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 / Summer 2012 / Issue 67(originally published by Booz & Company)


The Thought Leader Interview: Dov Seidman

When I interviewed him, I asked why he disqualified himself, even though he still wasn’t sure whether his putt was illegitimate. “I felt like I’d be getting away with something [if I stayed],” he said, “and I would feel like that regardless of how I did in the future.” He added, “I plan on playing golf for a long time.” He feared that if he let himself slip this way, he would never be able to perform as well again.

Just as David Toms has character, every company has a character, which is the aggregation of how all its people behave. I saw this firsthand through LRN’s ethics and compliance business, which was once our bread and butter. Compliance practices are designed to set up rules about what people can and can’t do. That can lead to unintentionally perverse incentives, unintended consequences, and the wrong behavior. For instance, a training program might explain the risks of laundering money in your home country. After hearing that warning, a chronic money launderer probably won’t stop; instead, he’ll move operations offshore.

But if you create a culture where people think like David Toms, your people won’t launder money anywhere, because they’ll recognize how that erodes performance over time. Instead of just setting rules, a values-based culture inspires people to do what they should do.

If a middle manager acted like David Toms, other people in the company would know, from every interaction, the level of his or her moral authority, and that would change the way they thought and behaved. For instance, a customer might say, “I’ll sign the contract only if you give me two Super Bowl tickets.” How does the manager counsel his people to respond?

In Search of Principle

S+B: Suppose, then, a company wants to become the kind of place where people think like David Toms, or even the kind of place where they recommend really sharp friends instead of their slacker cousins for jobs. What should it do differently?
If you want to move from a blind obedience or informed acquiescence to a self-governance company, you’re signing up for a long journey, not a six-month program. Businesspeople have systematized many things: HRIS, TQM, CRM, safety, Six Sigma, ERP. But we haven’t yet systematized our “hows”: We haven’t created the kind of human operating system that maps to 21st-century realities.

The human operating system comprises all the behaviors of an organization. It has three basic elements, all of which need to change in most companies. The first is governance: the policies, controls, rules, org charts, goals, and objectives that represent the formal structures of the organization. The second is culture: the values, principles, habits, mind-sets, history, lore, and legends that influence how people behave. And third is the leadership model. How do you lead? Is it through command and control, or connect and collaborate? Are you transparent, or do you share information only on a “need to know” basis?

Once you have focused on these areas individually, you have to fit them together into a single system. Are your governance, culture, and leadership models fighting or reinforcing one other?

S+B: A lot of leaders have tried to change these three elements, usually without success. Some would say it isn’t possible.
It’s hard, and it doesn’t happen overnight. But there are precedents in business. In the 1920s, hazardous working conditions were considered normal; for every floor of a skyscraper, a number of deaths and injuries were accepted as an unavoidable cost of construction. Only the foreman was expected to pay attention to hazardous conditions. Today, when there’s a frayed wire or an exposed pipe on a worksite, employees consistently report it. Safety is in everybody’s consciousness. Companies compete on it: “Come work here; you’ll be safer than you’d be with our competitors.”

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