Strategic adaptive planning in the US military, or "a study in banging one's head against the wall"

When I was a child, I received a piano as a gift from an elderly neighbor. I was excited to begin playing, but my mother told me she wouldn't pay for lessons until I demonstrated a commitment to the piano by playing it regularly. But every time I sat down to try to play, she would tell me to stop pointlessly plinking on the piano.

This comes to mind when I reflect on the state of our military today. Many critical business processes, from strategic planning to project management, have come from the Department of Defense. However, when business adopts a military practice, it gets changed and morphed to meet business objectives, and before long becomes an iterative, adaptive process. Meanwhile, the military languishes with processes that don't adapt to new realities.

Paul Masson gave a great illustration of this issue with Col. Ed Hatch of the USAF.

A few decades ago, the US' only enemy, for the most part, was the Soviet Union. In much the same way that corporations could make twenty year strategic plans, because their markets weren't expected to change much, the military historically takes 18-24 months to develop contingency plans, which then sit on a shelf and don't change when conditions change. This made sense before the proliferation of nuclear weapons in the hands of tiny despots all over the world. After spending so much time developing contingency plans, if there was a crisis, the contingency plan wasn't implemented, but a whole new crisis plan was planned and executed, as the contingency plan was too far out of date to be useful. Not only is the process too long, but the strategic plans across governmental and military units were never coordinated, causing tremendous confusion, inefficiency and conflict. How do you manage strategic planning across 4 armed forces and a NATO alliance?

The military is addressing this problem by transitioning to what they term an Adaptive Planning and Execution System (APEX). This system would create continuous, living plans, rather than fixed contingency plans, augmented with crisis plans.

So today, a national security strategy is developed with each new administration. (This replaces the simpler defense plans of decades past.) From that is developed a national military strategy. The national military strategy needs to be translated down to 69 individual strategic plans for different sectors of the military. Sectors can be geographical, such as Europe or South America, or functional, such as transportation and joint forces, and of course, four are the Army, Navy, Air Force and Marines -- who have all the money and power and ability to get things done.

It's funny, having worked exclusively in the private sector, some things that seem obvious to me are brand new concepts to the military. In talking to Paul, he was concerned about the fact that they hadn't developed risk management and disaster recovery into their strategic planning. When I told him that those aren't strategic issues, per se, but operational control issues, he said that such delineation never takes place in the military, and if it's not in the plan it's not going to get addressed. Wow. They have a long way to go. It's great that portions of the military are reaching out to the private sector, trying to figure out what they can learn, and how they can perform adaptive planning better.

But they have barriers I could never imagine. When they start to implement a new idea, and begin working through the initial plan, a defense contractor will try to get the partially developed plan, take it up the chain of command, have it decreed ineffective and incomplete, and get it shut down. Defense contractors look at outreach to the private sector as a threat to their livelihood, and will do whatever they can to either control it or kill it. Col. Hatch spoke of situations where he's had to bury a contract, so that defense contractors wouldn't find out about it. One defense contractor found out about it, and secretly bought up all the IP, so the project couldn't move forward without the defense contractor. This happens ALL the time. Whenever they identify a solution in the private sector, a defense contractor tries to shut down the innovation. While Col. Hatch likes working with private industry, who don't have skin in the game, or a vested interest in a particular solution, defense contractors are not impartial. Defense contractors think anyone in private industry DOES have skin in the game, because private industry doesn't guarantee that money is going to the defense contractor.

Efforts to modernize the military's strategic planning are continuing, but the barriers are almost unfathomably huge.

I never did get piano lessons, and my folks eventually sold the instrument -- no one had ever learned to play it. I hope things work out better for our military.

fear and loathing in business ethics

When I presented at the PMI Global Congress in Malta about Corporate Social Responsibility, an American from a large insurance firm posed a question.

"I like your ideas about integrating CSR into corporate strategy, and evaluating projects not just for risks to schedule and costs, but also looking at ethical and social risks. I want to take these ideas back to my company and implement them. But what happens if I talk to my boss, and he doesn't like the idea? What then?"

"Well," I said, "Ultimately you need to determine where your priorities are. If you think this is a good idea for your firm, and will ultimately change how your company does business for the better, as well as preserve its reputation, it may be in your best interest to talk to others within the company, to circulate the ideas and see if they can get traction."

He laughed. "I need your business card! If I do that and lose my job, I'M CALLING YOU!"

It's sad when people are afraid to speak up, especially when what they have to share isn't bad news about their project or budget, but rather a good idea on how they can make their company better. But more than sad, it represents a risk to the company's ethical culture.

Marianne Jennings of the Makkula Center of Applied Ethics believes that to front-line employees, the line between right and wrong is very bright. Something happens to people as they climb up through management. The bright line seems to fade. The challenge is getting information about ethical breeches from the front line up to the right people who will take action. Too often, fear and silence thwart those efforts.

Are these fears unfounded?

According to the journal Strategic Finance ,

Based on the total failure of whistleblowers to obtain protection from discrimination under the provisions of SOX Section 806, perhaps employees still have good reason to fear retaliation. Of the nearly 1,000 complaints filed under SOX 806 in the five years since its enactment, not one person has survived the appeal process and won his/her case.

I guess not.

The problem with the triple bottom line: Corporate Social Responsibility reporting

In the world of CSR and business ethics, "triple bottom line" is the idea that a company should measure their success not just financially, but on three axis -- financial, social and environmental.

The truth is, there is no quantitative measure -- no way to evaluate what my "triple bottom line" is. Even the concept of the "triple bottom line" is deceiving. It implies that social and environmental results can actually have a bottom line, a measure that a company can evaluate themselves and others against. I'm sure that using that term helps some executives get through the feeling that CSR activities are only warm and fuzzy, with no real end result for the corporation.

This article from Business Ethics gets to the core of the issue.

So we might reasonably ask of firms like The Body Shop, or British Telecom, or Dow Chemical – all companies that have claimed to believe in the 3BL – what their social bottom line actually was last year. But just posing this question conjures up visions of Douglas Adams’s comic tour de force, The Hitchhiker’s Guide to the Galaxy, in which the greatest of all computers is asked to come up with an answer to “the great question of Life, the Universe and Everything”. That answer, which takes seven-and-a-half million years to calculate, is “42”. At least part of the charm in this Hitchhiker shtick is that “42” seems wrong not because it arrives at the wrong number, but because it is ridiculous to think that the answer to such a question could be expressed numerically or even just with one word (especially a dangling adjective – 42 what?).

The paper further poses that if I make a promise and keep it, I am seen as ethical. But if I make ten promises and keep them, I am not seen as more ethical than when I only made and kept one promise. Flattening multidimensional ethical issues for the purpose of measuring is bound to create some errors.

But I disagree with the paper in his conclusion that there's no point in trying. Is the jargon of "triple bottom line" misleading? Absolutely! Is the current state for measuring a company's commitment and effectiveness in this area defective? Absolutely! Has the concept of Corporate Social Responsibility been hijacked by PR departments who only address CSR issues as part of a marketing portfolio? You know the answer -- Absolutely!

The idea of the triple bottom line has significant potential. It took generations for us to develop effective and thorough financial reporting rules and guidelines, and they are still being undermined by creative accountants. We've only just started incorporating social and environmental ideals into corporate performance -- it will take several years before the first rudimentary reporting standards begin to emerge. I have no doubt that our largest audit firms are energetically exploring this new market opportunity.... = )

How do you measure corporate social responsibility?

No one really knows yet how to measure corporate social responsibility.

Every month, a new report is issued which lists the most socially responsible companies. McDonalds is listed as one of the top companies, due to their work in the environment. (What about the fact that their very existence causes obesity?) Wal*Mart is listed in another as well, due to their focus on zero waste. (What about their low wages?)

The dichotomy is inescapable. Every company is good in some ways, bad in others. So in my CSR report, I highlight the areas we've improved, and where we might be doing better than our competitors. This year I talk about labor relations in Nigeria, next year I talk about labor improvements in Ghana. Does that mean conditions in Nigeria are the same, or is Nigeria's absence from the report indicative of the fact that there's something to hide?

How can an independent party ever hope to evaluate whether a company is "good" or "bad?" And is there even such a concept? You know how in the US legal system, if a person commits a crime, he can be let off the hook because he is criminally insane, or incapable of determining right from wrong. Corporations are criminally insane. You can't think of a corporation as good or bad, right or wrong, because the corporation isn't a human, with the ability to discern the difference. So okay, the corporations aren't good or bad, but the leaders are. Well, that doesn't make sense either.

If a government wants to change the way a company does business, to make all companies "good" companies, it would change the current rules. Without laws in place that determine what every company has to follow, the least socially responsible will have the greatest competitive advantage. In 1993, Levi Strauss phased out production in China because of concerns about its human rights record. In 1998, they reversed their policy, as they were losing out in the competitive game.

Don't get me wrong. I'm thrilled when I see a company out in front of an issue, as they can guide legislation. I just don't think that CSR alone is the whole answer. Yes, it's easier to lobby a company for change than to drive change through our political system. But we don't accept workarounds in our professional life -- isn't this more important?

corporate social responsibility and the project manager

Corporations, and the society they operate in, are already intertwined -- companies affect society through the activities they do every day. A society needs corporations to give people employment and infrastructure, and corporations need a healthy society to provide a capable workforce. While society looks in many cases to the corporate world rather than government for the provision of employment and infrastructure (not to mention goods and services), it is only a healthy society that can create the kind of productive workers that every corporation seeks to hire.

Companies exist to create prosperity. Society in turn decides what limits to impose on how companies behave, and thus we have laws to protect the common good. Corporate social responsibility tries to bridge the gap between what laws are in place and enforced, and basic fundamentals of good business practice, such as avoidance of exploitative practices, and complete transparency.

In the same way that social responsibility is not solely the government’s job, corporate social responsibility is not only the task of a company's senior executive. Project managers are instrumental in achieving strategic goals, as they hold the path to execution. In this way, they can play a pivotal role in corporate social responsibility. Being familiar with the details of day-to-day operations and execution, the manager is in a position to perceive and analyze socially relevant issues and situations that may not be obvious to senior management. The manager knows from firsthand experience that norms and laws, culture and traditions may render a project very different in execution and outcome from what it is in other countries, including his company’s home country.

The experienced project manager brings discipline in risk assessment and mitigation, which can be used to identify social risks that might go unnoticed by top leadership. For example, your company may not uphold norms of behavior in developing countries, arguing instead that they operate within the local laws of the countries in which they are working. You will be in the position to see that disconnect more vividly than a distant executive, and will be able to escalate discrepancies between the minimum the law requires and what’s appropriate for the community, before it turns into a crisis for the company’s operation or reputation. Don’t assume that company executives are aware of the social ramifications of a project – it’s the manager’s responsibility to ensure these issues are raised appropriately. The data a manager provides his leadership can help them make bold decisions, to go beyond what the law requires in developing ethical business practices.

For example, Levi Strauss and Company has a strict policy against underage workers. But when they discovered that two factories in Bangladesh had workers under the age of 15, executives in the US didn’t just shut down the factories or demand the workers be fired. Instead, the managers in the field looked into the problem, and they recognized that in Bangladesh, families rely on the money brought in from a child worker to survive. So they helped come up with a creative solution. The children who were already employed could remain, but the factory had to support their education, sending them to a local school, even hiring a teacher if there were no local schools nearby. That way, the company could ensure the children were getting proper education, while not driving families into poverty. Ultimately, such actions set the standard for other local factories, raising the bar throughout the society.

How can you evaluate risks around corporate social responsibility? You can rank social issues when you rank all other risks to project success, by probability and impact. What is the likelihood a social, environmental or ethical issue will arise in this project? What is the potential impact, not just to the project, but also to the community or the company at large? Never forget that you are your company. If you want your company to be ethical and do the right thing, be sure to model that behavior yourself.

Pharmacanomics - the ethics and economics of drug development

It's fascinating how investor pressure has changed the behavior of pharmaceutical companies. They're not alone, of course, but we like to think of medical firms as being a bit more altruistic than most. I remember when I thought it was noble that a firm would go after "previously unmet medical needs." It wasn't until I talked to a pricing specialist at such a highly successful firm that I realized that's not nobility, that's a competitive advantage, and one which allows the company to price their goods as high as possible.

We saw this a few years ago, with the shortage of flu vaccines. Suddenly it was painfully obvious that very few companies made drugs that had such small profit margins.

We see it again today with news that fewer antibiotics are now in the pipeline. New antibiotics are harder to develop, and they aren't the blockbuster that investors are looking for.

"Drugs that treat chronic conditions such as heart disease, arthritis and diabetes must be taken for a lifetime. A good antibiotic can clear an infection in a week to 10 days. With the cost of developing new drugs ranging between $110 million and $800 million, cautious investors are putting their money into research that promises the biggest payout."

So what about the argument that companies need blockbusters, and they have to charge huge prices in order to better fund drug development? Most early-stage drug discovery takes place in universities and research institutions, not pharmaceutical firms. What's more, a study published earlier this year in the journal PLoS Medicine found that US pharmaceutical companies are spending twice as much on marketing as they are spending on the research and development of new drugs. While $57.5 billion was spent on drug promotion in 2004, only $31.5 billion dollars was spent on industrial research and development.

These same economics also prevent drug companies from sharing their product with sick people in developing countries. As an investor, I want the highest return for my money. As a citizen, I want drug companies to do the right thing for their consumers and society. Unfortunately, there are penalties for not giving me the highest return, but there are no penalties for not doing the right thing for society. Which has the greater pull?

Cityphilia

I found this article to be a fascinating (if rambling) study of how financial deregulation has contributed to deteriorating societal values. It's easy to fall into the habit of seeing each new scandal, each new corporate misfortune as an aberration, rather than seeing indications that we're overdue for reform and regulation in the banking sector.

Oh, wait! Maybe we can just cut rates again and drive up confidence, right? Right?