Leadership and Performance Metrics

I have been doing some strategic advising for a couple of not-for-profit corporations. It has been quite an experience for me. There are special challenges, not the least of which is that some have no paid staff; only volunteers.

Generally speaking, measurement of performance of for-profit corporations is easier than for not-for-profits; there are more "hard" tangibles in the for-profit area. The quid pro quo environment is one of "pay for work done." In addition, the interests of all stakeholders are more closely aligned: greater profit, higher dividends, etc.

For not-for-profit corporations, there are more "soft" intangibles. A great deal of work is done by volunteers; thus no "pay for work done." The volunteers must receive non-monetary satisfactions for their labors. And, the interests of all stakeholders are not as closely aligned. Nevertheless, performance measurement (in both quantitative and qualitative terms) is no less important for the not-for-profit; it still has to be done.

A couple of factors can make development of metrics on performance in a not-for-profit easier. They fall under the purview of the governance and management areas of the organization. The first factor is operation plans that are tied tightly to a well-defined corporate strategy contained in a strategic plan that is constantly under review. The second factor, critical to the measurement process, is a deep understanding by the leadership of the internal strengths and weaknesses of the organization. This deep understanding is a prerequisite to the organization's being able to deal successfully with the inevitable changes in external conditions of threat and opportunity facing the organization. The bottom line is that if the corporation cannot manage its internal challenges it won't be able to handle external challenges.

Some not-for-profit organizations are funded by dues paid by members of the organization. In this sense, dues-paying members are the analogue of stockholders who have made an investment in a for-profit corporation. Thus, in a not-for-profit corporation, the members can also look at the dues they have paid as constituting an "investment." Members have the right to ask the organization what the rate of "return on investment" is on those dues. This is aside from the fact that the organization has legal and fiduciary relationships with its members.

To succeed, the organization needs well-conceived strategic and operations plans based on clear statements of organizational vision and mission coupled to an effective leadership model (and the requisite resources.) These, taken all together, will allow the organization to provide materially better services to all classes of stakeholders in the organization. The evidence of these high levels of service will be reflected in the metrics ("the proof in the pudding") as it were. Over time, it is continuing evidence of benefits of this sort that will provide a significant part of the motivation for stakeholders to support the organization, financially and otherwise.

Implementation of any performance measurement must start with the top leadership (Board of Directors) of the corporation. Without sufficient emphasis by leadership on the building of the infrastructure of the organization as a whole, there can be no reasonable hope for it to be successful in carrying out its mission. Without well-functioning human and financial sub-systems within the infrastructure system, there can be no reasonable hope of growing the capacity of the organization to conduct its operations, now or in the future. These sub-systems are interdependent. Without the one, nothing much can be done with just the other.

The U.S. economy is becoming increasingly fragile due to its being intertwined with economies elsewhere that are even more fragile. Government, private industry and the academy are cutting back in many areas. If the organization is to have any impact, it will have to learn how to do more with less, even as its margin for error is being drastically reduced. To accomplish this, the leadership of the organization will have to bring people with strong supporting skill-sets onto the board and into executive positions. A good leadership model and rigorously applied performance metrics will provide people with what they need (critical infrastructure) to function properly. They will also provide the kinds of nourishment necessary for the people to build a corporate culture that will contain the elements necessary to sustain the critical infrastructure of the organization.

Phrases That Should Strike Terror Into a CEO's Heart

"It is clear that in moments of stress, organizations do not always operate in the same way that they would in a normal operating environment." So, said Jon Corzine, former CEO of MF Global, while testifying in front of the House Agriculture Committee on Thursday, December 7, 2011.

Apparently, as it became clear to him that MF Global was melting down, and sometime before the firm filed for reorganization under Chapter 11 of the Bankruptcy Code, Corzine had said to his associates, "We've got to fix this." While acknowledging that "Someone could misinterpret" the phrase, Corzine also testified he had learned, only one day before the firm filed for bankruptcy, (Monday, October 31, 2011) that at least $1.2 Billion had "disappeared" from his firm's clients' accounts.

It's up for grabs right now as to whether there is any causation (or even correlation) between the latter pronouncement and the "disappearances." Regardless of that issue, though, Corzine is SO RIGHT about the possibility of misinterpretation of his words.

Depending upon the content of the corporate culture and the leadership "tone" set by the CEO, there can be a high risk that a CEO's words will be misinterpreted by subordinates. That condition of risk is rife any time the corporate culture is steeped in a "Your-wish-is-my-command" atmosphere and where the culture knows that the CEO places great emphasis on pragmatic ideas represented by such common catch phrases as: "In this company, we all have a 'CAN DO' attitude," or "In this company, we do whatever it takes to get the job done." Both of these catch phrases are positive in character. But, without at least the implicit qualification that "the job to be done" will only be done "as long as it is legal, moral and ethical," blind or sycophantic adherence to them has the strong potential to bring about disastrous results. Taken a face value alone, they are phrases that should strike terror into a CEO's heart.

The Road to Economic Chaos and Ruin is Paved with Keynesian Bricks

Murray Rothbard, in his excellent study of Lord John Maynard Keynes, keenly observed that "Keynes, the man,—his character, his writings, and his actions throughout life—was composed of three guiding and interacting elements. The first was his over-weening egotism, which assured him that he could handle all intellectual problems quickly and accurately and led him to scorn any general principles that might curb his unbridled ego. The second was his strong sense that he was born into, and destined to be a leader of, Great Britain’s ruling elite."

Further, "both of these traits led Keynes to deal with people as well as nations from a self-perceived position of power and dominance. The third element was his deep hatred and contempt for the values and virtues of the bourgeoisie, for conventional morality, for savings and thrift, and for the basic institutions of family life."

Keynes, while at King's College, was a member of a secretive group called the "Apostles." "Two basic attitudes dominated this hermetic group under the aegis of Keynes and [his "friend"}, Giles Lytton Strachey. The first was their overriding belief in the importance of personal love and friendship, while scorning any general rules or principles that might limit their own egos; and the second, their animosity toward and contempt for middle-class values and morality. The Apostolic confrontation with bourgeois values included praise for avant-garde aesthetics, holding homosexuality to be morally superior (with bisexuality a distant second), and hatred for such traditional family values as thrift or any emphasis on the future or long run, as compared to the present. (“In the long run,” as Keynes would later intone in his famous phrase, “we are all dead.”)"

As Keynes himself wrote during his undergraduate days in a letter to his friend and co-leader, Strachey, “Is it monomania—this colossal moral superiority that we feel? I get the feeling that most of the rest [of the world outside the Apostles] never see anything at all—too stupid or too wicked”

This is the man who published, in 1936, his "new" theory of economics, the "GENERAL THEORY OF EMPLOYMENT, INTEREST, AND MONEY." The "Theory" is almost totally fraudulent because it is based upon a "house of cards" system of 'mythological mathematics" (my term) and a set of fallacies, themselves built upon still other fallacies. It is a "dream" handbook for politicians, giving them license to spend, borrow and waste assets that don't belong to them. Further, it is adherence by politicians to this egregiously faulty "Theory" in the "handbook" that has brought the Western World to the edge of economic chaos and potential ruin.

If we do a close examination of his "Theory" we will quickly see its "feet of clay." But we don't have to start from scratch. Henry Hazlitt has already done that for us in his superbly written analysis of the "Theory." To see just how stupid and out of touch Keynes and his followers are, just read Hazlitt's book, "THE FAILURE OF THE "NEW ECONOMICS: An Analysis of the Keynesian Fallacies." Beware though, reading it could change your life.