On reconciliation

Non-catholics may not realise that the sacrament of reconciliation is the modern name for what used to be called confession. It is not just the name that has changed. The emphasis on owning up and penance in a dark box in Church has largely been replaced by a quiet chat in a lounge with a priest who tries to help you come to terms with yourself.

In its new form, this is a powerful process. And it is no coincidence that reconciliation is emphasised in many other forms of self-help.

Take the AA 12 steps for example. Step one is about surrender - reconciling oneself to powerlessness. Steps five to seven are a sort of confession. And step nine, the last step before a recovery can enter a phase of stability, is about reconciling and making amends with all those we have wronged. Often the hardest thing to live with for an addict, or anyone else for that matter, is the guilt and shame. These steps face up to guilt and shame, and create the space to make it possible to move on.

A completely different example comes from business, and the Kotter model of change management. The first step in this model is about creating urgency, and it is the one where most change programmes fail. I would argue that this step is about helping those that need to change to feel reconciled with that fact. Before we accept this need we are stuck in the past, living a long-lost dream. Intellectually, we may see this, but it takes a human step of reconciliation to accept it and be ready to move on. The best implementations of Kotter do not emphasise leader speeches and compelling power points, but instead ask people to talk among each other. That way, nostalgia can be seen for what it is, individuals and teams can mourn their loss, and then face a different future. Leaders struggle with this because they do not usually have the need for reconciliation themselves, so are blind to it in others.

Mourning is another form or reconciliation. Nowadays, funerals attempt to be a celebration of life. Another catholic healing sacrament, anointing the sick (formerly last rites – how things have moved on!), seeks to reconcile people with their possible death and help others reconcile themselves to the loss they may face too. A wake tries to achieve the same. A strange ritual at first glance (especially to cold English people like me) it is powerful, and has parallels in most other religions and cultures. Just like in the two other examples above, the key element is encouraging people to talk openly to each other, to rid themselves of the baggage that would stop them moving forward.

So, reconciliation works. We should try it. Some of the happiest news stories of recent years involve reconciliation. Explicit in South Africa via the heroic truth and reconciliation commission, similar processes have been followed, arguably with less grace, in Northern Ireland and the former Yugoslavia. Only this week, ETA in Spain came closer to disbandment, following a long reconciliation effort. It is not easy, especially when memories and discrimination are long-standing and where everyone has a reason to hate and for suspicion. But facing the past, accepting it, and even forgiving it, is the only route out of the cycle of misery. You cannot move forward successfully unless you are at peace with the past.

I sense different sorts of reconciliation are the key steps in other situations. Tony Blair removed clause four, and somehow reconciled most of his party from a past that was no longer relevant. This week’s Economist has a hopeful article about Detroit. It seems that a key step in creating a positive future there has been to accept that the city must be different and smaller than before. The Norwegians were remarkable this summer in reconciling themselves to the massacre of its youth. In its attitude to the EU, the British are not really reconciled to a less powerful role than in the days of empire. Reconciliation is hard – often close to impossible. But its lack is more damning than anything.

Many muses on this and other blogs have some well-reasoned diagnosis, but then are unable to offer practical solutions. The wonderful thing about reconciliation is how much we can do about it ourselves. And we don’t even need priests!

We all have reasons to complain about others. We say stupid things to each other, hurt each other. To some extent, we can’t help it. What we can help is what happens next. We tend to make assumptions about how people think about us, about what they meant when they said something hurtful. We sulk. We are stubborn. Wow, how we are stubborn.

We could instead try another tactic. We could attempt to reconcile. We could make the first move, and apologise, even when we aren’t so sure it was our fault. Apologise, with no buts and no bitterness. We could make it easy for the other party to apologise. We could try to understand things from their point of view. We can try to create conditions where we can move on together.

What would this cost us? A bit of pride. Some feeling that the other party got away with something. Not much really. Whereas the rewards are huge. There are few better feelings in life than after unloading with an apology, receiving forgiveness, and feeling a friend become a friend again after a period of strain. We feel lighter. We feel happier.

So, where to start. Most of us have an opportunity with work colleagues, notably with our boss. Bosses can be so stubborn, as they have their position to maintain. Try disarming them by recognising their side and giving some ground. They won’t know what to do, but they won’t be able to stop themselves giving ground in return.

Then there are parents. Parents still treat us as though we are small children, so usually like to keep a bit of power and struggle to make the first move in apology. How sad. We only have two parents. Imagine if one of them died and we hadn’t made peace with them. It would haunt us for ever. Painful though it is, make the first move. Accept them as they are. No matter how many times they misbehave, never break off good relations. Most of us are lucky, and our parents have time to reconcile their affairs before dying, to set their relationships in order and say what needs to be said. But sometimes that cannot happen, and we have to be ready for that contingency. Follow the timeless advice to live each day as though it were your last.

Then there are other acquaintances, friends, and especially our partners. We can make a start today.

Sometimes we have a strained relationship and we don’t even know what lies behind it. In my experience, the most common cause is that the other party has some baggage to reconcile with you. I had a recent experience of this, and the thing the other party was carrying guilt over came out quite by accident one day. That was a true turning point, as both of us could immediately sense a new lightness, and start to go forward again. We have to be patient of course, as the other party has to move in their own time, but we can always do things to signal our readiness, to make it a bit easier rather than a bit harder. Life is so much happier if we stop seeing it as a point scoring exercise.

When I learned to drive, my instructor taught me some famous last words. Something like “it was my right of way”. If we are killed in a car accident, it is little consolation to know we were in the right. We are dead anyway. This same philosophy applies to our relationships.

In the end, our own peace comes less from seeing the pleasure of others, and more from the feeling of being reconciled with ourselves. That is the point in AA and in the sacrament, and a happy consequence in the business context. We don’t have to leave it until we are on our death beds.

I am one of the worst role models for my own advice that I know. I have relationships to reconcile in all the categories listed, and can be as stubborn as anyone. Wow, how I love to score points. Yet I feel I am getting better, and benefiting a lot from it.

Who will you start out to reconcile with today?

The 10,001 customer problem

The 10,001 customer problem is one of my favourite models of reality. There are two reasons I like it. One is that it seems to work and be instructive. The second is that, to the best of my knowledge, I invented it. A bit of vanity can’t be helped occasionally.

The idea is that most people or organisations are trying to manage a very large number of small relationships, and a very small number of big relationships. Imagine you are a petrol station manager. You have thousands of customers buying fuel, and you have to try to satisfy each of them, to make them buy a bit more or come back more often. And you have one fuel supplier, say Shell. Now where should you focus your energies? If you can persuade Shell to give you a bit of extra credit, or some support with discounting, or some improvement to the station, it can be worth thousands. The 10,000 can be worth thousands too, collectively. But to maximise bang for buck, the smart owner focuses on Shell.

There are examples everywhere. If you are a salesman, you can either try to sell to 10,000 customers, or alternatively you can try to convince your boss to reduce your target or give you a reward anyway because he likes you or thinks you are trying hard. As British Gas, you can either offer superior customer service, or secure some monopoly concession from the regulator. If you are Shell, you can either try to squeeze a bit more value out of 30,000 petrol stations, or alternatively secure one juicy exploration deal. As a Tesco store manager, you can display your milk beautifully, promote and advertise milk skilfully, price milk cleverly – or just squeeze another penny off milk from the buying department.

In each case, the smart people choose the few important relationships over the many smaller ones. But look more carefully. In most cases, the enterprise would be better served if the focus was on the many small relationships. The few, big relationships are often internal, are often a zero-sum game, and rarely create value for the system. We want people to innovate and create customer value outwards, but their incentives usually drive them inwards instead.

There it is, the 10,001 customer problem. As with many problems, recognising it is the first step towards solving it. To solve it, make sure rewards for the 10,000 are as big as possible, and for the one as small as possible. In the first example above, Shell can make its supply contracts fair, transparent and demonstrably non-negotiable. The sales manager can make KPI’s for his sales force as objective as possible, and the review system as unbiased as possible. The Gas regulator can be truly independent and pro-competition. Shell can create a retail division with a role only to grow sales in stations. And Tesco can remove buying price from the KPI’s of the store managers.

In the latter two cases, Shell will still make sure its best people are doing deals in Qatar, and Tesco will have their best people as buyers, but the organisational division will at least ensure that the 10,000 are not ignored completely. For what good is oil from Qatar without any outlets to sell it? And what is the only true basis for Tesco to get better supply prices than the power from scale emanating from its selling excellence? This demonstrates the second weakness with focusing on large relationships – even when it is productive at first, it tends to be unsustainable.

In this week’s Economist, I read of a study with one of the best demonstrations of the 10,001 customer problem I have ever seen, in the finance and economics section, entitled Money and Politics, link http://www.economist.com/node/21531014. Someone has found a link between the amount of lobbying a firm does, relative to its size, and its share price performance. Believe it or not, the big lobbyers do better.

Isn’t this priceless? Firms indeed do better (in the short term) focusing on the one big relationship, in this case a regulator, than getting on with the boring business of caring for real customers. British Gas, keep up the crap service, you know the regulator is the real game in town. And, true to form, lobbying is internal and non-productive to the wider economy.

This study was from the US. It is no surprise the growth and innovation have slowed – companies are rewarded not for that, but instead for buying lunch for a congressman. I wonder if the correlation is as strong in Europe? My guess would be that is very high in Greece or Italy but lower in Holland or Sweden or Germany. Nellie Kroes as competition commissioner probably did more to foster European growth than any other individual – more power to her.

Russia and communist countries are built on the power of lobbying and patronage. This is arguably what ultimately makes the system uncompetitive and ultimately unsustainable. What about China? Once the demographic dividend has worked its way through, will the propensity for patronage kill their growth too?

Just like in a firm, a country can address the 10,001 customer problem too. Transparent, independent regulation. Keeping politicians out of the way. Tough anti-monopoly laws. Support for small businesses and plurality. Training in customer facing skills over political ones. Banning or heavily restricting lobbying, or pricing it out of the market? Taking the money out of politics.

This could be a winning business and industry policy. And, sorry Ed Miliband, it is the diametric opposite of what you were proposing last week, which would be a dream world for lobbyists. Wrong, wrong, wrong.

Kohr Blimey

The Guardian weekly had some excellent articles this week about the global crisis. My favourite one was by Paul Kingsnorth, extolling the philosophy of Leopold Kohr, who he called the most important economist we had never heard of. Well said Paul, I had indeed never heard of him.

Kohr was an Austrian Jew who formed most of his theories during the Spanish civil war and then the second world war, and then published “The Breakdown of Nations”. He later one a sort of secondary Nobel Prize and became the inspiration for “Small is Beautiful” and other seminal works. Not a bad CV.

His simple theory is that size destroys. As soon as things grow beyond human scale, they have a tendency to become inefficient and dangerous. In the end, the concentration of power creates destruction. Simple. And easy to see how a Jew living through the Hitler era might reach such a conclusion.

I find the theory attractive as well. I have long argued that in my work life I have seen far more examples of diseconomy of scale than of economy of scale. The bigger the enterprise, the less well motivated the employees, the more vanilla the direction, and the slower the response. There is also the problem of layers of bureaucracy in place to manage internal things rather than do anything of value to customers.

I saw one result of this when I visited Shell in Manila this summer (just as a tourist really) and read all the internal communications I could find. Nowadays, companies like Shell run most of their operations continent-wide or even globally. I was a victim of the early stages of this process in Europe, and always found it destructive of value. Well, now I saw the end game. For this business segment, there were clearly no leaders in a place as small as the Philippines (a mere 90 million people), merely supervisors relaying instructions from some remote centre. And since those instructions had to apply to every conceivable market circumstance, they were utterly devoid of content. If you have ever played Bullshit Bingo this was the ultimate example. The business was exhorted to be world-leading, customer-focused, best-in-class, innovative, to delight its customers, and much else besides, without any real description of what the people were actually supposed to do.

Another example was in a study in the Economist last week, with an American survey about how staff viewed their companies. Whereas most bosses thought their firms were inclusive and modern, staff overwhelmingly described them as command and control. Part of this must be a result of the distance created by scale. Dilbert is still a pretty fair reflection of business life.

The most compelling theoretical argument in favour of Kohr is the classical curve of the evolution of the firm. A firm starts bubbling along the bottom of the graph, as it creates its products and infrastructure. Then there is a growth spurt, with clear focus and strong management, and market impact of the firm’s distinctiveness. Then follows maturity, with little unit growth, as the internal processes of the larger firm clog up the works, and also when a single manager can no longer run the place effectively. In the end comes decline, as competitors overtake the slumbering giant.

There it is, in all the economics text books. And if it true for the firm, it is likely to be true for a country, an army, or even a Church, for the same basic factors are in play. When the bullshit bingo starts, you know the decline is on the way.

What the theory does not prescribe is how long each phase is or how big the firm is before it hits its plateau, as this will be decided by factors like context, skills and product of the firm. Some can fly very high before declining. Very occasionally, a new management team can engineer a rebirth, for example at IBM.

The pattern is obvious with empires through the ages, from the Greeks and Romans through the British. Another article in the same Guardian Weekly argued that when we look back on the current crisis we will see it as the decline of the age of American hegemony. Of course, most writers on the Guardian disparage the US, so this might be more wishful thinking then prescient analysis, but the may be some truth in the claim. Certainly, the poor education, dysfunctional politics, and even the rampant obesity do not auger well for a strong US future.

Then it will be China’s turn, and one lesson from Kohr is to recognise that even that era will have an end. We read about these wonderful Chinese companies – be careful not to invest too late, as what goes up must come down, in the end.

I suspect most of us would find that our personal experiences back up Kohr. When have you been most productive? In a corporate army, or within a small team with shared belief and autonomy?

There are social policy implications too. If the police is seen as a distant controlling body, we might try to outsmart it. If it is the guy in the village who drinks with Dad, we’ll find it a bit easier to understand and comply. If we feel part of a community, family or otherwise, we are more likely to have a mentality of service and support. An argument for the big society?

And while we are on British politics, Kohr would certainly find plenty of fault with Ed Miliband’s nascent industrial policy. What guff that was, somehow thinking the state could pick winners and punish those with the wrong motivation. Create conditions for innovation, then get out of the way, is surely a better plan.

We can take Kohr a bit further, and takes a global perspective. Is bigness not just destroying the US, but humanity? The EU responds to its crisis with more integration, creating more bigness and sowing the seeds of accelerated destruction? In the next era, might the successor to the UN even go the same way? Is climate change a classical Kohr symptom of diseconomy of scale? A fan of the EU, this certainly challenges some of my core assumptions. Then there is global finance. Is it possible that the real problem is that it has become too big, too integrated?

The theory is good, but perhaps we need a bit more to explain the world. Communications must help learning, yet communications needs scale to work. I for one am happy I have the internet. Is it possible to make good infrastructure advances while promoting smallness? I am not sure.

Of course, the big problem with Kohr is what to do about it. He was a sort of early hippie, advocating city sized states and autonomous communities within them. He was realistic enough to understand that there was no likelihood of this actually happening. Human nature looks for consolidation of power, for single repeatable solutions, for joining a winning team. Most firms in the decline phase respond my making acquisitions and managing ever more globally. You don’t see the Catholic Church devolving power from the Vatican. Not many US politicians or citizens advocate breaking the country up.

But what we can do is challenge our own assumptions, and consider giving more support to those who argue in a different way. The current UK coalition government started with an admirable intent to devolve decision making to local and regional bodies. It has lost its way, as so often is the case, swayed by the lazy “postcode lottery” brigade. In companies, some people do advocate genuine empowerment and even some internal competition, and I always tried to support them. I love the management concept of getting out of the way. The motive of the UK Eurosceptics may be unpalatable, but perhaps different logic could support some of their conclusions.

Thank you, Paul Kingsnorth, for bringing a valid alternative view to my attention.