Strategies for a discontinuous future.

Saturday, May 13, 2006
Response to Comments

David G writes:

"Either you believe that a business' primary asset is its human capital, or you don't. If you do, it's irresponsible not to develop & invest in that asset - the at-will system absolves management of this responsibility - and laziness compounds the problem.People without leadership skills get promoted here because leadership is not important to a company's financial performance - thanks to at-will employment contracts."


"Do we understand you correcly that you disagree with Umair that the US workplace is dysfunctional? It appears that you are predicting the decay of all global worplaces that don't map to the US way of doing things.???"

Excellent points that I thought deserved a separate response because these issues are worth thinking about.

First of all, let's separate leadership from management. The reality is that what companies need most are just able and competent managers, not necessarily great leaders. If anything, a significant reason for terrible management in corporate America is this silly belief in the heroic powers of messianic leaders who will rescue dysfunctional org cultures. This is responsible for creating the cult of the mega-million bonused executives and the rat race to the bottom among middle managers who are obsessed with politicking and power grabbing rather than focusing on running their businesses well. So, I'd frame the problem in terms of bad management.

Secondly, let's examine if there is any causal relationship between bad management and at-will employment. First thing I'd point out is that there is no evidence that at the aggregate level, companies from different jurisdictions with similar level of economic development in their respective domestic markets are that far apart in terms of the quality of their management. Phone companies are pretty well equally evil around the world and few people are happy with their nickle-and-diming banks. Few airlines can get their act together. Te few French and German companies that I've had the misfortune to deal with are just as terrible as their Amercian counterparts. It then begets the question : why aren't stronger job security laws correlated with higher levels of motivation or more healthy and/or effective org cultures?

Secondly, at the micro level, there're vast differences in the quality of management among companies in the same markets that operate under identical employment laws. I'd suggest that the reason for that is that the winners have not only perfected their strategies but actually created high performance work cultures based on trust and common sense, regardless of the at-will employment relationship. Such cultures are fostered and shaped by the continual hard work of emplyees and managers at every level, not by the inspiration of towering visionaries.

Think about this : Southwest has continued to outperform any other US airline for over three decades, Westjet in Canada consistently provides outstanding service that delights their customers while United, US Air, Northwest and Air Canada continue to suck, even after getting bailed out by US or Canadian taxpayers and the bankruptcy courts. Why is it that Westjet and Southwest can do this but the others can't? Why is it that Westjet and Southwest employees are actually happy to work for them? This is true across industries and geographies : people just love banking with ING Direct or buying Apple's products, for example. Bank of America and Dell, on the other hand, can't even dream of having anywhere near that level of performance or bonding with their customers. Why is it that the case although these companies are based in the same legal jurisdictions as far as employee relations are concerned?

This leads me to conclude that it's not the at-will employment that is to blame. Clearly, many corporate environments around the world are dysfunctional but the reasons for that range from the short-term'ism, slavishness to stock analsysts, hidebound cultural norms and clueless management. Even then, sweeping generalizations are not quite accurate : for example, the quality of management and work cultures in the US ranges all the way from absolutely outstanding companies such as IDEO, the SAS Institute and Google to the abominably evil phone and cable companies.

The key determinant is the willingness of the management to build a solid, long-term business which can only be achieved by having an environment that attracts and nurtures top talent. If you are an entrepreneur, I hope that you are trying to create such great work environment. If you are a worker bee, I hope that you do your due diligence on the prospective employer, or fire your current employer if it's not meeting this requirement.

Of course, I am not suggesting that cultures that don't adopt US style business practices are doomed - far from it. All I am trying to do is figure out what works, irrespective of which culture it comes from. Clearly, there are many things wrong with the US businesses, and indeed the American culture itself. However, I don't think that at-will employment is one of them.

-- Mahashunyam // 3:30 AM //


I think a major problem is the idea in most companies that simply being good at your job means you deserve to get promoted to manager. Most managers never study management, and they have no clue what they should do or how to become better other than to model the way they were managed.
// Rob // 2:57 PM

"Management is doing things right, Leadership is doing the right thing"
- Peter F Drucker

By Drucker's definition, your bias of management over leadership (very common in the US) may even be (a) cause of the accounting scandals (& the other similar examples of managers not doing "the right thing"}.

I agree that the distinction is important but totally disagree that management is the more important skill. Management can be taught (to anyone) - it's an administrative function; leadership is about who you are.

It's the belief that US-corps should only have one leader that's resulted in the ceo-as-overpaid-idol phenomenon we have today - because there's little leadership bench strength.

I do think that there's a strong causal relationship between at-will and poor leadership - and never stated that at-will results in bad management - although, for me, a good leadership is the most important quality in a good manager - although I understand that's not a popular definition.

Maybe the problem in the US workplace is this de-emphasis of leadership.

[would be great to have this debate over beers someday]
// David G // 3:01 PM
Post a Comment



due diligence
a vc
tj's weblog
venture chronicles
the big picture
bill burnham
babak nivi
n-c thoughts
london gsb

chicago fed
dallas fed
ny fed
world bank
nouriel roubini


uhaque (dot) mba2003 (at) london (dot) edu


atom feed

technorati profile

blog archives