute- ly stark analysis of outcomes. The right to fail, according to Forbes, is the shadow of business success. Forbes tells the story of Lewis Water- man, an insurance broker in 1883 who, after his “old-fash- ioned pen leaked during the signing of a major contract,” ran back to his office to find a fresh con- tract, but while he was gone a compet- ing broker at the ex- change moved into his seat and closed the deal. He was so determined not to have this hap- pen again that he tinkered in his brother’s workshop and invented a new fountain pen, one that had a steady flow of ink. Thus the Waterman Pen was born. Free markets work when the incen- tives are clear. What gets Forbes’ ire is the re- ceived wisdom that passes for eco- nomics in the political and media establishment. He asks somewhat rhetorically: “Would you rather have FedEx or the U.S. Post Of- fice delivering your mail?” A sim- ple fact suggests the answer: Why do we always think of the postal service in terms of how many em- ployees are considered “excess” but very little about its profitabili- ty? Whereas we don’t we have any idea how many people FedEx em- ploys but know a great deal about its profitability? Why are the in- ternal issues of one organization a political affair whereas the oth- er is not on the policymaker’s ra- dar? Because, Forbes would say, one is driven by government sub- sidies and, having lost its purpose in the free market, now exists only to maintain employment. The other is focused on customers and profitability. Which is better for business? Which is better for America? Forbes believes in tough eco- nomic love, and cites the tech- nology business as the “most successful industry of the last forty years…built on failure after failure.” Failure in busi- ness is more a track meet than a death sentence, at least from the larger point of view of soci- ety. You try one race and, if it’s not right for you, move to anoth- er heat, until you match your strength with the demands of the market. For those who believe the phrase “government ingenuity” is an oxymoron, Freedom Mani- festo will both restore your faith in human potential and your skepticism in human nature. —Jeffrey M. Cunningham (Disclosure: The author worked at Forbes for 18 years and was publisher of Forbes magazine from 1992 to 1998.) Crown Business, 2012 Current/Penguin, 2013
  • 3. 72 NACD Directorship May/June 2013 Readings By Judy Warner The hype around Facebook as it grew ex- ponentially along the technology adoption curve has fallen into what first-time author Bob Zukis describes as “the trough of disil- lusionment.” In his new book, the 30-year PwC partner—who retired from the firm last June, having lived and worked as an IT and management consul- tant in 20 countries on four continents—develops a com- pelling case for why and how social technology is changing business as we know it. In the introduction to Social Inc.: Why Business Is the Next Social Opportu- nity Worth Trillions, Marc Benioff, CEO of SalesForce. com, sets the stage. Be- nioff, who saw the potential for cloud computing years ahead of competitors and helped transform the culture of Toyota with cars capable of tweeting their owners, writes that companies need to embrace and be empowered by social technology: “Much as the Internet has given a voice to people around the world who once went unheard, the cloud and social technology have leveled the busi- ness playing field, giving all companies the same access to tools that can increase their capabilities, competitive advantag- es, and power to unleash innovation.” What makes Zukis an authority on so- cial technology-enabled business is his exposure to its transformative power and his clear understanding of its potential for all companies. His book is a treasure trove of sources, illustrations, and inci- sive, instructive business pro- cesses. How the board factors into the social media discus- sion receives ample coverage in a chapter titled “CEOs, Boards, and Some Social So- briety.” (An excerpt from this chapter is featured on Direc- torship.com.) Zukis, long active in the NACD Southern California Chapter, where he is a board member, writes with clarity, authority, and humor. With four to five billion smart de- vices now in the hands of peo- ple worldwide, Zukis says we are at an in- flection point where Internet technology has become so invasive it has the pow- er to change the course of history, and the next social media wave—what will trump Facebook and Twitter—is well underway. Even so, boards are woeful- ly ill-prepared. Making smart use of so- cial networks requires IT and IT requires governance. As Zukis ruefully writes, “…boards weren’t exactly winning the old game of IT governance.” Zukis turns to his friend and NACD board colleague, Ed Merino, CEO of the Office of the Chairman, which coaches C-suite executives and directors. From his vantage point, Merino expresses wor- ry that “we are one social or cyber se- curity crisis away from a mandated IT expert in the boardroom,” much like Sar- banes-Oxley ushered in a requirement for board-level financial expertise. Boards need to enhance their knowl- edge and command of social media by ac- tively recruiting directors with these skill sets. And because these skills are still rela- tively new (relative to the average age of in- dependent directors, which is 62.4), Zukis recommends searching three groups not usually plumbed for directorships: former or current CIOs, management/IT consul- tants, and social or information technolo- gy professionals. His book will no doubt serve as an in- valuable calling card for his independent consulting business, Saaskwatch Systems. And there is this upshot: he and his wife and muse, Kimberly, to whom the book is dedicated, will donate a portion of each book sale to support another passion, no- kill animal shelters. The End of Future By Cheryl Soltis Martel Whether developing business plans or scheduling weekend activities, 21st -century living demands constant preparation for fu- ture events. But the future is already here, contends media theorist Douglas Rush- koff in his latest book, Present Shock: When Everything Happens Now. Rushkoff ex- plains that because people are immersed in a world where everything is happening im- mediately, they have lost the sense of future. “If the end of the twentieth century can be characterized by futurism, the twenty-first can be defined by presentism,” he writes. The book’s title is a play on Alvin Toffler’s 1970s best-seller Future Shock, which de- scribed the phenomenon of having “too much change in too short a time.” How are people adapting to this new relationship with time? Not so well, according to Rusk- koff, who identifies five main ways in which people are struggling with this new reality: Narrative collapse. Failing to set future goals leads to actions with no anticipated results. Rushkoff points to the Tea Party and the Occupy movement as examples. Kauffman Fellows Press, 2013 Harnessing New Social Skills
  • 4. Digiphrenia. Technology allows— and encourages—people to be constantly connected to events happening all over the globe simultaneously. Overwinding. Packing time into al- ready-full lives to achieve goals. Rush- koff highlights Black Friday, where a year’s worth of retail sales expectations is squeezed into one day. Fractalnoia. The need to connect un- related ideas for the sole purpose of gaining a better understanding. Think conspiracy theories, writes Rushkoff. Apocalypto. Coming to grips with be- ing obsolete. Humans can never hope to keep pace with their electronic devices. Must people admit defeat at living in the present? Rushkoff claims the battle is not yet lost, but there are obstacles. “We’ve spent the past thousand years functioning on a very specific economic operating system—one in which money is quite literally embed- ded with time,” he explained in an inter- view with NACD Directorship. “This was great for a society that was expanding into new colonies, but it doesn’t tend to work as well for a society without room to ex- pand much less the ability to accelerate its rates of expansion.” Rushkoff notes that the determina- tion to continue Industrial Age priori- ties in a digital environment is holding people back. Operating in the digital age offers opportunities to disconnect time from money; however, people have used digital technology as a way of generat- ing yet another cycle of growth, turning consumers and producers into always-on people who learn to consume and pro- duce more constantly, he says. The author suggests living more in “real time,” setting a schedule for being available online, and continuing to embrace emerg- ing technologies while also knowing when to pump the brakes on the tech train. “The object of the game is to develop a more steady-state, peer-to-peer, and transaction- al economy that is more biased toward the velocity of money than the accumulation of capital,” Rushkoff says. “I think directors are ready to hear this, though, because it’s not only possible but it’s happening, and most organizations and companies really can make the transition.” Worried about thriving in this new era? Rushkoff says we have about 500 years be- fore presentism becomes something else. D The Conference for Governance Professionals Registration and information: governanceprofessionals.org

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