Issue 4.5 | October 2013

In this Article: while thieves extract value, leaders create it.

by Jonathan Wilson 

Few of us may be part of it or even directly encounter it, but we all know what corruption and thievery looks like, whether legal or illegal. Back in 2008 we were served the poisoned cake of financial foolery on which sat Bernie Madoff’s ponzie scheme as one of several bitter cherries. The effects of that crisis continue in global markets to this day. Justice seems to be catching up. As I write, the US Justice Department and JP Morgan are thrashing out a deal by which the corporation will be coughing up a cool $13 billion to the American taxpayer.  The bank will pay for its sins of selling securities made up of low-quality mortgages, an approach explained by no meaningful business rationale, but only by a total lack of corporate and personal self-discipline; in other words, greed.

Thievery does not create value, it extracts it. Value extraction takes place in many industries and in many ways far less dramatic than those described above. There are, in fact, two very different kinds of thievery in which, unfortunately, you and I may well be complicit, even if unwittingly.

Stealing from the Customer

No team exists for itself, but for a cause.  There is no reason for a business to exist except to provide a service. Not even shareholder gain represents the purpose of a business (or, for not-for-profits, donor satisfaction). For both shareholder and donor, the customer’s benefit is their benefit.

We steal from our customer when, as owners, we place ourselves at the centre of the business and we channel company revenues into perks over and above standard salaries and benefits. This deprives the company of the efficiencies and working capital associated with financial prudence and which in turn will drive greater service for the customer.

We steal from our customer when we permit employees to see themselves as the centre of the business, where a focus on entitlement trumps the priority of performance for the customer. We steal from our customer when, out of good will and perhaps appreciation for their personal qualities, we keep employees who don’t perform. This may show up in absenteeism, failure to resolve conflict, failure to learn and change, failure to meet deadlines, failure to solve problems, or the creation and delivery of mediocre products and services. However it shows up, it steals from the customer the full potential of products and services for which they have already paid.

And, of course, it steals from the shareholder who has invested in the business so that it might succeed.

Stealing from the Employee

A team cannot serve its customer well if it isn’t internally healthy. Internal health is both individual and corporate. Employees thrive when they believe in their company, their role, and their team-mates. In his book on motivation, Drive, Daniel Pink shows that they also thrive when they have the opportunity for mastery and can work autonomously but interdependently. And of course they thrive when they are physically and emotionally healthy.

So when, in the name of productivity, we keep our employees working longer than a 40-or-so hour week, we steal from them. We likely steal from them in real financial terms, since the average worker is paid only for those hours. But we steal as well from their physical and emotional well-being, which can be gained only by rest and by time in other pursuits, such as exercise, hobbies, and time with friends and family. A 2007 study estimated that the fatigue experienced by employees in the US cost the country in excess of $101 billion per year in health-related lost productive time (LPT). When employees are parents, the exploitation goes further still – we steal from their children.

We steal from our employees when they have no opportunity to learn, to master new skills, to deepen in character and in relationship with one another. Those of us concerned with financial discipline may see only the expense associated with this, but there is in fact a tremendous return on strategic investments we make into the well-being and growth of our employees, both as individuals and as a working community (e.g. by way of social and celebratory events). Our employees should experience the business as a place of flourishing, not of indentured slavery.

And, of course, we steal from our employees when we accept from them anything less than the best. Assuming they’ve received the support and accountability they need, the kindest gesture may be to show them the door. It may even be the push they need to find the environment and role in which they will do well.

Investment vs Extraction

Theft is cost. We saw it in the financial crash, and we see it when a mother or father arrives home from work just in time to kiss their children goodnight.

Greed reflects a failure in discipline and courage. Greed is not, however, the primary driver of value extraction. The root driver is fear. The antidote to fear is faith – faith that the right thing is, indeed, the right thing: for the employee, for the customer, and for the shareholder.  Lori Patterson, founder of Pixo, a small, successful technology services firm, exemplifies this faith in the right thing. By investing in her team she creates value for her customers.  One of several tactics she uses is to ensure her technology professionals work within disciplined time boundaries. As described in an article by Susan Cramm:

Bids are prepared based on 25 hours of billable time per week—versus industry averages of 40—and burnout is avoided through realistic timelines. According to Patterson, “We deliver on the same schedule as our competitors because our competitors promise a shorter schedule but come up late.”

Highly impressed customers spread the word with the effect that, for a short time, Pixo was turning down referrals while it scaled up its capacity. Patterson represents the truly tough leader who possesses the courage to do the right thing. And the right thing creates value.

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