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ebbfgovernance keynote: aligned human networks by James Jennings

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10 years ago, James started using open-book management, a governance model that embodies the values of justice, equity and human nobility. Far more than radical transparency, open-book teaches universal financial literacy so that everyone can speak the same language. It unifies goals, engages employees in the management of the company and shares the rewards of success. The hard outcomes are growth and profitability. The harder to quantify benefits are greater collaboration, engagement, ethical behavior and sustainability.

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ebbfgovernance keynote: aligned human networks by James Jennings

  1. 1. Geneva - 17th to 20th May 2018 ebbf’s 28th international learning event ethical business building the future, rethinking the governance 
 of your organization #ebbfgovernance proceedings Keynote James Jennings
 Aligned Human Networks
  2. 2. Aligned Human Networks James Jennings At One, Sàrl ebbf InternationalConference onGovernance Geneva May 2018 © At One Sàrl 2018
  3. 3. koan Noun: an unsolvable riddle to show the limitations of rational thought © At One Sàrl 2018 Notes: A Koan is an unsolvable riddle in Zen Buddhist practice to show the limitations of rational thought and provoke Enlightenment.
  4. 4. You know the sound of two hands clapping; tell me, what is the sound of one hand? © At One Sàrl 2018 Notes: An example is What Is the Sound of One Hand Clapping. How many of you have heard of it? Raise your hand. Now clap. Kidding. Why go to the trouble of showing the limits of rational thought?
  5. 5. © At One Sàrl 2018 Notes: Economic theory is based on a expedient fiction called homo economicus - rational actor. It is expedient because it makes the math easier. It doesn’t always make for better answers, just easier calculations. Sometimes we have the same temptation with governance.
  6. 6. When an economist says the evidence is “mixed,” he or she means the theory says one thing and the data say the opposite. - RichardThaler © At One Sàrl 2018 Notes: DickThaler was one of my professors 25 years before he won the Nobel Prize for his contributions to Behavioural Economics. Perhaps I should call him Richard now. Anyway, after he won, a journalist asked him what he was going to do next. He said he was going to put human beings in economics. So let’s start with human beings in our discussion of governance. Governance is an expression our beliefs and aspirations and it has to work for human beings as we are, not a fiction like homo economicus.
  7. 7. © At One Sàrl 2018 Notes: Where to begin with humans? We are complex and layered. I propose to begin at the top with the pinnacle of human awareness and insight. In religion, philosophy, politics, art we find Enlightenment.That is Enlightenment with a big E.
  8. 8. © At One Sàrl 2018 Notes: Man exiting Plato’s cave and being blinded by the sun, Arjuna in the Bhagavad Gita being blinded by Krishna who is brighter than a thousand suns, St. John on the road to Damascus being blinded for 3 days by a light in the sky.
  9. 9. © At One Sàrl 2018 Notes: Despite the appearance that only a chosen few experience Enlightenment, we all have the biology for it. It is fundamentally inclusive not exclusive. Researchers using brain scans have identified 3 parts of the brain that are effected during and after an Enlightenment experience. and we all have those parts. If you hold your hands like this and place them against your head, behind your forefingers is the dorsolateral prefrontal cortex.This part of the brain is normally most active when you are thinking about anything or focusing attention on a specific task like solving a math problem. Inside thumbs is the parietal lobe, where your sense of self originates. In both these areas, during an Enlightenment experience, activity drops 40% or more.
  10. 10. We are One © At One Sàrl 2018 Notes: One’s sense of self dissipates or is extinguished.Thinking shuts down. Sensing goes into overdrive. People describe an instantaneous awakening, a bright light, a sense of super-connectedness or unity with everything everywhere. That sense of connectedness can be distilled into three words. We are One. [pause and pause again breathe] Looking around the room, many of us have experienced it or believe it. why did I start with We are One? When thinking, there is always a risk that we start with homo economicus or some other expedient fiction. By starting with the highest level of human insight, we can align the governance system and hold it accountable to our humanity.
  11. 11. © At One Sàrl 2018 Notes: For example,Thomas Jefferson wrote “We hold these truths to be self evident, that all Men are created equal.
  12. 12. © At One Sàrl 2018 Notes:The US Constitution begins We the People in Order to form a more perfect Union establish Justice. Notice that justice is first. Ahead of domestic tranquility, common defense and general welfare. If you look behind Equality and justice you see we are one.
  13. 13. © At One Sàrl 2018 belief goals language Commun- ication Incentives value proposition leadership culture Notes: ebbf is ethical business, so let’s apply we are one to governance in business. First lets look at common mechanisms of governance. goals, language, communication, incentives, value proposition, leadership, culture
  14. 14. © At One Sàrl 2018 belief goals language Commun- ication Incentives value proposition leadership culture Notes: together and in myriad combinations, they can make a system of governance. Governance is not a silver bullet, more like a silver web.The pieces support and amplify each other.
  15. 15. © At One Sàrl 2018 belief goals language Commun- ication Incentives value proposition leadership culture Notes: together and in myriad combinations, they can make a system of governance. Governance is not a silver bullet, more like a silver web.The pieces support and amplify each other.
  16. 16. © At One Sàrl 2018 We are One Goals Language Commun- ication Incentivesvalue proposition leadership culture Notes: How may goals? Many or one? One. How many measures or KPIs? Many or one? One. How many conversations about performance? Many or one? One. How incentive pools? Many or one? One. You might have started to think about how this might work or why it can’t work. One conversation? With everyone? Sales and Operations don’t have the same goal. Indulge me a few more minutes.
  17. 17. Bob Stiller • Open-Book Management • Appreciative Inquiry • GettingThings Done • Mindfulness • Situational Leadership • And others… Notes: From 2000 to 2009, I worked at Keurig Green Mountain, a publicly traded American coffee company, as it grew from $100 to $900 million. Bob Stiller, the founder and CEO, was a visionary who brought many practices into the company that expressed his fundamental belief in people. One was open-book management.
  18. 18. © At One Sàrl 2018 Goals Language Commun- ication Incentives Notes: Open Book Management is a system of governance that has one goal, one conversation about performance, and one universal incentive pool.
  19. 19. Things Money © At One Sàrl 2018 Notes: For everyone to be able to participate, we all need to speak the same language.To enable us to create the future together, we have to be talking about the future. Let me say a little more about these. Most organizations are bilingual. Not French and English. Companies speak the language of things and the language of money.
  20. 20. Language of things Practical Intuitive, common Horizontal – From input to output – From farm to table – How people talk about creating value for customers Real time © At One Sàrl 2018 Notes:The language of things is the common language. it is practical, intuitive, horizontal and real time. Cases of coffee, customers, phone calls, trucks, nuts and bolts.
  21. 21. Language of money Abstract – Can’t be seen or touched Elite – owners, management and finance Vertical – Rolls up Periodic (not real time) © At One Sàrl 2018 Notes:The language of money is abstract, elite, vertical, periodic. It is the language of owners, boards, management and finance. Money is the language of power in business.
  22. 22. © At One Sàrl 2018 Notes: A minority of people speak finance so it is a barrier to participation. Like any language, if you are not fluent, you hold back. When first learning French, you learn descriptions and transactions. You are less likely to have the vocabulary and grammar to talk about values and other things of importance to you. How can you talk about sustainability if you just know colors, construction equipment and animals?
  23. 23. Language is a significant barrier to participation… so it is a barrier to realizing our values of justice, equality, and human nobility. © At One Sàrl 2018 Notes: If you believe that we are one and that what connects us is more real than what separates us, then we need to dispel the illusion that some people do not deserve to be part of the conversation. By learning the language of power and using it, the artificial barriers between those who govern and the governed dissolve
  24. 24. © At One Sàrl 2018 Notes: Financial reports are the rear view mirror.They can’t help drive. So our primary conversation is a 90 day rolling forecast.The future is where we anticipate, plan, adapt. If you want to engage people’s curiosity, creativity, compassion, sense of adventure, boldness, empathy, and commitment then we are best served by talking about the future. Let’s bring this down to earth.
  25. 25. © At One Sàrl 2018 We are One Goals language Commun- ication Incentives value proposition leadership culture Notes:The first step to set our goal was to listen. We surveyed all employees, interviewed senior leaders, reviewed 5 years of financials. For our issues and ambitions, our goal was expressed in net operating income. So that everyone could be engaged, we taught financial literacy to everyone. Production line workers, service techs, accounts payable clerks, marketing project managers, call centre reps, HR admins. Everyone. So we had one goal and one language.
  26. 26. © At One Sàrl 2018 We are One Goals language Commun- ication Incentives value proposition leadership culture Notes: We mapped the income statement to the people who made the decisions that effected revenue and expenses. We met once a week for an hour to update a rolling 90 day forecast of the entire income statement. So you don’t have the wrong picture about this in your mind, each person would update their forecast by saying something like Period 5 no change. Period 6 up 6000 to 58000. Period 7 no change. Someone might ask for a clarification. Overall, a very light touch. When actuals came in, we calculated forecast accuracy. Someone who was dead on or within a couple percent knew their business.That earned respect and trust. If someone had low forecast accuracy, they didn’t understand their business.This accelerated learning though feedback, transparency and emergent cultural norms.
  27. 27. © At One Sàrl 2018 Controller Mktg Sales Ops Purch HR IT Notes:To compare. In the old world, the Controller reviews actuals versus budget than contacts line managers to explain variances. Nobody looked forward to those calls, not even the controller.The marketing guy might say “we had a favourable expense variance of $60K.”The finance guy would roll up all the numbers and report to the senior leadership team.
  28. 28. © At One Sàrl 2018 Controller Mktg Sales Ops Purch HR IT Notes:
  29. 29. © At One Sàrl 2018 Controller Mktg Sales Ops Purch HR IT Notes: New world, all the line managers and execs are in the same room.The marketing guy says “I had a favourable budget variance of $60K.” Polite applause then the sales guy asks what that was for.The marketing guy explains, “The Q1 promotion won’t be ready until Q3.” Sales guy takes revenue down. Ops doesn’t schedule overtime and temp labor. Supply chain puts a hold on purchase orders. Accountability is where it belongs but more importantly, people are steering the company together in real time.
  30. 30. © At One Sàrl 2018 We are One Goals Measures Commun- ication Incentives Notes: We had one goal, one language and one conversation about upcoming performance. What about money? Aren’t people motivated by money? For some people, it was about the money. For most, money was recognition for creating value. It was recognition of us engaging our curiosity, creativity, compassion, sense of adventure, willingness to collaborate, boldness, empathy, and commitment toward a common goal and being successful.
  31. 31. Monday October 22, 2001 © At One Sàrl 2018 Notes: Case in point. Monday October 22, 2001 there was an argument in the office next to me then the door slammed. TheVP of sales and marketing had just fired the national sales director. At 5 pm, I was in charge of the National Sales Team. A few days later, theVP told me that we were overstaffed for our revenue and I had to choose 2 positions to eliminate. It felt wrong, but I did it.That quarter, the company made earnings and theVP along with his peers got paid bonus. There was a lot of water cooler talk around the company.They get rich and we get screwed.
  32. 32. © At One Sàrl 2018 We are One Goals Measures Commun- ication Incentives Notes: The universal bonus pool is a key element of open-book management.There was one goal, one language, one conversation and one bonus pool. It paid out proportional to base compensation. We could forecast earnings, so we could also forecast bonus. People could connect the decisions they made day to day with the company goals and their compensation. When do people take open book management seriously? When the first quartlerly bonus checks get paid.
  33. 33. Open-Book Management changes how power and information are distributed within a structure. © At One Sàrl 2018 Notes: Open-book doesn’t change the organizational structure. It changes how power and information are distributed within a structure.That is worth saying twice. It changes how power and information are distributed within a structure. Meeting weekly gave us the perspective, skills and confidence to solve our own problems without the need for further guidance or clarification. By having hundreds of people participating in these weekly interactions, we saved an incalculable amount of time that was no longer needed to seek clarification or permission.
  34. 34. © At One Sàrl 2018 We are One Goals Measures Commun- ication IncentivesLeadership Value Proposition Processes Notes: As I said a the beginning, Governance is an expression our beliefs and aspirations, mechanisms to achieve them. When we are clear about what we believe, we can ensure the mechanisms work together. I’m a fan of Open-Book because of its speed, simplicity and power. We implemented it with an excel spreadsheet and a meeting one hour per week. Nevertheless, it has its boundaries. Open-Book has these components and does not explicitly include these.There is opportunity to align and integrate other parts of the governance system.
  35. 35. When you appeal to people at the highest level of thinking, you get the highest level of performance. -Jack Stack, CEO SRC © At One Sàrl 2018 Notes: Open-book has been hiding in plain sight for 30 years.The man who coached us at GMCR has coached over 400 companies. Many are small, but some you’ve heard of. Southwest Airlines, Harley Davidson, CarlsonWagonlit, Zambian Consolidated Copper Mines. None are doing it because they are enlightened.They are doing it because it works.That is the good news.You don’t need to believe anything for it to work. It is a governance system that embraces and encourages human beings to be at our best and rewards us for the value we create.
  36. 36. Meaningful Conversations We hold these truths to be self evident… How can we express those beliefs in governance mechanisms? What do you need to defend against? © At One Sàrl 2018 Notes: Get into groups.Two questions. 1. We hold these truths to be self evident… what do you believe that should be the sun in the solar system of your governance system. 2. How do you express those beliefs in governance mechanisms like metrics, communication, rewards, human performance management, leadership.
  37. 37. what is the sound of one hand? © At One Sàrl 2018 Notes: what is the sound of one hand clapping?You can’t reason your way to it. A key is in the charkas – the body’s energy centers in Hindu and Buddhist traditions.The name of the 4th chakra is anahata. In English it means unstruck. It is the sound produced when two parts do not strike each other. You can only have impact when there is separation. However, when you love, when we are one, there is no separation, no impact and no sound.There can still be movement, dynamism. It isn’t about being locked in an embrace. Instead, imagine dance partners. at one with yourself, are at one with your customers at one with your coworkers When the elements of your governance system are at one with each other, there is no separation and no impact.
  38. 38. Service to or Service with © At One Sàrl 2018 Notes: Last year, Dhairya Pujara told of a project in Africa. In his story, he made a distinction between “service to” and “service with.” “Service to” implies separateness and worse a hierarchical separateness. It is supposed to sound humble, but is still egotistical. As an alternative, he described “Service with” as shoulder to shoulder. Both parties learn and both benefit. Effect without impact. That is the sound of one hand clapping.
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