Slippery when oily

More than two years ago, BP lost control of a well it was drilling using the Deepwater Horizon oil rig in the Gulf of Mexico. 700 million liters of oil poured into the ocean and the consequences for business, society and environment have since been widely discussed. The oil spill in the Gulf of Mexico is still a rich case study for various subjects related to stakeholder management and I have been following the issue of high-tech oil extraction more or less closely during the past years.

However, I am still surprised and somewhat indignant about the behavior of some of the affected stakeholders, based on their assertions that they have learned their lessons. This is because a few days ago a report showed that the United States government and the oil and gas industry have both failed to effectively improve the regulation and safety of offshore oil drilling. The report issued by Oceana, the largest international organization for protecting the oceans, further states that during the past ten months, at least three more leaking oil wells have been detected.

We know from many other case studies that changes in regulation and the implementation of successful business models take time, in spite of initial wake-up calls or public outrage. We have also heard of time-taking learning processes, slow processes of institutionalization and the tedious development of organizational cultures. It is clear that strategic, organizational and technological change processes cannot be implemented overnight. Yet, I am asking myself, why I still get upset reading reports like the one from Oceana? Some self-reflection led me to three possible causes for my astonishment.

First, as I am not a part of the oil business itself, I do not know what kind of systemic pressures oil companies are exposed to. As most of the oil companies are listed on stock exchanges, financial results have to be provided on a quarterly basis. This clearly supports short-term thinking, which is at odds with long term oriented fundamental change processes. Moreover, my personal concept of value creation is broader than the focus on maximizing financial profits.

Second, I think that my perception of issues like the oil spill in the Gulf of Mexico is framed by the coverage in the media. Spectacular and more recent events have a bigger impact on the readership than long-lasting change processes in the business models of organizations. The same is true regarding the media coverage of negative news compared to positive news. It is in this context that I think there exists a huge potential with new social media to accompany such organizational change processes in a timely manner and thus make them more visible.

Last but not least, there is the matter of dealing with causes and effects. The debates in the aftermath of the oil spill mainly covered the issue of improved regulations regarding deepwater drilling. However, this focus on symptoms of deepwater drilling does not take a sustainable perspective. As deepwater drilling is the cause of oil spills, we have to question if we are really capable to perform it in a safe way. Otherwise, it remains slippery on the oily ground.

Tom Schneider

Lasting change

In 2008 Obama campaigned with the slogan "Change We Can Believe In!" Four years later this slogan evokes the question what kind of change has actually taken place in the US since 2008. President Obama’s opponents claim in the current campaign that they are going to bring about “real change,” since Obama has failed to make the "hope for” change happen. Clearly perceptions differ regarding kinds of change, and especially the expectations about how quickly and fundamentally such change should take place.

In an evolutionary perspective, continuous gradual change is often compared to discontinuous and fundamental change. One can assume that those who voted for Obama expected quick and fundamental change during his first term of office, especially in the economy, which was extremely weak at the time of his election because of the financial crisis. In the present campaign job creation is the dominant issue. But precisely in this area it hasn’t been possible for Obama to achieve fundamental change, at the most some gradual changes.

Observation of strategic changes in firms provide findings that explain why fundamental change is often impeded: One important explanation is that over time successful firms tend to reinforce their values and norms with strong myths and legends so that adapting to changing conditions becomes difficult. Sometimes organizational routines are created; management resorts to this especially in uncertain situations. Thus, uncertainty can be reduced and anxiety can be controlled by routine actions; however, this prevents fundamental change.

The successful development of firms, and growing economic prosperity over decades in a Western context, is an example of a successful development that has lead to inertia. The successful development in the past has become the main barrier for fundamental adaption in the future: despite increasing criticism of neoliberal economic systems, necessary changes have not taken place. When in recent years, new challenges arose in the form of social expectations, especially as a result of corporate scandals and the financial crisis, leaders of firms and of political organizations mostly tended to rely on the deep structures that had been successful in the past. Fundamental adaptation has so far not been able to take place.

Evolutionary research has also shown that sometimes systems destroy themselves by applying their behavioral principles in an exaggerated manner. Excessive short-term shareholder-value thinking, for example, can prevent necessary adaptations and lead capitalism to destroy itself. This primarily, quantitative understanding of welfare is now criticized even by such leading economists as Joseph Stiglitz and Amaryta Sen. Analogous developments can also manifest themselves in other areas of society.

Gradual change consists of continual change in small steps. In this sense Obama and his team have effected, for example, that now in the US access to health care for everybody is being discussed and first measures are being taken. We have been able to observe similar continuous changes in our longitudinal case studies in firms (see Sachs S., Rühli E., Stakeholders Matter, 2011). As an example, since the early seventies there has been a continuous increase in the consideration of an ever-broader cast of stakeholders by firms. New kinds of tools (e.g. stakeholder mapping), departments (e.g. public affairs) and processes (e.g. stakeholder engagement) have been developed. Corporations have started to publish sustainability reports and signed standards (e.g. Global Compact) and founded roundtables (e.g. corporation 20/20).

As in firms, societal developments have taken place in the US, even if not to the hoped for extent and with the anticipated speed. More importantly it seems to me, we should concentrate on the events and stories that show the continual transformation processes to improve the quality of human life, rather than to bemoan the lack of fundamental change that has taken place. By no means should the partial lack of change be used as an excuse to go back to business as usual. In German we have the saying: “Good things come to those who wait.” Therefore I suggest “lasting change” for Obama’s 2012 campaign slogan.

Titanic disasters - or stories of successful, sustainable life?

11^th April: A hundred years ago, the pride of the White Star Line, RMS Titanic, was steaming westward on its maiden voyage to the New World. What happened around midnight between the 14^th and the 15^th of April has become part of our collective archetypal memory: a titanic disaster, caused by a blend of arrogance and ignorance, and a false feeling of safety.

Why has this tragic accident achieved such an epic status? The 20^th century has seen so many human tragedies and disasters – why this one? It happened even before the First World War that showed how effective and efficient industrialized nations were in killing enemy soldiers, and how ineffective and inefficient they were in solving political problems.

It happened before the Second World War that not only brought an unprecedented amount, but also unprecedented qualities of distress and suffering to humans.

How could the sinking of RMS Titanic create or keep its fame as an archetypal disaster of the 20^th century?

Many people have speculated about this question. Let me try it anyway: First of all, it was not a 100% man-made disaster. Travelling by ship was almost as safe back then as it is today. What if the Iceberg had been drifting by the ship at safe distance? To a certain extent, it was just bad luck. It was a risk most of us would have taken. It was an accumulation of unfortunate circumstances that (hopefully doesn’t, but) could happen to any of us.

Second – and even more important – I think it was the moment when the 20^th century lost its innocence. The RMS Titanic was a symbol of the achievements of a new area: High tech, top luxury, giant size, top speed; it seemed that man-made technology could break the chains of the old ages, reach new horizons and open the doors to a new quality of life.

The big cities of the early century offered a modern, urban lifestyle that brought an end to old fashioned traditions and gave freedom to the individual. The Titanic was a symbol of a new lifestyle. It offered fast and comfortable travelling to business people, back and forth across the Atlantic Ocean. And it offered affordable transfer to people on the third class decks: emigrants of Old Europe on their way to the pursuit of happiness in the New World.

Literally “out of the blue”, within less than a few hours, all these visions, dreams, lifestyles and hopes that had shown a way into the new century, were destroyed. The unthinkable had happened, the unbreakable was broken, and the unsinkable had sunken to the ocean floor: a titanic disaster disenchanted the young century. The reasons – Ambition? Unthoughtfulness? We will never really now. What we do know: It was the absence of true leadership - the ability to responsibly use the possibilities of a new technology, to adapt to changing external conditions, to take responsibility for human lives.

Many ships have crossed the sea since then. And a new century is about to leave its childhood behind. Has it lost its innocence yet? The archetypal incident must have been 9-11 2001.

While the Titanic disaster was the moment of truth with respect to the limits of new industrial technologies, 9-11 was the moment of truth with respect to the limits of new communication technologies in a global village. Hate and fanaticism keeps mankind from becoming global sisters and brothers through internet, mail and social media.

New technologies, new opportunities, new ages and centuries don’t automatically lead us into a bright future. It takes leadership: responsibility, respect and regardfulness, to make this world a better place, and to create collective archetypal memories which tell us stories of successful, sustainable life.

Christoph Weber-Berg

I Paid a Bribe – Ordinary People Fight Corrupt Bureaucrats

What are the costs of getting a professor post in Hyderabad India? 380’000 rupees (~ $7’500). The expenses of obtaining a driving license vary from 100 to 3’500 rupees. The purchase of the international driving license costs even 5’000 rupees (~$95).

This is the price of so called “retail corruption”, the sort of petty bribery that affects everyday life in many parts of the world.

Swati Ramanathan and her husband set out to change all this in August 2010.[1] They started the webpage ipaidabribe.com to uncover the market price of corruption. On the site people can anonymously report bribes they paid, bribes that were requested but not paid and requests that were expected but not forthcoming. The webpage offers detailed analysis of the bribes reported so far concerning the departments and the cities where corruption occurs. In India for example as well as in Kenya the police department is the organization that asks most often for extraordinary “fees”.

The webpage is booming: up until now it received 400’000 reports of illicit payments for routine work. In the first three days of April, already more than 20 bribe payments have been reported in India. The webpage idea is spreading around the globe. Nongovernmental and governmental organizations from at least 17 countries have contacted Janaagraha, the nonprofit organization in Bangalore that operates ipaidabribe.com. The organizations were asking about setting up a site of their own. In Kenya for example the site is operated under the same name and in Pakistan it is called ipaidbribe.pk. The Pakistani site estimates that over the last four years the country’s economy has lost about $94 billion to corruption, tax evasion and weak governance!

All these websites, even if no names are given and the reports therefore cannot be verified, have got an impact. This impact is threatening enough that when similar sites popped up in China last summer, the government stamped them out within a couple of weeks, contending they had failed to register with the authorities. In Bangalore for example, ipaidabribe.com helped to push through reforms in the motor vehicle department. Citizen apply now online for licenses.

Thanks to social media the average person obtained powerful tools to fight endemic corruption. By reading the bribe payers reports you get an idea about the anger and shame people feel by paying bribes to officials. The anonymity provided by the internet gives people the chance to talk about their experiences concerning the contacts with officials in everyday life. These exchanges over the internet serve as an awareness raising instrument. People get aware of other concerned people who are totally upset about this corruption. Social media gives them the possibility to demand change. Corruption is therefore no more seen as a problem that ordinary people cannot do anything about it. Based on this awareness social movements against corruption can grow and corruption can be tackled by harnessing the collective energy of citizens.

Sabrina Stucki

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[1] The following information is based on the article „Web Sites Shine Light on Petty Bribery Worldwide“, The New York Times, 06.03.2012 and on the webpage www.ipaidabribe.com

Polity of Certainty or Polity of Doubt?

It is a striking phenomenon that we human beings have a strong penchant for supposing we comprehend things, sometimes even how the whole world functions. We have opinions on most things, and if not, are quite fast in formulating one if so prompted. Indeed, it seems to be almost expected of us socially to have such ready-made opinions on just about everything. This fact is ever again driven home to me during political discussions, debates and elections. Each participant – if spectator, analyst or candidate - has his or her own take of the state of affairs, what the problems “really” are and what “exactly” needs to be done to solve them.

What conceit – if not sheer lunacy – however, to think things are so simple! The complexity of the world (including all political process) is thus, that no human being - citizen, politician or think-tank - can hope to grasp it all, make reliable predictions, or make proud declarations as to how to “solve” this or that problem, yes, if you only listen or elect me, this and that will happen. How refreshing (yet utterly unrealistic) it would be if a pundit, CEO or candidate would openly proclaim, “Frankly, I don’t fully understand this whole mess we are in and while I’ve got my hunches and inclinations, at the end of the day I simply don’t know for sure how to get us out of it. But we’re in this together and together we will stumble about as best we can, making judicious use of that which we can and do understand and using common sense as best we can. But predictions and promises? That I cannot and will not give you!”

Human existence is never a straightforward plan that simply awaits to be implemented. The trouble, however, is that while our limited, or “bounded”, human rationality is a fact, it is also a fact, as numerous empirical studies have shown, that perhaps the single most important trait of a “successful” leader is that he or she is decisive in his or her decisions, sticks with them and avoids signaling any form of doubt once the decision has been made. This has deep psychological – and even evolutionary – reasons, hailing from a still more primitive, precarious world setting than our 21^st century reality presents us with. But therein lies the fundamental dilemma of any leader – above all a political one, repeatedly forced to make predictions and pledges. It is in essence one between honesty and utility.

Or does one in fact really need to choose between the two? Can one indeed be humble enough so as to be honest, while still confident and decisive enough so as to be effective as a leader?

While certainly not self-evident, I think the answer is yes. One can be decisive and confident also in acknowledged uncertainty. It simply requires an attitude that eschews what our current “achievement culture” (and perhaps even innate biological inclinations) seems disposed to undercut. But it is perhaps homo sapiens’ most remarkable asset to be able to rise – at least at times - beyond our predominant evolutionary tendencies and the social prescriptions they give rise to. And thus I shall close these considerations with the following entreat: dare to be humble, dare to be confident and dare to be bold!

Manuel Heer Dawson

Escape the City

In 2009 two Ernst & Young consultants, Rob Symington und Dom Jackman, quit their jobs and established an online job platform. There is nothing particularly exciting about this. The interesting thing is: it is called “Escape the City”, and is designed for young people who did everything right: school, university, a career with one of the big banks or consultancies of the City of London, but still felt that something is wrong.

“Escape the City” is a platform for highly qualified young people who want to escape the clichés of a successful career and an important job. It has been created by Symington and Jackman for people who are looking for meaningful jobs that make a real difference, not only to their lives, but to the world. As of March 2012, the platform has almost 60’000 registered members.

The success of this idea is so evident that the two young Englishmen expanded their business to New York where they obviously were welcomed with open arms. The NY subsidiary of “Escape the City” now ranked the most unpopular investment banks of Wallstreet. JP Morgan Chase, Goldman Sachs and Morgan Stanley are “top”. But also some of the famous European Names such as UBS, Credit Suisse, Deutsche Bank and Barclays rank among the “top ten”.

So what about the rhetoric of many of these organizations when it comes to claiming to be employer of choice for the most talented people? Is it the truth or just a short sighted self-deception? Difficult to tell. But one thing is clear: More and more young and talented people are no longer satisfied by fast careers, big salaries and fancy job titles. They want to make a difference, and they want meaningful jobs.

Many people these days are frustrated with respect to what we could have learned from the crisis. It seems like companies are going back to business as usual: New financial “products” find their way to the market, executive compensation increases, and reaches pre-crisis levels. Sometimes I’m frustrated too, and I’m afraid that many practices will continue or change only marginally. But “Escape the City” is a sign of hope to me: It seems that there are a growing number of young people who have a different vision, a different idea and a different notion of a good and meaningful life.

Talking about leadership of the 21^st century, I think these are the ones we need as future leaders. They are neither dreamers nor altruists. Quite the contrary: They are realists and they think for themselves. All they want is to live in a better world, where the quality of life is more important than the quantity of money.

Christoph Weber-Berg

Tradition as a source of innovation?

At first sight, tradition is not a genuine source of innovation and dynamism. However, the Jura region, one of the most peripheral areas of Switzerland, has a long tradition in watch making, and is one of the most dynamic regions of the country. What might be the reason? A few thoughts on leadership, innovation, stakeholder-networks and tradition.

The news: According to a Credit Suisse study, the Jura, one of the peripheral, rural areas of Switzerland, ranks among the top 5 of the most dynamic regions of our country http://snipurl.com/22lul1s.

Switzerland is often associated with banks, chocolate, cheese and watches. Among the respective industries, the watch making industry is the most dynamic presently. The Swatch-Group, mother of many world famous brands, is growing rapidly, and presenting new record-breaking results. Growth comes from all regions of the world, and from all customer segments.

But not only the great market dominator, also many smaller Swiss watch brands are very successful and dynamic. Many – or almost all of them – are located in a peripheral area of Switzerland, where no one would expect dynamic global industries. Some of the most delicate, complicated and sought-after pieces are handcrafted to highest precision standards by dedicated people with very specific skills and knowledge in the region of the Jura mountains.

Asked for the reasons of success, one of their answers is that there is no other place in the world, where so many people have had the knowledge and tradition of watchmaking for such a long time. In many towns and villages, watches have been made for more than 200 years.

Tradition may be a source of success, just as much as it may be the reason for lethargy. So the question is how tradition can contribute to success. Tradition is a form of sharing knowledge, not only today, but also through generations. It is a form of sharing knowledge in a way that cannot be replicated by the most sophisticated software. Tradition expands the stakeholder network to the dimension of time.

In the case of watchmaking in the Jura, tradition is the success-critical intangible asset of a whole region. It preserves supra-individual inspirational resources that condense to creativity and even to innovation if the right people are brought together, to follow the same vision.

In the 1970ies and early 80ies, when cheap Japanese quartz watches conquered the global markets, the Swiss watchmaking industry almost disappeared. The watchmaking companies of the Jura regions lost their license to innovate, as well as their license to compete, and people lost their jobs. But most obviously, knowledge, tradition and specific skills survived. When Nicolas Hayek, the founder of the Swatch Group reanimated the Swiss watch industry from its coma, he could rely on what I previously called the “supra-individual inspirational resources”.

Hayek was the core of condensation for the resurrection of a whole industry, and a whole region. Of course, he was a visionary leader. But visionary and charismatic individual leadership is not the whole story. Leadership flourishes on the foundations, and out of a specific culture and tradition, of shared knowledge. It emerges within a stakeholder network that reaches out not only in space, but also in time.

Tradition, culture – “supra-individual inspirational resources” – may trigger leadership, innovation and dynamics with people, in regions where no one would expect them.

Christoph Weber-Berg

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One piece of chocolate now or two pieces of chocolate later?

In the aftermath of the recent economic crisis, much has been debated about its potential causes and the lessons learned. However, it seems to me that neither from the causes nor the lessons as a starting point, a significant and generally accepted foundation emerged that could now lead the way out of this precarious situation and prevent us from future economic failure or misbehavior. Except for the obvious and the unhelpful, such post-fact evaluations leave us still wondering when the next crisis is going to happen and what it might look like.

In a recently published paper, Thomas Donaldson (2012) illuminates potential causes for the crisis from the angle of business ethics and leadership. In doing so, he also sheds a valuable light on some of the lessons that must be learned. Donaldson puts forward an argument for the ethics story behind the crisis and submits that among its causes can also be found three ethical roots: ‘Paying the peril’, ‘The normalization of questionable behavior’ and ‘Tech-shock’.

Without going to much into detail on these ethical roots that indeed go beyond the obvious and unhelpful, I came across a central aspect that is common to all of them to a certain extent – the dilemma between short-term profit and long-term value. Whether it is on an individual level, where an investment banker gambles on a ten percent annual risk of disaster in order to reap a big bonus; or on an institutional level, where banks pay salaries and bonuses to managers for actions today, even though the firm’s rewards or penalties for those actions happen tomorrow; or on an industry level, where practices become accepted that enrich the short term only to impoverish the long term, the dilemma is ever-present.

Thinking of these matters, I was reminded of an insightful TV report about the human ability to make time-dependent decisions. A simple experimental design was set up; children at the age of about 4 years were given a piece of chocolate and told that if they won’t eat it during the next 5 minutes, they get another one. The outcomes were equally amusing as astounding: except for some rebels for which the single piece seemed too tempting, the majority either managed to run down the clock without touching the chocolate (in which case they usually tried to distract themselves) or they tried to cheat, i.e., tasting the chocolate and then putting it back before the investigator returns in the hope of getting away with it. Apparently, the ability to trade individual short-term satisfaction for a future bonanza, which is by the way also found among certain animals, starts to evolve at around 3 to 4 years of age – one of the behavioral scientists explained.

Although, this straightforward comparison might tempt us to argue that the bad ethics, which led to the recent financial crisis, is occasionally part of our nature, it also and more significantly emphasizes the importance of setting appropriate incentive structures to encourage good ethics and placing more weight on collective rather than individual value. Because the most important question that remains is at what age the ability to trade individual short-term profit against future collective prosperity starts to evolve?

Marc Moser

Donaldson, T. (2012): Three Ethical Roots of the Economic Crisis. Journal of Business Ethics, vol. 106, no. 1, pp. 5-8.