Thursday, April 2, 2009

Sharing A Podium

About ten days ago, I was invited to a second year law school class on corporate governance at the University of St. Thomas, given by adjunct Professor John Stout. I shared a panel chair with Tom Holloran, who heads up the Center for Ethical Leadership in the Professions. I talked about the changing role of a public company CFO in relation to the board of directors. Tom--who incorporated Medtronic, was CEO of Dain Rauscher and CEO of Medtronic--talked about a wide range of issues that really got me filling up my notebook.

Tom described business as a "morally serious calling." In a law school associated with a Catholic university, the word "call" or "vocation" has a particular meaning. In his mind, business must provide an environment where employees can find personal satisfaction and a life of commitment to others. In my fifteen plus years as a Wall Street analyst, visiting hundreds of public and private companies, I can count on one hand the number of times I heard an executive speak to these kinds of ideas.

He said that if an enterprise were to describe itself solely in terms of a mission to maximize shareholder value, then Tom believed that the employees of that enterprise would find that "their calling lacked nourishment."

He then quoted Bartlett and Ghoshal, "A New Manifesto for Management," who said, "Purpose--not strategy--is the reason an organization exists." When I was the CFO at Possis Medical, we developed a new tag line under our logo that said, "Bringing Medical Possibilities to Life," and it was clear, easy to remember, and it summarized what we were all there for--our calling, so to speak.

I found a related article from Bartlett and Ghoshal in the MIT Sloan Review (vol. 43:2, 2002) and here is some material from the abstract:

"Forget capital; it's relatively easy to obtain nowadays. Today's scarce, sought-after strategic resource is expertise, which comes in the form of employees. Although organizations have changed mightily from the days of hierarchical, top-down management, they still have a long way to go."

Human resource professionals should have an important seat at the table in trying to maximize the return from human capital. In fact, HR is most often a record-keeping, compliance-oriented, lawsuit-preventing function that is the caboose on the executive management train.

Bartlett and Ghoshal talk about two tasks, a linking task and a bonding task. The describe the linking task as finding "a way to embed individual-based knowledge in the company, making it accessible and useful not to just one unit or one function, but to the entire organization."

In my website,, I use a term"embedded knowledge," which means everything that is known and has been deposited in an organization through the cumulative experiences of executives, managers, and line employees that have been part of the organization's life. This embedded knowledge can be tapped, but it is a process like spelunking or setting a new route on a mountain. It's iterative, has long pauses, retreats and straight shots upward. The authors are directing HR executives and managers to institutionalize a process for "linking" this individual-based knowledge. For you IT experts out there, a collaboration tool can help, but it's more than a piece of software. It is a mindset and a culture that has to be established first, and it rarely has, in my experience.

The second "bonding" function is described as creating an environment where people can express their individuality and align their efforts with a purpose. While Bartlett and Ghoshal assign this task to HR, it seems to me that this is something that has to come from the very top, if not the board of directors then from the CEO, with continuity beyond the tenure of one individual.

Of course, the rewards from hewing to a purpose and creating an environment where sustainable value is created must then be shared throughout the organization. This is also where the modern public corporation has fallen down with its continuing acquiescence to out sized compensation for CEO's regardless of performance.

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