Energy Flows in Business and Society
Posted on March 16, 2009
Filed Under Leadership, Management, Norman Wolfe, Organization & Culture, Strategy | 3 Comments
The underlying foundation of The Living Organization™ model is that everything is Energy. In the model we draw on this turth to aid us in understanding the dyanmics within an organization giving deeper insight and additional options to helping our organziations grow.
Just as an organization is a living entity directing and transforming energy towards a desired result, so is our overall society. In my recent post on the FastCompany Expert Blog (http://www.fastcompany.com/blog/norman-wolfe/leading-living-organization/world-energy-will-always-flows) I discuss the impact of the massive number of people who suddenly find themselves unemployed from the point of view of a living system of energy flows.
Read the article and let me know if you agree with my conclusions.
Norman Wolfe | President/CEO | Quantum Leaders, Incnwolfe@quantumleaders.com
www.quantumleaders.com
www.quantumleadersblog.com
http://twitter.com/nswolfe
Even Welsh recognizes The Living Organization
Posted on March 14, 2009
Filed Under Governance, Leadership, Management, Norman Wolfe, Organization & Culture, Strategy, Strategy Execution | Leave a Comment
Well perhaps he didn’t exactly call it that, but in a recent article in Financial Time (3/12/2009) Jack Welch who is regarded as the “father of the shareholder value movement” said said it was “a dumb idea” for executives to focus so heavily on quarterly profits and share price gains.”
What is he really saying about an idea he promulgated in a speech in 1981 that has come to dominate the corporate world ever since? Is he saying we should abandon shareholder value? No, of course not; to quote the article, “On the face of it, shareholder value is the dumbest idea in the world,” he said. “Shareholder value is a result, not a strategy . . . Your main constituencies are your employees, your customers and your products.”
As we describe in The Living Organization™ model the soulful purpose of an organization is to contribute, in their unique way, products and services to their market and it is the employees who are the ones who are collectively making this contribution. Said another way, a company’s constituencies are the employees who collectively create products and services in service to the customers.
It is not that our financial metrics are unimportant, just misplaced in our focus. To again quote from the article, “Mr. Welch last week said he never meant to suggest boosting a company’s share price should be the main goal of executives. “It is a dumb idea,” he said. “The idea that shareholder value is a strategy is insane. It is the product of your combined efforts – from the management to the employees”.
I believe there are signs all around us that now is the time to rethink many of the assumptions that have framed management thinking for many decades. It is time for a new map to guide us as we navigate through not only these tough times but through the changing world the 21st century is unveiling.
Norman Wolfe | President/CEO | Quantum Leaders, Incnwolfe@quantumleaders.com
www.quantumleaders.com
www.quantumleadersblog.com
http://twitter.com/nswolfe
Marketing is a Many-Splendored Thing…
Posted on February 4, 2009
Filed Under Gregg Gallagher, Innovation, Marketing, Strategy | Leave a Comment
Set Godin’s blog post today - “Which comes first, the product or the marketing?” touches on a subject near and dear to my heart. In fact, it’s a “soapbox” issue for me, in that I find myself elaborating on a daily basis regarding the many different aspects and disciplines falling under the marketing umbrella.
Seth’s post alludes to the need for marketing playing a role in the upfront stages of product creation. At Quantum Leaders, we have developed a model of the overall flow of Demand creation within The Living Organization™
In this model, there are a 3 major processes/functions that should comprise a firm’s marketing activities: Strategic Marketing, Product Management and Product Marketing. Depending on the size of the firm - and the resources and staffing available - these functions could reside in one or more individuals or departments - or even outsourced.
Very often the conversation around marketing (even among many marketing professionals) is completely around the Product Marketing / Marketing Communications activity. (How do we sell the product?) Indeed, many firms organize their marketing completely around the MarComm functions of brand marketing, lead generation and public relations. This is particularly the situation with so-called “engineering-driven” firms, where the product design function is performed completely within product development, with little or no participation or inputs from Marketing via the Product Management function.
True innovation derives from the creation of customer value via invention. Pure invention/ideation that is not based on an understanding of the needs of the customer seldom achieves success in the marketplace.
I’ll explore this notion further in future posts and welcome you sharing your thinking & experiences…
The Living Organization™ Model – The Spirit
Posted on January 11, 2009
Filed Under Leadership, Management, Norman Wolfe, Organization & Culture, Strategy Execution | 4 Comments
The key to success is to maximize energy contribution while minimizing the loss of energy as it flows through the system on its way to becoming valued goods and services. But the model is not complete if we think of the flow of energy as just one frequency.
Like light passing through a prism the energy flowing through The Living Organization™ has a number of different wavelengths. If we look at the model in a three dimensional view as if we were looking at light through a prism we will can observe three distinct energy waves or frequencies – Activity, Relationship and Context.
Activity is the energy of doing. It covers both the “what and how” of the work to be done. This energy has the characteristics of linear, cause and effect relationships. The information it provides is processed analytically. It is the domain of the left brain and uses physical intelligence or IQ.
Relationship is of the energy of interactions. It covers the “who” we do the activity with. Its dominant characteristic is seen in communications and is experienced in terms of empathy and patterns. The information is processed by the right brain and we call on emotional intelligence or EQ to process this information.
Context is the energy of meaning and purpose. It is the “why” of what we. Its dominant characteristic is experienced as culture and values. It is experienced as holistic knowing or intuition. It is a connective energy as it connects to information from other entities through their context energy field. It is processed by the heart-brain and calls on the spiritual intelligence of individuals or SQ in order to process the information coming to us form this field of energy.
Activity is what we can observe and measure. It is the field of energy that is most easily processed through the human senses. It is in the Activity field where potential energy becomes converted into kinetic energy and transforms into goods and services.
Since it is the field that is easiest to measure we tend to think of it as the most significant energy field. It is certainly the one most traditional theories of business has focused on. And while it is certainly a critical part of the overall flow of energy it is by no means the only one or the most significant one.
Relationship is the energy that emanates from the interaction of two energy sources. When we work with someone we are in conflict with, we tend to guard and withhold some portion of our energy. And when we are in a positive relationship with our co-workers we tend to feel more energized and desire to contribute more.
There is also the effect of synergistic flow of energy that further adds to the total energy flowing through the system. When two energy waves are in synch their energy levels are additive, they are amplified. When they are out of synch, in physics this is called being out of phase, their energy is attenuated, or diminished.
When we speak of teamwork we are, in essence, discussing ways to create maximum amplification of energy from individuals creating synergy, the whole being greater than the sum of the parts.
Context is the field of energy I suspect will be the most difficult for people to understand, especially in the arena of business. I believe everyone has, within their life experiences awareness and an understanding of this field of energy. It is the place within us that carries our deeper values, meaning and purpose. It is the source of our passions and our loves.
We have been reading more and more of late about such issues as vision, values, mission, and culture. We know that intuition plays an important role in decision making. We strive to stimulate creativity within our organizations. All of these lie within the domain of the Context layer. As does such elements of our model as Experience and Soulful Purpose.
Over the last few decades we have come to understand the importance of issues like culture, creativity and intuition but we really do not understand much about them or their nature. At best it is left as that “squishy stuff” and we return to what we know best, what we do and how we do it (Activity).
When we do attempt to address these issues we often do so by defining activities like a visioning exercise or creativity sessions. This unfortunately relegates them to only intellectual understanding and thus loses much of the energy that emanates from the Context field.
While there is a great deal of information about what to do and how to do it (Activity), and an equal amount on teamwork, psychology of interactions etc. (Relationship), there is little within the traditional sources of information for business about the Context energy field.
There is however a rich body of knowledge about this field of energy that we can draw on as leaders of our organizations. It lies within the psychology of Cal Jung. Abraham Maslow, Carl Rogers and others. We can find it in the writings of some of the greatest poets and philosophers. And we can find it in the literature of the great religions of the world. And yes even in the movies such as Star Wars. The Context field is the field of the Collective Unconscious, the domain of The Force, and the world of The Divine (however you choose to define that).
And while this energy field is the least understood by business leaders it is the one that will have the most impact on the long term performance of your company. It is the layer that forms the context for everything that is and is not done within your organization. This context will drive all behaviors which in turn reflect in the relationships we have and in the end impacts what is and is not accomplished.
When we speak about “the spirit” of the organization it is the energy that flows from the context field, an energy that cannot be seen but is always experienced, that we are referring to.
Norman Wolfe | President/CEO | Quantum Leaders, Inc
nwolfe@quantumleaders.com
www.quantumleaders.com
www.quantumleadersblog.com
http://twitter.com/nswolfe
The Living Organization™ Model – The Physics
Posted on January 7, 2009
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The one thing we know about the universe that is uniformly agreed to by all disciplines is that everything in the universe is energy - and that energy can neither be created nor destroyed. Therefore everything that happens in the world is the transformation of one form of energy into another.
We know energy can take many different forms, from the observable - such as the flow of a river or human activity, to the unobservable - such as magnetic flux or human thought. We also know that energy is almost always flowing and transforming; this seems to be one of the basic laws of nature.
Likewise, business is energy flowing and transforming, with the intent that it transforms into desired results. This is the first part of The Living Organization™ Model, the physics of business. It is useful to visualize this flow and transformation by referring to the following diagram.
The Flow of Energy
The business system
In business organizations, the primary source of energy is the people and their unique contributions. It is from the active release of energy through their efforts that we derive the major source of energy for the transformation process.
Energy, however, cannot be allowed to flow totally free and still be expected to transform into a desired output. Energy, in order to create a desired result, must be directed like waveguides guide energy in physics. In business, these energy waveguides are the work flow and other business processes we use to help define how work is to be done. These energy waveguides are also the means for integrating and mixing the energies of the various elements of the organization; integrating energy from Marketing with Sales energy, Sales with Operations, Operations with R&D, and so on, and so on. It is these business processes that guide the flow of energy, directing and transforming it along the way into the desired output.
The desired output is the goods and services provided to markets and customers. In business, a common definition of “success” is providing a highly valued good or service to a market place that adopts it. The specific and unique way a company serves the market is defined by its Soulful Purpose.
Since the source of energy comes from the people, it is helpful to understand the dynamics that allow for increasing the flow of energy. Certainly one can increase energy by simply linearly increasing the number of people. However, this would run counter to the desire to most efficiently use resources.
It is here where we come to a fascinating aspect of the model - the primary source of energy (labor) delivers a varying amount of energy that can be increased on a per unit basis. When done correctly, the application of effort towards a desired result also increases the capacity, the amount of energy that can be contributed. This is the process we call Learning.
This is the basic system flow of every business; the organization’s Soulful Purpose defines its purpose and the derivative goods and services it will provide as its unique contribution, its service to the market. The Living Organization™ transforms the energy of its people into those goods and services with its business processes serving as the waveguides for the transformation process. It creates the opportunity for learning, thus increasing capacity and also defining the experiences of those interacting with the organization, thereby impacting the perceived value.
The feedback loop
As with all systems, this system requires a feedback mechanism to ensure that the process is in equilibrium and achieving the desired results. The gauge we use to measure the various aspects of organizational performance is the financial system.
The foundation of all feedback metrics is Profit, and its two major components: Revenue and Expense. While Profit is considered by many as being the root of all evil, it is anything but. In fact, the bottom line is a critically important aspect of any successful enterprise.
Revenue is the measure of value perceived by the market. The higher the value the market perceives in the goods and services the organization provides, and the larger the market that perceives such value, the more revenue the firm will generate. Revenue received is a function of value perceived.
Expenses are the measure of energy consumed by the organization, energy classically defined as labor and materials. Expenses should thus be viewed as the efficiency rating of the organization in transforming energy into its goods and services
Profit is the feedback that lets the organization know how much the market perceives the value of the goods and services in relationship to the consumption of energy required to produce it.
However, it is important to be mindful that this measurement system is not the same as the system being measured.
Norman Wolfe | President/CEO | Quantum Leaders, Inc
www.quantumleadersblog.com
http://twitter.com/normanwolfe
The Living Organization & The Physics of Business - A Personal Perspective
Posted on January 5, 2009
Filed Under Gregg Gallagher, Innovation, Leadership, Management, Marketing, Organization & Culture | 1 Comment
In his recent post, Norman described The Living Organization model as the conceptual framework for understanding the physics of energy flows within organizations and between organizations and their environments. This model - which is in a state of ongoing evolution - is the result of years of Norman’s own experience as a business leader.
My own journey along this path somewhat parallels Norman’s, driven initially by an ongoing interest and readings in the scientific fields of complex systems & chaos theory, quantum physics, null-space energy, the theory of a holographic universe.
In my business career, I participated in both high-energy, highly-effective environments (largely driven by soulful purpose, although I didn’t fully understand it back then) and lower energy/performance environments that, at the very least, provided learnings as to how NOT to lead & run organizations.
These experiences have given me a deep appreciation for the role that properly designed and managed processes can play in directing/ and focusing the energy of an organization at both the activity and relationship levels (as described in The Living Organization model)
Two years ago I left my position as COO of Citizen Systems America and formed an individual consultancy - Quantum Shift Group (QSG) - founded on the basis of my initial understanding of importance and impact of shifting the energy state of an organization, improving it’s overall execution capabilities.
Shortly after founding QSG, I first met Norman at an Orange County business networking event sometime in the Winter 2006. At that first encounter, we compared notes as to how our separate consultancies (Quantum Leaders v. Quantum Shift Group) were based on the “Quantum” metaphor - and we also were attracted by our common origins in the streets of Brooklyn, New York. Norman’s view of the organizational model was that of a complex, adaptive system that needed to be understood in a more holistic manner than previous management theory provided for. My own perspective was centered around achieving shifts in the energy states of the organization, allowing for higher performance.
For a number of months, Norm was a friend & personal coach during my vocational and marital transition period, encouraging me to consider becoming a partner in Quantum Leaders if I should decide to pursue consultancy as a full-time career path (as compared to an interim period before moving back into a corporate executive role.)
Eventually, I came to realize that I was highly driven to be a full-time consultant, and decided to join Norm as we had come to a realization that our views re a new organizational model were highly in alignment, albeit still in need of further refinement and extension. Norm’s recent posting elaborates on our current view of the model, and my personal area of focus will be on the Demand aspects of the model, which include the Marketing, Sales, Product Management and Innovation activities within an organization.
To The Future!
The creation of The Living Organization™ model
Posted on January 3, 2009
Filed Under Governance, Leadership, Management, Norman Wolfe, Organization & Culture, Strategy, Strategy Execution | Leave a Comment
During my 35 plus years of leading organizations and helping other CEOs lead their organizations I have been seeking to understand and then explain what is required to successfully create sustainable growth. The Living Organization™ model is the culmination of that journey.
I have chosen to name my upcoming book “The Living Organization ™: the Physics and Spirit of Business”, because during my quest I came upon two major discoveries. The first major breakthrough I made in my understanding is that organizations are systems that direct the flow of energy transforming it into the desired results. Hence much of what we experience in business can be seen as the physics of business and many of the laws of physics and energy apply to the creation of desired results.
The second major breakthrough was when I recognized that corporations are living systems. Like all living systems they have a soulful reason for existing. And just as all living entities are unique, though they may share many similarities; each corporation is equally unique even though they share similar markets and products. And their soulful purpose defines the unique way they are meant to serve their markets and hence society overall. When I realized that all corporations have a soulful purpose meant to serve society, I recognized that there is a deeper purpose and meaning, a spirit, to business and commerce.
Since The Living Organization™ model is intended to describe both the physics and spirit of business let me start with the physics….
Norman Wolfe | President/CEO | Quantum Leaders, Inc
www.quantumleadersblog.com
http://twitter.com/normanwolfe
Do we manage the system or the measurement system?
Posted on December 1, 2008
Filed Under Governance, Leadership, Management, Norman Wolfe, Organization & Culture, Strategy Execution | 1 Comment
Today I was listening to the on-going debate of Executive Compensation and the struggle companies are having in this economy. There is so much talk these days about setting up pay for performance systems that reward growth and punish failure. In equal proportion there is talk about executives should be aligned with investors and hence they should suffer when the stock price plummets as we are experiencing in today’s economy.
All of these are excellent points but we are trying to solve them at the wrong level (remember Einstein’s guidance “a problem cannot be solved at the same level it was created”). We have lost sight of the fundamentals of running a business. Let me explain
A business is a living system that is designed to transform one form of energy, mostly the efforts of the people into another form of energy, the value proposition we provide our customers. It is the job of the Board, the CEO and the Executive Team to be clear about the value proposition and how to build the right business model to deliver on this promise.
As with all systems there is a need for feedback to ensure the various components of the system are operating as designed. This is the primary purpose of our financial systems, to provide feedback to those responsible for the performance of the system so they can make adjustments as necessary.
What seems to be happening in our business community, maybe in our society, is we have lost site that it is the system being measured that we are interesting in improving, not the measurement system. Of course having accurate measurement tools has always been critical to any system designer so I do not want to minimize the importance of the measurement system. And at the same time we must remember that it is not the measurement system that produces the results, which is what I think many people think happens.
So if we want to understand how to reward a CEO for performance we must fist understand the system that is doing the performance and acknowledge when the system is performing well and when it is not. Yes we need measurement tools for this but be careful for all measurement systems can be adjusted to give the result you want without effecting the underlying system being measured.
Do Bonus Plans Motivate?
Posted on November 20, 2008
Filed Under Governance, Leadership, Management, Norman Wolfe, Organization & Culture | Leave a Comment
The whole issue of Executive compensation is coming under increasing scrutiny by just about everyone these days and rightfully so. Here is an interesting question – Do Bonuses actually incent behavior to perform better?
This is a foundational question as much of the compensation plans are based on the strongly held belief by most people that money incentivizes performance. It has been my experience throughout my management career that money was never a great motivator. My experience has followed Herzberg’s principal that money is a hygiene factor – it can de-motivate but not motivate.
So what say the experts? In a recent study conducted by Dan Ariely, a professor of behavioral economics at Duke and author of “Predictably Irrational: The Hidden Forces That Shape Our Decisions”. He and three colleagues conducted experiments to look at money as a motivating factor, and concluded that “people offered medium bonuses performed no better, or worse, than those offered low bonuses.” Meanwhile, individuals “offered the biggest bonus did worse than the other two groups across all the tasks.” He and his colleagues found that bonuses do not motivate as we might think they do.
Wow, what will this do to righting the ship when it comes to CEO comp plans I wonder. Perhaps it will help us get back to a more appropriate approach to compensation. One that rewards performance not incentivizes behavior. (Not sure what the difference is, come back to the blog for my thoughts on that topic).
Norman Wolfe | President/CEO | Quantum Leaders, Inc
www.quantumleadersblog.com
http://twitter.com/normanwolfe
The real problem with Executive Compensation
Posted on November 2, 2008
Filed Under Governance, Leadership, Management, Norman Wolfe, Organization & Culture | 1 Comment
There is a lot of talk lately about CEO pay, how much they get and how we have elevated them to superstars. As I posted on my FastCompany.com blog, I was recently listening to a speaker on this topic and realized that of course we have a problem with CEO pay, we as a society have set it up to be that way. And we did it for all the right reasons, or so we thought.
Here is the problem. By assuming that CEO pay will incentivize appropriate behavior, we are in fact putting the CEO’s focus on his pay. And once we have done that and say we expect you to maximize your pay then that is what they will do. And often to disastrous results.
You see the problem is that we assume by aligning the CEO pay with that of shareholders we will get behaviors that maximize shareholder return because the CEO will be maximizing their return in terms of their pay.
The first problem is the underlying assumption about thinking that the way to get the behavior we want is through pay design. What this has the potential of doing is drive the CEOs attention to his pay.
What’s wrong with this you ask? Well what is wrong with it is the same thing we see when all an organization does is focus on profit. We forget that profit is the result of fine tuning the organization to perform at its fullest potential. It is the metric not the outcome. When all we care about is the metric then it is often easier to adjust the gauge that is producing the reading than to work on the system that is producing the result.
How does this show up? Well one easy example is off-balance sheet transactions. We can adjust the reading of profit without changing anything in the underlying performance of the system. And we all know what that has led us into over the last 10 years.
Well I would argue that driving the CEO to focus on pay as the indicator of success will produce similar self-interested pay maximizing behaviors that we have seen lead to the crisis we are experiencing.
What we want is to ensure the CEO is actually behaving in accordance with the long term value of the organization. By understanding that it is A Living Organization™ and the CEO is the custodial of its spirit, will go further to ensuring proper decisions and choices than trying to design a pay package that will “predict” or “force” the right behaviors.
In my next blog I will address some of the other mistaken assumptions in designing Executive Compensation
Norman Wolfe | President/CEO | Quantum Leaders, Inc
www.quantumleadersblog.com
http://twitter.com/normanwolfe
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