The Performance Improvement Blog

Management at the Bottom of the Pyramid

Much of what I’ve posted in the past has been about management and leadership in resource-rich organizations in developed parts of the world. These are organizations that sell products and services to people who can afford cars, hotels, and washing machines. But what about management and leadership for economies at the base of the economic pyramid? Can we develop business leaders among the four billion people around the world living in poverty?

Many excellent examples exist of successful business management in these communities. Local entrepreneurs, in some cases with the help of multi-national corporations, have started companies that employ local people and provide products that local people can afford. Grameen Bank’s micro-credit program might be one of the most famous because the founder, Muhammad Yunus, received the Nobel Peace Prize in 2006 for the business opportunities Grameen had given to many local entrepreneurs throughout the developing world. Some other examples of success at the base of the pyramid (BoP) are:

• VisionSpring. Assisted by the William Davidson Institute, this NGO employs people in remote villages in India to bring desperately needed affordable vision care products to some of the poorest people in the world.
• BMVSS. Another NGO that since 1975, starting in India, has supplied a high quality prosthetic free of charge to poor people who have lost part of a leg due to accidents and land mines. Donations pay for the “Jaipur Foot,” which is made by local workers with local materials and costs only about $30 to $40 to produce.
• PRODEL. An organization for small-scale farmers in Ecuador that, with the help of AED, is assisting these farmers in creating business opportunities for themselves (for example, exporting coffee beans) and learning how to develop a stable economy.
• Acumen Fund. This is an investment vehicle that provides financing and management assistance to social ventures. Each recipient organization uses a business model to bring about social change in a developing nation.

Business development at the base of the pyramid can also be found in developed countries. Stuart L. Hart and Monica Touesnard report on a number of credit unions in the U.S. that are using innovations in financing to help poor people in their local communities.

In each of these situations, skills are required that are not typically taught in western business schools. According to C.K. Prahalad and Stuart L. Hart, in their article "The Fortune at the Bottom of the Pyramid,” being successful with this market requires a different set of abilities than are applied by western managers, particularly in large, multi-national corporations. They write this about BoP leaders:

Creativity, imagination, tolerance for ambiguity, stamina, passion, empathy, and courage may be as important as analytical skill, intelligence, and knowledge. Leaders need a deep understanding of the complexities and subtleties of sustainable development in the context of Tier 4. Finally, managers must have the interpersonal and intercultural skills to work with a wide range of organizations and people.

In addition to those skills, it appears that managers at the base of the pyramid need a wide range of competencies including:

• A mental model that the world’s poor are a viable market worth pursuing.
• The willingness and skill to engage all sectors in business development – multi-national corporations, governments, NGOs, tribes, religious institutions, and any other significant segments of local society.
• Respect for local people who might come from a different socio-economic background.
• Ability to collaborate with people who do not have literacy skills taken for granted in people who are higher on the economic pyramid.
• Ability to co-create business solutions with local people and institutions.
• Ability to bring innovation to western business models.
• Being open to experimenting and failing and changing an approach based on the data.
• Ability to adapt technologies to solving local problems.
• Having both local and global knowledge.
• Ability to learn from new cultural experiences.

Ted London, professor in the Ross School of Business at The University of Michigan and the William Davidson Institute (WDI), has begun to address some of these competencies. He teaches a class on base-of-the-pyramid business. According to the newsletter of WDI:

The course integrates concepts of strategy, international business, non-profit management, and poverty alleviation to stimulate the leadership skills and competitive imagination needed to create successful BoP ventures.

This kind of course is certainly important. It educates MBA students in a western university about BoP issues. However, we also need to find ways to develop managers among the people the BoP approach is intending to help.

Good management at the base of the pyramid is about more than jobs and higher incomes for poor people. It is not too grandiose to conclude that developing effective managers and leaders at the base of the pyramid is about world peace and prosperity. Prahalad and Hart say it this way:

…MNC investment at “the bottom of the pyramid” means lifting billions of people out of poverty and desperation, averting the social decay, political chaos, terrorism, and environmental meltdown that is certain to continue if the gap between rich and poor countries continues to widen.

Über-Lessons For Leaders

Great leaders learn from their missteps. Thomas L. Friedman, in his column in the New York Times today, talks about a new book by the noted pollster Stanley B. Greenberg titled, “Dispatches from the War Room” which describes the “crashes” experienced by Bill Clinton, Nelson Mandela, Ehud Barak and Tony Blair and what they learned from these very difficult challenges to their leadership. Friedman sums it up with this wonderfully insightful conclusion to his column:

You can’t be too honest in describing big problems, too bold in offering big solutions, too humble in dealing with big missteps, too forward in re-telling your story or too gutsy in speaking the previously unspeakable.

R. L. Polk & Co., University of Michigan, Comerica, NSF International Receive HR Award

Four Michigan employers received the prestigious 2009 Arbor Awards for Excellence in recognition of their innovative human resource strategies that are helping to build Michigan’s emerging knowledge-based economy. The awards were presented March 12 at The Ritz-Carlton in Dearborn, Michigan.

R. L. Polk & Co., a global company that specializes in automotive information and marketing solutions, is pioneering new methods of recruiting Gen X and Y, high-tech talent using social media strategies such as chat rooms, Facebook, Twitter and a robust internship program. Their philosophy is to “Hire slow. Hire tough,” taking two to three months or longer to make the right hire. As a result of Polk’s recruiting strategy, employee recruitment, retention, and satisfaction have increased dramatically. Named as a “Cool Place to Work” by Crain’s Detroit Business in 2007, 86.5% of employees surveyed recently would recommend Polk as a place for employment.

University of Michigan employs more than 27,000 people involved in higher education, research and health care who have serious challenges communicating with their leaders. Voices of the Staff is an award-winning initiative that annually involves 120 people from all areas of the university and health system in sharing their ideas and concerns with President Mary Sue Coleman and top administrators. This “bottom-up” communications initiative has been successful in contributing to major changes in the University and to improving employee engagement.

Comerica Bank, a subsidiary of Comerica Incorporated, has a business footprint across five states: Arizona, California, Florida, Michigan and Texas, with select businesses operating in several other states, as well as Canada, China and Mexico. In 2006 Comerica invested in HR by building its HR Academy, an internal service and career development learning center for human resource professionals at every level of the organization. More than 130 HR colleagues (40% of whom were new in 2006), have participated in the HR Academy’s virtual learning program that, among other benefits, enables HR professionals to build contemporary HR competencies, a personal career plan, and a deeper business skill set.

NSF International, a nonprofit global public health and safety certification organization based in Ann Arbor, is expanding its business by listening to its employees at all levels and functions in the organization. Employee Innovation Teams engage employees in idea generation, ensuring that anyone with a good idea is heard, and then evaluating their ideas for their market potential. Employees’ ideas are being implemented with a positive effect on NSF’s bottom-line. For example, employee ideas have resulted in a new Toy Safety Program and the new “Smart Choices Program,” alerting consumers to smarter food choices while shopping.

The Arbor Awards for Excellence, which recognizes best practices and innovation in human resources, is sponsored by The Arbor Consulting Group, Inc., a national human resource management consulting firm based in Northville, Michigan and by Eastern Michigan University, Master of Science HR/OD Program. This year marks the 10th anniversary of the award.

“As Michigan employers face unprecedented challenges, the strategic leadership role of human resources professionals has never been more important,” says Joan Moore, J.D., SPHR, president of The Arbor Consulting Group, Inc. “If we are to succeed in moving to a knowledge-based economy, we need to invest in the development of our greatest asset, our people. HR plays a key role in attracting and developing Michigan’s talent pool. We have strong leadership in the field of human resources in Michigan and, as our Arbor Award winners demonstrate, these talented professionals can help make the difference in our state’s success.”

Lead in Tough Times As You Should Lead in All Times

You’d think retention bonuses were the only way to keep and motivate your best people. At least, that’s what AIG would have us believe. But open, honest communication all the time is better for retaining employees during the current recession and best for any organization in the long run.

Paul B. Brown, in a recent column titled “How to Lead in Tough Times” has accumulated leadership advice that is good for any time. This is my synopsis of what he wrote:

• Get out in front of negative events so that the rumor mill doesn’t make things worse than they already are. This is particularly difficult to do in this age of instant messaging, which makes it all the more important to be transparent.
• Put things in perspective so that everyone understands events in the context of the ups and downs of business over time.
• Involve employees in identifying opportunities to reduce costs and increase revenue.
• Be positive and optimistic. If you can’t be, stay away.
• Tell your best people how important they are to the organization and how much you need them to make the company successful over the long run.
• Volatility, uncertainty, and complexity will continue to be the norm, not the exception. Keep focused on your destination while being flexible about how to get there.
• Get the truth out in the open so that everyone can deal with it. Contrary to what Colonel Jessep said in A Few Good Men, your best employees can handle the truth.

In summary, Brown quotes F. Scott Fitzgerald (Esquire, 1936): “The test of a first-rate intelligence is the ability to hold two opposed ideas in the mind at the same time and still retain the ability to function. One should, for example, be able to see that things are hopeless and yet be determined to make them otherwise.”

Some Wall Street Leaders Never Learn

Leaders and organizations make mistakes. And we’ve seen plenty of evidence of mistakes made over the past few years by many previously highly respected financial firms. The tragedy is that some of these leaders and organizations have not learned from their mistakes, mistakes that have dramatically affected the economic well-being of millions of people. William D. Cohan, author of House of Cards: A Tale of Hubris and Wretched Excess on Wall Street, in his op-ed piece in the New York Times titled, “A Tsunami of Excuses,” contrasts Wall Street executives who haven’t learned from what went wrong with those who have learned. He quotes the former CEO of Bear Stearns responding to questions from the Senate Banking Committee:

I can guarantee you it’s a subject I’ve thought about a lot…Looking backwards and with hindsight…If I’d have known exactly the forces that were coming, what actions could we have taken beforehand to have avoided this situation? And I just simply have not been able to come up with anything ... that would have made a difference to the situation that we faced.

Compare this to the Morgan Stanley CEO’s comments to Congress:

The events of the past months have shaken the foundation of our global financial system…And they’ve made clear the need for profound change to that system. At Morgan Stanley, we’ve dramatically brought down our leverage, increased transparency, reduced our level of risk and made changes to how we pay people…We didn’t do everything right. Far from it. And make no mistake: as the head of this firm, I take responsibility for our performance.

What a difference between these two leaders! We need more like the Morgan Stanley CEO, Wall Street executives who learn from their mistakes, who take responsibility for their actions, and who help everyone else in their organizations continuously improve performance and do the right thing. Otherwise, how can we have confidence in our financial institutions?

Balanced Leadership

In these tumultuous times, with the economy in turmoil and so many organizations teetering on the brink of insolvency (businesses, nonprofits, and governments), we need leaders we can believe in. Rob Pasick has given us a book, Balanced Leadership for Unbalanced Times, that can help leaders become the kind of honest, trustworthy, transparent, and inspiring people our organizations need, now more than ever.

Pasick offers 20 principles that define a "balanced leader":

1. You balance your needs with those of others in your organization.
2. You balance your needs with those of others in your family.
3. You manage your energy.
4. You manage your time.
5. You adhere to your values.
6. You keep an optimistic outlook while remaining realistic.
7. You cultivate consistency while adapting to change.
8. You practice self-reflection.
9. You maintain your emotional equanimity.
10. You recognize and manage your blind spots.
11. You leverage your strengths while managing your weaknesses.
12. You try to see yourself as others see you.
13. You alternate periods of hard work with periods of sustained rest.
14. You play as hard as you work.
15. You take chances and make mistakes.
16. You acknowledge your mistakes.
17. You learn from your mistakes.
18. You maintain a good sense of humor.
19. You cultivate friends and relatives to keep you on the right path.
20. You never do any of this alone.

These are the kinds of leaders we desperately need. These are leaders who are willing to accept responsibility for their mistakes and learn from what they did wrong and what they did right. Balanced leaders, according to Pasick, do this in all aspects of their lives. Here's hoping for more leaders who are continually striving for balance.

Zappos Attends to the HOW of Business

Zappos, a billion dollar e-commerce business on Fortune Magazine’s 2009 list of the 100 Best Companies to Work For, does some quite innovative things in how it hires, trains, retains, and downsizes (when needed) its workforce (See the RealTime Leadership blog). But most interesting to me is how Zappos creates a culture that supports employee and customer engagement. CEO, Tony Hsieh, talks about the importance of happiness in his company culture. He writes:

Zappos is about delivering happiness, whether for customers (through customer service) or for employees (through company culture). It's been interesting thinking about how all of my personal learnings about happiness can be applied to delivering happiness in the business world as well.

Hsieh emphasizes how his company works (and how he works) rather than what they sell. This is also the theme of Dov Seidman’s book How: Why How We Do Anything Means Everything..in Business (and in Life). At his blog he writes:

Human conduct — how we do what we do — represents the next frontier of powerful differentiation. The qualities that many once thought of as “soft” — trust, integrity, honesty — are now the hard currency of business success and the ultimate drivers of efficiency, productivity and profitability. Connections based on these values can reduce corporate governance risks and supply chain disruptions, enhance customer experience, help executives exert greater influence over a highly decentralized global workforce, and ultimately lower costs and boost revenues.

Zappos appears to be an excellent example of operationalizing the value of “trust, integrity, honesty” that Seidman addresses in his book and on his blog.

Communicate, Communicate, Communicate!

In John Baldoni’s latest book on leadership, titled Lead by Example, lesson nine is the one of 50 lessons he offers that resonates most strongly with me. It is about communication. Baldoni writes:

Communication is rarely a given; it must always be put into practice. It has become a cliché unfortunately. One of the leading causes of organizational underperformance is a failure of communications. Often that failure has little to do with words. It has everything to do with attitude and outlook…It comes down to the essence of what communication from a leader really is. And that is connection. It is a leader’s responsibility to be present to give direction, listen to what people have to say, seek input from others, and learn what could or should be done.

Baldoni gives excellent examples of communication from the actions of Franklin Roosevelt, Lyndon Johnson, and many others. The book has been well received. T&D (March 2009) wrote this about Lead by Example:

While your bookshelves may already be stuffed with books on leadership, make room for Lead by Example. Each three- to five- page lesson is filled with leadership insight and anecdotes, qualifying it as an attainable read for even the busiest professional.

Baldoni has produced an excellent compilation of the characteristics, in practical form, of good leadership. If we could get leaders to pay attention to just one of these, communication, that would go a long way to improving the performance of our organizations. In the current economy, with the failure of so many companies, this need is greater now than ever. Employees, suppliers, shareholders, and the general public desperately need leaders who communicate with authenticity, consistency, and clarity.

Less Training; More Impact

Spending on formal training of employees has had the largest year-to-year decrease in ten years with spending, according to Bersin & Associates, down 11% per employee . This is not surprising given the pressure that all companies feel to reduce costs. However, the need for employee learning, whether that is customer service, sales techniques, project management, teambuilding, communication, leadership, or any of a wide range of technical competencies, is greater than ever. Effective training is critical for companies to get through this recessionary economy and emerge on the other end ready to compete. It is essential that every precious training dollar is used wisely.

The 5As Framework represents a way of thinking that will help you ensure that your investment in training will contribute to achieving business goals. Sean Murray and I have recorded our February 26th Webinar on the 5As Framework and this is now available for your viewing and listening pleasure. I would appreciate hearing your reactions to the Webinar and the 5As Framework. Please post a comment.