INTERVIEW WITH MARK CHUSSIL FROM ADVANCED COMPETITIVE STRATEGIES (PART I of II)
This week we had Mark Chussil from Advanced Competitive Strategies join us on our radio show. Since he had only begun to share his thoughts on trustworthy business behavior during the show, I decided to ask some follow up questions. Due to the length of this blog, this is Part I. Part II will follow.
Barbara: Mark, tell us a little about your background.
Mark: I am the Founder and CEO of Advanced Competitive Strategies See Website Link, and author of Marvelous Techniques: Essays on Going Beyond Strategy as We’ve Known It Nice Start: Questions Only You Can Answer to Create the Life Only You Can Live
I lecture and consult globally about strategic thinking, business war games, and strategy simulation. My work has appeared in Fast Company, The Wall Street Journal, and elsewhere. And finally, I earned an MBA at Harvard and a BA at Yale.
Barbara: Why do companies engage in untrustworthy behavior?
Mark: No one gets up in the morning saying “My job today is to screw up the world. If I make people miserable, if I hurt the general well-being, if I damage our civilization in even the slightest way, then I can go to sleep with the satisfaction in a job well done.” Most people want to do good things, but when we work for a company, we are bound, in a keep-my-job way, to “do good” according to the company’s definition of “doing good.” We do what we’re paid to do.
Barbara: On your blog you have an essay called “What You Pay For.”Read Blog PostIs that what you mean?
Mark: Yes. The customer gets what he or she pays for, and companies are our customers when it comes to employment. If the customer, the company, pays you for sales growth, it will get sales growth from you. It may also get profits or innovation or social responsibility, and it may also get shortcuts or bribery or non-compliance with safety regulations, but those are side effects.
Barbara: Presumably a trustworthy company cares about more than just sales growth.
Mark: Yes, a trustworthy company will care about other metrics too, such as impact on the environment, fair treatment of employees, customers, and suppliers, and living up to its word. The point is that compensation programs — what companies pay for — are tremendously important. Perhaps one way to identify trustworthy companies is to find out what they pay for.
Barbara: What else can we look at besides compensation programs?
Mark: Look also at how they work. Kaiser Permanente, the big HMO, is proactively using data on medical tests. Over the last 15 years they identified 450 patients with new or recurring cancers or abnormal biopsies who would not otherwise have been found. I’m one of their customers, and that proaction is one reason why. See “What the Doctor Missed”Read Full Article
Barbara:The Wall Street Journal had an another article on automobile safety. See “What’s Safer A Chevy or Mercedes?”Read Full Article
I think you blogged about it, in “Who Doesn’t Like Airbags?”Read Blog Post. The auto industry has often resisted mandatory safety improvements, even going back to seat belts, as well as fuel-economy standards. Now they compete on safety features and fuel economy. What happened?
Mark: Regulations forced some good behavior, such as publicizing crash-test results so customers would have the information they need to compare car models. Plus, Lee Iacocca, who used to run Chrysler, decided to stop resisting safety improvements and, instead, make safety a selling point. The resulting competition directly benefits customers.
Barbara: Why did Mr. Iacocca do that?
Mark: I don’t know. Did he change his mind because he saw there was money to be made or because he wanted to save people’s lives? Do we care about the answer?
Barbara: Are you saying that it doesn’t matter why a company does good things? What, then, does it mean to be “trustworthy?”
Mark: At one level I don’t care why a company does good things. I want Delta to fly me safely from one place to another. I don’t care if they do it because they’re afraid of punishment if they fail, they don’t want to lose customers (perhaps literally), or they think it’s honorable to keep their customers safe. Does it matter if I give to a charity because I like the charity or because I think the donation will get me into heaven?
Barbara: But the threat of punishment seems to happen when a company has proven itself untrustworthy.
Mark: I agree. We expect “trustworthy” to have some connection to good motives and intentions, not merely following the rules. A company that demonstrates good intentions makes us trust that it will not deceive us or put us at risk. We’re all sadly familiar with the opposite kind of company.
Barbara: So let’s talk about a company’s motives and intentions. Is it reasonable to expect a company to behave well?
Mark: Professors Jay Lorsch and Rakesh Khurana of the Harvard Business School wrote an article called “The Pay Problem.”Read Full Article They say corporations have shifted their focus from “stakeholders” to “shareholders.” Stakeholders can include customers, employees, and society in general; shareholders means just the people who own shares in the company. When we evaluate decisions in terms of effects on stakeholders, we look more broadly than when we think only of shareholders.
Barbara:Mark: I believe it means we have more need of government regulation, and I think that recent events ranging from the financial crisis to the BP oil spill show why. We need rules to ensure that the shareholders-perspective does not go too far. That’s why we have anti-trust laws, the FAA, FDA, and FTC, minimum fuel economy rules, and so on. Those solutions might have been controversial when they were first put in place, but just try to take them away now.
Barbara: You mentioned regulations, which are enforced with fines and other actions. An article in Newsweek, “Do Fines Ever Make Corporations Change” (September 13, 2010), suggested that fines won’t make corporations change because they are tiny relative to the size of the companies. Do we get untrustworthy behavior because fines are too low?
Mark: Perhaps fines are too low, and perhaps inspections are too infrequent or lax. An option might be for fines to go up as a company accumulates offenses, just as insurance companies raise our rates if we get into too many accidents or we face more years in prison for repeated offenses. But those are punishments. We really want to prevent bad behavior, and there are reasons why companies may think it’s profitable to risk take chances.
Mark: One reason is that companies generally don’t quantify the value of their reputations, so they don’t know until it’s too late (and maybe not even then) how much it hurts to have their name dragged through the mud. A second is that human beings underestimate the odds of a bad event; “it won’t happen to us.” A third is that there’s little incentive to be the first one to play fair. Managers can clearly see, or think they see, the costs of playing fair, and it’s harder for them to see the benefits.
Barbara: It’s important to level the playing field or to have vigorous competition.
Mark: I agree. Regulations level the playing field so no one has extra costs. I’ve worked with executives who want stronger regulations so that they can do what they know is right without making themselves uncompetitive. And Lee Iacocca’s move, being the first to embrace safety features, was important because he changed the calculus for the other automakers. They could see the costs of falling behind.
PLEASE READ PART II