STRATEGIC SOLUTIONS:  LAW OFFICE OF MARK J. GUAY, PC

The Commission on Corporate Governance [CCG] of the New York Stock Exchange just issued their Report on good corporate governance in response to the financial crisis in 2008 and 2009. It lists 10 key principles.  Principle #2 is very interesting.  It states that, although there has been an emphasis on the board – shareholder relationship in the recent years, the CCG finds that “the critical role of management in establishing proper corporate governance has not been sufficiently recognized”.  The CCG states that management must create a “culture of performance with integrity” and accountability systems. Healthy debate, which the CCG refers to as “constructive tension” is also needed between the board and management.  In the wake of many major corporate tragedies lately, the CCG is now shining the spotlight on execution and not just strategy.   So how is your board working with your managers?

The Unites States and China have always rallied their respective countries with a good metaphor.  In the late 50’s, when the Soviet Union launched their first satellite in orbit the United States responded to the challenge by calling it a “sputnik moment”. Today, China’s attempt to reconcile its controversial past and promote a global image of cooperation, just erected a statue of Confucius on Tiananmen Square. One metaphor focuses on energizing, the other on harmonizing. Both are important in following strategy at a global level. Why? Take for example the Executive Order signed by President Obama on January 18^th.  It states as its premise that, to reform government regulations to ensure maximum benefit, each agency “may consider [and discuss qualitatively] values that are difficult or impossible to quantify, including equity, human dignity, fairness, and distributive impacts”.  Regulatory integration and innovation are not a zero sum game.  The key competitive advantage of great companies is their ability to synthesize historical core values with groundbreaking products and services. So in 2011 lets energize AND harmonize and use the combined metaphor to SHOW the world HOW to make positive change.

The Economist Magazine recent article addressed the seminal problem of what risk will hurt you the most – either what you don’t know or what you know but don’t interpret properly and implement remedial action.  The article focus was on the shadow banking system [non-bank financial systems] and the recent recession. But the lesson learned [or not] was that the key economic risks were not buried in data but rather in “plain view” – inflated housing prices and some banks low capital level. But “plain view” facts are not literally in plain view if you do not see them.  Some refer to this as black swan risk management. Whatever you refer to it as, the circumstances of these past few years is a reminder that if you change the way you look at things, the things you look at change. If so, how are you changing the way you look at 2011?

Values and traditions are two words that come to mind when we think of the upcoming holidays in December. But these are also the two words that the Economist magazine [October 30th] cited as the most important “intangible things” for good corporate governance [versus "ideal constitutions"]. Why?  Because recent studies show that corporate culture trumps corporate checklists when it comes to predicting the success of a company. Unlike check the box rules, a good corporate culture fosters good habits.  So what values and traditions do you want to carry forward into 2011- and which ones do you want to leave behind in 2010? December is a good time to “mull it over”.

How do you know that the answer to your current problem may just be very simple but, because you assumed it was too complex or expensive to resolve, you were afraid to ask for help?  Conversely, how do you know that an issue you have that seems simple may, in fact, be a whole lot more complicated – so you can’t afford not to solve it or it will get even worse?  How do you know unless you ask?  Here is one example. The saying goes that great companies are bought – not sold.  If so, ask yourself why anyone would want to buy your company? If so, why? If not, why not? How do you know unless you ask?

The Story of the Rug Merchant

The simple story of the rug merchant is about a man who stepped on a bump in the rug in order to flatten it out only to see the bump reappear in another part of the rug. He repeated his actions again and again yet the bump reappeared again and again. Finally, in frustration he lifted the rug, and as he looked underneath, an angry snake slithered out.

This story is shared by the famous business consultant Peter Senge in his books as an example of a “find and fix” mentality in which companies try to solve dynamic problems with static or incorrect solutions. Frustration sets in, or worse, the company is lost before it knows what happened. It’s another example of your biggest risk which is “what you don’t know that you think you know.” Solution: learn about the problem first! Next, play what I call business BINGO which is the confluence of your Goals and Tasks and the people performing same. Of course in order to play you need to know your Vision and Mission. If you are unsuccessful in “find and fix” mode, over and over again, maybe it’s time to start learning another way to play the game of business?

Fundamentally speaking, strategic planning is basically a 3 step process. First, a company’s Vision is supposed to be abstract and directional. Most companies know it answers the question WHAT you are all about. It’s a picture of the future. Step two, your Mission Statement is your purpose.  It’s your concrete descriptive version of your raison d’être. It’s WHY you are a company.  Step three is to figure out HOW you plan to connect your Vision and your Mission. The right brain approach is to focus on core values such as trust, respect, and team work. The left brain approach is to list all the Goals and Tasks to implement the Vision and Mission. The former is more intrinsic, the latter is more extrinsic. Some companies tend to emphasize one or the other – you need both.  Thinking in the conjunctive is too often neglected because we tend to habitually follow our personal proclivities under the assumption that critical – linear thinking is the only way to go. The problem is that it fails to take advantage of lateral [non-linear] thinking. As Apple Computer coined it, we need to “think different[ly]”.

A typical Monday.  You need to make some important decisions so you call a meeting. Why?  Organizational behavior expert Chris Argys writes that “the value of a group is to maximize individual contribution”.  The meeting has an agenda. OK so far. Then it devolves into what is called “rational ritualism” where everyone does a data and interpretation dance. Decisions are made using critical thinking methodologies such as deductive and inductive arguments. Why? “It’s the only way we know how” is the usual answer. Yet your company still has problems but you still meet the same way.  So what is the solution? You need to get beyond critical thinking so that you can create a great thinking machine. How? It’s sometimes referred to as “metacognition”. There are many ways to think, thinking only one way is like a baseball cap – it’s “one size fits all”. Business is not simple so if you don’t explore metacognition you are leaving a valuable strategic resource untapped. Or as one of my professors once said ” there is always a simple solution to a complex problem, and it’s usually wrong”.

Are you spending most of your time “making decisions” or “solving problems” as Peter Drucker once phrased it? How do you tell the difference? Decisions are often about next year, solving problems is usually about this year. Decisions can be very few, problems are often many. Decision making is usually on the balcony. Solving problems is usually on the dance floor. Decisions are often the most productive use of your time. Solving problems is often the least productive use of your time. Decisions are usually about strategy. Solving problems is usually about tactics. Want a simple test? Ask yourself, how big is the impact of the time you spent on the last matter you worked on?  I’d like to hear from you.