ON DIRECTORSHIP is by PETER TUNJIC.

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 a leading voice in the re-discovery of what corporations are and why they exist.

Be the Bend in the River

The Australian desert is hypnotic from the air.  Dusty hues broken only by the occasional ruffle of a mountain range Wand the long thin lines of ancient waterways.

Why do rivers snake like they do across this vast land?

This was the question I put to a hundred or so miners a few years ago.  I was in Kalgoorlie but I wasn't there to talk about gold.  I was there to explain how ethics work.

Hands went up with various explanations to my question.  "It's the force of the stream" said one.  Another suggested it was the sediment in the flow.  Then from the back of the auditorium I heard "it's the banks".  Whether a river moved left or right or kept dead ahead depended on what was in its way.

"What does this have to do with ethics" they, and no doubt you are wondering.

Most of you will be familiar with the idea of following the path of least resistance.  The physical or metaphorical path that gives something or someone direction and describes why an object or entity takes a given path.

Rivers follow the path of least resistance.  But if you think about it, it's more accurate to say that rivers follow the path of greatest resistance.

There are two sides to the path.  Inside the path is what yields - the least resistance.  But on the outside is what gives the path its direction - the greatest resistance.  The greatest resistance creates the way and gives the river direction.

When energy meets the greatest resistance the path turns and something or someone follows.  This simple proposition provides an alternative line of inquiry into why some organization run into trouble and others run into opportunity.

Traditional management views direction as something that is forged through a combination of strategy, will power, talent and resources.  What drives direction is the application of energy in a strategic direction.  To me, that can be likeexpecting a flood to change the direction of a river? Nature's lesson is that like the river in flood, once all the energy of the latest change management program dissipates, the organization returns to it's natural direction.

My message was simple: what resists is directing and few notice.

If you want to understand where a corporation is headed pay attention to what resists and what doesn't when opportunity presents.

Ethics resist.  Culture resists.  Values resist.  Organizational habits wrapped up in stories resist.  They all share the characteristics of a river bank.  Good or bad these intangible behaviors are repeated so often and for so long that they become invested with a solid quality.  And like the river, they direct the flows of energy and opportunity within organizations in a way that goes largely unnoticed.

This wasn't news to the mining industry.  Stories of accidents at the mine repeated over generations were constantly directing employees out of dangers way.  But what was new was an appreciation of how policies, ethics and culture worked.  The organizations safety habits subtlety and imperceptibly helped steer the organization clear of risk.

Why did AIG have a massive exposure to the sub prime risk and other insures did not?  Why did Lehman and Bear Stearns collapse and other commercial banks survived?  In part, the answer lies in resistance.  Their culture, ethics and habits were directing them into the path of the global financial crisis years before the implosion of the financial system.  Their culture directed them into harms way.

But others resisted and even became stronger.  They were made of tougher stuff.  Many were exposed to the same pressures but ended up going in a different and better direction.  This was not just good fortune.  It was their healthy culture, ethics and habits at work.  They were directed out of harm’s way by saying no to false opportunity.

Understanding how companies get direction requires a different level of thinking.

  • At one level direction is a function of what is intended - strategy, planning, risk management, execution.  These head skills are vital but only part of the equation.
  • The next part is intent - ethics, values, culture and habits.  These behavioral skills create the paths of resistance and what I'll call "natural direction".
  • Finally there is outrageous fortune.  The world rushes at an organization faster that it does at the world and like a landslide can change the course of a river, so can outrageous fortune change the direction of a company.

My rule of thumb is that direction approximates what is intended (forged direction) multiplied by intent (natural direction) divided by outrageous fortune.   Seeing direction this way elevates culture and values to the stature of strategy.  Both contribute to direction.  But do so in different ways.

The lesson is that if boards want a change in direction they must first be the bend in the river.

 

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