Doesn't anybody deserve a government that works?

What if TV political pundits decided to be positive rather than their favourite way - mocking and mean. Oprah took a different path to her talk show competitors who were going for the mean and nasty shows. Before you roll your eyes over Oprah, she a is a billionaire. Taking the positive path to push better management has always been Henry Mintzberg's strength. Here he gives his take on the nasty attitude to government in the US. I did not know the military leadership story. See what you think - here's Henry:

"Doesn't anybody deserve a government that works?" Lou Dobbs asked this over and over again in an advertisement on CNN. The answer is yes, Mr. Dobbs, for anybody who respects government and is not so quick to put it down. We get the government we deserve. 

If we vote for empty promises, we should expect empty actions. If we vote out of anger, we will find ourselves with angry politicians who are mean. If we expect little from government, in the belief that it is rotten, then they should not be surprised to get rotten government that does little. And vice versa.

Americans don't much believe in government. Many think it incapable of doing most everything. (Ronald Reagan, as U.S. President, claimed that "The ten most dangerous words in the English language are 'Hi, I'm from the government, and I'm here to help!'" He, of course, was there to help.) As a consequence, many capable people hesitate to work for government, while some who do function under a cloud of inadequacy. Hence there is a lot of inept government in America, which of course only makes people even more suspicious of government. If ever there was a self-fulfilling prophecy, this is it. And that, of course, plays into the hands of corporate executives and others that don't want to be bothered by government.

I was at a dinner party in Virginia recently, where people were railing against government. I got nowhere trying to make the case that they need government, let alone better government, so I asked: "How about the military? Do you respect that?" Sure, came the reply. "But is that not government?" ("here to help," I might have added) Hm... they never thought about that. In the great condemnation of American government, the military is somehow exempt. It is perceived as highly competent; in fact, it is revered by many Americans. Two of the most vociferous people at that party were retired from the military, which means that their salaries before and their pensions since have come straight from the government -- from the taxpayers. Surprise! 

Now if so much in American government is so bad, then the public service has to be marginalized: its top ranks, several layers into each department, have to be reserved for political appointees, ostensibly to keep those civil servants in their place. For example, FEMA, the Federal Emergency Management Agency, was headed in the George W. Bush administration by a good Republican who had previously been supervising the judges of horse shows. He presided over the debacle in New Orleans. (Contrast this with the recent effort in Chile to save those miners: it was orchestrated by government.) Bush's Secretary of the Army was a businessman who announced on arrival that he was going to bring in "sound business practice." He came from Enron.

In the military, however, political appointments are taboo. The generals -- one, two, three, and four stars -- are not removed en mass every time there's a new government. But why not? Shouldn't they too be replaced by people who ran horse shows and failing companies?

"We can't do that," came the reply at the party. After all, the military is so important, the experience of the generals so critical. Unlike education? Health care? Emergency relief?

In Canada, we believe in government. As soon as a serious problem arises, most of us expect the government to deal with it. One consequence of this is that we too get the government we deserve, at least at the civil service level: competent. Not faultless, but is business faultless? Over the years, I have been struck time and again by how thoughtful, concerned, and capable are so many of the senior civil servants I have met in Ottawa.

We barely have political appointments in Canada. The "deputy ministers," who report directly to the ministers and advise them as well as run the departments, are usually career civil servants, or else people appointed for their competencies, not their connections. And so too are the people who report to them.

To appreciate how Canadians feel about government, consider this. In 2004, CBC television (itself government owned, with a radio network that has to be one of the best in the world) held a contest to elect "the greatest Canadian". And the winner: Tommy Douglas. If you are an American who has never heard of Tommy Douglas, don't worry: he is hardly a household name in America. If CBS ran such a contest, with Abraham Lincoln or Thomas Jefferson the likely winner, believe me, we would know those names in Canada. We could have picked Wayne Gretsky or Pierre Elliott Trudeau -- you probably heard of them. But we picked Tommy Douglas. Who is he?

Tommy Douglas's highest post in life was the leadership of a marginal opposition party in the Canadian parliament, and before that, the premiership of the province of Saskatchewan (population at the time: less than a million). He was obviously chosen for another reason: Tommy Douglas was the father of Medicare, Canada's system of health care that covers all medical and hospital costs for every Canadian, with the money coming straight out of general taxation.

Douglas brought Medicare to Saskatchewan in 1961, against the fierce opposition of the American Medical Association, which saw it as a foothold for socialized health care in North America. And then in federal politics in 1966, he led his party to vote with the minority Liberal government to pass Medicare for the entire country.

When Americans debate changes in their system of health care, as they do regularly, the opponents point to Canadian Medicare as a disaster. So why do Canadians think so highly of Tommy Douglas? Because Canadian Medicare is not a disaster at all: health care in Canada costs much less than it does in the United States while its outcomes are consistently better. (The two countries had comparable costs before Medicare came to Canada.)

Of course, we never stop complaining about our health care services in Canada. But neither do people in every country I have ever visited. A few years ago, after listening to some Italians in this field go on and on about their health care, I asked "So how did Italy come out in the last WHO rankings?" Their reply: "Oh, second best in the world." Apparently second best is not good enough.

In fact, anything to do with health care is never good enough. At a party in Montreal, a young physician was going on and on about the dire state of health care in Quebec. Finally I interrupted her and asked: "You did your residency in the U.S. What about that?" She threw her hands in the air and blurted out: "Don't get me started on the American system!" Paraphrasing Churchill, I guess Canada has the worst health care system in North America -- except for all the alternatives.

There are, however, bright spots in American health care. One is the Veterans Administration. There you go again -- government. Michael Porter, Harvard Business School's strategy star, has co-authored a popular article and book about redefining health care in America. On government-controlled regulations, the book states that it is "never a real solution" (2006: 382); on the unsatisfactory performance of American health care over many years, it claims that "while this may be expected in a state-controlled sector, it is nearly unimaginable in a competitive market" (2004: 21). How about the opposite, Professor Porter -- a few facts? There was not a mention at this place in the book about the Veterans Administration (although a search in its index revealed three brief references to it elsewhere, two of them favorable, the third neutral).

Most Canadians revere Medicare as a pillar of the country's collective democracy, much as Americans revere business as a pillar of the country's individualistic democracy. But in a world that requires a decent if not dominant public sector, it is the Americans who get the government they deserve, not the one they need.

Henry Mintzberg is Cleghorn Professor of Management Studies in the Desautels Faculty of Management at McGill University

What is the truth about private equity?

The one overarching truth about private equity: The entire investment hinges on improving the business and increasing its value. If the private equity firm fails to do that, it loses its own money, its investors lose their money, and its ability to raise future funds is undermined.

The essence of private equity is the alignment of the interests and incentives of management with that of the owners.

In a public company, the owners — shareholders — are largely separate from the management of a company. Private equity eliminates this disconnect. The owners often include the management (PE firms usually requirement management to invest their own money into the company so they have a vested interest in its success).

This provides a sharper focus on how capital is allocated across the business. Everyone has a single objective: Grow the company’s value. Thus, they can make business decisions solely focused on that goal, rather than satisfying external constituencies, such as analysts, traders, stock brokers, and the media.

Why are only 6% of tech start ups by women?

Ilse Treunich, CEO of the MaRS Discovery District, points out that only 6 per cent of tech start-ups accessing the Toronto innovation centre’s advisory services have a woman as founder or senior executive. “Young high-growth firms create the majority of new jobs. Women remain significantly underrepresented in this cohort, relative to their participation in the work force.”
The big question on the minds of policy makers, bankers and female entrepreneurs is: why is this the case, and what can be done about it? Ruth Bastedo has a long history of helping women and particularly business owners. She writes an article about the latest program she developed with Rotman and how it impacts these female business owners. 
Read more at Globe and Mail

There are a number of similarities between for-profits and non-profits which make people with for-profit experience particularly helpful as board members. Marc J. Epstein of Rice University and F. Warren McFarlan of Harvard Business School have a new book on board work. They discuss the similarities of working on nonprofit and for-profit boards.

6 Key Similarities

1. Both organizations can grow, transform, merge, or die. Success is not guaranteed for either type of organization, but requires sustained work.
2. In both cases, cash is king. This for-profit focus is critical for a nonprofit board.
3. In both settings, good management and leadership really matter. Delivery of service, motivating and inspiring staff, and conceiving of new directions for growth are all vitally important.
4. Planning, budgeting, and measurement systems in are vital in both settings.
5. Both types of organizations face the challenges of integrating subject matter specialists into a generalist framework.
6. Both organizations add value to society. They just do it in different ways.

In short, there is much overlap between the skills needed and perspectives provided by leaders in the two types of organizations. This is a key reason why social enterprise courses have taken root in business schools and why, appropriately socialized, those with for-profit backgrounds can contribute so much to the nonprofit world.

How nonprofit and for-profit board work is different

For those who sit on nonprofit and for-profit boards, the differences between the two organizations couldn't be clearer. Nonprofit boards meetings tend to be longer, less tightly organized, and more sporadically attended by the board members themselves. 

The focus is far less on making money, but this can be a fatal flaw. Both nonprofit ad for-profit need to focus on revenues.

I attended a womens’ Board Director’s dinner held by the prestigious Heidrich and Struggles firm, who have done invaluable research on women and boards. 

Diane Francis was the guest speaker and she had recently been invited to sit on the board of a mining firm with a profit motive. Diane commented that it was a completely different experience and far more demanding. Immediately, this was dismissed by one of the women, a formidable lawyer. Her rebuttal was that women are told to go on nonprofit boards to build their resumes and there are talented people on these boards, working just as hard as on a for-profit board. 

I agreed with Diane Francis though, because the for-profit is under far more pressure with paying shareholders money at risk. For women, I believe it is an important message that putting time into a nonprofit board might not make as much sense as we are lead to believe. There are many companies with revenues of $10M and up who need board members and would give a great experience of how to add value to a company from that position.

My chief regret from the evening was not speaking up to encourage more debate between Diane and the woman who snapped the topic closed. 

Now, here is a book from Harvard that opens up that topic and the authors  support Diane Francis and her view on for-profit boards. Another reason I wish I had spoken up - think of the opportunity for these top women to get out a few more points we could all have discussed. 

Next time.

Marc J. Epstein of Rice University and F. Warren McFarlan of Harvard Business School have a book to crack open this debate with solid facts about the key differences. These key differences are said by industry leaders and are well worth re-visiting. Here are Epstein and McFarlan:

 Failure to understand these differences can cause the new board member to stumble badly and perhaps irretrievably damage her credibility and effectiveness in a nonprofit organization.

Differences

At its core the nonprofit is fundamentally different than the for-profit. At the center of the nonprofit is its social mission. Understanding the mission, helping the organization to fulfill it, and adapting it to a changing world is the very core of nonprofit governance and management. It is for this reason this book starts with a detailed discussion of mission and how it grows. Right behind this are the two major intertwined strategic themes that the nonprofit trustee must deal with. 

The first theme is fulfilling the mission and whether we are doing it in a fiscally responsible fashion. There is the complex multifaceted issue of mission definition and evaluation of its appropriateness. There needs to be a deep understanding about how organizations can go about measuring their performance against mission. For the new trustee, understanding these issues is the place to begin her trusteeship. 

The second theme is financial solvency. There is the board's fiduciary responsibility and financial sustainability. Our life experience drives us to put this behind "performance measurement against mission." Repeatedly we have seen new trustees and ineffective boards try to wag the mission dog with the financial tail. It just doesn't work that way. Without mission and its accountability we have nothing.

Achieving financial sustainability is very different for the nonprofit than the for-profit in that the nonprofit cannot easily access the public equity markets but instead has philanthropy as a potential additional source of funds. Non-profit boards must deal with the role of philanthropy and the trustee's role in it. This may be summarized by giving often and generously and when not giving helping others to give (hence the phrase, "give, get, or get off.")

Finally, the execution of the work of the board is deeply different from that of boards in the for-profit world because of the tasks of mission performance measurement and different capital markets. Nonprofit boards are often larger, have more committees, and have a very different trustee life cycle. Further, the heart of the governance process is a volunteer nonexecutive chairman and volunteer board, leading a staff of paid professionals. The dynamics of this are complex and profoundly different than the process in the for-profit world.