Nature is said to be the greatest teacher and it has a lesson for boards and directors.
The Australian desert is hypnotic from the air. Its hues of dusty brown broken only by the occasional ruffle of a mountain range and the long thin lines of ancient, and as I would come to realize, wise waterways.
Rivers hold a secret. Standing on the banks the eye is drawn to the water and the movement. The force of the flow appearing to carve the river’s direction. But looking down it’s a different story.
At 10,000 meters, the directing is being done by the river banks. My small epiphany was that direction is as much a function of what doesn't move as what does. Whether the river moved left, right or held its line depended on what was in its way - the soil and the geology. You can do this experiment for yourself. Next time you’re walking in a crowd just stop and watch how you start directing the flow.
Rivers follow the path of resistance. In other words, what resists directs. That’s their secret. It’s what doesn’t move that matters as much as what does. And, in some way, the same might hold true for corporations and their direction.
Culture, ethics and habits share similar characteristics with the banks of a river. They are repeated so often and for so long that they are invested with a solid and permanent quality and are hard in the sense that they don't change easily. And like the river, they direct the flow of our wants and desires in a way that can’t be seen from the ground.
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 systems. Made of weaker stuff they yielded to false opportunities and there was nothing to direct them in another direction.
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 culture, ethics and habits at work. They were directed out of harm’s way by their resistance to the forces of change.
The point of my reflection is twofold.
- Directing is not just about whether you split the chair/CEO or whether directors should come up for annual election. Directing is foremost about understanding the corporate condition and using this insight to build better corporations. Caught up in the human condition, governance activists forget this.
- Second, if we want to change the current trajectory of capitalism and regain confidence in the acumen of our business leaders, it might help to search for fresh insights on how corporations get direction.
Nature's lesson is that like the river in flood, once all the energy of the latest change management program dissipates, we return to the same path and direction. That is, unless we learn from nature and form new banks in the process (no pun intended).
*updated 31 May 2013