David Rader’s blog

This is part of the Crown Financial Ministry's materials on using income and wealth according Biblical principles.  This book is an overview of the core themes.

There is value in learning these concepts.  However, the greater value comes from transforming personal and family financial practices by living these principles.

One way the transformation process is started is by the 10-week small group Biblical Financial Study.  The associated Practical Application Workbook has effective small projects to document the current financial situation, establish improvements in budgeting and financial planning and begin prayerful consideration of uses for the resources God provides.

Crown provides materials on teaching financial principles to children, teens and college students and for running a Business by the Book.

Churches around the country offer 1 and 2 day workshops, 6 to 10 week group studies and individual budget counseling.  Menlo Park Presbyterian Church offers individual small group sessions and the Business by the Book workshop.  For more information about upcoming sessions, please send me an email inquiry. 

Creating a culture for knowledge workers  is well described by Dennis Bakke in Joy at Work.  Bakke is the co-founder and former CEO of “AES, an energy company that by 2002 had plants in 31 countries, $8.6 billion in revenue, $33.7 billion in assets, and 40,000 AES people.... [and] by the mid-1990s only 8 percent of the company's employees spoke English as their first language.” This is a company founded in 1982 with a $60,000 bank loan and has an October 2005 market capitalization of $11 billion.

And this is what joy at work means:

Joy at work gives people the freedom to use their talents and skills for the benefit of society, without being crushed or controlled by autocratic supervisors or staff offices. ... People I have met – regardless of class, income, nationality, and education level – want a chance to meet the needs of their families while doing something useful for society.

Opus is another Latin word for work, and it comes closer to the concept of work that I am championing.  Opus connotes a voluntary act, an act imbued with creativity and meaning.  The development of a fun workplace is based on the Opus concept of work.(p.74)

Bakke's focus on the inherent value of people slays an overused nostrum of “people: our most valued assets”.

In reading annual letters by CEOs, I have noticed that when an organization wants to make a positive statement about its employees, the letter often says something like, “our people are our best assets.”  After I used similar language in one of my annual letters, I had second thoughts about using the word “assets” to describe people in my company.  What do we do with assets?  We use them.  We buy and sell them.  We depreciate them.  When they are used up, we dispose of them.  I vowed that I would never again use that word to describe the people in my organization.(p.49)

AES people, I wrote:

·       Are creative, thoughtful, trustworthy adults, capable of making important decisions

·       Are accountable and responsible for their decisions and actions

·       Are fallible.  We make mistakes, sometimes on purpose

·       Are unique

·       Want to use our talents and skills to make a positive contribution to the organization and the world. (p.72)

The book describes the successes and failures of trying to give people freedom to use their talents for the benefit of society in a global multi-cultural organization.  This begins with a focus on shared values.  Bakke comments on a “McKinsey  consultant” who thought the value of a value statement was getting the employees to work harder.  Bakke's view is different:

The proliferation of values statements prompted one journalist to call them “a deodorant for self-interest.”  There is often a basis for cynicism. (p.35)...

This is the pragmatic line of thinking about values that I had fought since the early days of the company.  It ignores the moral dimension of values and regards them as nothing more than a means to make money.  The distinction was articulated by an Oxford professor names John Kay:  “There is a real difference between saying to your workers, 'We care about your  welfare because that will make you work harder for us.'”  Employees can tell when values are genuine and when they're adopted for ulterior purposes. (p.27)... We are trying to live these values because they are right, not because they work. (p.32)

The four shared values are:

·       act with integrity

·       be fair

·       have fun

·       be socially responsible

This looks innocuous enough. Except that the SEC required the following “special risk factor” notification in the AES public offering statement:

Adherence to AES's Values – Possible Impact on Results of  Operations.  An important element of AES is its commitment to four major 'shared' values:  ... AES believes that earning a fair profit is an important result of providing a quality product to its customers.  However, if the Company perceives a conflict between these values and profits, the Company will try to adhere to its values – even though doing so might result in diminished profits or forgone opportunities. Moreover, the Company seeks to adhere to these values not as a means to achieve economic success, but because adherence is a worthwhile goal in and of itself.  The Company intends to continue these policies after this offering.

The core of this book are a set of chapters showing the values in action and the consequences.  A nine-page appendix contrasts the “Joy at Work Approach” versus the “Conventional Approach” in treatment of employees, purpose, mission and goals, annual reports, leading and managing, compensation, training, information, auditing and the board of directors.

Interestingly, one of the more dramatic shareholder consequences occurred when the shareholders believed the values were applied and nine water-quality managers in Oklahoma did not.  There were no harmful discharges but incorrect information was included on a form filed with the EPA and the State of Oklahoma. This broke trust inside and outside generating a reaction larger (40% stock drop) than warranted by the initial problem (would have been a small fine if there had been damage to the environment, which there wasn't).  One board member advised:

“Investors would not treat us so harshly if we didn't put the values out front so much and then fail to live them.” (p. 69)

Chapter 2 deals with the issue of centralization and bureaucracy which essentially remove freedom from the vast majority of people.  Sarbanes-Oxley furthers this trend by trying to make the CEO and CFO personally vouch for the accuracy, timeliness, completeness and applicability all the financial transactions of the business.  Technology also promotes centralization.  While communications, information systems and databases can distribute the facts for localized decision making, these same technologies allow some information to be consolidated for central management.  This has led to central buying, central pricing and contract management, etc. and other forms of specialization.

But, the recorded facts are not the whole story.  All three books repeatedly emphasize the importance of context and relationships – not recorded or  represented in the computing and communications systems of organizations.  Therefore, it is necessary to both collect facts and counsel.

Chapter 3 sets the cultural context for joy at work.  The key idea is putting people into positions where they can use their talents and experience to affect the outcome.

One of the more unusual practices at AES is limiting managers to “one” decision per year.  Important choices are assigned to the person in the best position to make a good decision.  This might be due to proximity to the problem or effects.  This might be based on expertise in some topic.  The key requirement is that the person chosen must solicit the views of a wide group of people who may have an ability to improve the decision.

One of the clearest examples is the initial investment in Pakistan.  A financial analyst visited his family in Pakistan and returned to request a leave from his current assignment to investigate the opportunity in Pakistan. 

At each major step in the 2 ½-year development process, Shahzad asked for advise, then made the key decisions himself.  Before securing the $700 million financing...Shahzad consulted with the AES board. ...

Neither the idea to investigate the possibilities in Pakistan nor any important decision that followed was made by senior executives or central planners, or by the finance department or even a central business-development unit at AES.  (p82-83)

Chapter 4 describes a honeycomb organization structure as the joyful alternative to the  typical hierarchy structure. This chapter answers questions about how staff should be co-located at any one physical location, how big teams should be and how many layers an organization – even one with 30,000 employees – needs to have.  Further, teams can effectively replace many staff functions. 

Human resources is one of my least favorite.  AES did away with its HR department six months after we started staffing our first plant.  All but a few of the administrative functions were turned over to the existing teams within AES's operating facilities. ... Professor Jeff Pfeffer celebrated this radical decentralization in a Stanford Business School case on AES titled, “Human Resources:  The Case of the Missing Department”. ...

If the central staff is believed to be very competent, operating leaders and their subordinates have a tendency to become passive, to stop leaning about important aspects of the business, and to stop linking the success of the company with the success of their teams. (p104)

Task forces help people see work as a voluntary act, something they choose to do rather than something they have to do.  My goal was to have everyone in the company feel like a volunteer.  Volunteers are typically enthusiastic, energetic and effective. (p106)

This team-based structure carries over to performance appraisals and measurement.  Discussion within the team of individual performance was one of the AES practices that did not translate well to cultures outside the U.S.  Chapter 5 on appraisals and measurement discusses this issue in Asia.  This chapter also discusses tying measures to mission and values.  Bakke also discusses the effects of hourly pay, salary and bonus and periodic compensation adjustments. 

The hourly pay issue is similar to measuring hours spent “thinking” in knowledge work.  Hours are an input.  If we pay for inputs, then they certainly increase.  But, while Bakke mentions this problem of mis-matched economic incentives, he focuses on the ethical question of how people are treated.

In keeping with my desire to make the workplace fun, the compensation  issue that caught my attention most was the practice of paying salaries to executives and other “important” people, while everyone else in the organization was paid an hourly wage.  In 1993, as I was first reading Peter Block's Stewardship, ... I came to his chapter on compensation.  Block suggested that a class system existed in most organizations.  Managers got paid salaries and were eligible for bonuses and some form of ownership participation.  Everyone else was paid for the number of hours spent at the workplace, including overtime if they couldn't finish their work within the normal time allotment.... (p.120)

It took me three years to persuade our plant leaders to experiment with an “all salary” approach to reduce and possibly eliminate this discriminatory behavior. ... we couldn't simply  junk the hourly wage systems.  Instead, we  created a voluntary program. ... (p. 121)

By the time I left in 2002, over 90 percent of the 40,000 people in 31 countries were paid a salary, just like the company's leaders. ... On average, people were paid about the same amount of money as before but spent less time at their plants and offices. There was no reason to take four hours on a Saturday morning to make a repair instead of staying an extra hour on Friday evening to get it done. ... The most important result was the self-respect that it engendered among AES people. (p.123)

Chapter 6 is on leadership.   This chapter is best summarized as “leadership is fun, spread it around.”  Bakke's approach draws from the work of Max De Pree, former Chairman of Herman Miller, whose latest book is Leading without Power.  “I tried to make my attitude reflect Max De Pree's admonition that leaders should introduce employees as the 'people I serve'.”

This chapter extols the examples of leaders within AES and in other organizations who free their employees by exhibiting humility, passion and integrity.  These themes are developed further in a more personal epilogue and postscript.  The postscript contains Bakke's description of his faith and Biblical principles were applied at work and in avocational activities. 

Chapter 7 comes back to the issue of mission and purpose of the organization.  Increasing shareholder value works as an economic theory and a set of equations.  But, it is hard to jump out of bed every morning with the sole purpose of making someone else wealthy.

People want to be part of something greater than themselves.  They want to do something that makes a positive difference in the world.

Shareholder value becomes one of three objectives of an organization and a measure primarily of stewardship.  Bakke writes, “I like Max De Pree's analogy: “Profits are like breathing.  Breathing is not the goal of life, but it is pretty good evidence of whether or not you are alive.'”

Still, every modern, progressive, and socially responsible organization should strive to achieve three goals:

·       To serve society with specified services or products;

·       To operate in an economically sustainable manner;

·       To achieve these results while rigorously adhering to a defined set of ethical principles and shared values (p.152)

Chapter 8 is a series of vignettes of the consequences of running a global corporation according to purpose, values and fun.  There are examples of people who creatively applied these elements and there are examples of people who did not.  There is an example of taking over an existing, traditionally managed facility, and implementing the changes to live the AES way.  The example of a plant in Beaver Valley, Pennsylvania showed that after 5 years only 80% of the employees were operating consistent with AES practices.  After 10 years, people began retiring and “... between 5 and 15 percent of the people were leaving for the wrong reason. ... They did not experience the joy of using their skills, making decisions and taking responsibility.” (p.181)

Chapter 9 describes the nature of the interactions with the board of directors and the AES executives as the stock price is buffeted by internal events (like the Oklahoma filing errors), Enron, September 11, financial crisis in Argentina, the California energy crisis and other external events.  Ultimately, being different is its own kid of risk.

The reaction of the AES board [in 2002] was the same as it had been in 1992... The most salient emotions were fear and loss of confidence. ... Some were concerned about their reputation as business leaders.  Others focused on their legal liability as directors and officers. ... Several of my board colleagues suggested that putting so much emphasis on creating a fun workplace was a major cause of the company's problems.”

Bakke does admit three strategic – primarily capital structure –  mistakes that led to the fall of AES in 2002.  First, in the 1990s “... we abandoned our ceiling on investments in any one market. ... Limiting investments and cash flow in certain markets would have reduced our upside economic potential, but it would also have reduced dramatically the losses and asset write-offs that came later.”  Second was the over reliance on debt financing.  “By the time the financial crisis of 2002 effectively barred non-investment-grade companies from obtaining new debt, AES had over $6 billion of debt ...  Even a reduction of $2 billion ... would have made for a much easier transition during the liquidity scare that occurred later, caused primarily by the collapse of Enron.”  Third was building high fixed-cost facilities that sold into volatile open markets.  This operating leverage and the financial leverage multiplied to crunch AES shareholder value. 

Thirty years ago, the futurist Alvin Toffler, examined  the work practices of a large company and told their senior management in 1972:

A higher percentage of the decisions made by its managers... and others, now require “non-programmed” thinking, evaluation and learning... More and more, the individual is faced with situations in which the implementation of an existing policy or procedure could lead to disaster.  The individual is faced, in short, by situations in which he must invent a response...

Alvin Toffler, The Adaptive Corporation, 1985

Thomas Davenport has spent most of his career in professional services and higher education.  Thus, he is well positioned to reflect on best practices in accumulating and deploying knowledge.  

We are already aware that the “touch labor” component of manufacturing can be performed anywhere.  Consequently, the touch labor portion of manufacturing moves to the point where labor costs offset transportation costs.  Movement for lower labor costs into Asia and Mexico is well publicized.  Movement for lower transportation costs, as well as political and currency  risk management, has led Toyota, Nissan, even Mercedes, to open manufacturing plants in the U.S.  Global sourcing is a fact of life in manufacturing.

Many of the jobs in a manufacturing company are knowledge jobs whose performers never touch the end-product (except as a consumer), for example:  product design, procurement, scheduling, marketing and selling and accounting.  The recent trend has been to globally source this knowledge work. 

The Internet and global telecommunications have increased levels of communication with people we cannot see.  And growing standards for knowledge work (particularly in computer programming) have lowered the level of trust necessary to contract with someone you don't know.  Thus the movement of knowledge work “offshore,” which began with call centers and the more structured forms of knowledge work, ... now encompasses consulting and systems integration, product design and engineering, and even medical processes, including diagnosis and interpretation of X-rays and CAT scans. (Davenport, p44)

Then in 1997, [Peter] Drucker went even further out along the knowledge worker limb:

the productivity of knowledge and knowledge workers will not be the only competitive factor in the world economy.  It is, however, likely to become the decisive factor, at least for most industries in the developed countries.

Peter Drucker, “The Future That Has Already Happened,” Harvard Business Review (September/October 1997), p 21

(Davenport, p8)

So, how do organizations develop a globally competitive advantage in knowledge work?

There are many dimensions to knowledge work.  Davenport picks two dimensions 

•        the complexity of the work and
•        the level of interdependence

to define a plane of systems solutions to knowledge problems (see figure 5-1, p87). 

He does mention other aspects of knowledge work including:

•        knowledge life cycle:  find, create, package, distribute, apply (iterate)
•        type of idea:  big, small
•        recurrence rate:  infrequent to repetitious
•        cost and scale of the knowledge work (basically the number of performers)
•        sequential or parallel processes
•        number and characteristics of inputs (e.g., reliability, timeliness, accuracy)
•        performer mobility
•        performer role (unit leader, work manager, individual contributor)
•        qualitative or quantitative results

Davenport does not assume intervention in knowledge work is necessarily a good idea.  Management can intervene at the individual and group levels.  Management can focus on enhancing the performance of the individual professor or researcher and management can intervene to improve the performance of entire teams such as product designers.
Intervention in knowledge work is an uncertain proposition. The usual method of measuring productivity is to divide “outputs” by “inputs”.  Since we have difficulty measuring both, a focus on measuring knowledge worker productivity may be pointless.  Some measurement difficulties include the following:

• the output of knowledge work is hard to measure – volume is not the only, and rarely the best, measure of impact and value
• conscious and subconscious processes are used; subconscious work occurs at all hours – even while sleeping
• knowledge workers highly value independence and have high confidence in the patterns that have made them successful
• “thinking” is not transparent – not an externally visible process
  (this “implicit” knowledge is the core of the work by the Kikoskis
• each type of work has different characteristics making for many small populations of performers to target

Chapter four, on knowledge processes, brings insights from multiple disciplines.  In  the knowledge creation process, storytelling is  identified as a useful tool.  Davenport relates the experience of Amerada Hess in documenting the knowledge of how to explore for oil and gas.  A formal decision process map was found interesting, but not useful, while documenting (creating) and relaying the history (story) of a prospect “...  served to encourage open discussion among peers of alternative interpretations and enabled them to make sense of ambiguities.”

In terms of “distributing” knowledge, Davenport finds that co-location of knowledge workers is effective.  In today's highly networked organizations, many team members may be scattered in different locations, joining meetings while traveling to  customer and supplier locations or, increasingly, working from home.  Davenport notes:

The sharing of knowledge is difficult to enforce, since we don't know what any person knows, or how diligently he or she has searched for available knowledge.  Yet there is a substantial body of research suggesting that knowledge worker groups that share knowledge perform better than those that do not. 

The most viable approach to managing knowledge distribution or sharing is not to manage the process itself, but rather the external circumstances in which knowledge distribution is undertaken.  This typically involves changing where and with whom people work. 

Warren Bennis' book, Managing Genius, provides multiple examples of how forcing a small group of multiply-skilled people to close collaboration – often in isolated locations – leads  to breakthroughs in performance, in a word, genius.  Davenport devotes a full chapter (Ch 8), to this topic. 

This co-location phenomena appears at micro and macro levels.  At the macro level, “Knowledge workers congregate in particular geographical areas. ... The connotation is that  if you're a knowledge worker or a business that needs to hire them, you need to find out where the center of action in your industry is, and locate yourself there.”  And, at the micro level, “Knowledge workers collaborate.  They meet, they chat, they congregate.  Office environments need to facilitate the collaboration and exchange of tacit (hard to express in explicit written terms) knowledge.”

Most shocking of all to modern sensibilities, “Knowledge workers work in the office.” and “Knowledge workers communicate with people who are close by.  Tom Allen, the dean of researchers on the work behaviors of scientists and engineers, found more than two decades ago that technical workers (a proxy for knowledge workers) whose desks are more than thirty meters apart have a frequency of communications that is roughly zero. ... companies should design work environments so that knowledge workers who need  to communicate a re physically close to each other.”

What does this look like if knowledge work can be “outsourced”?  The computer software and support work that has been outsourced to providers in India is located in three primary cities:  Bangalore, Pune and Hyderabad.  In each city, large office buildings are constructed to house the knowledge workers.  And, best practice requires one or more of the off-shore team to be co-located at the client's US or European office.  The chunk of work moves as a block to the team whose members are co-located – rarely is a chunk of work spread across locations. 

The third step in the knowledge process is applying the knowledge.  Here the best practice is “reuse”.  Davenport's counsel:

How do we make knowledge application better?  In many cases the goal is to reuse knowledge more effectively.  We can greatly improve performance by having a lawyer reuse knowledge created in another case, or having a programmer employ a subroutine that someone else created.  Knowledge asset reuse is a frequently stated objective for organizations, but it's hard to achieve.  Many organizational and professional cultures reward – sometimes unconsciously – knowledge creation over knowledge reuse.

Davenport has focused most of his career on how organizations can use computing to improve process performance.  His career has included work with Computer Sciences, Ernst and Young and Andersen Consulting, now Accenture.  His first book was Process Innovation:  Reengineering Work through Information Technology, 1992.  He has been a professor of management information at University of Texas, Boston University and, now, at Babson where he is the President's Distinguished Professor of Management and Information Technology. 

Thus, the core of this book, chapters 5 through 7, is using computing and communications to improve knowledge work.  There are fairly detailed descriptions of the systems supporting decisions in medicine (Partners Healthcare), telecommunications (BT Adviser Space), airline reservations, program trading, credit approvals (Fair Isaac) and automated pricing. Chapter 6 focuses on individual knowledge worker tools such as messaging. 

The consistent theme is workers in control of their work (fully developed in Joy of Work reviewed below).  Thus...

Perhaps the most popular technologies were those involving information and knowledge “pull” rather than “push”.  These are corporate websites, information portals, and document sharing systems.  ... The positive reaction to document sharing was the highest for any technology in the study.  As the amount of information in organizations continues to proliferate, these technologies are likely to become even more popular. (p.127)

Commenting on the common practices of those who are “highly effective in managing their own personal information environments.”

... she uses IM more sparingly, and turns it off whenever she has a report to write or a research issue to think through.  She also neglects e-mail during these periods, even though her unavailability violates some unstated cultural norms at her firm.(p.136)

Finally, it all comes down to people.  We are social by nature and our understanding is often a social construct.  Thus, the knowledge repositories become a type of “Yellow Pages” where workers discover who knows what.

In fact, research over the past twenty-five years consistently reveals that people rely heavily on other people to find information and to learn how to do their work. (p.144) ...

Overall, our survey results provided us with some interesting insight.  ... high performers were distinguished by larger and more diversified networks that allowed them to both become aware of and rapidly take action on new projects or opportunities. (p. 147-148)

High performers also have more ties reaching outside of their organizations, making them effective boundary spanners.  They also have more ties to new employees, making them effective at transmitting knowledge and culture during the “onboarding” process.  Both these areas could be further cultivated. (p163)

After 190 pages of mostly technology and its role in supporting knowledge work, Davenport concludes with Chapter 9 on Managing Knowledge Workers. In this he contrasts the organization of work for manufacturing versus the organization of work for thinking.  This requires different approaches to recruiting, assessing, motivating and  retaining workers  (note:  Davenport does not write “employees” perhaps implying employees, contractors, customers, suppliers – all who may be involved  in the  “knowledge community” p.193-194).

Knowledge work is not visible – how would one measure how  “hard” or “effective” or “creative” a person is thinking or  acting.  How would one validate that all points of view and risks have been considered in making a major decision?

Ultimately, this comes down to creating a culture where people, not machines, operate a peak performance.  And, since people are not machines, an engineering solution, process refinement and automation cannot compensate for gaps in the will, ability and opportunity for people to think and act smartly.