Organizational Behavior – Page 2

Warren Buffett’s Opening Statement at Salomon Brothers Testimony

In 1991, Wall Street investment bank Salomon Brothers was embroiled in a bond-rigging scandal. U.S. Treasury Deputy Assistant Secretary Mike Basham ascertained that, between December 1990 and May 1991, Salomon Brothers’ trader Paul Mozer had dishonestly been submitting false bids to purchase more Treasury bonds than a limit imposed per buyer. Salomon was fined $290 million for this breach of rules.

Warren Buffett was the largest investor in Salomon Brothers during the days of this Salomon scandal. Warren Buffett took the helm as chairman and chief executive of the embattled company for an annual salary of $1.

Here is Warren Buffett’s opening statement before the Subcommittee on Telecommunications and Finance of the Energy and Commerce Committee of the U.S. House of Representatives:

Mr. Chairman, I thank you for the opportunity to appear before this subcommittee. I would like to start by apologizing for the acts that have brought us here. The nation has a right to expect its rules and laws to be obeyed. And at Salomon, certain of these were broken. Almost all of Salomon’s 8,000 employees regret this as deeply as I do. And I apologize on their behalf as well as mine.

My job is to deal with both the past and the future. The past actions of Salomon are presently causing our 8,000 employees and their families to bear a stain. Virtually all of these employees are hardworking, able and honest. I want to find out exactly what happened in the past so that this stain is borne by the guilty few and removed from the innocent. To help do this, I promise to you, Mr. Chairman, and to the American people, Salomon’s wholehearted cooperation with all authorities. These authorities have the power of subpoena, the ability to immunize witnesses, and the power to prosecute for perjury. Our internal investigation has not had these tools. We welcome their use.

As to the future, the submission to this subcommittee details actions that I believe will make Salomon the leader within the financial services industry in controls and compliance procedures. But in the end, the spirit about compliance is as important or more so than words about compliance. I want the right words and I want the full range of internal controls. But I also have asked every Salomon employee to be his or her own compliance officer. After they first obey all rules, I then want employees to ask themselves whether they are willing to have any contemplated act appear the next day on the front page of their local paper, to be read by their spouses, children, and friends, with the reporting done by an informed and critical reporter. If they follow this test, they need not fear my other message to them: Lose money for the firm, and I will be understanding; lose a shred of reputation for the firm, and I will be ruthless.

Recommended Reading: Liar’s Poker by Michael Lewis, an autobiographical account of Michael Lewis’s own experience as a bond salesman at Salomon Brothers where the Liar’s Poker is a figure of speech for the Salomon culture of intense risk-taking with immediate payoffs.

Dave Packard’s 11 Simple Rules

Hewlett Packard: David Packard and William Hewlett

Dave Packard, along with Bill Hewlett, friend and fellow graduate of electrical engineering from Stanford University, started Hewlett-Packard (HP) in Packard’s Palo Alto garage with an initial capital investment of US$538. Bill Hewlett and Dave Packard are known for their legendary people-oriented management style and community consciousness.

Below are eleven simple rules that reflected Dave Packard’s philosophy of work and life. These rules were first presented by Dave Packard at HP’s second annual management conference in 1958 in Sonoma, California. A memo containing these seven simple rules was discovered in Dave’s correspondence file.

Think first of the other fellow. This is THE foundation—the first requisite—for getting along with others. And it is the one truly difficult accomplishment you must make. Gaining this, the rest will be “a breeze.”
Build up the other person’s sense of importance. When we make the other person seem less important, we frustrate one of his deepest urges. Allow him to feel equality or superiority, and we can easily get along with him.
Respect the other man’s personality rights. Respect as something sacred the other fellow’s right to be different from you. No two personalities are ever molded by precisely the same forces.
Give sincere appreciation. If we think someone has done a thing well, we should never hesitate to let him know it. WARNING: This does not mean promiscuous use of obvious flattery. Flattery with most intelligent people gets exactly the reaction it deserves—contempt for the egotistical “phony” who stoops to it.
Eliminate the negative. Criticism seldom does what its user intends, for it invariably causes resentment. The tiniest bit of disapproval can sometimes cause a resentment which will rankle—to your disadvantage—for years.
Avoid openly trying to reform people. Every man knows he is imperfect, but he doesn’t want someone else trying to correct his faults. If you want to improve a person, help him to embrace a higher working goal—a standard, an ideal—and he will do his own “making over” far more effectively than you can do it for him.
Try to understand the other person. How would you react to similar circumstances? When you begin to see the “whys” of him you can’t help but get along better with him.
Check first impressions. We are especially prone to dislike some people on first sight because of some vague resemblance (of which we are usually unaware) to someone else whom we have had reason to dislike. Follow Abraham Lincoln’s famous self-instruction: “I do not like that man; therefore I shall get to know him better.”
Take care with the little details. Watch your smile, your tone of voice, how you use your eyes, the way you greet people, the use of nicknames and remembering faces, names and dates. Little things add polish to your skill in dealing with people. Constantly, deliberately think of them until they become a natural part of your personality.
Develop genuine interest in people. You cannot successfully apply the foregoing suggestions unless you have a sincere desire to like, respect and be helpful to others. Conversely, you cannot build genuine interest in people until you have experienced the pleasure of working with them in an atmosphere characterized by mutual liking and respect.
Keep it up. That’s all—just keep it up!

For Bill Hewlett and Dave Packard’s legendary management style and the history of Hewlett Packard, read ‘Bill & Dave: How Hewlett and Packard Built the World’s Greatest Company’ by Michael S. Malone and ‘The HP Way: How Bill Hewlett and I Built Our Company’ by David Packard.

Source: HP Retiree Website

What Makes Good People Do Bad Things? The Roots of Unethical Behaviour in Life and Work

The Root Cause of Unethical Behavior

The memory of ethics catastrophes at firms large and small like Enron, WorldCom, Tyco, and Hewlett-Packard elevated public bitterness toward corporate executives as never before. Unethical behavior has spoiled the public’s conviction about the inherent goodness in people and spawned charges for more government oversight of private industry.

In free societies, many people identify with Milton Friedman’s laissez faire principle that if society lets its people pursue their personal and professional interests in the context of a capitalistic framework to operate without restraint, positive principled intentions and ethical consequences will naturally ensue. On the contrary, it turns out that most people unaware of the divergence between how ethical people think they are and how ethical they actually are.

Why do people behave unethically? Why do some employees engage in unethical acts such as lying on an expense account, accepting kickbacks, falsifying reports, and forging signatures? One or more of these root cause factors might be at play in unethical behavior:

Poor ethical leadership
Poor communications
Pressure to balance work and family
Pressure to meet sales or profit goals
Lack of management support
Resentment to the workplace and retaliation
Company policies
Little or no recognition of achievements
Long work hours, heavy workload
Personal financial worries
Insufficient resources

In the modern societies, with eroding adherence to personal and societal values, the temptation to behave in unethical ways is not going to go away. As young professionals go into business today, the enticement to evade ethics is mounting. We live in a time of deep obligation on individuals and organizations to cut corners, pursue their own personal and professional interests, and forget about the consequences of their behavior on others.

Top Performers Make Corporate Values Visible and Champion Them

Most companies have precise corporate values, usually containing strong positive cultures and corporate philosophies. Corporate values can help companies engage consumers and employees. It is a company’s values that help bring about the kind of business behavior that the company needs to achieve it’s strategic and operative objectives.

Organizational changes—especially those are strategic—require a completely new array of attitudes, behaviors, and mindsets. The attitude of compliance—doing what’s been told—cannot bring about widespread organizational progress. To enable employees to assume responsibility, implement initiative and be directly accountable for the organization’s success, they need to be continuously reminded of corporate values. Far from mere words on a piece of paper, companies expect employees understand that “living our values” as part of the fundamental performance objectives for employees. Top performers intentionally connect values and operations and their management practices are effective in fostering values that bear influence on their performance assessment.

GE Corporate Values

General Electric Logo During the Jack Welch era, when General Electric (GE) first started considering assembling a list of core values that would set GE apart from the completion, over 5,000 employees who took training at GE’s famed Crotonville training center hammered out a values statement over a three-year period as part of their training classes. These values were so important to the company that General Electric put them on laminated cards that employees were required to carry with their identification badges.

All of us … always with unyielding integrity …

Are passionately focused on driving customer success

Live Six Sigma Quality … ensure that the customer is always its first beneficiary … and use it to accelerate growth

Insist on excellence and are intolerant of bureaucracy

Act in a boundaryless fashion … always search for and apply the best ideas regardless of their source

Prize global intellectual capital and the people that provide it … build diverse teams to maximize it

See change for the growth opportunities it brings … e.g., digitization

Create a clear, simple, customer-centered vision … and continually renew and refresh its execution

Create an environment of “stretch,” excitement, informality and trust … reward improvements … and celebrate results

Demonstrate … always with infectious enthusiasm for the customer … the “4-Es” of GE leadership: the personal Energy to welcome and deal with the speed of change … the ability to create an atmosphere that Energizes others … the Edge to make difficult decisions … and the ability to consistently Execute

GE Corporate Values, Version 2007

GE Corporate Values, 2007 Version

Management Guru Tom Peters on Benchmarking

Management Guru Tom Peters

To grow, companies need to escape of the vicious cycle of competitive benchmarking, replication, imitation that’s so much in vogue today. A company cannot simply be remarkable by following some other remarkable business.

Here is a classic video of Management Guru Tom Peters discussing the pointless exercise of benchmarking:

I hate Benchmarking! Benchmarking is Stupid! Why is it stupid? Because we pick the current industry leader and then we launch a five year program, the goal of which is to be as good as whoever was best five years ago, five years from now. Which to me is not an Olympian aspiration.

Clearly, there is no tangible benefit from attempting to imitate another business that has excelled at something. If a business pursues the leading benchmark, the company will forever be a follower. In addition, the uniqueness of the product or service or process will no longer be as unique once many achieve it.

Successful leaders don’t seek to learn from the “best in class” in their field. They seek to learn from companies outside their field as a way to innovate.

Microsoft Ends its “Stack Ranking” Forced Ranking System

Microsoft

Per the following memo from Lisa Brummel, the head of human resources, Microsoft is ending the “stack rank system,” Microsoft’s adaptation of the forced ranking performance management system.

To Global Employees,

I am pleased to announce that we are changing our performance review program to better align with the goals of our One Microsoft strategy. The changes we are making are important and necessary as we work to deliver innovation and value to customers through more connected engagement across the company.

This is a fundamentally new approach to performance and development designed to promote new levels of teamwork and agility for breakthrough business impact. We have taken feedback from thousands of employees over the past few years, we have reviewed numerous external programs and practices, and have sought to determine the best way to make sure our feedback mechanisms support our company goals and objectives. This change is an important step in continuing to create the best possible environment for our world-class talent to take on the toughest challenges and do world-changing work.

To learn more about the new approach to performance and development, please join me for a Town Hall today at 2:00pm PT, either in person in building 92 or via webcast (see details below).

Here are the key elements:

More emphasis on teamwork and collaboration. We’re getting more specific about how we think about successful performance and are focusing on three elements — not just the work you do on your own, but also how you leverage input and ideas from others, and what you contribute to others’ success — and how they add up to greater business impact.

More emphasis on employee growth and development. Through a process called “Connects” we are optimizing for more timely feedback and meaningful discussions to help employees learn in the moment, grow and drive great results. These will be timed based on the rhythm of each part of our business, introducing more flexibility in how and when we discuss performance and development rather than following one timeline for the whole company. Our business cycles have accelerated and our teams operate on different schedules, and the new approach will accommodate that.

No more curve. We will continue to invest in a generous rewards budget, but there will no longer be a pre-determined targeted distribution. Managers and leaders will have flexibility to allocate rewards in the manner that best reflects the performance of their teams and individuals, as long as they stay within their compensation budget.

No more ratings. This will let us focus on what matters — having a deeper understanding of the impact we’ve made and our opportunities to grow and improve.

We will continue to align our rewards to the fiscal year, so there will be no change in timing for your rewards conversation with your manager, or when rewards are paid. And we will continue to ensure that our employees who make the most impact to the business will receive truly great compensation.

Just like any other company with a defined budget for compensation, we will continue to need to make decisions about how to allocate annual rewards. Our new approach will make it easier for managers and leaders to allocate rewards in a manner that reflects the unique contributions of their employees and teams.

I look forward to sharing more detail with you at the Town Hall, and to bringing the new approach to life with leaders across the company. We will transition starting today, and you will hear from your leadership in the coming days about next steps for how the transition will look in your business. We are also briefing managers and will continue to provide them with resources to answer questions and support you as we transition to this approach.

I’m excited about this new approach that’s supported by the Senior Leadership Team and my HR Leadership Team, and I hope you are too. Coming together in this way will reaffirm Microsoft as one of the greatest places to work in the world.

There is nothing we cannot accomplish when we work together as One Microsoft.

Lisa

The forced ranking system has always been controversial. In theory, there isn’t anything wrong with concept of ranking the performance of people along a bell-curve and using this distribution to decide merit awards and promotions. What’s wrong is that employees learn to game the system and turn it into a political exercise. Brownnosing, politicking, favoritism, bias, and discrimination trump authentic performance and consistent teamwork. The system fosters a competitive environment in a way that counters to team work and business goals.

Yet another upshot of the forced ranking system is that the system acts as deterrence to making drastic career moves and risk-taking on their job by incentivizing employees to settle into their current functions in their current group and take no significant risks in how they go about their work. The forced ranking system informally guarantees that the longer an employee’s tenure in a particular group, the higher the employee shall be ranked because the incoming employee knows the ropes. Employees moving into a group or function are often ranked lower until they warm up.

The HP Way: Bill Hewlett and Dave Packard’s legendary management style

Bill Hewlett and Dave Packard

Bill Hewlett and Dave Packard, two graduates of electrical engineering from Stanford University, started Hewlett-Packard (HP) in Packard’s Palo Alto garage with an initial capital investment of US$538. Initially, the company was unfocused and worked on a wide range of electronic products for industry and agriculture. HP incorporated on August 18, 1947, and went public on November 6, 1957.

Bill Hewlett and Dave Packard made the HP Way official in the year 1957 when the company went public. With the company expanding in leaps and bounds, the founders recognized the need to enlist a set of company objectives to channel the efforts of divisional managers. In forming the HP Way, Hewlett and Packard had a broader foresight of bearing in mind that profit is an enabler of various other valuable objectives, including employees and corporate citizenship.

In the words of Bill Hewlett, the HP Way is “a core ideology … which includes a deep respect for the individual, a dedication to affordable quality and reliability, a commitment to community responsibility, and a view that the company exists to make technical contributions for the advancement and welfare of humanity.”

Bill Hewlett and Dave Packard’s legendary management style, which came to be known as the HP Way, has been the topic of many case studies by ivory-tower professionals, management theorists, academics, and Wall Street professionals. The tenets are as relevant today as they ever were.

We have trust and respect for individuals. We approach each situation with the belief that people want to do a good job and will do so, given the proper tools and support. We attract highly capable, diverse, innovative people and recognize their efforts and contributions to the company. HP people contribute enthusiastically and share in the success that they make possible.
We focus on a high level of achievement and contribution. Our customers expect HP products and services to be of the highest quality and to provide lasting value. To achieve this, all HP people, especially managers, must be leaders who generate enthusiasm and respond with extra effort to meet customer needs. Techniques and management practices which are effective today may be outdated in the future. For us to remain at the forefront in all our activities, people should always be looking for new and better ways to do their work.
We conduct our business with uncompromising integrity. We expect HP people to be open and honest in their dealings to earn the trust and loyalty of others. People at every level are expected to adhere to the highest standards of business ethics and must understand that anything less is unacceptable. As a practical matter, ethical conduct cannot be assured by written HP policies and codes; it must be an integral part of the organization, a deeply ingrained tradition that is passed from one generation of employees to another.
We achieve our common objectives through teamwork. We recognize that it is only through effective cooperation within and among organisations that we can achieve our goals. Our commitment is to work as a worldwide team to fulfill the expectations of our customers, shareholders and others who depend upon us. The benefits and obligations of doing business are shared among all HP people.
We encourage flexibility and innovation. We create an inclusive work environment which supports the diversity of our people and stimulates innovation. We strive for overall objectives which are clearly stated and agreed upon, and allow people flexibility in working toward goals in ways that they help determine are best for the organization. HP people should personally accept responsibility and be encouraged to upgrade their skills and capabilities through ongoing training and development. This is especially important in a technical business where the rate of progress is rapid and where people are expected to adapt to change.

Motivation: Praise is better than Criticism

Criticism In the day-to-day rush to get things done, recognizing employees takes a backseat to everything else managers have on their plates. However, praise is important.

A study by Wichita State University found that praise and commendation by a boss is a very strong motivator. The survey also found that nearly three fifths of employees do not receive any form of recognition or appreciation on a regular basis from their supervisors.

Some managers are quick to criticize employees for their mistakes. That employees will be motivated because of the repulsiveness of the criticism and change their behaviors is an absurd notion. For this reason, criticism is very counterproductive. Managers unfortunately do not realize that criticism only motivates employees to do anything to avoid criticism and not focus on doing a better job.

The best managers hit upon creative ways to delivering well-timed, sincere praise to employees who do well. Here is what you can learn from them:

The most effective praise is well timed. Good managers praise their employees as soon as the employee displays the desired behavior.
Praise is effective only when it is genuine and heartfelt.
Managers that excel at recognizing their employees are very specific in their praise. They avoid generalities and discuss identifiable achievements of their employees in such a way that the desired behaviors are reiterated.

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GE Corporate Values

GE Corporate Values, Version 2007

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