Executive Times

Volume 8, Issue 6

June 2006

2006 Hopkins and Company, LLC

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Novelty

For many executives, it can be hard to become exposed to new things and new ideas. Many of us achieved our current roles because of the experience we’ve accumulated. Often, the most important decisions we have to make involve taking a leap into the unknown, and whatever our past experience has been, the future has new things that we’ll face. We’ve gained wisdom from those hard-earned past lessons, and it can be hard to acknowledge points of view that don’t harmonize with our experience. In this issue, we examine novelty from several perspectives, and offer some opportunity for readers to think about receptivity to the new. For many of us in North America, this is a time of year to vacate the typical, and re-create ourselves in something new. Vacations don’t always involve exposure to new things, but they can. Think about how your summer vacation can open you up to something that’s new and different.

Fifteen new books are rated in this issue, beginning on page 5. Two books are highly recommended with four-star ratings; ten books received three-star ratings, and two books are mildly recommended with two-star ratings. Visit our 2006 bookshelf at http://www.hopkinsandcompany.com/2006books.html and see the rating table explained as well as explore links to all 319 books read or those being considered this year, including 27 that were added to the list in May. If there’s something missing from the bookshelf that you think we should be considering or if there’s a book lingering on the Shelf of Possibility that you think we should read and review sooner rather than later, let us know by sending a message to books@hopkinsandcompany.com. As an added benefit to Executive Times readers, we’ve put all the books we’ve ever listed on one web page at http://www.hopkinsandcompany.com/All Books.html.

Shocking

There’s a great article in the current issue of McKinsey Quarterly (2006 Number 2) (http://www.mckinseyquarterly.com/article_abstract.aspx?ar=1757&L2=18&L3=30) titled, “The Adaptive Corporation.” Eric D. Beinhocker, a London advisor to McKinsey, notes that while organizations need to both execute well in the present and adapt to the future, few accomplish both, and most companies focus on execution. While the article shows a path to achieving both, and you should read it to find that out, our purpose is to call attention to some of the data about barriers to adaptation. According to Beinhocker, “Many cognitive scientists believe that one important way people learn involves condition-action (or if-then) rules. … Through experience, we accumulate a storehouse of such rules. Our environment gives us feedback about which do and don't work. Over time we tend to give more weight to those that have worked in the past. Mental models also organize rules into complex hierarchies and webs of relationships. … This set-up of rules, weightings, and hierarchies has tremendous benefits. It enables us to learn from experience, to make decisions using ambiguous information, and to make inferences across experiences. … But the downside is that our mental models tend to become more rigid, more locked in, and more averse to novelty as we gain experience. When we are young and inexperienced, our hierarchies of rules are fairly shallow, so our views of the world are relatively general. This way of thinking has advantages and disadvantages. The advantage is that such mental models are easy to change: new experiences are readily absorbed, and reorganizing the hierarchy of rules isn't very difficult, because there isn't much to reorganize. The disadvantage is that we are less likely to respond correctly in unfamiliar situations. Hence the stereotype that young people are more adaptable but also more likely to behave inappropriately. As we gain experience, our rule hierarchies fill up and the situation reverses: we have a larger collection of specific experiences and more feedback on what has and hasn't worked. Our mental models grow into complex structures of categories, interlinked rules, and weightings. We become less likely to perceive experiences as totally new and instead try to relate them to previous ones, which we group into existing categories. Once in a while, we encounter something outside our experience and must then create a new category or rearrange an existing one. As mental models become more complex over time, major rearrangements become more difficult. Reorganizing an older, more experienced mental model resembles reorganizing General Motors, whereas reorganizing a younger, less experienced model is more like reorganizing a start-up. Mental models tend to settle over time, and bigger and bigger shocks are needed to shake them up. This is not an ageist argument; certainly there are 20-year-old fuddy-duddies and adaptable people of 70. But in broad terms, the structures of mental models change over time, and each stage of development has its strengths and weaknesses. The implications for organizational adaptability are critical. Companies tend to be organized as hierarchies, with the most experienced, successful people on top. This arrangement presents a trade-off: the mental models at the top are usually among the best for execution in a stable environment. These executives have extensive experience and a large storehouse of specific responses that are quite likely to be appropriate. Yet when the environment changes significantly, such individuals may have difficulty recognizing the change and then, once they do, may draw too heavily on what has worked in the past. This kind of inertia helps to explain the hero-rogue syndrome: a CEO executes successfully in one environment, is lauded by the press and investors, and then falls off a cliff when the environment changes. It also helps to explain why many turnarounds involve wholesale changes in top management: it is often easier and faster to change which people occupy the executive suite than to change their mental models.” Adaptation demands changes in mental models, and those executives who can expand personal and organizational mental models are more likely to succeed especially when pressed to adapt to new conditions.

How rigid are your mental models? Can you recognize the difference between what’s new and what seems like a rerun of you past experiences? How big a shock do you need to revise your mental models? Who and what will shock you?

Curiosity

Many executives subscribe to evidence-based management: making decisions based on empirical facts. There’s likely to be a correlation of these executives with those who have been trained in and believe in the scientific method. Other executives, while preaching fact-based decision making may be observed to act based on what others are doing. In an executive’s search for new evidence, the question “What’s new?” is rarely rhetorical, and in some organizations, the answer better be supported by factual evidence. In the current issue of Strategy + Business (Spring 2006) (http://www.strategy-business.com/press/article/06114?pg=0) titled, “Why Managing by Facts Works,” Jeffrey Pfeffer and Robert I. Sutton note, “From our research, we are convinced that when companies base decisions on evidence, they enjoy a competitive advantage. And even when little or no data is available, there are things executives can do that allow them to rely more on evidence and logic and less on guesswork, fear, faith, or hope. For example, qualitative data, such as that gathered on field trips to retail sites for the purpose of testing existing assumptions, can be an extremely powerful form of useful evidence for quick analysis. By emphasizing the importance of evidence and knowledge, we do not mean to dismiss the value of intuition and innovation. But even hunches, fresh ideas, and inventions should be measured against logical and empirical benchmarks to determine whether they are efficacious ideas or just momentarily exciting thoughts better off abandoned. … Executives who use evidence-based management best encourage their employees to learn even as they act on what they already know. They regard their companies as a work in progress — one that constantly needs to be tested, probed, and experimented with, to be certain that it is evolving in the right direction. … The most striking thing about evidence-based management is that it forces executives to be curious, not passive, and to be receptive, not closed, to new information. The difference between an executive who embraces evidence-based management and one who can’t see the value in it is invoked in the joke about the two economists walking down the street who spot a $20 bill on the sidewalk. The first says, ‘Look, a $20 bill. Let’s pick it up.’ The second replies, ‘It can’t possibly be a $20 bill. If a $20 bill were lying on the sidewalk, someone would have picked it up by now.’” Natural and cultivated curiosity can be an effective way for all executives to gather quantitative and qualitative data to make better decisions.

What have you done recently to expand and improve the factual data that supports key decisions for your organization? Are you clear about the evidence you want to see from your direct reports? How do you cultivate your curiosity, and keep an open mind? Do you come across as if you already know the answer to all questions?

Creativity

There’s an interview with Jim Clifton, CEO of The Gallup Organization in the Gallup Management Journal (5/11/06) (http://gmj.gallup.com/content/default.asp?ci=22693) titled, “Is Your Organization Creative Enough?” According to Clifton, “For American companies to be competitive, creativity can't be the domain of just the big thinkers. In the new world, from designing multimillion dollar technology to selling a book, you must employ creative people throughout the organization. … you've got to make it OK throughout your organization to be creative, then you've got to make it part of people's jobs. Sure, you can just hire creative people, and there are questions you can ask in an interview that will determine if a job candidate is big-idea person. But that's not enough. Bell Labs once conducted an experiment where they studied what separated their star performers from the rest. It wasn't IQ or work ethic -- the scientists were all geniuses, and they all worked on science twenty hours a day, seven days a week. The researchers looked at every attribute they could possibly imagine, and they found there were nine work strategies that correlated to high output. The top two attributes that correlated to productivity were initiative and networks. The best scientists were much better at taking initiative in ways that paid off for the company. They also had big networks of smart friends that they could tap when they needed expert help. People who are big producers take more initiative and have unbelievable networks. … If someone brings you a great idea, it changes your relationship with that person. Then you know that person really cares about what you're doing. … Another thing that works for me is talking to smart people. I'll ask our senior scientists, these world-famous brains, a question, then watch for agreement among the group on an issue or a problem. When there is high agreement, they are almost always right. … You've got to make creativity part of the culture. When walking around the company, to our computer labs or the print room or anywhere else, I'll discover and point out a good idea. However, it's important to make generating ideas part of everybody's job. … in the near future, Wall Street will notice that ideas will win, not products.” Executives who support and sustain a culture that promotes idea generation and sharing will lead organizations to success.

Where do your ideas come from? How much a part of your job involves creativity? What was the last idea that you brought to someone else? What was the last idea someone brought to you? For each person who reports to you, how big a part of their jobs involves creativity, and how do you find out their ideas?

Follow-up

Here are selected updates on stories covered in prior issues of Executive Times:

Ø We last paid attention to the scandals at Sotheby’s and Christie’s in the March 2003 issue of Executive Times. The May 15 issue of Fortune profiles Sotheby’s CEO Bill Ruprecht (http://money.cnn.com/magazines/fortune/fortune_archive/2006/05/15/8376897/index.htm) saying, “If history chooses to remember Bill Ruprecht, he'll go down for this: saving Sotheby's. Six years ago he took on one of the worst jobs in corporate America. … The scandal nearly destroyed Sotheby's. The fines and lawsuits it faced were huge. … Once he had just 12 hours to come up with the cash to make payroll. … If success in the art business is measured in dollars, then Ruprecht now qualifies as a grand master. Today, after years of struggle, Sotheby's has resurged. In March it reported that net income for 2005 rose 80% on a record $513 million in revenues. Since then the company's stock price has jumped 50%, to a recent $30 a share. A year ago it was at $16. But ultimately, Ruprecht's marker will not just be resurrecting Sotheby's. It will be where he takes the company from here.” We’ll continue to watch what happens.

Ø We may have been premature in the March 2006 issue of Executive Times when we referred to Carly Fiorina’s tenure at Hewlett-Packard saying, “Fiorina’s super-star image exceeded her actual results and she was fired after she failed to move the company forward.” Alan Murray ponders the question, “Was Carly right after all” in his Wall Street Journal column of May 24 (http://online.wsj.com/article/SB114843553791861429.html): “Carly's version of her ouster has yet to be told. She has a book coming out in October that her publisher promises will be ‘brutally honest about her triumphs and failures.’ Somewhere in there, she undoubtedly will give voice to her feeling that the H-P board overstepped its bounds in pushing her out and that H-P's current success is a vindication of her strategy. On the second point, at least, she may be right.” We await the book.

Legacy

Consideration

Partisan politics seem to have been led over the past decade or so by loud-mouthed, closed-minded ideologues who often alienate the vase middle of the electorate. It wasn’t always that way. One slow talking, emotionally restrained, thoughtful participant characterized an era of cooperation. Lloyd Bentsen may be best remembered for his measured response to Dan Quayle during the Vice Presidential debates of 1988 when Bentsen said to Quayle, “Senator, I served with Jack Kennedy. I knew Jack Kennedy. Jack Kennedy was a friend of mine. Senator, you're no Jack Kennedy.” The Dukakis-Bentsen ticket was trounced by Bush and Quayle. Less well known or remembered was the pivotal role that Bentsen played in 1980. According to The Wall Street Journal (5/25/06) (http://online.wsj.com/article/SB114852203215562621.html), “Bentsen … was the Democratic Chairman of the Joint Economic Committee in 1980, amid stagflation and the intellectual collapse of the reigning Keynesian economic orthodoxy. To his credit, Bentsen was willing to consider new ideas, even some offered by non-establishment thinkers. He became, at a crucial moment, a convert to the supply-side policy mix of tighter money to re-establish price stability and tax cuts to lift incentives to work and invest. The JEC's annual report in 1980 was entitled ‘Plugging in the Supply Side.’ Bentsen himself described the report as ‘the start of a new era of economic thinking.’ The past had been ‘dominated by economists who focused almost exclusively on the demand side of the economy.’ The urgent need at the time, he added, was policies ‘designed to enhance the productive side, the supply side of the economy.’ His unanimous committee report lent a bipartisan legitimacy to what would soon become the Reagan economic agenda and usher in a generation of prosperity.” Bentsen died in late May at age 85. All in public life can look to him as a role model for open-mindedness, cooperation and the willingness to consider new ideas.

Latest Books Read and Reviewed:

(Note: readers of the web version of Executive Times can click on the book covers to order copies directly from amazon.com. When you order through these links, Hopkins & Company receives a small payment from amazon.com. Click on the title to read the review or visit our 2006 bookshelf at http://www.hopkinsandcompany.com/2006books.html).

Title (Link to Review)	Author	Rating	Review Summary	Purchase
The Penelopiad	Atwood, Margaret	***	Perspective. Ever wonder about what Penelope was doing while Odysseus was on the road? Atwood offers Penelope’s own point of view in this finely crafted book that includes a chorus of 12 handmaids.
Company	Barry, Max	**	Agendas. Satire about a Seattle company, its visible and hidden agendas, and one employee whose rapid promotion leads him on a hilarious corporate adventure.
Body Brokers	Cheney, Annie	***	Products. Journalist’s sensational first person account of the legal and illegal ways that money is made from cadavers, with or without the knowledge and consent of loved ones, and how body parts have become products that meet the needs of medical practitioners.
The Scorpion’s Gate	Clarke, Richard A.	***	Stinging. Debut novel set in 2010 by government expert on security and terrorism who advised four U.S. Presidents. Recommended for the author’s experience and expertise, not for the quality of the writing.
Integrity: The Courage to Meet the Demands of Reality	Cloud, Henry	***	Character. Psychologist explores six character traits that he’s observed can contribute to a leader’s success. Minimal jargon and a conversational style of writing.
Whiteman	D’Souza, Tony	**	Aimless. Entertaining debut novel about relief worker stuck in Ivory Coast village without the resources to do his job, trying to immerse himself in village life and relationships amid coups and war.
The Year of Magical Thinking	Didion, Joan	****	Grief. Outstanding, emotionally raw and powerful writing in the form of a memoir of the year following the death of Didion’s husband, John Gregory Dunne. Also a memoir of grief itself, and a tribute to him and to their marriage.
Murder on Naked Beach	Henderson, J.J.	**	Jaunt. Debut of new mystery series features Lucy Ripkin, a working journalist off on a jaunt from New York to Jamaica for fun and better weather. Both author and protagonist need maturing.
Field Notes from a Catastrophe	Kolbert, Elizabeth	****	Hot. Sober, clearly written book that lays out the facts about global warming in a calm way, and calls attention to what will happen if changes aren’t made.
The Ethical Assassin	Liss, David	***	Animals. Author known for historical fiction takes on trailer trash in modern South Florida and provides a manifesto for treating animals with respect while presenting captivating ensemble of characters.
The Tender Bar	Moehringer, J.R.	***	Nurture. Pulitzer-Prize winning Los Angeles Times writer centers this touching memoir at the bar on Long Island where he grew up, and introduces readers to the people at that bar who nurtured him.
Catholic Matters	Neuhaus, Richard John	***	Continuity. Former Lutheran minister and current NYC Catholic priest explains current issues in that Church in the context of fidelity, authority and continuity. Explains why, despite scandals and disagreements, many people still define themselves as Catholic.
Abide With Me	Strout, Elizabeth	***	Community. Compassionate novel about a rural minister’s grief in 1959 at the death of his wife and ways in which his breakdown and recovery transform him and his congregation.
Apex Hides the Hurt	Whitehead, Colson	***	Naming. Quirky novel in which the protagonist, a nomenclature consultant, is called to a small town to help solve its identity crisis, while the consultant struggles with issues of his own.
Dwelling Places	Wright, Vinita Hampton	***	Attachments. Novel about the precarious attachment of an Iowa farm family to the land and to each other. Reminiscent of, but not as poetic as the work of Wendell Berry.

ã 2006 Hopkins and Company, LLC. Executive Times is published monthly by Hopkins and Company, LLC at the company’s office at 723 North Kenilworth Avenue, Oak Park, Illinois 60302. Subscription rate for first class mail delivery of the print version is $60.00 per year (12 issues). Web version subscriptions are $30.00 per year. Single issues: $10.00 print; $5.00 web. To subscribe, sign up at www.hopkinsandcompany.com/subscribe.html, send an e-mail to executivetimes@hopkinsandcompany.com, call (708) 466-4650, or fax to (708) 386-8687. For permission to photocopy or e-mail Executive Times, call (708) 466-4650 or e-mail to reprints@hopkinsandcompany.com. We will send sample copies if requested. The company’s website at http://www.hopkinsandcompany.com/archives.html contains the archives of back issues beginning in the month after the issue date.

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