Wednesday, December 31, 2008

Principles Based Standards

A major debate between the U.S.'s "generally accepted accounting principles (GAAP)" versus the international community’s "international financial reporting standards (IFRS)" is the difference between the U.S. focus on "bright light" standards as contrasted with the U.K.’s (among others) focus on "principles-based" standards. The U.S. "bright light" criteria is sort of like "see how far you can get away with something before you get caught" while the U.K. "principles-based" criteria is more like "you know the difference between right and wrong."

A major reason the U.S. will have major difficulty implementing the IFRS "principles-based" accounting standards is that American business today seems to have no principles.

Of course, there are exceptions, but doesn’t it seem as if, right now, there are way too few Ethical Leaders in positions of power and responsibility at American corporations and way too many Bernie Madoffs?

Citigroup CFO Gary Crittendon was quoted in the Wall Street Journal as saying that his bank "was forced" to put "hard-hit collateralized debt obligations" back onto its books in 2007. What is he saying?

There were lousy mortgage loans out there in the marketplace: sub-prime, Alt-A, Interest Only, Principle-Only, Option Adjustable Rate Mortgages, just to name a few. His company’s leadership bundled thousands of these loans together and created credit derivative obligations (CDOs) -- securities backed by the loans. The leadership sliced and diced the CDOs to create the impression of higher risk-higher returns, for which they could charge higher fees. They created special purpose entities (SPEs or special investment vehicles, SIVs) that essentially were limited liability partnership which they moved off of Citigroups’ books, even though they were really Citigroup's investments. Citigroup reaped the benefits of investment in those SIVs by speculators who were convinced by Citibank financial managers that the company had perfectly modeled the risks such that the value of the secruties would grow infinitely and forever. Citigroup sold the CDOs into the naïve pension fund investment market, the even more naïve charitable investment marketplace, and the even more naïve international investment marketplace. Executives like CFO Crittendon took in major bonuses for many months.

Life for Citigroup was good as long as Alan Greenspan kept interest rates at 1% after Wall Street went into a catatonic state following September 11, 2001. Ultimately, interest rates adjusted: adjustable interest rates on mortgages, by definition, adjust up when the Fed ups the Fed rate. Duh! Home speculators (flippers) and owners could no longer support higher mortgage payments, so many defaulted on the loans.

The securities (CDOs) which had been backed by weak real estate mortgages were no longer delivering the streams of expected interest and principle payments. The foreclosed properties reverted to bank owned real estate (REO), and the CDOs secured by those properties now had to be re-valued. Now Citigroup et al. had these overvalued SPEs or SIVs off their books. The choice was walk away from them, as Lehman Brothers did, and let the bankruptcy courts battle it all out at fractions of pennies on the dollar OR bring them back on the books and try to figure out how to re-value them while staying in business.

That’s what’s called "being forced" to meet the obligations you created in the first place.

Citigroup, Wachovia, Merrill Lynch, Washington Mutual didn’t ever ask "What is the principle, here?" Maybe they asked, "How long can we play this game before the interest rates change?" or maybe they asked, "How long before we get caught?"

After awhile, don’t all of these operations begin to sound the same:

  • Mortgage brokers being paid fees by investment banks to bring them large volumes of NINJA ("no income, no job applicant") loans so they could produce mortgage backed securities, credit derivative obligations and synthetic CDOs that could be sold to unsuspecting third-party buyers.

  • Appraisers being paid to inflate home appraisals to increase the value of the loan to be securitized and sold through CDOs to third-party investors.

  • Credit ratings agencies being paid by insurance companies and investment brokers to artificially inflate the ratings on debt issuances and securities in order to help them charge third-party investors higher prices for apparently safe investments.

  • Stock researchers being paid by investment brokers to produce positive stock analyses and recommendations so as to inflate the valuations on IPOs.

  • Insurance firms paying kickbacks to brokers to incent them to send them only preferred customers.

  • Options backdating: CFOs artificially altering the grant dates of options back to the date during the quarter that provided the most preferential stock value in order to maximize executive compensation based on options grants.

  • Artificial tax shelters: auditors advising clients facing large potential capital gains to invest in tax shelters established exclusively to enable those clients to avoid capital gains taxes.

    Doesn’t it all begin to look a lot like a Barnum & Bailey Circus Side Show, a Snake Oil Salesman’s Convention, or a PTL Revival Tent? Where are the "principles?" Where are the ethics in this church? Maybe that’s the problem: we’ve become so enamored of the financial side-show that we’ve lost sight of the message. We’ve gone back to caveat emptor -- the buyer better look out for him or herself because Shylock is out to scam them.

    The principle, today, is fraud. What is in this deal for me, now, rather than what are the consequences, the externalities, of my actions over the long term? Who cared what was the larger impact of these speculative SIVs on the marketplace and on other people?

    How do we undo this mess? It’s like asking: How do we get steroids out of professional sports? How do we get drugs out of the entertainment industry? How do we get fraud out of our financial markets?

    The freshness which followed from the Yellowstone fires of some years ago offers us some insight into the opportunities that could be gained from today’s financial tragedies. In medicine, if one valve is blocked sometimes letting that path stay as it is, while opening up a fresh new route, can create new and healthier circulation. The same happens in the brain as dead neurotransmitter paths are replaced by alternative mental circuitry.

    Proposals to seed 20 to 50 new banks nationwide offer us the opportunity to find principled-leaders and re-build a healthier financial economy. Other proposals suggest that firing the chief executive officers and presidents of our top 200 firms might be another sound idea.

    The principle being embraced here is that we have to stop protecting the idiots and the status quo that got us to where we are today. It’s like trying to save the dinosaurs. It goes against the natural order of things. We really need to purge a lot of the sick members of our financial community.

    Looking across our financial landscape, our banking entities have become behemoths that are too big to endure in a society that increasingly demands personalized attention and fine-tuned products and services.

    In a principles-based economy, I would expect to see a lot more people in leadership who actually cared about the consequences of their actions on their firms, their industry and their society. Maybe that explains why "principles-based accounting" is having such a difficult time finding traction in these here United States of America.
  • Friday, December 26, 2008

    Tough Love FSA-style

    In 2006, New York City Mayor Michael R. Bloomberg and New York Senator Charles E. Schumer commissioned a study that led to their recommendations in January 2007, entitled: Sustaining New York’s and the US’ Global Financial Services Leadership.
    See the 142-page study reprinted here.

    Three core recommendations were summarized as follows:

    1. It’s all SOX’s fault: "First, our regulatory framework is a thicket of complicated rules, rather than a streamlined set of commonly understood principles, as is the case in the United Kingdom and elsewhere. The flawed implementation of the 2002 Sarbanes-Oxley Act (SOX), which produced far heavier costs than expected, has only aggravated the situation, as has the continued requirement that foreign companies conform to U.S. accounting standards rather than the widely accepted -– many would say superior -– international [principles-based accounting] standards."

    2. It’s the lawsuits: "Second, the legal environments in other nations, including Great Britain, far more effectively discourage frivolous litigation."

    3. It’s the lack of immigrant visas: "Third, -- we are at risk of falling behind in attracting qualified American and foreign workers [and] fewer American students are graduating with the deep quantitative skills necessary to drive innovation in financial services."

    Bloomberg and Schumer’s primary argument was that "The British are competing! The British are competing!" They said Wall Street was losing out to better competition from the U.K., with its principles-based accounting standards and its simplified one-regulator oversight -– the Financial Services Authority (FSA).

    Now, in December 2008, comes this very same "simplified regulator," the FSA, the U.K. counterpart to a super-Securities and Exchange Commission (SEC), with tough new proposals to strengthen their regulations and oversight of most British financial services markets, exchanges, and firms. I wonder if Bloomberg and Schumer really want a U.S. version of what the FSA is proposing. It looks promising.

    The FSA’s statutory objectives are four-fold: (1) to maintain confidence in the financial market, (2) promote public awareness, (3) secure appropriate consumer protections, and (4) reduce financial crime.

    Under their "approved persons regime" (under authority of the Financial Services and Markets Act 2000), the FSA has the power to interview, vet, and monitor the performance of directors and executives at financial services entities. They can even prevent unqualified persons from taking a position of "significant influence" at a financial institution or compel a company to oust an un-approved person.

    In December 2008, the FSA proposed changes to its regulations of individuals with a "significant financial influence" on a firm as well as those individuals who deal with customers (or the property of customers).

    FSA describes "controlled functions" (levels of employment/service within regulated entities) ranging from CF1 through CF30, where the first 29 are positions of "significant influence:" CF1 is a director, CF2 is a non-executive director, CF3 is a chief executive officer, and C29 is a "significant management function." CF30 is the "customer function."

    In response to an internal audit and review of its own oversight of the Northern Rock bank failure, FSA proposed a Supervisory Enhancement Programme both to strengthen its existing principles-based regulation and to ensure, more proactively, that the board and executives of firms discharge their responsibilities.

    "The FSA is seeking to ensure that all directors and senior managers understand their regulatory obligations, have relevant experience and carry out their roles with integrity . . . [and] where a significant influence holder shows incompetence or dishonesty, we will consider enforcement action against him or her."

    Isn’t that interesting? Wouldn’t we like to have such authority over the 211 companies in which the U.S. Treasury and, by extension, the U.S. citizens, now own equities as a result of our TARP investment strategy?

    Shelia Nicoll (Director of FSA’s Retail Firms Division) spoke before an FSA conference in September, discussing the types of issues that might arise during the FSA’s on-site visits and interviews with a senior management team, executive and non-executive directors. She said firms could expect the FSA would review such issues as:

  • "whether you, and your fellow Non-Executives, have a good oversight of the risks facing your firm;
  • how effective the controls are within the firm;
  • the adequacy of the firms infrastructure, including whether the firm's people know which legal entity within a group they are actually operating; and
  • what controls there are in place to ensure that business is conducted properly with customers and markets."

    That looks surprisingly like Sarbanes-Oxley (SOX) Section 404 internal controls terminology. SOX required that executives affirm by their signatures that they understood the documentation they submitted to the SEC. The FSA explicitly expects key executives to understand the risks and to challenge business decision-making that might place the firm in jeopardy.

    "One of the main ways we try to ensure high quality governanjavascript:void(0)ce is through approving and holding to account those individuals who undertake governance functions. . . we will be seeking to hold more individuals accountable… [because] action against individuals has a much greater impact in terms of deterrence than action against firms."

    Wow, I wonder what Bloomberg and Schumer think about them apples?
  • Thursday, December 25, 2008

    TARP Accountability

    It is astounding that we give greater media attention to the Inaugural Parties and a search for the Whitehouse Puppy than we give to the financial meltdown of our economy.

    U.S. Treasury Secretary has ensured that Wall Street had a wonderful, wonderful Christmas this year.

    A total of $350 billion so far has gone to banks ($247 billion to 210 financial institutions), to American International Group ($40 billion), and to unfreeze consumer credit markets ($20 billion). President Bush (not Treasury!) announced that the government (probably Treasury) would provide a $13.4 billion loan to General Motors and Chrysler with another $4 billion promised for February (even though the Treasury has less than $2 billion left). American Express received commitments for $3.39 billion and CIT Group for $2.33 billion, after they became bank holding companies. Treasury provided, from the Capital Purchase Program under TARP, another $2.8 billion investment to 49 banks on 12/19/2008 and $1.9 billion to 43 other banks on 12/23/2008, the same day the Fed approved GMAC to convert from a privately-held investment entity to a bank holding company.

    To keep track of the Fed’s approvals of bank holding companies, go to
    Fed press page.

    To keep track of all the money Treasury has invested in the financial marketplace on your behalf, see ProPublica’s Bailout Bucks to Banks page.

    On December 19, 2008, Treasury Secretary Paulson went back to the trough to ask Congress to authorize the remaining $350 billion in TARP funds. Before we give him any more money, there are a few people asking him, "What did you do with the money we already gave you?" Unfortunately, we are not getting a lot of answers.

    The GAO issued a damning report on TARP dated December 2, 2008: Troubled Asset Relief Program: Additional Actions Needed to Better Ensure Integrity, Accountability and Transparency: (GAO-09-161). See GAO TARP Report.

    Those recommendations are being ignored.

    Harvard Finance Professor Elizabeth Warren, currently head of the Congressional Oversight Panel, issued a first report asking Treasury to explain its TARP strategy: Questions About the $700 Billion Emergency Economic Stabilization Funds: The First Report of the Congressional Oversight Panel for Economic Stabilization (December 10, 2008). See the COP TARP report.

    But of course Congress has gone home for the holidays and the New Year. Party time in DC., party time at the financial institutions and party time back home in legislative never neverland. Is there any way we could stop the Administration and the Treasury from emptying out the federal coffers before leaving office January 19, 2009?

    Friday, December 12, 2008

    The Bebchuk Solution

    On September 26, 2008, Lucian A. Bebchuk did an email blast of his working paper, A Plan for Addressing the Financial Crisis. His document (File: SSRN-id1273241.pdf) can be downloaded here.

    Bebchuk’s September recommendations would have gone far toward reconstituting our financial markets or at least address a few of the underlying causes of the financial meltdown. But his recommendations have not been heeded, and we are in a deeper financial quagmire than ever before.

    Lucian Arye Bebchuk is no slouch or hack. He is Professor of Law, Economics and Finance and Director of the Corporate Governance Program at Harvard Law School (in Cambridge, MA). He also is Research Associate at the National Bureau of Economic Research (NBER in Cambridge, MA) Research Associate at the European Corporate Governance Institute (ECGI in Brussels, Belgium). See his more recent writings here.

    There were four basic recommendations in his September paper:

    Recommendation 1. Treasury should only purchase troubled assets at fair market value.

    First, Treasury has reneged on getting rid of toxic assets and has switched to simply passing through taxpayer money to banks which also are reneging on getting rid of toxic assets. “Fair market valuations” are under attack from all sides in an effort to avoid placing bad overvalued assets in the crapper where they belong.

    Recommendation 2. Treasury should purchase new bank securities at fair market value to help under-capitalized financial institutions.

    Second, Treasury is giving out money without any monitoring of how it’s being used: whether for recapitalization, dividend distribution, or settlement of acid securities. Neel Kashkari (Interim Assistant Secretary of the Treasury for Financial Stability and Assistant Secretary of the Treasury for International Economics and Development) has said that Treasury favors monitoring through “general metrics” that look at the overall economic effects of the disbursed funds.

    Recommendation 3. Treasury should buy new bank securities through multi-buyer processes to ensure market discipline and competitive incentives.

    Third, Treasury has now written blank checks directly to 210 financial entities, many of whom didn’t want or need the money but took it because if they didn’t then other banks would do so and use the money to buy up smaller banks.

    Recommendation 4. Treasury should push financial firms to expand private capital through rights offerings to existing shareholders.

    Treasury has only pushed the public wealth down the throats of financial institutions, even letting companies continue dividend distributions – sort of a leak to private shareholders.

    The market was frozen in September, and not any better in December.

    Friday, December 5, 2008

    A Mind Is A Terrible Thing To Waste ®

    The United Negro College Funds slogan, "A mind is a terrible thing to waste," strikes me as incredibly wise, especially these days as our political idiots return home to their villages. Of course, some village idiots remain in Congress and others still have jobs at city desks, but certainly we can hope that the Big Kahunas won’t be there to push the economy around any more after January 20th, 2009.

    We are in a situation where our markets have failed, yet we continue to throw good money after bad after bad after bad. The problem is that we are financial idiots. Not simply you and me, but also the boards of directors at major financial institutions, top level managers at mortgage brokers and appraisers, and pretty much anyone who has touched credit default swaps.

    Our financial markets have failed: could it possibly be any clearer?

    Instead of using our money deposits in banks to invest in wealth-creating-business activities, our banks are hoarding money, while the federal government is giving them even more money. Instead of using our homes as residences, we are using our homes as high risk piggy banks to eke out marginal speculative returns because there are no alternative wealth-creating-business activities growing in this economy. Remember when real estate was the conservative investment option?

    How do we know that that our markets have failed? Two strong indicators affirm it. First, business has been doing business with bad people, which is called "adverse selection" -– choosing to do business with people who have no business being in the marketplace. For example, you wouldn’t sell a car to a 12 year old, would you? Well, we did.

    "Adverse selection" is a clear economic indicator that buyers and sellers in the marketplace have different information on which they are making financial choices. Prices are distorted and no longer reflect a preferred balance of underlying supply and demand. You actually DID sell a car to a 12 year old because the kid lied, he looked like an adult, and the seller in the marketplace did not care because he was getting his money from fees, which were side-deals and bets, not the price to settle in the marketplace. The market is broken because sellers keep making "adverse selections" again and again and again.

    The second indicator of a failed market is that business continues to operate recklessly, as if risk did not exist, because some Big Daddy Kahuna underwrites the losses. This is called "moral hazard" -- you can recognize it if you have kids who can’t seem to graduate from college, get a job, save money, stay away from overcharging their credit cards, and counting on their parents to keep bailing them out. Now we are seeing "moral hazard" underwritten by the US Treasury and the Federal Reserve. "Moral hazard" we have in abundance these days.

    The banks know they are protected by the political and financial subsidies from Paulson, Bernanke, et al. AIG and the insurance industry know they are protected by the same political and financial generosity. And now, the auto industry and GMAC, its own private banking system, know they can act with impunity because they can expect to be bailed out, too. Credit card companies and developers are in line with their hands out. Can landscape gardeners be too far behind?

    Not only did business sell cars to any 12 year old who came in the door, but now other business people think that selling to 12 year olds is profitable as long as the Fed keeps printing up money to back more and more risky behavior. The market is broken because now new sellers think that the marketplace (government-subsidized) approves, encourages and incentivizes more risky behavior.

    The market is broken, but there isn’t any adult intelligent enough to realize we have to stop this vicious cycle. The banks sit on the loans and infusions from the federal government, hoarding money that needs to be invested. But no action has been taken to identify who or what might be worthy of American financial investment: we keep protecting the village idiots.

    Who is trustworthy anymore? Does anyone really trust the U.S. auto industry, the entertainment industry, the publication industry, the retail sector, or the technology providers? The reality is that real estate speculation was the last gasp of a miserably broke market. The only thing America seems to be doing (regardless of whether we’re doing it well or not) is waging war against the rest of the world.

    The federal government is taking no action to alter the imbalanced information asymmetry in the marketplace. We are doing nothing to develop a derivatives clearinghouse that might properly value toxic securities. Only the FDIC and a few small nonprofits are trying limited short-term strategies to pressure mortgage renegotiations for small groups of subprime borrowers. There is no long-term strategy being developed that might address the causes of the bigger scale problems of stopping the glut of Alt-A, Option-ARM, Interest-Only, Principle-Only loans that were used by "flippers" to speculate in the real estate marketplace (the 12 year olds). There is no effort in Congress to repeal the stupid laws they passed to "de-regulate everything, so the financial industry can play." There is no effort to publicly compel banks and former investment houses to take back onto their balance sheets those "special investment vehicles" which were the equivalent of un-regulated, un-supervised, un-backed IPOs that allow investment banks to divert real money from productive uses and shareholder investments into phony assets with now negative returns to equity. There is no effort to publicly compel insurance companies to increase their capital requirements to match the level of risk actually incurred by credit default swaps speculation.

    The real reason that there is no substantive effort to address the underlying problems of this failure of the financial markets is that there is so little understanding of the financial markets today, especially by those legislators who so willingly passed lobbyist-written bills that generated so many of these problems. Some of those bills are so complex and sophisticated that there is no way your congressman or mine could possibly have pulled it off. Our Congress is broken -– just examine everything that is included in each subsequent bill being passed and you’ll see we do not have legislation, we have AS-IS FOR-SALE-CHEAP: American Assets and Values.

    Our media, newspapers, radio, television talking heads, and (even worse) our Internet bloggersphere merely make things worse by repeating bits and pieces of data without any concrete understanding of the financial concepts or consequences. The Wall Street Journal came out, around the time of TARP, with a two page spread of their boxes "explaining everything about the subprime crisis" -– everything, of course, except the subprime crisis. It looked surprisingly like the same two page spread of boxes that explained the "Enron crisis."

    There is only one person I trust to explain this financial quagmire in which we’ve found ourselves: that’s Salman Khan, founder of Khan Academy. His credentials include an MBA from Harvard Business School, a Masters in electrical engineering and computer science, a BS in electrical engineering and computer science, and a BS in mathematics from the Massachusetts Institute of Technology. Even more important, Sal Khan knows how to explain complex subjects by tapping both the right and the left brain and by using whiteboard demonstrations as a knowledge delivery vehicle. His Credit Crisis web page video segments on YouTube describe sophisticated financial issues with great clarity using straight-forward balance sheet and income statement examples.

    Oh, that the SEC would require such explicit documentation of its regulated entities.

    See his 27-module explanation of the Credit Crisis at: Crisis

    Frankly, I wish every single American journalist would be required to pass a test showing that they understand his explanations of the difference between mortgage-backed securities and credit derivative obligations, since no American journalist today seems to know what either of them are, let alone how they differ from credit default swaps. They all seem to spit out this jargon as if it were spaghetti from a bad frat party.

    On October 2, 2008, Sal Khan reported on a recommendation by Todd Plutsky, a friend from Harvard, for the U.S. to consider founding 20 to 50 new national banks as a strategy for fixing the failed financial market. See: A Possible Solution.

    CNN interviewed Khan on October 10, 2008: CNN video with the text version at:
    CNN text.

    David Leinweber, of University of California at Berkeley’s Haas Business School, Center for Innovative Financial Technology, came out November 10, 2008 with a formal proposal co-authored with Sal Khan:
    New Banks Initiative.

    The Wall Street Journal picked up on the idea briefly November 25, 2008:
    WSJ article.

    Not a word has been uttered since Thanksgiving. Let’s hope that the Obama financial advisors are looking seriously at this proposal which clearly tosses out the financial industry’s village idiots and their strategies to sell to 12 year olds.

    Sunday, November 30, 2008

    Lord of the Flies – Take 2

    Let me see if I get this straight. A crowd of 400 people stood outside the doors at the Valley Stream, NY Wal-Mart store on November 30th. At about 5:00 AM, approximately 1,600 shoppers, who had been hiding in their cars, protected from the cold, mobbed the line of bargain-hungry people who had queued up beforehand, and together they all broke through the secured doors, flooded the store, and over-powered a 6-foot-5, 270 pound, 34-year old male: Jdimytai Damour. They stomped him to death as they rushed to get holiday deals on electronics and toys, while also injuring several others including an 8-month pregnant woman. And the family of the man is suing Wal-Mart.

    Also on Friday, the day after Thanksgiving, in Palm Desert, CA, two men shot and killed each other in another retail confrontation where their female friends fought over a toy.

    Did I get it right? Three people died in our pursuit of cheap toys and electronic gizmos.

    Just out of curiosity, could someone please tell me how you can walk over the body of another human being without, you know, looping back around to see what you did to him? How does anyone go on to the toy counter and just casually shop and buy a present after committing manslaughter? When these people went home, did they hold up Elmo in front of the kids and grunt something about the "spoils of war?"

    With our blessed, so-called religious society (some 80% of whom allege they are regular church-going faithful), surely 80% of the people who trampled this man to death went on to confess their sins on Sunday, saying: "Father, forgive me, for I killed someone."

    Are we now going to need weapon detectors at the entrances to our shopping malls? Do we now need to post new signs at the front doors of our retail outlets, saying "Shopping may be hazardous to pregnant women seeking deep discounts." Somebody please tell me why an expectant mother would even consider going to Wal-Mart at 5:00 AM on Black Friday?

    Is it worth a human life to get 20% off the price of any toy? Even 50% off – is it worth it? Is this what Michael Dell meant when he said he wanted to excite "“product lust" among electronics consumers?

    Have you noticed newspapers are very hesitant to voice an opinion on these events because they fear alienating their advertising clients. There has not even been an editorial cartoon expressing outrage at shoppers’ stupidity in either of these two events.

    The Nassau County Police are pouring over surveillance video tapes to identify the hit-and-run shoppers who killed the temporary worker. They might want to scrutinize the credit card purchases made during the first hour after store opening as well because if those people did not actually pummel the man, at a minimum, they were witnesses to the murder and left the scene of the crime.

    But, in any event, the only reason for suing Wal-Mart is our great American faith in deep corporate pockets and our incredible ability to delude ourselves into believing that we are not responsible for our own actions. It would be like a drunk sneaking alcohol while hiding behind a bathroom stall, then saying (after a hit and run accident), "The bartender made me do it."

    Wikipedia reports that Valley Stream is a little Long Island town with fewer than 40,000 people and a median family income of $110,000. I bet every person in town knows exactly who was there and when.

    The Nassau County Police should hold each and every one of these people accountable for participating in this utterly uncivilized, terrorist-like behavior that resulted in the death of an innocent bystander. And maybe we all should re-think our sick compulsion to shop to excess.

    It was not Wal-Mart who killed this poor man. It was 2,000 self-centered, greedy, and irresponsible shoppers who played like the little boys in Lord of the Flies.

    Tuesday, November 25, 2008

    On Domestic Violence

    The logic behind Fortune’s November 24, 2008 article on "domestic violence" goes something like this: "Since banks are the site of most bank robberies, banks should be held responsible for implementing 'SafeHaven' programs and Human Resources counseling for robbery victims. And THAT will stop bank robberies in the future!"

    "Domestic violence" is not simply a taboo subject in corporate halls -– it is a subject ignored by the mental health profession; by the local, state, and federal police authorities; by the video/computer gaming industry; and by the advertising and entertainment industries. Not one of these sectors "owns" the problem of "domestic violence" in its entirety, but all of these entities participate in the misdiagnosis of its cause. All of them contribute to its perpetuation. Even calling this brutal abuse by its politically-correct euphemism, "domestic violence," just paints the ugly pig with pretty pink lipstick.

    First, we need to recognize that stalking is a premeditation to do harm: planning aforethought that is similar to bullying, which -– if not aborted -– will lead to injury or death. Driving recklessly will earn the perpetuator at least a ticket or a fine, but stalking warrants zero deterrence. Stalking triggers a presumption that the victim, alone, must act to deter the next, worse behavior: the victim needs to initiate a protection order, not the authorized policing entity. We do not assume the stalker owns any responsibility for his/her actions. We pass the buck exclusively to the victim.

    Two reasons why personal abuse and stalking victims get no help from public authorities are: the potential size of the problem and its complexity (Is it her fault? Is it his fault? Will she file a complaint or forgive him again?). Another reason is the lack of mental health training to properly diagnose and deal with stalker behavior. And still another reason is that, too often, members of traditional police forces see themselves in the behavior or attitudes of the perpetrators: people enamored of control and power may not have the capacity or desire to stop such behavior in others (who might not carry a shield of authority).

    Women create the "usual solutions" to "domestic violence:" the nonprofit organization made up of sympathetic, caring, emotionally-supportive fellow abused victims whose primary treatment is the magic of words ("Recognize. Respond. Refer." Wow, if that doesn’t stop him, then nothing will!) Nonprofit counseling for victims of abuse is like hospice care for terminal cancer patients: palliative, too little, and too late.

    Alternatively, women try to pass the buck to their employers, corporations which have become their alternative protectors in the modern economy. But, putting "domestic violence" into the Company Store of products provided to employees by well-intended Human Resource personnel simply relocates the problem from public/police accountability into the more litigious world of corporate liability. It does nothing to diminish the problem; it does nothing to get at the root of the problem.

    At a minimum, let’s stop playing patty-cake with the terminology: "domestic violence." Let’s at least call this pig the big, ugly thing it really is: "Aggressive Conduct Disorder" or bullying, in the vernacular. It's a mental health sickness. Stalking and bullying are mental health problems.

    Researchers at the University of Chicago reported in the journal of Biological Psychology (November 2008) did a study using functional MRIs on 16 adolescent boys (16 to 18 years old), half of whom had a history of "aggressive conduct disorder," compared with a control group without any such indications. The fMRIs measured synaptic activity to determine the areas of the brain "excited" by observing video clips of people in pain as a result of an accident.

    In the aggressive boys, activated areas were the amygdala and vertral stiatum -– areas associated with "feeling rewarded." The control group, rather than delighting in the pain of others, empathized with the victim. Their brains were activated in the medial prefrontal cortex and the temporo-parietal junction areas, parts of the brain associated with self regulation.

    The researchers concluded that a "bully’s brain feels joy in others’ pain." Another interpretation is that the judgment areas of a bully’s brains are somehow subordinated to the stimulation (excitation) of emotional reflexive areas.

    What is patently clear for "domestic violence" is that the perverse aggressive conduct behavior which it represents has yet to reach the scale of public concern that warrants serious consideration and treatment. When a dozen or so workers are killed in some corporate office stalker mahem, then we will possibly give "domestic violence" the knee-jerk attention it truly deserves.

    Because, now, while we have the luxury to think about the causes, and possibly preventative measures or treatment, we are ignoring at least the following realities:

    1. Stalkers are sick people in need of treatment by adequately-trained mental health professionals and, possibly, behavior-modifying medicines.

    2. Abusers are criminals who need to see, up close and personal, the limits of their unacceptable behavior: in terms of financial consequences, limits on their personal liberty, and wide-scale social stigma.

    3. Any entity (whether a video game, a movie, a rap music clip, an article in print, or a clip in blogspace) which advocates the subordination of any human being (spouse, partner, child) may be considered a form of personal terrorism, and any reasonable response or act of self-defense may be considered appropriate and legal.

    4. Victims who enable are different from victims who defend themselves: the first requires treatment, while the second requires all of the tools and resources which a responsible society can provide. The first victim is a co-conspirator in the domain of Stockholm Syndrome; the latter is an agent in the prevention of a crime.

    When women cower in fear in their own homes, their offices, behind "corporate policies to help," or at nonprofit counseling centers, the result is the same: the stalker has won. The abuser controls and overpowers. The terrorist is prevailing. The answer is not to hide; the answer instead is to take on this scourge, this mental sickness.

    Wednesday, November 19, 2008

    Women and HR

    The "Human Resources" function in business has the responsibility of ensuring leadership development of all employee resources. If women would take the initiative in using HR policies and procedures to foster leadership opportunities within the organizations where they dominate, we might expect to see greater diversity based on performance exhibited throughout corporate organizations overall. Yet, there is even some question as to whether the HR organization actually helps advance women to leadership.

    Women represent somewhere between two-thirds and three-fourths of the total headcount in "human resources" professional ranks depending on the country studied. Yet, men continue to dominate the HR leadership at most organizations. Thus, a first question would be how to advance women to leadership roles from their majority position as HR staff inside their own organizations.

    McKinsey & Company, in their September 2008 report, A Business Case for Women, argues that HR policies need to be monitored to ensure that they are not "inadvertently biased against women or part-time workers."

    "HR policies can inadvertently hold women back," McKinsey reports. HR is in charge of internal processes for identifying high-potential candidates for management. Yet, HR itself often selects candidates based on too restrictive parameters: focusing on too thin age brackets rather than on broader measures such as years of relevant experience. Among the HR "to do list" for women are: "establish targets for diversity," "create better work-life balance," and promote and encourage "mentoring and networking." Why is it that women, in the majority at HR organizations, have not implemented such policies that would advance themselves to leadership?

    McKinsey also says that recruiters within companies and operational managers who hire for their own areas need training to help them focus on diversity opportunities and identify prejudices they bring to the interview that might limit their hiring perspective. HR is responsible for educating and training all staff in effective, productive, legal and diverse recruitment and hiring practices. If HR owns that domain, why has their training not adequately advanced women to leadership positions?

    McKinsey states that shortages of women in leadership are the result of "mismatches between training and employment." If women are failing to pursue on-the-job training that would ensure their advancement to leadership positions, then this is another area within the unique professional domain of HR that needs to be strengthened.

    The report mentions that job postings contain images and content which "market" the employment opportunities. When the photos and copy emphasize "images" which are more appealing to men than to women, then HR potentially is limiting the "targeting" potential of those job ads.

    The report cites differences between men and women candidates as they view open job postings and select those positions for which they think they might be eligible. Men self-select if they meet two-thirds of the requirements, while women self-select if they meet 100 percent or more of the requirements. Women want greater certainty of success before taking the risk of applying.

    It also describes differences between men and women candidates as they consider applying for promotions. Men tend to apply for promotions even in cases where they don’t meet or exceed performance expectations. Women tend to underestimate their performance and hesitate to seek out challenging promotions.

    Is it HR’s responsibility to alter women’s perception of risk? Or is HR’s responsibility limited to making risk-taking and negotiating on-the-job training available to all candidates? Is it HR’s duty to "encourage" women to take risk? Is it HR’s duty to "mentor women" to assess the benefits of more assertive or competitive training? Is it HR’s duty to "encourage women" to network among professional peers to learn from them what works to advance candidates to positions of leadership? Is it HR’s responsibility to bolster women’s self-assessment or confidence that they merit promotions? How many of these essential pre-requisites for leadership are within the control, domain and responsibility of individual women to pursue on their own?

    If the Finance Department in a corporation failed to meet the requirements of its function, would the answer be to "mentor" and "encourage" better financial accountability?

    A separate study, The Invisible Fire, was recently produced reflecting a Canadian HR perspective. They stated that HR was "too low" a function within the organization to have enough clout to bring the women in leadership the attention it warranted. They, too, advocated more "mentoring, networking, educating management and accountability" in order to promote more women to leadership roles. The Canadian study "delegated the task upward," saying that it is the responsibility of CEOs and the Board of Directors to help and enable women to succeed. In other words, HR wanted senior executives to do the job they could not perform.

    In general, if women constitute a significant majority within HR professional ranks, and yet STILL, women do not rise to leadership there; if women do not implement policies within their own HR ranks that would advance women to leadership or develop programs that are known to improve the odds of women rising to leadership; then why should women expect someone else in the corporation to do the hard work necessary to move them forward and upward when they don’t seem willing or interested in doing it for themselves?

    There is a distinct "entitlement" perspective in these reports: "I can’t do the work myself, so somebody else please make it happen for me." This is not the perspective of women who currently hold leadership positions in top corporations, today. Perhaps that distinction is the real difference between women who fail to move toward leadership roles and those who succeed in doing so.

    What’s Wrong With This Picture?

    On November 17-18, 2008 The Wall Street Journal convened a gathering of national corporate and public sector leaders for a "CEO Council: 2008 – Shaping the New Agenda."

    One hundred and six participants are named in recent full page ads promoting the event. Out of those 106, there were 5 women. Angela F. Braly (WellPoint Inc.), Stephanie A. Burns (Dow Corning Corp.), Lynn Elsenhans (Sunoco, Inc.), Susan Nowakowski (AMN Healthcare) and Mary Sammons (Rite Aid Corp.). Two more are listed on the web site: Charlene Barshevsky (WilmerHale) and Ann Misiaszek Sarnoff (Dow Jones Ventures).

    In 2008, I cannot fathom how it might be possible to have less than 5% women in leadership participating at a major media conference to address the needs of the new political and economic agenda.

    There have to be reasons: what are they? Were other women in leadership not invited? Were the women too busy or otherwise committed? Do the women not see this type of forum as an important part of their role as women in leadership.

    At a minimum, there are 22 other women CEOs on the Fortune 1000 list of top women CEOs who could have been included. (Dow Corning is not on that list because it is a joint venture, not a public company. AMN Healthcare did not make the Fortune 1000 cut in 2008.)

    CEO (Company)
    Braly, Angela F. (WellPoint)
    Woertz, Patricia A. (Archer Daniels Midland)
    Elsenhans, Lynn (Sunoco Inc. as of 8/8/2008)
    Nooyi, Indra K. (PepsiCo)
    Rosenfeld, Irene B. (Kraft Foods)
    Meyrowitz, Carol M. (TJX)
    Sammons, Mary F. (Rite Aid)
    Mulcahy, Anne M. (Xerox)
    Barnes, Brenda C. (Sara Lee)
    Jung, Andrea (Avon Products)
    Ivey, Susan M. (Reynolds American)
    Reynolds, Paula Rosput (Safeco)
    Gold, Christina A. (Western Union)
    Robinson, Janet L. (New York Times)
    Bern, Dorrit J. (Charming Shoppes)
    Lang, Linda A. (Jack in the Box)
    Young, Dona Davis (Phoenix)
    Lau, Constance H. (Hawaiian Electric Industries)
    Anderson, Kerrii B. (Wendy's International)
    Krill, Katherine (AnnTaylor Stores)
    Wilderotter, Mary Agnes (Citizens Communications)
    Taylor, Cindy B. (Oil States International)
    Stevens, Anne (Carpenter Technology)
    Gallup, Patricia (PC Connection)
    Fowler, Peggy Y. (Portland General Electric)

    Even if these women were not included, why not Sheila Bair, Laura D’Andrea Tyson, Madeline Albright, Hillary Clinton, Drew Faust Gilpin or any of the 1,100 women who currently serve on the corporate boards of the top Fortune 1000 firms in the country?

    I just don’t understand how the Wall Street Journal cannot get better representation from the top women in leadership in this country. This IS 2008, isn’t it?

    Tuesday, November 18, 2008

    There’s Just No Pleasing Some Women!

    If you read all of the press releases out of Davis, California this week (November 17, 2008), you probably would be wringing your hands in woe at "the travesty, the tragedy" reported from UC Davis' latest Census of Women Business Leaders in the State of California. You’d moan and groan along with the study sponsors about "only" and "how few" and "how barely."

    Some dear friends even suggested that they were "glad they didn’t live in California" after reading the sad, sad news out of Davis.

    Don’t cry for us in California. In fact, let’s issue a little challenge to New York, Texas, maybe Pennsylvania, New Jersey, Ohio, or any other top states with large numbers of businesses. Let’s ask their academicians to repeat the study conducted by UC Davis: survey your top 400 firms and report to us the number of women corporate directors and the number of women executives in your states. Let’s just compare apples with apples and oranges with oranges to see exactly how well New York, Texas or other states are doing in bringing women to top leadership roles at their public corporations. We could start by asking how many states even have 400 companies anywhere near the size of these top firms in California?

    Let’s also read the study from an objective perspective, rather than the whiney approach that so often accompanies these women on board censuses.

    Fact #1. Over half of the 400 largest public companies in California have at least ONE woman on their board. That’s 53.2% or 213 firms. Can any other state report such a significant share?

    Fact #2. The top Fortune 1000 firms based in California (102 companies) have 138 women corporate directors (from all over the country, not just from this state). That’s an average of 1.4 women per top Fortune 1000 board. What other states match that average for that many firms?

    Fact #3. For the top Fortune 100 firms in California, the average is 2.5 women per board; for the next 400 firms (Fortune 101-500), the average is 1.5 women per board; and for the next tier (Fortune 501-1000), the average is 1.0 woman per board. Those are impressive averages for such large firms. Can any state report they are peers in this measure?

    Fact #4. The overall percentage shares of women-occupied board seats at California Fortune 1000 firms is very high: 21.4% for the top 10 firms, 13.9% for the F101-500 and 11.6% for the F501-1000. I would like to see any state match that performance.

    Fact #5. For all 400 firms in the state, women average 10% of the board seats: representing a total of 328 women-occupied seats out of 3,278 total board seats. Does any other state have more than 300 women directors at top tier firms? Can any other state report a 10% average for all their 400 firms? Can any other state report 400 firms with over $160 million capitalization?

    Fact #6. Over half (54.6%) of the women directors at those top 400 firms sat on boards of companies with over $1 billion capitalization. Can any other state report such tremendous financial responsibility given to women in leadership?

    Fact #7. Small companies tend to have smaller boards on average and are generally less likely to have women directors. Small cap companies in California average about 7 directors per firm and 1 woman director at every other company. Still, California has 175 companies with capital of between $160 and $500 million with 79 women directors on their entrepreneurial boards. How many states can match that smaller company performance?

    Fact #8. There are more corporate director seats available at California’s top 400 firms (3,278) than there are top executive positions (2,772) available at those same companies. Yet, there were more women in top executive positions at those firms (333) than there were women-held director positions (328). How many states can match that executive level performance?

    Fact #9. There is a high level of demand for women directors at corporate boards: 328 director positions were held by 287 women, or 41 "multiple seat holders." Where do other states stand on the "multiple seat" status?

    If you were a young woman in college or graduate school, today, and you read the conclusions as written by the UC Davis professors, would you be motivated or discouraged from trying to achieve positions of leadership? Would you dare to enter challenging fields such as science, math, technology, or engineering? Would you feel welcome at business schools? Would you feel good about communicating with your own corporate board of directors? Would you aspire to be among the "only," the "barely," the "too few" women who did achieve directorships? How much harm are these studies perpetrating? How much are they deterring women from rising to leadership ranks?

    My congratulations to the 287 women directors and the 333 women executives at California top 400 firms. You are exceptional and you’ve earned the respect of this community for your dedication and achievements as a woman in leadership. You also deserve to be recognized for your professional credentials more than simply being dismissed as "barely," "only," or "just a few."

    There is no doubt in my mind that we can do better. We differ about how change can happen. It would be my wish that Graduate Schools of Business, across this great nation, might actually study the careers and contributions of these incredible women in leadership in order to learn how the next generation might reach such positions of stature, especially during these days where census after census after census undervalues their accomplishments and their efforts.

    Monday, November 17, 2008

    On Trust

    Two parents were talking about their Generation-X offspring in terms that finally shone a bright light on today’s financial meltdown. "We no longer trust our child. We’re not sure she’ll stay on her job or earn the money needed to support herself and her son. We taught her everything about how to manager her money, how to protect her credit, how not to overextend herself. But, she would get offers every month for a new credit card during college. She’d listen to her friends’ advice more than to us. She got an ARM loan from an aggressive mortgage broker, then watched as the rate jump up three times before we were able to find a desperate buyer for the house. The new broker said, 'How did someone so unqualified ever get such a mortgage loan in the first place?'"

    Trust. How do we restore trust in our markets if even fathers and mothers no longer recognize the consumers they thought they had raised? Another friend, commenting on the right wing religious zealotry running rampant in our country: "How did a nation based on the separation of church and state come up with a slogan, 'In God We Trust?'" Maybe because the rest of the slogan is, "Everyone else, we check and verify."

    If well-educated, hard-working, experienced and responsible parents no longer trust their own progeny, how can an employer trust that same person as an employee? If that person cannot be trusted to stay on the job, earn a living and pay off her credit card debt, her tuition loan or her mortgage; then on what basis does a landlord trust that she will pay the rent? Could the grocer trust her to pay the food bill? If she cannot be trusted to handle normal adult discretionary and essential expenses, then on what basis do we think she could differentiate between the values of short term vs. long term investment options? Does she understand the implications of the bond initiatives on which we’re asking her to vote?

    If banks cannot trust that she will keep her checkbook, savings or retirement funds on their books, then on what basis can they trust that her peers will have deposit balances against which those same banks might make loans to entrepreneurs, for working capital, or to other home buyers, for sound loans backed by the residential or commercial real estate assets of solid income-earners and established business enterprises?

    If there is no trust, then there is no basis on which to assess the risk because there is no further possibility of reward or a return on an investment. There is zero chance of recovering all that money expended on the child and certainly no chance of a profitable payback on that investment. There will be nothing saved that might benefit or educate the grandchild she gave to them. No trust means that there is no crop seed stored away for the next harvest. We will simply have to deal with the future next spring when it’s planting time. Risky, chancy, uncertain. Nothing to trust.

    How do we start again to rebuild trust? How do we start from scratch, from a total lack of trust? Mohammed Yunus did something like that in Bangladesh that offers us hope. There was no trust, no economy and no future for the women of impoverished rural India. He and his investors had money, but who knew which villagers were winners and which were not? Not unlike Mr. Paulson and Mr. Bernanke’s dilemma today.

    Mr. Yunus told the villagers that it was their burden to demonstrate worthiness of trust –- not his. He suggested they create peer groups of 3 to 5 people from among their neighbors and friends. These people had to agree to meet and counsel each other at least quarterly and to demonstrate their confidence in a candidate who would be the first to request financial support from the Grameen Bank. All of them had to ante-up something in support of the group effort. They had to defer something from their own resources (time, donation, currency) which they invested themselves, first. They could use their labor or their funds to seed the Grameen Bank fund.

    Next, they all had to agree on which one among the peers had the most worthy and productive entrepreneurial idea and was the most trust-worthy individual to receive the first microloan from the Bank. They were peers –- all in the same economic status and situation, but they had to decide which one among them had the greatest likelihood of succeeding. One of them had to create value worth the vote and support of all their peer group members, and they all had to affirm that trust in their request for funding from the Bank. Only on that basis might trust possibly be re-built.

    It did not end there. The peer group had to show continuing discipline by meeting regularly and reporting back on their candidate’s progress. If the candidate failed, all of the peer group would be responsible to pay back the loan plus some small interest. If the chosen candidate succeeded, then she made enough to repay the investment. So the peer group was motivated to counsel her well so they would be able to select the next candidate for the very same cycle. The peer group stayed together until all members created their value, gained a leg up and succeeded in paying back all of the loans with some return to the fund so that others could succeed as well.

    The very same philosophy helped thousands of immigrants from Norway, Sweden, Italy and a host of other origins to form Penny Banks, Farmers and Merchants Banks, Sailors Savings and Loans and Credit Unions. They very same strategy can be seen today among new residents from Southeast Asia, Mexico and Latin America.

    There is no Daddy and Mommy to force this solution down the throat of recalcitrant children. Peer groups could crop up on FaceBook as easily as in Pilgrim America or Bangladesh. All that is required is a desire to build trust to replace uncertainty and fear. To build trust takes initiative, creativity and a willingness to work together and to look out for the best interests of the peer group, rather than simply "me."

    Wednesday, November 12, 2008

    The Pity Platform

    Have you noticed how web sites or advocates for women’s issues morph into an oh-by-the-way-let’s-not-forget-all-of-the-other-disadvantaged? It’s never just a simple case of women in leadership. It goes on and on to include all poverty stricken women, all abused women, all women of color or minority designations. It’s immigrant women. It’s gay-lesbian-transsexual-bisexual-asexual women. It’s every suffering puppy dog or kitten that can be brought into this great inclusive menagerie of sympathy-evokers.

    The UCLA "Leadership Series" introduces the concept as follows:

    "Like all leaders, women, African Americans, Latinos, and those who identify as lesbian, gay, bisexual, or transgender must convey credibility, foster career-building alliances, and master the informally learned nuances of management. Yet, being perceived as 'different' or 'other' presents unique challenges as these managers seek to establish themselves within their organizations."

    Pity all the poor leaders! They’re soooo different.

    The logic behind the Pity Platform is that if you cannot somehow drop a tear and a few hundred bucks to support one or another of these most deserving candidates for mercy, then you must not be The Caring Woman we took you to be.

    Today, though, we listen to news broadcasts, one after another, reporting on doors closing, programs being cutback, and staff pink-slips handed out at charities, symphonies, ballets, foundations and other bake-sale candidate charities. The women-also-ran issues can expect parallel cutbacks in the face of serious economic challenges. The false hope was that, by affiliating with other sympathy-generating groups, women would somehow win broader support than they seemed able to garner on their own merits. The reality was that issue of the advancement of women inevitably became lost and diluted under the weight of competing issues from far-afield.

    The real need has nothing to do with any "pity platform." Instead, it is an issue that has earned the right to be considered on the merits and on the basis of performance. The real need concerns how to advance women of competence and talent to leadership positions.

    Monday, November 10, 2008

    I Just Want To

    In talking with another competent woman in a promising position on track toward leadership, recently, I was taken aback when she told me that -– rather than do the performance reviews required to get her less-than-stellar sales staff up to par -– she "just wanted to quit and go run a day care center, instead."

    So, she believes that the grass is greener over among hordes of whining, demanding cold-infested children? How tough can performance appraisals be, anyway? She is more than capable of handling the salesman feedback challenge – but she may need some advice and probably better examples of tough performance appraisals than the ones she has received to date. She is a performer: used to positive and affirmative annual reviews. She’s a self-starter who charts her course by her own compass. So, where would she have seen or learned about giving that type of good "constructive criticism" that now is required of her?

    You can see the astonishment in her eyes: the disbelief that her salepeople are laying back, trying to tread water, float through the quarter and pretending the deliverables will be overlooked by management. She wouldn’t think of trying to "get away with it" herself, so it’s difficult for her to comprehend what motivates slackers to slack.

    Where, in her years of training and upbringing, were there lessons and case studies of how to deal with, much less motivate, such people? Did she learn about them in school? High school? College? Or did she get the "sugar and spice and everything nice" special training that we reserve only for the two-X gene pool? Do we fear that teaching her how to handle the “snips and snails, and puppy dogs tails” this late in life will corrupt her by association with those of a more devious persuasion?

    She must learn: it is now or never. Because, if she, as a manager, does not have the ability to bring her sales people up to and beyond par, then -– for the first time in her professional career -– she might receive the negative spillover on her own performance review. Then it will be a lesson learned too late: how to deal with staff, motivate underlings, delegate but verify performance all are part of the art essential to every position of leadership. The sooner women learn how to address those essential challenges successfully, the better off they and their businesses promise to be.

    Thursday, November 6, 2008

    What If?

    The naming of the next Secretary of the Treasury will have "huge significance" for the Obama Administration and for the direction of U.S. capital markets.

    The nominee chosen (November 25) is 47-year old New York Federal Reserve Bank President Timothy F. Geithner, a former U.S. Treasury assistant secretary for international affairs, who gained a lot of attention since the start of the financial bailout.

    For a more complete overview of the key economic appointments, see Washington Wire of November 24th

    Now, we have two interesting "side bars" to this very solid selection. The first is that Lawrence Summers will be Barack Obama's Director of the National Economic Council, while the second is that Christina Romer will be the new chair of the Council of Economic Advisors.

    Dr. Summers upset many at Harvard University with his January 2005 comments before the NBER regarding the reasons he thought women were not rising to top math and science positions in academia. Dr. Romer was given the blackball by Harvard President Drew Faust Gilpin earlier this year after it looked as if she and her husband (both economists at UC Berkeley) would relocate to Boston.

    It looks as if the view from Harvard is getting a bit foggy.

    Melody Barnes was named Director of the Domestic Policy Council within the White House, while Heather A. Higginbottom was named her Deputy.

    Thursday, October 30, 2008

    Chapman v. Dell Inc.

    Mildred J. Chapman, a 59-year old Director of Global Human Resources at Dell Inc. (Round Rock, TX) filed a federal lawsuit in San Francisco’s Northern California District Court along with three other women alleging discrimination based on gender and age. Sanford Whittles & Heisler, LLP is handling the class action complaint on behalf of Mildred J. Chapman, Angela Hopkins, Julia M. Mahaffey and Bethany Riches.

    Complaint No. 08-cv-4945 MHP (N.D. Calif.) filed October 29, 2008.


    According to the filing, professional employees at Dell Inc. are categorized into grade levels in ascending order as follows: C1s to C3s (Managers and Senior Analysts); D1s (Senior Managers) to D3s (Directors); E1s (Vice Presidents) to E2s (Officers and Executive Leadership Team).

  • Mildred J. Chapman was a D1 in Dell’s Global Human Resources Department from November 2005 to April 3, 2008.
  • Angela Hopkins was a Senior Manager (D1) at Dell’s Global Human Resources Department from January 2006 until April 3, 2008.
  • Julia M. Mahaffey was a Manager (C3) in Dell’s Global Human Resources Department from 2000 until October 26, 2007.
  • Bethany Riches was a Senior Manager (D1) in Dell’s Human Resources Department from September 2003 until May 26, 2008.

    Despite receiving favorable performance reviews, the women repeatedly were "put off" regarding promises of promotion. As a consequence, they "complained repeatedly" to higher-ranking executives about pay that was lower than male counterparts.

    In the summer of 2007, Ms. Riches was also interviewed as part of an internal
    investigation or audit referred to as a "focus group" regarding gender discrimination at Dell. After that, she alleged suffering retaliation for her views.

    No women serve on Dell’s 14-member Officer and Executive Leadership Team (E2). Approximately 80 percent of all Vice Presidents (E1 level), the D3 (Director) level and the D1 (Senior Manager) level are male.

    The suit alleges that "The systemic means of accomplishing gender-based stratification include . . . Dell’s development, placement, promotion, advancement, training, performance evaluation, and termination/retention policies, practices, and procedures."

    Many questions come to mind.

    1. Didn’t Dell have a "Diversity Council?"

    Yes, and Michael Dell was its chair: "Michael Dell Chairs Company Global Diversity Council," Aug. 11, 2008.

    The diversity council consists of six executives, including three from the company’s executive leadership team [the presidents, listed below]. Only one member is a woman: Jan Uhrich.

    The Global Diversity Council members include:

  • Paul Bell, president, Dell Americas;
  • Kevin Brown, Vice President & Chief Procurement Officer;
  • David Marmonti, president Dell Europe, Middle East and Africa;
  • Amit Midha, president Dell Greater China;
  • Stephen Schuckenbrock, president of global services and Chief Information Officer; and
  • Jan Uhrich, vice president, Dell Global Commercial Support Services.

    2. Didn’t Dell win accolades from "working mothers?"

    Yes again. "Dell Makes the List for Working Mothers," Sep. 23, 2008

    "We’ve recently been named to the Working Mother 2008 100 Best Companies. We’re honored because Working Mother is known as the premier source for celebrating America’s family-friendly leaders. In fact, Carol Evans, CEO and Founder of Working Mother Media, had to say this about Dell:

    'In this sluggish economy, many employers are controlling costs by cutting back on family-friendly policies — but not the 2008 Working Mother 100 Best Companies. From flextime and telecommuting to backup child care and parental leave, our 100 Best Companies have made work/life balance a top priority for working moms and dads. This year, Dell won a place on our list for the first time. I am so proud to welcome Dell to the Working Mother 100 Best Companies.'"

    3. Weren’t there other women in Dell’s leadership?

    Yes: some of them are/were top technology and support service professionals. A few of these include:

  • Susan Sheskey was Dell’s Chief Information Officer from August 2005 until her
    retirement in 2007:

    "Susan Sheskey, a Dell vice president and 12-year veteran of the company's information-technology function, [August 1, 2005] was named chief information officer.

    Kevin Rollins, president and chief executive officer, announced Ms. Sheskey's appointment, which is effective immediately. She had been serving as interim CIO. Ms. Sheskey reports to Dell's Office of the Chief Executive Officer and becomes a member of its Global Executive Management Committee.

    'Susan has an exceptional understanding of our business model and the competitive advantages derived from a robust IT infrastructure,' Mr. Rollins said. 'Her team is skilled, knowledgeable and deep, and an ideal example to customers about capabilities and benefits from powering their enterprises with Dell standards-based technology.'

    Ms. Sheskey has had broad management experience at Dell, including serving as vice president for Global Sales, Services, Manufacturing and Fulfillment IT before being named interim CIO in July.

    Prior to joining the company in 1993, Ms. Sheskey compiled key planning, development and operational experience during 20 years with Ameritech's corporate and services functions and at Ohio Bell. She is a graduate of Miami University in Oxford, Ohio."

  • Karen Bruett, is Vice President of Dell's K-12 business and from 2004 – 2006 was Director, Education and Community Initiatives.

  • Sally Stevens was Director, Dell PG Enterprise Marketing/Product Mgmt and is Director of PowerEdge Servers

    "Sally Stevens joined Dell as the Director of Server Product Management. Sally comes from AMD, where she served as Director of Commercial Platform Solutions, responsible for driving Commercial solution requirements and awareness into AMD mobile, desktop and server designs. Prior to AMD, Sally spent 10 years at Compaq/HP in various marketing management and executive roles including Director of ProLiant Marketing, and Director of Strategy and Business Planning, and was key in defining and launching HP's blade solution. Sally has also held various product management and software engineering roles during her 10 years at NCR."

    4. Doesn’t Dell have two women on their board of directors?

    Yes, Judy C. Lewant and Sallie L. Krawcheck.

    Judy C. Lewant
    Age: 58
    Director since May 2001
    Board committees: Finance (Chair), Leadership Development and Compensation

    Ms. Lewent is the former Executive Vice President, Chief Financial Officer of Merck & Co., Inc. She retired from Merck on September 1, 2007. She served as Chief Financial Officer of Merck since 1990 and has held various other financial and management positions since joining Merck in 1980. Ms. Lewent is also a director of Motorola, Inc. Ms. Lewent is a trustee and the chairperson of the audit committee of the Rockefeller Family Trust, a life member of the Massachusetts Institute of Technology Corporation and a member of the American Academy of Arts and Sciences.

    Sallie L. Krawcheck
    Age: 42
    Director since July 2006
    Board committees: Finance

    Ms. Krawcheck is the Chairman and Chief Executive Officer, Citi Global Wealth Management. Until March 2007, Ms. Krawcheck served as Chief Financial Officer and Head of Strategy for Citigroup Inc. She is also a member of the Citi Management, Operating and Business Heads Committees, as well as the Citi Foundation Board and Citi Business Practices Committee. Ms. Krawcheck joined Citigroup in October 2002 as Chairman and Chief Executive Officer of Smith Barney. Prior to joining Citi, Ms. Krawcheck was Chairman and Chief Executive Officer of Sanford C. Bernstein & Company. She also served as an Executive Vice President of Bernstein's parent company, Alliance Capital Management, from 1999 to 2001. Ms. Krawcheck is a member of the Board of Directors of the University of North Carolina at Chapel Hill Foundations, Inc., Carnegie Hall and the Board of Overseers of Columbia Business School; and the Board of trustees for the Economic Club of New York.

    5. Didn’t Dell have a Leadership Development Committee with responsibility for monitoring all aspects of leadership development?

    Yes, the Leadership Development and Compensation Committee met 8 times during 2008. The members in 2008 were:

    Alan (A.G.) Lafley (Chair)
    William H. Gray, III
    Michael A. Miles
    Sam Nunn

    Most recently, Judy Lewant was added as a Leadership Development committee member.

    The charter of the Leadership Development and Compensation Committee reads:

    Acting pursuant to Section 141 of the Delaware General Corporation Law and Section 1 of Article IV of the Company's Bylaws, the Board of Directors has established a Leadership Development and Compensation Committee for the purpose of reviewing and (except in the case of the Chairman and Chief Executive Officer) approving, on behalf of the Board of Directors) management recommendations regarding all forms of compensation to be provided to each executive officer and director of the Company, including any perquisites and equity compensation, and salary, bonus and equity compensation guidelines for all employees. The Committee will also have responsibility for reviewing management succession plans and leadership development strategies."

    6. Did the four women complainants appeal to any of the above corporate resources while they were employed at Dell in order to try to bring this situation to the attention of the leadership and seek remedies during the period that they were employees of the firm?

    I guess we’ll have to wait and see.
  • Sunday, October 26, 2008

    Billie Jean King

    Another addition to your “inspirational” recommended reading list:
    Pressure is a Privilege: Lessons I've Learned from Life and the Battle of the Sexes by Billie Jean King with Christine Brennan (192 pages, LifeTime Media Inc.; August 12, 2008)

    Wednesday, October 22, 2008

    Nothing Personal, Mrs. Palin

    It mystifies me how some women might prefer Sarah Palin over a host of other competent, capable, educated and experienced Republican women who might have been chosen as a Vice Presidential candidate. Why would anyone prefer a journalist, beauty pageant contender, small town Hockey Mom and globally-isolated individual to stand so close to the office of President of the United States of America rather than an educated, experienced and tested woman leader? Why would women or men prefer an obvious token to right wing zealots over any number of far more talented Republican middle to centrist women who currently serve in government? The Republican party has an abundance of women leaders at the gubernatorial to the Congressional level. Why Sarah Palin?

    Because she does not threaten or scare the average female of voting age. My theory is that large percentages of women – from both parties – feel threatened by other women, especially women who have risen higher than they. Strong women (anything "more" than, say, Monica Lewinski) might take the attention of the men in their lives (or even the potential men in their lives) away from a focus on themselves. Women see competition differently from the way men view competition: women see it as daughters capturing the attention of their husband. Women see competition as potential devastation not the opportunity as men perceive it.

    If you can assess a woman’s perception of her mother -– whether it is a relationship of respect or one of fear and jealousy -– then you will be able to assess how that woman will view her female peers, subordinates and superiors. If she is afraid of her mother or views her mother with disdain, then probably her perspective of contemporary women will mirror that attitude.

    Is it possible to change a woman’s view of her mother from negative to positive? Is it possible to change a bigot into a tolerant human being? Absolutely, but not without effort will old biases and uncertainties abate. Is it possible for a woman to leave intact her inter-familial prejudices while also constructing new unbiased external views? Possibly, but the internal conflict probably needs genuine resolution before real in-depth acceptance can be allowed to blossom. A woman cannot hold two dramatically viewpoints simultaneously and remain healthy. A woman cannot long espouse one view externally, while sustaining an opposite, undoing view internally. Something must give.

    The struggle to find an appropriate personal path is evidence of the failure to examine and address that internal conflict. Women who quit, or “opt out,” women who cannot quite make up their minds or who cannot choose for themselves are examples of women who persist in not addressing their quandary: am I myself or am I my mother? To extricate one’s own personality from that of one’s mother appears to these uncertain women as a rejection of all things feminine, good, warm, comfortable and caring. It seems to be a journey out and away from safety toward the unknown, risk and danger.

    Women like Sarah Palin because she appears to "boldly go" back to a time when things were simpler, when mothers comforted us, when the biggest issues to be addressed were what to put on the dinner table or how to comfort a wayward daughter or tend to a truly helpless baby. Because, if women like Hillary Clinton are allowed to rise to public prominence, then other women ("women like me!") might also be compelled or expected to address the far more complex issues of how to prioritize among contending healthcare costs and benefits. "Women-like-me" might need to comprehend subprime loans, collateralized derivative obligations or credit swaps. "Women-like-me" might need to choose between shopping and saving for that very long term future all women will face. "Women-like-me" might actually need to cut back on discretionary consumption in order to invest more in quality education -– including our own.

    Sarah Palin represents a very strong emotional bond to a much simpler past, when Mother stayed in the background, quietly telling us that “Everything will be just fine, dear, because Father Knows Best.”

    Wednesday, October 15, 2008

    Women Who Dare

    This is my recommendation for the Christmas present of the year:

    Women Who Dare
    ® (2009 Calendar Hardback from Pomegranate Publications in collaboration with the Library of Congress).

    This is an impressive collection of 53 biographies of women of achievement from many eras, many nations and many professions or avocations. Plus each day in the calendar also has a birth date or anniversary celebrating some woman of achievement.

    Over ten years ago, I spoke with a woman to try to get her help in publishing a book of women of achievement. Her uninspired response back then was, "Why would anyone read this?" This calendar is the answer: "To inspire the next generation of women leaders." "To inform today’s young girls of how many women overcame many obstacles and challenges so that they could have the great opportunities that exist today!" "Because traditional media so ignores the accomplishments of incredible women!" "Because these women are inspirational!" And furthermore, "Because these women have earned our recognition and our thanks!"

    Click on this link and order a copy of the Women Who Dare 2009 Calendar for every young woman in your life who has asked, “Where are the women to inspire me?” “Where are the women in leadership, today?” “Who are the women role models of our future?”

    Friday, October 10, 2008

    I Have Two Kids

    Let's assume that I have two kids. One is a boy, and the other is a girl. When they brought homework to the dining room table, we didn’t provide different answers to one or the other because of their gender. We didn’t counsel one how to take advantage of the opposite sex on a date, but tell the other how to play coy. We didn’t tell him he could be whatever he wanted to be, but tell her that she needed to set her sights only on a hausfrau future. We didn’t tell her to wait for Prince Charming to kiss her and make the world a wonderful place to live forever after. We didn’t tell her to wait for “some nice man” to give her everything she could possibly want.

    We taught them both that they could succeed at anything IF they were willing to work hard, become competent, learn from their experiences and be in touch with their own humanity and that of the world around them. We didn’t exactly tell them all that. We tried to live those examples and let them learn from what they observed.

    Now that we’ve turned them over to the workforce and to their communities, it is somewhat surprising to see that some people suggest we should give one of them preferences, special treatment or help -- over and above what is available to the other.

    In California, we tried to legislate that in the 1990s, calling it “affirmative action.” The belief then was that we had to do something to compensate for past discrimination, a little something to make up for past oversights. Call it a contemporary form of social reparations.

    The only problem was that we learned that we could never quite pay off today for sins and errors incurred yesterday. You can only learn from the past, never replay it. Like revenge and retribution, we can never really get calculations quite right and no one is ever satisfied. A better strategy is to focus on ensuring that past errors are never repeated.

    So, Californians passed Proposition 209 in 1996 to amend the state constitution and bar BOTH discrimination and preferences in choices, decisions or actions made by any entity that received money from the public at large. Since those who pay taxes in the state are on a level playing field -– men and women -– those on the receiving side likewise should be on an even playing field. Like it or not, the law of the California land prohibits public institutions from considering race, ethnicity or sex (gender).

    An interesting consequence in California is that our state has the highest number of women added to public company boards of directors, based on press release announcements tallied by (a blog managed by Alice Krause of New York). We believe the state generates the greatest amount of investment in new venture creation which builds businesses and attracts talent -- and that includes a lot of very competent women.

    So, should we be telling our children to sit back and wait for someone to hand them gender reparations on a silver platter, or should be showing out next generation (both our daughters and our sons) case studies and business examples of how successful women (and men) make a positive, economically viable contribution to our economy?

    Should we be expecting this president or that to make the world some perfect place for our kids to play? Should we wait for Congress to act or the Courts to decide who will be winners, who will be losers and who will pay? Or should we be teaching all of our kids how to stand up for themselves, fight for their rights, negotiate for their economic opportunities, save for their long-term futures, study the mistakes and successes of their elders, build careers and families and communities of which they can be proud and raise the next generation of kids as if equality of opportunity existed?

    Let’s teach our children well.

    Sunday, October 5, 2008

    Top Fortune Women in Leadership - 2008

    There’s a change in tone at the top, and Fortune Magazine is “getting it,” finally. Rather than the usual emphasis on the skirts, makeup or fashion at “The 50 Most Powerful Women” in the Fortune Magazine October 13, 2008 issue, we finally have the opportunity to read about the money, the products, the industry sector, the value and the profits these talented, competent women are generating for their companies.

    Finally, we are beginning to see new faces and impressive credentials. The average age of the most impressive women leaders of 2008 is 50.5 years for the domestic U.S. listing and 51.4 years for the Global listing. The youngest is Marissa Mayer, 33, VP of Search and User Services at Google and the oldest is Cathy Black, 64, of The Hearst Group of magazine publications.

    In the Global listing, the youngest is Kristina Stenbeck, 31, Chair of Sweden’s Kinniveck entertainment/media enterprise while the oldest is Yoshiko Shinohara, 73, of Tempstaff, Japan’s staffing/recruiting firm.

    Technology and Investment firms dominate the U.S. top 50 listing with 8 women in each category, while Investment and Banking firms dominate the Global top 50 listing with 8 and 5 women in each listing, respectively. We’ll see if those sectors remain on top for long, now that the credit markets have imploded.

    France was home to 9 of the women in the Global listing, followed by Britain (7 women) and China (6 women). Singapore, Sweden, and India each had 3 women. Netherland and Israel each had 2 women. Fifteen other countries had 1 woman each. Interestingly, Norway -- which has a law mandating 40% of the public company board seats be occupied by women -- had no women on the top Global listing.

    The magazine also compared the top 2007 salaries for men and women. On average, the top U.S. listed women earned about $14 million, including Safra Catz, co-head of Oracle, who earned $34.1 million and Shailyn Gassaway, EVP/CFO of Alltel (the only woman from that company on either list), who earned $38.6 million. The lowest salary for the top 25 women earners was $8.9 million.

    The top salaries for the men ranged from a high of $350.7 million to a low of $41.9 million – both earned by Blackstone executives (of which there were 4). Included in the top male earners were four each from Alltel and Goldman-Sachs. Only one woman working for Goldman-Sachs in Britain, Isabelle Ealet, made it to the Global list, and none made it to the U.S. list.

    As ever, incredible talented women are beginning to achieve internationally recognized positions of leadership. We genuinely congratulate them and Fortune Magazine for helping to change the tone and the attitudes that we exhibit towards women in leadership in the 21st century.

    Saturday, September 20, 2008

    Women on Boards: Leveraging the Promise

    DATE/TIME/LOCATION: Tuesday, October 28, 2008
    7:30 AM to 9:00 AM
    at Verity, 111d Queen Street East; Toronto, ONT, CANADA

    Knightsbridge Human Capital Solutions is pleased to sponsor a roundtable discussion on the topic of women on boards. The objectives of the session are to discuss the qualifications and experiences that make someone “board ready”; and to engage a diverse group of stakeholders to identify strategies to increase the number of women on the boards of Canadian organizations. The discussion will also focus on how to pursue board positions and succeed in them, based on the real life experience of the panellists and guests.

    Susan Black: Senior Vice President, Strategic Planning & Chief Human Resources Officer ING Canada Inc. Former president of Catalyst Canada which completed a study on women on corporate boards in Canada in 2007.

    Elizabeth Ghaffari: President/CEO of Technology Place Inc., founder of Champion Boards and author of Surveys of Women on Boards of Directors at California-Based Fortune 1000 Firms in 2004 and 2005.

    Courtney Pratt: Chair of the Board of Knightsbridge Human Capital Solutions. Chairman and CEO of the Toronto Region Research Alliance. Previously Chairman, President and Chief Executive Officer of Stelco, Chief Executive Officer of Toronto Hydro, CEO of Hydro One Networks, Chairman of Noranda Inc., and President of Caldwell Partners.

    Beverly Topping: President/CEO of the Institute of Corporate Directors, founder of Today’s Parent Magazine and a multi-media company which she sold to Rogers Media in 2000.

    Betsy Wright: Previous senior positions with Chemical Bank, Bank of Montreal, CIBC, Midland Walwyn Capital Inc. and National Trust. Current/past Director of BCE Inc., Canadian Bankers Association, Canadian Depository for Securities, Canadian Scholarship Trust Foundation, Canadian Payments Association, Holt Renfrew and Co. Limited, MasterCard International and Pizza Pizza Royalty Income Fund.

    Liane Davey, Ph.D., Liane is a Principal in the Organizational Leadership and Solutions practice of Knightsbridge. She has over 10 years consulting experience in the areas of Strategic Facilitation, Organization Development, and Measurement. Liane’s first book, Leadership Solutions (co-authored with David Weiss and Vince Molinaro) was released in the fall of 2007.

    Monday, September 15, 2008

    On “members only”

    What is the value in having a “members only” web site or organization? Especially for women who are trying to advance to leadership?

    Babson College Professor Patricia Green wrote that “women have different circles of friends,” suggesting “members only” cliques might be part of the explanation behind why there were so few women in leadership at top companies.

    Chambers of Commerce today have several “Women’s Chambers” groups which are spin- offs from the main coed group. That may not be a bad thing if the small groups become real platforms for “commercial” success for women entrepreneurs. But, if the “members only” subset becomes craft and “mommy ‘n me lifestyle” hobby-activities that further isolate business-minded women from real economic knowledge, then maybe that’s another explanation behind why there are so few women in leadership at top companies. Are women hiding from the challenge of debating and networking among men in the coed groups by fleeing to these members-only spin-offs?

    Women’s organizations abound today, asking members to volunteer or to dedicate themselves to cause after cause, with little thought about the value of women’s time. If women add value to business, which I believe is the case, then women also deserve to be paid for their services to women’s organizations – say speaker fees or consulting fees -- rather than simply expect all women currently in leadership to mentor for free the next tier of candidates. Women in leadership give generously of their time. Do women in membership groups truly value that asset?

    Women’s advocacy groups get formed to critique male business strategies: “Action Required of CEO’s and Boards”, but strangely enough, no action is required on the part of independent women.

    Some of the oldest women’s groups in the country are “for members only.” In fact, they’re “by invitation only.” It’s hard to imagine how such groups can help advance women to public company boards when nobody knows who has been invited or selected to become part of the group except the women themselves. Are women businesses bringing women to top leadership? To their boards? Paying them top corporate dollars? Even more important is the question of how can women tell corporations and men in charge there that disclosure and transparency are desirable when women don’t practice openness themselves?

    An interesting contrast is the Institute of Corporate Directors’ (ICD) Canadian “Women in the Lead” program supported by the alumnae of the Richard Ivey School of Business at University of Western Ontario. They are launching their fourth edition of a Canadian directory of women’s competencies: Women in the Lead/Femmes de tête. Ordering information at:

    “National in scope, [the book] lists the professional expertise, responsibilities, contributions and recognition of more than 800 accomplished women” for top Canadian women in work and communities. They currently serve on over 3000 boards representing corporate, government and not-for-profit organizations, or an average of 3.75 boards per woman.

    The other very encouraging example is this very website,, which has had such a major and positive impact on young women seeking to find role models of successful women in leadership. Not a clique, not a groupie: just an open door where business, corporations, boards of directors, and other aspiring women can see what leadership looks like today.

    Wednesday, September 10, 2008

    Glass Half Empty? or Half Full?

    The number of women in business schools, today, is very much like the trends in other parts of business. There are as many women in that field as there are women who aspire to achievement in the field.

    Women should be telling each other the truth: that more women than ever before ARE taking business subject as undergraduates and in graduate schools of business/management. [Data and figures have been updated to 2006-2007: Digest of Educational Statistics, U.S. Dept. of Education.]

    The total number of degrees conferred in business, management, marketing and related support services at the Bachelor's level reached 327,500 in 2006-2007, with women representing 161,200 graduates every year or a 49.2% share.

    Even more important is the accelerated increase in the number of women over the years. Total undergraduate degree head count increased 23% from 1995-96 to 2006-07, but women earning bachelors' business degrees increased 27%.

    The total number of degrees conferred in the same fields at the Masters level reached 150,200 in 2006-07, with women representing 66,100 graduates every year, or a 44% share.

    Again, total graduate degree head count increase 23% from 1995-96 to 2006-07, but women earning masters' business degrees increased 30%

    The picture is even more impressive for all master's degree recipients. Women earned almost 61% of the 610,000 graduate (master's) degrees in 2006-07, a trend that has been on the rise for years.

    Rather than tell the next generation of women leaders that "business is soooooo hard!" like some make believe plastic mannequin, we could be telling that talented, competent, capable next generation of women leaders the truth:

    1. GO FOR IT! A business degree is a ticket to a better future in any field you choose to follow.
    2. You're not alone in pursuing a business, economics or finance education -- there are a lot of talented women doing just that.
    3. Look around you, look up ahead of you: women in business are making a real difference, even in tough economic times.

    Source: U.S. Department of Education, National Center for Education Statistics.

    Saturday, August 30, 2008

    How Stellar Women Succeed

    Boris Groysberg, an Assistant Professor in the Organizational Behavior unit at the Harvard Business School, wrote "How Star Women Build Portable Skills" published February 1, 2008 in the Harvard Business Review.

    Prof. Groysberg found that star women "thrived in new work environments" because they built "portable skills," specifically:

    1. women invested more in external relationships (breadth of networks) and
    2. women conducted far more due diligence which helped them make good strategic decisions (depth of analysis).

    Rather than focus on the "whys" behind women’s choices (many of which might perhaps be negative), Prof. Groysberg focused on the consequences of their choices which actually were beneficial for the women. Star women increased their performance and "maintained their shine" which translated into added value to both the receiving company and to the outstanding women, themselves. Presumably, the companies that lost the star women suffered the consequences of letting good talent escape their confines, and those firms probably will pay the price in both performance and value declines.

    In separate research published in 2005, "What Differences Make a Difference: The Promise and Reality of Diverse Teams in Organizations," Elizabeth Mannix (Johnson Graduate School of Management, Cornell University) and Margaret A. Neale (Stanford Graduate School of Business) struggled to reconcile two different views of diversity: one pessimistic and the other optimistic. Is the glass half empty or is it half full?

    Profs. Mannix and Neale looked at alternative definitions and categories of "diversity" in an effort to determine when, where and how "differences" might have positive impacts on organizational performance. They concluded that heterogeneous groups have a greater tendency to enhance group performance because they expand "information processing" which is exactly comparable to Professor Groysberg’s finding that women benefit from tapping larger external linkages or networks.

    Diversity matters not by uniting similar attributes or fostering common socialization together (i.e., building girls-only or guys-only groups), but rather by exposing organizational participants to the learning processes engendered by "different backgrounds, networks, information, and skills." It's not just the skirt, it's the world-view.

    "This added information should improve group outcome even though it might create
    coordination problems for the group." (Mannix.)

    The first portable skill Prof. Groysberg cited was: bringing in more and better information from outside the group. Travel abroad heightens one’s appreciation of one’s culture, but also compels the traveler to test one’s personal experiences and capabilities within the larger world setting. Sometimes we struggle with language differences, but we benefit from the inter-human valuation process which results when others see we are at least attempting to understand and learn from their world.

    The second portable skill he cited was: a willingness and ability to ask effective, deeper and more probing questions in order to get a better handle on possible risks and to challenge traditional assumptions or preconceived notions which may no longer be valid.

    These skills are essential as groups evolve new strategies to deal, effectively and successfully, with the more complex challenges of today’s business operations. As we look at failed company after disastrously failed company today, we realize we are watching lemmings chase each other over a cliff, playing follow-the-leader into risky investments and unsubstantiated valuations.

    Prof. Groysberg also mentions the need for more business case studies to help all of us (women and men) understand how successful women in business leadership today are making the choices that propel them forward -– the choices that make their stars shine.

    Note there is no stated need to study all of the possible rationales that women or others have used in the past to keep their light hidden under the bushels. We do not need to hear more about what has kept other women down.

    We need more cases investigating how successful women perform and achieve positions of leadership in business today. What choices do stellar women make at each stage in their successful careers?

    Here is an interesting test:

    How many readers actually went to the Harvard Business Case web site and downloaded his paper? You can purchase a copy for $6.50: Article #R0802D.

    Mannix and Neale’s research can be found at the American Psychological Society: Vol. 6, No. 2 (October 2005). APS:

    It’s not enough simply to read the abbreviated interview: women need to read the original research, too. Sometimes the best, long-term strategy is to take the road less traveled. Depth as well as breadth.