On SCA SMO 500 Reflection Post #3

I would like to open this week by stating the goal of these reflections:
I am to record the lessons I have gleaned on "how managers and organizational leaders can best create (or avoid failing to create) value." I tend to stray from the goal, so here it is front and centre.

One of the better google image search results for search terms: leaders managers create value

The big value creating or negating lessons that can be drawn from this weeks material can be summed up in three statements. First of all, short term gains are no substitute for sustainable competitive advantage. Secondly, H.R. sub-functions, when properly aligned with a companies strategy, are powerful tools for creating and maintaining the desired culture within a firm. Finally, leadership shapes culture, and this can be for good or ill. Not only would I like to focus on and apply that last idea to my own profession and my personal management style, I will also be attempting to express my understanding of some more nuanced details of the broad lessons stated above. How does a "just culture" for instance fit into the HR sub-functions? Likewise, how do the short-term gains and even shorter collapse of Enron help to prove the sustainable competitive advantage framework outlined by Charles O'Reilly III in week one.

Let's start there shall we. The most interesting discussion, and the most thought provoking arguments come out of the interplay between proponents of a win for winning's sake attitude and the less and more tempered view that a company ought to somehow be improving the world. The difference is between short term profit and sustainability. So what leads to sustainable competitive advantage?

Metpahor

One theme that is coming out of this course and several sources is that in order to get the most out of the people that are working in an organization is to hire intelligent adults, treat them as intelligent adults, and they will act as intelligent adults (O'Reilley). One approach that compliments this idea is to do away with a detailed and overt "rule book" for employees to follow. A rule book damages in two ways, it stifles the creativity that is needed for dealing with exceptions that are unpredictable, and the rule book treats intelligent adults as children that need to have their behaviour and actions managed.

How Necessary is the Rule Book?

I bring up this notion of the rule book because it leads to the conclusion I arrived at after a very interesting discussion in class. When talking about competition many of the students pointed to the argument that in highly competitive financial industries the employees are often driven by bonuses. This notion can be equated to a model for Enron in the post-Kinder Era: a highly competitive culture that is financially motivated and driven by large individual bonuses. One of the conclusions that classmates seemed to point to again and again, and one that has probably come out of other studies of the Enron corruption and collapse case, is that industries that meet and assume the Enron model, even to a small degree, need more rules to regulate behaviour.

Here, then is the interesting paradox. If an individualistic, financially motivated, and highly competitive culture needs a rule book to govern behaviour, but a rule book stifles an organizations ability to create a sustainable competitive advantage, then what, if any, conclusions can be made? I shouldn't have called this a paradox because the answer is actually quite clear. When intelligent adults are asked to compete with one another for money they become unintelligent children that need to be governed. The implications for this argument are vast. Either the system must change or intense regulation is necessary. The rule book of regulation, however, is not conducive to creating sustainable competitive advantage.

"They are no longer adults"... and other conclusions I may regret later in my career. 

I will spare you the rant concerning our need to move away from profit motive as the most powerful driving force of our economic system and instead point to the possible ideals that have been expressed on at least two occasions in this course. Westjet was not trying to make short-term profit, they were trying to "change air travel forever." It also came up at another occasion (I can't find the source right now, hopefully before final submission) of a top CEO talking about having enormous ideals and goals like improving the world. If companies are meeting these goals then profits will come, but without movement towards sustainable competitive advantage through a strategy that aligns all HR sub-functions and tools of cultural creation and maintenance to unleash the talent of all people in an organization then a company will be doomed to mediocrity or simply short-term profit.

Other lessons from the Enron case around HR sub-functions like employee selection based on culture fit, purposeful assessment and reward systems to reinforce culture, socialization to promote and maintain a given culture, and the importance of leadership role-modelling and storytelling by leaders are more appropriately discussed in the successful case of West-Jet. Enron simply proves that the power of culture and synchronized HR sub-functions can be a value-neutral force. Strategy determines value, whereas culture and synchronized human resource approaches can be used to achieve any lofty or base strategy.

I am reluctant to continue with this review because I think my best ideas have already been explored, but there is at least one more idea that deserves to be reviewed.

While I found a great deal of the Allina case difficult to read due to the lens of cynicism that I was wearing while reading a case written by employees of a firm that they are "Exploring." I did take interest in the notion of a just culture that Allina adopted.

A Blameless culture acknowledges that to err is human. 

If a company wants employees to take risks, a necessary ingredient in maintaining and creating a sustainable competitive advantage, then it must accept that sometimes mistakes will be made. The Allina case was not advocating a medical services corporation adopt high-risk behaviour. Their justification for adopting a blameless culture is unique to their field. Both approaches, however, do operate under the assumption that intelligent adults are real human beings, and that once the psychology of human beings, their fears, their limits, and their capabilities are taken into account then a just culture is really the only sensible approach to handling mistakes when they occur.

My final thought, that I intend to include in my personal management approach, is that once again Enron and Allina both prove that leadership shapes culture. From a CEO publishing their weaknesses, to a COO acting like he's the Wolf on Wall Street by bragging in the boardroom and telling outlandish stories of wealth creation and crushing the enemy, the leader matters. Culture can often survive inconsequential or mediocre leadership, but strong leaders can circumvent systems, change and shape culture, or even help prop up or bring down companies.