Lessons from the Confucian Analects
Over the years I have found the Confucian Analects to be a source of inspiration when searching for underlying principles that guide performance improvement for individuals as well as organizations. Confucius (551-479 BC) lived during the Warring States Period when China was not unified and in the grip of civil war. For Confucius, the problem was that the leaders had lost the T’ien Ming (the Will of Heaven); that is, their own lack of morale behavior and awareness was causing the country to spiral out of control. The “fix” Confucius thought, was to provide a positive example of how to live thus serving as a model for moral education in a divided nation. If Confucius could transform bad (selfish) leaders into good (unselfish) leaders by first transforming their hearts and minds to be in accord with the Will of Heaven, then these same leaders would provide visible examples of love and benevolence (jen) that could turn war into peace and poverty into prosperity.
I believe that the key is to observe the little things that leaders do in daily life that evidence the quality of their thinking (mind) and leadership (behavior). Indeed, it is the small acts of kindness and consideration that, when accumulated drop-by-drop over time, can turn around an individual, a company, or even a nation.
Let’s consider one of my favorite examples from the Analects.
Analects 10:12. “The Master (Confucius) would not sit, unless his mat was straight”.
Talk about the “little things” … when I first encountered this passage I thought Confucius must have been completely anal-retentive! But think about it. Confucius was saying his behavior would always evidence his mind. If his behavior were disorganized and sloppy, then it would evidence a manner of thinking that was unclear and improper. Such thinking and action is not in accord with the Will of Heaven and principles of virtue that call us to respect not only persons with whom we live and work, but also a person’s property (the mat, a chair, a desk) where we live and work.
When I walk into a new client company or organization, sometimes “the culture” is palpable. For example, this simple Confucian principle was evidenced to me for the first time when I walked into my new client’s headquarters (Frito-Lay) in Plano, Texas. It was the late 1980’s and the headquarters looked to me like I was entering the Emerald City! As I walked into the glass sunlight building in the very early morning, I saw vast open clean spaces with beautiful hardwood furnishings at each cubical. At this early hour only the security personnel were available to let me enter the building. There were no employees, no suppliers, and no customers, and yet, the building itself exuded quality. The fixtures, the stair railings, the hardwood grain on the desk surfaces, all seemed to shine.
And then I noticed something eerie. There was not a single piece of paper, pen, or object out of place on ANY of the desk surfaces at EACH office cubical - - absolutely no clutter! I thought, “we have a culture here where the MIND of the entire organization (Pepsico) certainly believed in being aligned, focused, and purposeful”. And then I thought, “the Master would not sit, unless his mat was straight.”
So, you might be thinking, “What does this mean?” Or even worse, you might be thinking that you would not want to work in such an antiseptic workspace! But, let’s examine this more closely. What was obviously a corporate policy to leave one’s desk clean and clear after the workday, was not intended as an infringement of personal creativity and expression. Instead consider the Art of Preparation, the first of the Seven Arts change process. Imagine the mindset required to purposefully align people, processes, and core metrics for improved financial performance. Consider further the importance of establishing a clear baseline (as in “standard work”) in a truly lean organization.
What is “standard work” other than the equivalent of “not sitting, unless your mat is straight.” Standard work means preparing to perform your duties the same way, every time for the purpose of establishing a clear measurable baseline necessary for process improvement in a data-driven organization.
In other words, just as my initial reaction to Confucius’ habit of correct sitting was negative (suggesting that he was anal-retentive), many employees consider performing standard work as a call to boredom (not action) by enforcing a lack of creativity and innovation. Quite to the contrary, standard work is the equivalent of the Art of Preparation - - “not sitting, unless your mat is straight.” Performing things consistently (standard work) serves as the basis for creating world-class products and delivering world-class services with zero defects built into the actual process. Doing things consistently in an error free manner is really a matter of MIND - - “not sitting, unless your mat is straight”.
Just for fun, let me conclude by sharing briefly a few of my favorite passages from the Analects that evidence lessons on leadership.
Analects 2:4 The Master said, “At fifteen I set my heart upon learning; at thirty I took my stand; at forty I came to be free from doubts; at fifty I understood the Will of Heaven; at sixty my ear was attuned; at seventy I followed my hearts content without overstepping the line.”
Lesson: Personal development is a lifelong process and there are no skipping steps!
Analects 12:17 “To govern (cheng) is to correct (cheng). If you set an example by being correct, who would desire to remain incorrect?”
[Besides being homophones, the two words in Chinese are cognate, thus showing that the concept of “governing” was felt to be related to that of “correcting”.] Note by D.C. Lau, trans. The Analects, Penguin Books, Great Britain, 1979, pg. 115.]
Lesson: Leadership means “leading by example”. If you practice what you preach, including learning from/correcting your mistakes, then others will find it easy to emulate your “best practice” example.
Analects 25:24 “A student asked, ‘Is there a single word which can be a guide to conduct throughout one’s life?’ The Master said, ‘Is not reciprocity (shu) such a word? Do not impose upon others what you yourself do not desire.”
Lesson: The Golden Rule (Matthew 7:12) is yet another prime example of “leading by example” … “Do unto others as you would have them do unto you.” Ironically, in the Confucian philosophical system, this passage 25:24 is called the Silver Rule and is based upon the same guiding principle of reciprocity. Using oneself as a measure to gauge how you treat others is a simple and effective tool applicable at work and in daily life.
Analects 2:3 “The Master said, ‘Guide them by edicts, keep them in line with punishments, and the common people will stay out of trouble but will have no sense of shame. Guide them by virtue, keep them in line with rites, and they will, besides having a sense of shame, reform themselves’”.
Lesson: Autocratic managers are never able to “lead by example”. The true goal of leadership is to create an environment where people perform willingly to the very best of their ability, even when no one is watching.
Sensen no Sen: Taking Performance to the Next Level
Suppose you are trying to take your performance to the next level. Whether the context is athletics, business, music, or maybe just taking better care of yourself through improved diet and exercise, you can always take your game to the next level through improved focus.
As a practitioner of the martial arts, I find the training methods used for black belt examinations to be of the same substance as methods used to improve anyone’s performance in any endeavor.
Peak performance requires calmness under stress, which yields expanded awareness, which feeds the ability to clearly focus on the right “stuff.” This enables you to perform with confidence at a higher level. When you learn to practice with confidence in the daily pursuit of continuous improvement, for example in the martial arts or in a lean enterprise, anyone (or organization) can plan to take their game to the next level. For individuals as well as corporations, adopting the Seven Arts change process means that the focus is mental; that is, learning to be fully engaged and at your best every single day. Imagine what changes might occur at your workplace if everyone involved were completely focused and supportive of each other!
Let me explain the martial context first.
This past June I was teaching our Eastern Ki Federation Summer Camp held at Christopher Newport University. The focus this year was training students who were preparing for their Black Belt examinations. There is a planned increase in performance with each grade (kyu) as students work their way through the early stages of traditional martial arts training.
The theme was building upon an oft-spoken phrase that my teacher Soshu Koichi Tohei (1920-2011) always taught, especially when preparing students for black belt testing, “ki (or mind) moves first.” Tohei Sensei is the Founder of Shinshin Toitsu Aikido and Ki no Kenkyukai, and was the first person to bring the martial art of Aikido out of Japan in 1953. That “ki moves first” or “mind moves first” is an important concept to internalize for learning to move earlier (sensen no sen) in anticipation of your attacker’s intention(s). These concepts are also at the heart of the first of the Seven Arts, The Art of Preparation.
Any competitive endeavor has this mental dimension in which confidence arises from not only solid practice and preparation, but also from internalizing prior knowledge. In the business context, this prior knowledge refers to the company’s strategic plan. It represents a map to the future that when understood by all, enables the organization to execute the operations and commercial business plan. Again, whether in the martial arts, competitive athletics or business, it is important to communicate, understand, internalize, and have confidence in, “the plan.” Understanding and institutionalizing both the competitive strategy and the operational business plan means that everyone has bought-in and has prior knowledge (sensen no sen) of the roadmap to success.
Two of Tohei Sensei’s three main teachers were Morihei Ueshiba (1883-1969), the Founder of Aikido and Aikikai, and Nakamura Tempu (1976-1968), the Founder of Shinshin Toitsudo and Tempukai. From Ueshiba Sensei my teacher learned the “power of relaxation” for performance improvement. And, from Tempu Sensei, he learned the principle that “mind leads body”. When Tohei Sensei explained what he meant by “ki moves first” he would refer to traditional concepts in budo (martial arts) that were sometimes used by his teachers.
For example, Ueshiba Sensei (O-Sensei) used to refer to the concept of “sensen no sen.” At Summer camp I was sharing this concept in my efforts to explain Tohei Sensei’s teaching that for all forms of performance improvement, it is always the case that one must be prepared to act prior; that is, “ki moves first”/ “mind moves body.”
One of our EKF Head Instructors in attendance at the camp is originally from Japan, but is now living in North Carolina as a professional translator. After camp, she followed up and wrote back to me a very clear summary of sensen no sen:
“I have looked up sensen no sen and the character for sen is 先 (the same as saki = precede; anticipate; prior; ahead; previously). It is one of the Budo terms as follows:
go no sen (後の先) — after the prior
“go” = behind, after, rear, “no” = of
sen no sen (先の先) — prior to prior
sensen no sen (先先の先) — prior to prior to prior”
In other words,
Go no sen — After you see the actual attack, you respond.
Sen no sen — After you recognize the attacker’s intention, you deal with the him before his attack reaches you.
Sensen no sen — After you recognize the attacker’s intention to attack, you deal with the attacker before his intention become an attacking move.
They are all equally employed martial art tactics (so “go no sen" is not an inferior way to sen no sen or sensen no sen).”
So, what does all this mean? If you really think about it, what causes you to be held back in your performance whether it is at work, on the athletic field, or on the musical or artistic stage? That which holds you back is your mind, specifically your ability to focus on the task at hand. And, the key is that you cannot just focus some of the time when you feel like preparing and practicing. No, your ability to take your game to the next level will require you to remain calm, relaxed, and focused making “on-strategy” decisions all day, everyday. Executing “the plan” means being fully engaged, willing to give your best, and understanding exactly what you need to do to make a difference. In athletics and in business, you need to understand how to keep score (core metrics), how your personal actions influence the score, and you need to have prior knowledge (“mind moves first”) in order to execute the plan on a consistent basis.
Note that this Seven Arts change process applies equally to the minute-by-minute, hour-by-hour, daily focus required to overcome addictions of all kinds. After all, we are all addicted to “the way in which we have always done things” and this represents literally the attached mind that is holding us back! Unless your mind is 100% focused in the right direction, you cannot expect to take your game and performance to the next level.
The key to sustained improvement for individuals as well as corporations is to understand deeply, practice, and habituate/institutionalize the mental ability to remain calm and relaxed under the considerable stress of seeking continuous daily performance improvement. When the stakes are high the stress and pressure to perform becomes greater and greater whether it is advanced black belt testing, overcoming an addiction, or pursuing continuous improvement in a world class company.
In short, continuous performance improvement in the martial arts and in business means that you have to let go of tension, let go of the past (“the way in which we have always done things”), and have prior knowledge of, and confidence in, the future plan. You are really preparing to “boldly go where you have never gone before”! And that can be scary; unless you have (and believe in) an overall performance improvement strategy that when executed will lead to success.
Developing, practicing, and institutionalizing sensen no sen would enable you or your organization to anticipate obstacles and respond with corrective speed and accuracy. Whether you are responding to an attack in the martial arts, or a verbal threat on the factory floor, or an immanent strategic threat posed by a competitor with a new product or service, your ability (and your organization’s ability) to be at your best depends upon first calming your mind and then focusing it upon “on-strategy” tasks hour-by-hour every single day.
So, how then do you “take your performance to the next level?”
Overcoming an addiction and pursuing world-class performance both start with the MIND. At the end of the day, you must be able to focus, anticipate problems, respond in ways that are on-strategy (making good choices), and remain doing so on a consistent basis even under the daily stresses and strains occasioned by the pursuit of continuous improvement. As Tohei Sensei taught, “ki moves first” (related to Ueshiba Sensei’s sensen no sen) and “mind leads body” (related to Tempu Sensei’s shinshin toitsu-do).
Tohei Sensei’s ki-aikido teaching that “mind goes first” is woven through The Seven Arts of Change, but is especially important for practicing The Art of Preparation (Assessment), The Art of Relaxation (Clarity, Visibility, and Focus), and The Art of Conscious Action (Execution).
Schwarzman Scholars: The Right Idea at the Right Time
What if you were the kind of business leader that could envision the future and act upon that vision today? In the vernacular of The Seven Arts of Change, this would be practicing The Art of Preparation; acting now to prepare the conditions for a favorable future.
What if you could see the future and then act today in order to connect people, economies, and cultures for the good of the whole? This would be practicing The Art of Working Naturally in order to facilitate lasting, sustainable change.
What if you viewed free market capitalism as a gift enabling you to be so successful that you were determined to give back today thus enabling the education and success of future generations? This would be practicing The Art of Service.
What if today you realized deeply that your life was blessed because you were fortunate to receive the gift of nurturing parents, caring mentors, exceptional teachers, and dedicated co-workers? This sudden realization of immense gratitude would encourage you to practice The Art of Conscious Action and, in this case, motivate you to considerable generosity.
One hundred and ten years ago, successful British businessman Cecil J. Rhodes established the Rhodes Scholarship program enabling top students from the British Colonies, the United States, and Germany to attend prestigious Oxford University with the goal of promoting international understanding.
Today, successful American businessman Stephen A. Schwarzman has similarly established a scholarship program (Schwarzman Scholars) that will enable 200 of the best and brightest to study at the prestigious Tsinghua University in Beijing, China. Participants will be 45% American, 20% Chinese, and 35% rest of the world (top 20 economies). Scholars will study for one year in Beijing (with travel opportunities) and receive a Master Degree in any one of a variety of concentrations. The first class is set to graduate in 2016.
Schwarzman is the visionary Chairman and CEO of Blackstone, a leading private equity/asset management firm that he co-founded in 1985 starting with a modest $400,000. Today Blackstone has over 200 billion under management.
Question: Why is Schwarzman steering his significant philanthropic endeavors in this direction?
Answer: Because long term, Schwarzman understands that we need enlightened leaders who understand well what is to become the largest economy in the world. Like the vision of Cecil Rhodes, Schwarzman hopes that his foundation will enhance international understanding by preparing today the next generation of future leaders by exposing them to the country most likely to become the number one economy in the world in just a decade or two.
China is the second largest economy in the world and is currently growing three times faster than the United States! Indeed, while our employment numbers stagnate (even as the economy and stock market improve), China is creating 10 million jobs per year. Schwarzman wants to prepare us as a society (today) for what is to come. China is also becoming the United States’ largest creditor. Rather than becoming fearful and angry due to our relative under performance, Schwarzman wants to prepare America today for living and leading in a very different world tomorrow.
Education and understanding is key. As one who came to Furman University 30 years ago to teach Asian and Comparative Philosophy in the Southeastern United States, I tried to do the same; namely, foster international understanding by bringing different cultures and new ways of thinking to life for my university students. I applaud Scwartzman’s bold vision and investment in the kind of “hands on” educational experience that will surely help prepare the next generation of leaders for whom China will play a central role. Understanding Chinese culture, economics, business practices, and changing government policy deployment will be an asset to any leader in the coming decades. As Steve Schwarzman has said, China must become a part of our educational “core curriculum”, and not merely be an “elective” option.
And, the question you might be asking…”why am I choosing to highlight this investment in education as part of this Seven Arts of Change blog?” I want to share a conscious, heartfelt, and public thank you to my family and also my teachers and mentors at The University of Hawaii and in Japan. When I finished my dissertation research in Japan and then subsequently received my doctorate in 1980, Japan was seen as an economic miracle. Japan is the size of Montana, and yet, it became the world’s second largest economy. The American business world had far too few subject matter experts and I realized that the door was wide open for a young and eager scholar like myself. Even starting as an academic, doors unexpectedly opened for me in the business world working with the likes of Ryobi, Mitsubishi, Mita/Kyocera and many other multi-national organizations. Today I am filled with gratitude as I realize that none of these opportunities would have presented themselves to me had I not sought a unique educational track with mentors in Japan that took me under their able wings. As I am truly grateful for these educational opportunities, I applaud Schwarzman’s vision and generosity. It is wonderful that the next generation of business leaders will have this auspicious opportunity to study in detail the inner workings of what has become today the new second largest economy in the world.
The Life, Legacy, and Seven Arts Leadership of Nelson Mandela
An ongoing theme in this Seven Arts of Change blog is that leaders like Gandhi, Lincoln, King, and Mandela model “principled” leadership and inspire CEOs as they lead their organizations through sustainable change.
As the world reflects upon the life and legendary accomplishments of Nelson “Madiba” Mandela, it occurs to me to see his approach to leadership as richly aligned with the principles outlined in The Seven Arts of Change.
The Art of Preparation
Official biographer Anthony Sampson refers to Mandela’s 27 years in jail as a kind of preparation where he was able to develop “a philosopher’s detachment” such that he was able to learn how to be calm and relaxed under stress. Certainly every good CEO and leader must also develop the ability and capacity to master one’s emotions and not allow the daily fire fights of business to provoke a loss of composure, discipline, and/or integrity.
The Art of Compassion
Mandela’s life work stands as a principled testament for treating everyone with dignity and respect. He expressed this universal principle further as the noble cause of equal justice, and his natural actions arising from this basis secured the freedom for all in his native South Africa. Similarly, demonstrating compassion for others in the workplace is an effective leadership principle simply because it is consistent with human nature. We all desire to be treated with dignity and respect especially at work where human emotions and intense competition can sometimes bring out the worst in people.
The Art of Responsibility
Throughout his life, Nelson Mandela understood the power of acting responsibly. When serving a President of South Africa, rather than beating down his ideological enemies, he exercised disciplined restraint in order to create WIN/WIN conditions for all persons who (through his example) would learn to embrace change and work together within a new constitutional framework. In the same way, when organizations adopt an inclusive, highly participatory Seven Arts change process, then it is fair to expect every employee to act responsibly within the new system/culture that they have helped to create.
The Art of Relaxation
The African spirit of Ubuntu underscores our common humanity. People will naturally respond well to change when they are actively led by persons demonstrating the most basic human ethical principle: kindness. Simple kindness and accommodation, Mandela taught, are the seeds of real change. When people act out of kindness, it naturally triggers in others real calmness. In a relaxed environment, conflict can be addressed and problems can be solved precisely because people can now see clearly and make sound judgments. When organizations are faced with necessary change that inevitably surfaces fear, tension, and resistance, it is best to do everything possible to create conditions where doubt is removed and the new strategy is clear. When leaders of change can establish a clear direction and strategy, combined with transparent financials, then the organization can establish a kind of institutionalized calmness and trust that fuels lasting change.
The Art of Conscious Action
Mandela was very clear about his own values and principles. He was, in short, a very conscious leader who understood how to lead from the front. That is, he understood not only the power of simple acts of kindness, but also how to influence large-scale change through ritual and symbolism. Leaders of business organizations also have levers they can use to galvanize the collective spirit and shared experience of everyone in the company. In the Seven Arts change process, the CEO must lead by example and demonstrate the same values that he or she expects from everyone in the organization. Like Mandela, a CEO who is very visible leading the change process can use a wealth of tools that express their commitment to the change process.
The Art of Living Naturally
Even in prison Mandela began to build a network of loyalists equally committed to the cause of social justice. Overtime, the foundation was set to include a critical mass of followers who could lead a sustainable change process having many arms and legs. Similarly, in an organizational change process, real financial success and sustainability will require more than one charismatic champion. The CEO, no matter how committed and gifted, cannot execute all the change alone. Building a core team of change champions is critical. Each champion must understand that their mission includes developing people and preparing the next generation in order for the change process to last. In a Seven Arts organization, the change process grows and grows such that customers, suppliers, and shareholders all become active participants. Mandela, following the examples of Mahatma Gandhi and Dr. Martin Luther King, understood that real lasting change requires changing the mind-set of all those affected by the proposed change. At the end of the day, the leaders of sustainable change must first work to change the organizational thought process; and second, work to expand the circle of change agents working every single business day.
The Art of Service
Nelson Mandela has built a legacy leading change in ways that continue to inspire people all over the world. The legacy is based upon following simple ethical principles that inspire people and thus serve as a collective call to action. Simple actions that are based upon kindness, mutual respect, and service to others demonstrate a leader’s sincerity and integrity. The power to lead lasting change (for a company or a nation) springs from these most basic considerations. The universality and effectiveness of the Seven Arts of Change process is very well evidenced by the life and legacy of Mr. Mandela.
Un-Stuck: Improve Your Performance
Un-stuck - a TEDx Presentation
It was a real treat to give a TEDx talk last week in Greenville, SC. The theme for the TEDx program selection committee was “Living Your Life by Design!” Wow, that is a tall order for a 15-minute talk! Imagine what it would mean to truly “Live Your Life by Design”… it could be fantastic right? Just imagine the possibilities: you are living your life feeling empowered, there are no limitations, you feel calm, confident, expansive, grounded, centered, powerful, focused, and clear. You are the author of your dreams. Now that would truly be Living by Design!
But what if you feel stuck instead?
What if you do not feel grounded enough? Centered enough? Clear enough? What if you actually sometimes feel like a victim of all that is going on around you? What if you do not feel clear when you sometimes need to make important decisions? What if you feel that you are not properly prepared and supported? What if you know you do not have the right training, the right knowledge and those around you have all the control? What if you feel powerless?
There is a BIG DIFFERENCE in these two mindsets.
The first one is being able to truly live your dreams, but the second, sometimes all too familiar, scenario is one that I call simply being stuck!
I know what it feels like to be stuck and during this TEDx talk I shared with everyone what I have learned over a lifetime engaging the condition of stuckness. It is frustrating to feel small, ungrounded, unprepared, tense, and without focus. But I guarantee that it is possible to change your state of being from stuck to un-stuck, which is the same as living your life by design with intention, power, and focus.
Being stuck is a natural condition…it is in our biology, it is part of our neurological functioning. But it is not destiny. If you are not right now living your life with meaning, purpose, and intention, then you are probably somewhere in the stuck camp.
So, how do we become free of stuckness? How do we become calm and clear? How can we learn to be grounded and powerful each day where we can live our life as though we are the authors of our destiny?
It is quite simple and I look forward to sharing with you my story of experiencing and studying the phenomena I call being stuck. I will upload the TEDx presentation as soon as it is available in the coming weeks. This is just a heads up!
Let me add that the process of preparing (The Seven Arts, Art of Preparation) for this presentation was a great challenge that I would recommend to all of you. If you had just 15-minutes to explain how you would Live Your Life by Design… what would you say?
Prime Minister Abe and President Obama: Building Relationship is Key
Following the recent elections in Japan, the Liberal Democratic Party now has a super majority. I was disappointed to hear just days ago that newly elected Japanese Prime Minister Shinzo Abe was unable to work out scheduling difficulties with the Obama Administration such that the Prime Minister’s first visit abroad would be to the United States. I believe it is time to practice “The Art of Preparation” (Seven Arts process) in order to re-energize the relationship between Japan and the United States based upon trust and mutual respect. As President Obama begins his second term, both the United States and Japan have much in common with respect to the problems we encounter both domestically and internationally. Let me explain.
First and foremost, the United States and Japan cooperate on a global basis and together form the cornerstone of our mutual security interests in Asia. A strong, vibrant Japan (growing at 3% annually) is in the interest of Japan, the United States, and the global economy. Japan is the size of Montana and yet it is the third largest economy in the world following China and the United States.
Second, in recent years a polarized and ineffectual Congress/Parliament causing inefficiency and stagnation has weakened both Japan and the United States. Both nations need to put their “house in order” tackling government debt as a % of GDP. The United States has to control spending (the budget deficit) and focus upon growing exports (the trade deficit). Similarly, Japan, in addition to it’s debt burden, faces problems of demographics (aging population) and deflation.
Addressing these challenges in alignment would serve both nations. I agree with Robert Kimmitt* that we are going to witness (hopefully within the next two years) progress in trade for Asia as well as Europe. In Obama’s second term, the Administration will focus upon The North Atlantic Free Trade Agreement proposed by German Chancellor Angela Merkel (who will certainly be re-elected managing a 70% approval rating at home even while successfully steering the European Union around one challenge after another, especially Greece). And, in the Pacific, Japan will be a key participant in the G-20, the Organization for Economic Co-operation and Development (OECD), and Asia-Pacific Economic Cooperation (APEC).
Japan’s role in these global trade discussions is critical and yet I fear that Japan’s influence in recent years has been set back by a revolving door in the Prime Minister’s Office (6 persons in the past 7 years). Indeed, the average term for Japan’s Prime Ministers in the modern era is just 2 years! The strong support for Prime Minister Abe in Japan is something that can be leveraged such that Japan’s voice at the international table is strengthened. It is in the interests of the United States to have a strong Japanese representative where better results can be secured for Japan, the United States, and the global economy.
It is for these reasons that I hope experienced statesmen like Abe and Obama can form a personal relationship of trust and mutual respect - - both are at the beginning of what could be a mutually beneficial change journey. At the end of the day, getting the deal done, whatever “the deal”, requires compromise and mutual understanding. Cultivating this kind of relationships is key and at the heart of the Seven Arts change process.
I agree with Kimmett that the United States and Japan “need to make tough decisions at home and engage confidently in external discussions, including discussions with China. And ‘confidently’ means being willing to listen, learn and make changes, even as we defend our core principles. Japan, like any country, will defend very strongly its views on territorial and sovereignty issues. But I think it is important for Japan also to demonstrate willingness to engage in dialogue on specific measures to reduce tensions”.
When Prime Minister Abe’s trip to the United States is rescheduled (in February hopefully), I hope that the two leaders can prepare the way for a Seven Arts type relationship characterized by real trust and frank dialogue. In this way, as our nations confront real economic and security challenges, we can expect that our leaders have already paved the way personally so that in the future they can get down to business when faced with any emergency or important task. It would be wonderful if Japan were now entering a period of stability and international leadership. This was most recently the case during the able tenure of Ryozo Kato, Ambassador of Japan to the United States (2001-2008) who served the relatively long tenure of Japanese Prime Minister Junichiro Koizumi (2001-2006).
* I recently read a very smart piece (Asahi Shimbun, Jan. 13, 2012) written by Junji Tachino, the Washington Bureau Chief of the Asahi Shimbun. The article was based upon an interview with Robert M. Kimmitt who is an experienced diplomat with decades of Washington experience working in the State Department, Treasury Department, and also served as United States Ambassador to Germany. I found that the article was not only smart, but also it reflected core elements for managing change (Seven Arts) between governments.
Beyond the Fiscal Cliff: Let’s Operate from Abundance, Not Fear
We are all hopeful that sanity and rationality will prevail. We have before us a working model that recommends both spending cuts and mechanisms for collecting additional tax revenue. The gap we face is an annual deficit in excess of 1 trillion dollars. We must address skyrocketing healthcare costs, and the expanding cost of entitlements (as baby boomers become seniors), and we must also close the loop holes that create lost tax revenue occasioned by a broken system. The options are clearly spelled out in the bi-partisan Simpson-Bowles Report (The National Commission on Fiscal Responsibility and Reform). That Alan Simpson (R) and Erskine Bowles (D) could work out a bi-partisan model would be a good place to start for President Obama and House Speaker, John Boehner.
Actually, why not “think big” beyond the fiscal cliff? Instead of solving our deep and significant budget problems by operating out of fear (as in avoiding a scary “fiscal cliff”), why not use our present economic situation as an opportunity to solve our problems operating out of a mindset of abundance and fairness? This mindset of abundance is consistent with the Seven Arts change process and, I believe, is good for America’s economy long term.
Let’s be specific.
I recently saw an interview (conducted by Dr. Fareed Zakaria) with another high profile, distinguished bi-partisan pair. Imagine an O’Neill-Rubin Report, or better yet, actually following their recommendations for both tax reform and putting America back to work. Paul O’Neill, a Republican, former Secretary of the Treasury and former CEO of Aluminum giant Alcoa was trading recommendations with Robert Rubin, a Democrat, former Secretary of the Treasury and former Co-Chairman of Goldman Sachs. What struck me was the power of thinking big and using our current time crunch (approaching the cliff) as an opportunity to truly tackle all the problems that we know exist in our broken system.
For example, let’s think big (read “abundance”) and use the cliff (read “fear”) as an opportunity for Congress to:
- Fix our legalized system of corruption in Washington. Candidates for public office receive campaign funds from lobbies, corporations, and special interest groups. The same people get elected and then, in return (quid pro quo), create legislation that systematically reduces our annual federal tax revenue by bestowing preferred tax exemptions that amount to an estimated 1 trillion dollars in lost revenue. This lost revenue repeats itself annually because it becomes part of the tax code. As Zakaria stated, “It is the gift that keeps on giving!” Fix the tax code, make it fair to all, and the government nets 1 trillion dollars in annual revenue without raising taxes.
- By the way, a second benefit follows from the first. According to some analysts, eliminating tax preferred exemptions would enable the government to actually lower the current corporate tax rate from 35% to 28% making international investment in America much more attractive. Finding mechanisms to increase foreign investment would go a long way to put Americans back to work and stop the systematic out sourcing of American jobs. Corporations seek not only low wage workers abroad, but also a preferred tax system for conducting business overseas. Our tax system is not business friendly when compared to other nations actively seeking foreign investment.
- Simplify the operations of tax collection. We could replace corporate taxes, personal taxes, and payroll taxes all together if we adopted “pay as you go” tax often referred to as a value-added tax. Simply tax the consumption of goods and services we want and need. This seems like a big idea, perhaps even a radical idea, but it has been around for a long time and O’Neill suggests it could easily lead to the third big fix.
- Simply the system of tax collection. O’Neill suggests that the current system is very difficult to police and that an estimated 400 billion dollars of annual tax revenue is lost simply due to citizens cheating the system through non-filing or deliberate attempts to deceive engaging in fraud. To make matters worse, O’Neill points out that the current system required to collect taxes costs the federal government an estimated 431 billion dollars annually. As an experienced executive, he quipped that even a monkey could figure out a more effective and efficient system of fair tax collection. The system itself is broken and right now we have an opportunity to fix our system and prepare the country for economic growth and fair tax treatment for all American citizens.
Let’s think big, pull out a blank sheet of paper, and work together in a bi-partisan manner with a mindset that is operating out of a sense of abundance, not fear. President Obama already listens to Mr. Rubin, but I would argue that Paul O’Neill might have some ideas for turning around our economy just as he did the fortunes of Alcoa.
The business climate at present is uncertain which causes businesses to avoid capital investment. We have an opportunity to think bold, innovate, create certainty and fix our economic problems. Creating a sound and stable tax system we can believe in will spur growth, capital investment, and hiring thus putting more Americans back to work. As O’Neill says, “let’s put people back to work and give them a chance to compete”. I would add that The Seven Arts change process is exactly the right tool to enable employees to compete by giving them the tools to “be the best they can be” and succeed.
More Economic Bad News and the Good News of the Seven Arts
The World Economic Forum (WEF) Global Competitive Report entitled “The Global Competitive Index 2012-2013: Strengthening Recovery by Raising Productivity” has just been released. Unfortunately, the United States has once again fallen in the rankings from 1st in 2008, to 4th in 2010, to 7th in 2012. That’s the bad news.
However, here is some good news underscoring the universal application of the Seven Arts principles. Of the “12 pillars” used by the WEF to measure competitiveness, I’d like to highlight five (see below) that are related to the Seven Arts change process. As readers of this blog and The Seven Arts of Change know, engaging the Seven Arts significantly enhances a company’s financial performance and global competitiveness by creating conditions whereby employees are encouraged to grow and develop at work. And yet, as evidenced by more macro and micro-economic data, America is falling behind.
I’d like to see America return to a position of economic leadership, in part, by leveraging the Seven Arts change process on a grand scale. These principles that enhance a company’s productivity and competitiveness can be applied in any industry and in any location. I believe that the universal application of this transformation process is underscored further by the critical decision criteria used by the WEF to measure a country’s competitiveness all over the world.
Let’s consider five of these WEF benchmarks (called “pillars” in their report) that echo the importance of the Seven Arts change process aligning people development, process improvement (including technology), and delivering value to the marketplace. In this fundamental sense, a company’s competitiveness and productivity mirror a country’s ability to do the same. The conditions for success are so similar that I would advocate more companies adopting the Seven Arts approach to transformation and performance improvement. These sequenced principles have the power to not only help America return to a position of global leadership, but also to do so by helping every employee to engage in the challenge of personal growth in order to “be the best they can be”.
Here are five measures of long term productivity and competitiveness:
1. Higher Education and Training
Citing the report, “Quality higher education and training is particularly crucial for economies that want to move up the value chain by simple processes and products. In particular, today’s globalizing economy requires countries to nurture pools of well-educated workers who are able to perform complex tasks and adapt rapidly to their changing environment and the evolving needs of the economy”.
The Seven Arts change process is all about education and people development!
2. Labor Market Efficiency
Again, citing the report, “The efficiency and flexibility of the labor market are critical for ensuring that workers are allocated to their most effective use in the economy and provided with incentives to give their best effort in their jobs”.
The Seven Arts change process means putting the right people in the right positions, giving them the tools to succeed, and rewarding all. If you want people to” think and act like owners”, then I always say, “make them an owner through pay for performance systems and rewards”.
3. Technological Readiness
“In today’s globalized world, technology is increasingly essential for firms to compete and prosper. The technological readiness pillar measures the agility with which an economy adopts existing technologies to enhance the productivity of its industries, with specific emphasis on its capacity to fully leverage information and communication technologies (ICT) in daily activities and production processes for increased efficiency enabling innovation for competitiveness”.
The Seven Arts change process always means giving every employee the information and communication tools they need to be successful. If you expect world class performance from every employee, then it is required that world class communication tools be afforded each member of the team.
4. Financial Market Development
“An efficient financial sector allocates resources saved by the nation’s citizens…to their most productive uses. A thorough and proper assessment of risk is therefore a key ingredient of a sound financial market.
Business investment is also critical to productivity…the banking sector needs to be trustworthy and transparent…”
Using the Seven Arts change process means that the company allocates financial resources by investing in people. The investments ought to be productive in the sense of generating significant financial performance improvement. In this way, the shareholders (and employees) enjoy a significant ROI while enhancing global competitiveness. Moreover, the Seven Arts change process seeks “boardroom awareness” for all. Therefore, trust, integrity, and financial transparency are a must.
5. Health and Primary Education
“…a healthy workforce is vital to a country’s competitiveness and productivity. Workers who are ill cannot function to their full potential and will be less productive. Poor health leads to significant costs to a business as sick workers are often absent or operate at lower levels of efficiency. Investment in a provision of health services is thus central for clear economic, as well as moral considerations”.
During the Seven Arts change process, employees learn principles of peak performance characterized by mental, emotional, and physical fitness. To be the best you can be at home and at work requires unifying one’s mind and body. Employing the Seven Arts helps everyone to be calm, focused, and aligned. This heightened level of activity creates “eustress” typical of peak performance. Without clarity and alignment in an organization, dysfunctional “distress” creeps in which then contributes to sickness and ill health. Ensuring employee health and safety is a must.
In short, the much anticipated and recently released WEF report “Global Competitive Index 2012-2013: Strengthening Recovery by Raising Productivity” underscores one more example of the power and effectiveness of using the Seven Arts principles to set people up for success using five pillars of prosperity - - education, financial incentives, information (making tools available to connect people and improve the process), investment capital, and a focus upon employee health and safety.
Click image to see the full report:
Private Equity is NOT the Villain
On a recent trip to Minneapolis-St. Paul, I read an editorial in the local paper The Star Tribune. Casey Whelan of Maple Grove wrote,
“Public pension funds, union pension funds and teacher retirement funds have invested, and continue to invest, a significant amount of money with private equity firms. As these firms profit and create wealth, the retirement funds are able to pass it along to their members. Since these funds are owned by millions of hardworking citizens like you and I, you and I are direct beneficiaries of the success of private-equity firms. They are a vital part of a well-functioning, free-enterprise economy that benefits both Republicans and Democrats.”
In my opinion, this is exactly correct and I know this from firsthand experience. Indeed, the benefits to private equity investors can yield even greater dividends than the economic benefits stated above. The lives of hard working employees of companies owned by private equity firms can be significantly improved with the right kinds of performance improvement investments. At Wellspring Capital Management, for example, we are working to “Secure the Future” for all employees at JWAluminum. By changing the way we work, we are creating a world class high performance culture that is becoming a sustainable competitive advantage in the marketplace. Creating this kind of WIN culture at JWAluminum will increase the overall value of the company thus improving the ROI (return on investment) that helps both investors and owner-operators (the employees at JWAluminum).
Last year at Wellspring’s Annual LP (Limited Partner) Meeting, it was my pleasure to give the keynote address. With billions of investment dollars represented by the limited partner firms in the room, I shared real examples of successful turnarounds and explained in detail the reasons behind the dramatic turnaround success of JWAluminum in the very first year that we began the WIN Initiative (2010). This Seven Arts approach to business transformation included what we call “The Stake in the Outcome”. This new performance-based company policy made every JW employee bonus-eligible based upon executing the company’s annual objectives. The logic is simple, real, and honest: If you want employees to think and act like an owner every single business day, then I always say, why not make every employee a bonus-eligible owner?
The success continues to this day as right now, in 2012, every JW employee is on track to secure a 3% to 9% (of annual salary) bonus at the end of this fiscal year. Accordingly, all JW employees care (as owners) and all eyes are upon our WIN target behavior (see Chapter 3) of “doing what we say”… thus executing our 2012 annual business objectives.
The fact is, private equity is good for the economy. With a concerted effort to retain jobs in this country, PE firms like Wellspring Capital Management can do much to improve a company’s performance thus enabling it to better compete and return value to both investors and employee-owners. JW employees are literally changing the way they work by 1. developing people through continuous training and education (including financial literacy and transparency), 2. improving processes (IT, finance, and sales,) and 3. delivering superior products and value to the marketplace (operations). In combination, we are doing all this at JWAluminum because the premier private equity firm Wellspring Capital Management is willing to invest in people! The employees of JWAluminum now have the training and education means and the necessary financial support to secure their future. By working together, we are creating a high performance WIN culture that gives both employees and investors a sustainable competitive advantage.
Let’s break this down into simple steps. Private equity firms like Wellspring are first interested in buying companies that are ripe for change and at the right price. Second, the change process requires finding superior leadership talent capable of designing and executing operational improvements. The third and final stage for private equity entails selling the much improved company at a higher value (and multiple) in order to return to their limited partner investors a profit. (Remember too, these limited partners are you and I in the form of our retirement funds that include…teacher retirement funds, union pension funds, railroad trusts, university endowments, and bank investment funds). The beauty of the Seven Arts change process is that this formula for success is now shared with every employee. By providing real, honest, and transparent business education and training, the quality of life for every owner-operator employee can dramatically improve at work!
At the end of the day, PE firms seek innovative ways to enhance a company’s value by improving its measurable performance. The Seven Arts of Change principled-process can be followed by anyone with the desire to improve their company’s performance.
Bottom Line: When you treat people with dignity and respect and give them the educational tools to succeed in business, then you are simultaneously improving the quality of life for every employee AND you are also improving the financial performance and ROI for all investors. All it takes to achieve this WIN/WIN situation is to align the interests of the employees with the processes that lead to change and performance improvement.