Diverse ASSET Management

DIVERSE ASSET MANAGEMENT IN ORGANIZATIONS: A METHOD FOR PURPOSEFULLY CONNECTING PEOPLE UNDER CONDITIONS OF CONSTANT CHANGE

Authors
Ian Browde, Director Strategy & Business Development, Nokia Enterprise Solutions, 100 Enterprise Way, Scotts Valley CA 95066, USA., 408/504 4252 [email protected] Carol M. Sánchez, Associate Professor of Management, Grand Valley State University, 401 West Fulton, Suite 445 C, Grand Rapids, MI USA 49504 616/331-7451 [email protected]

Paper submitted to the Special Issue on ‘Connectivity’ in Merging Organizations Organization Studies, December 30, 2003

DIVERSE ASSET MANAGEMENT IN ORGANIZATIONS: A METHOD FOR PURPOSEFULLY CONNECTING PEOPLE UNDER CONDITIONS OF CONSTANT CHANGE Abstract
This paper offers a model for the disciplined sustainability of global business. This model of disciplined sustainability is called Diverse ASSET Management. We propose a method, a heuristic-model, that provides managers a way to exercise, and eventually master, the competencies needed to achieve connectivity among their people, manage risk, and gain sustainable business success. We discuss the concepts of connectivity and risk, and then unpack the model’s four assumptions and six guiding principles. The four assumptions are that sustainability leads to long-term business’ health, business is people-to-people relationships, the relationships are asymmetric, and people are the business’s most valuable appreciating assets. The six guiding principles, which comprise the phrase Diverse ASSET, are Diversity, Adaptability, Simplicity, Social capital, Ethics, and Trust. After unpacking the model, we illustrate how the Diverse ASSET Management method works through a case study.

Key words: connectivity, risk management, sustainable business, global business

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DIVERSE ASSET MANAGEMENT IN ORGANIZATIONS: A METHOD FOR PURPOSEFULLY CONNECTING PEOPLE UNDER CONDITIONS OF CONSTANT CHANGE

“People don’t connect with other people to accomplish less. Behind all our organizing [connecting] is the desire to accomplish, to create something more. In this desire, we mimic the world. Life organizes to discover new varieties, different capacities.” Wheatley and Kellner-Rogers (1996a) THE OVERVIEW Business environments today are dynamic and uncertain. They are fueled by continuous social, economic and political change and risk, driven by globalization and challenged by the interconnectedness of national and regional economies. In response, companies and entire industries are looking for ways to transform the way they do business. They recognize the importance of “connectivity,” or the integration of people, processes and activities in organizations to achieve sustainable success. For example, many communications firms are tackling the demands of rapid innovation, cost containment, and consolidation through mergers and alliances. But mergers, alliances and even conventional contractual relationships raise new issues of how to link, connect, and coordinate people, processes and activities across disparate organizations. How do they achieve “connectivity” as they bring different organizations together? And what does it take to manage risk and succeed for the long term in today’s environment?

What we offer in this paper is a model and a method of disciplined sustainability for global business, with discipline meaning the rigorous exercise of capabilities for achieving people-to-people connectivity and managing risk for long-term performance. To think about the concept of discipline, it may help to imagine a Nautilus machine, a golf driving range, a tennis wall, a yoga mat and blocks, a baseball batting cage or any other heuristic used to practice or exercise a skill or competence. In this paper we propose a method that is actually a heuristic model that provides a way for managers to exercise, and eventually master, the competencies needed for connectivity, risk management and sustainable business success. The sustainability part of the model refers to high organizational performance for the long term – at least 25 and hopefully 100 years. This model of disciplined sustainability is Diverse ASSET Management. What we will show is that Diverse ASSET

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Management provides the competencies and the heuristic-model needed to exercise the skills required for sustainable global business success.

UNPACKING THE CONCEPTS Most models are similar to well-packed luggage. They contain much inside of them, and there is a logic to them that, once discovered, helps us to understand how the packer managed to get so much into such a small space. Unpacking the model’s concepts methodically, paying attention to nuance, position, connection and detail is a sure way of fully grasping their meaning. In this section, we unpack the meanings of the ideas in the Diverse ASSET Management heuristic-model. We discuss the concepts of connectivity and risk, and then explore the model’s four assumptions and six guiding principles. After we unpack the model, we illustrate how the Diverse ASSET Management model works through a case study.

Connectivity is a term used in information technology that refers to the “unbiased transport of packets between two end points” (Frankston, 2002), or the quality of successfully connecting disparate objects to reach an objective. Connectivity is achieving integration of people, processes, and activities within, and outside, organizations by bringing them together in formal and informal ways. Connectivity becomes very important when different organizations join together either for a long-term purpose, such as a merger or an acquisition, or for a shorter-term, contractual purpose, such as to create a joint venture or complete a special project. Organizations may adopt programs and initiatives to formally promote connectivity. For example, executives of companies involved in mergers are advised to connect in what is called a strategic leadership assessment (Carey & Ogden, 2004). The strategic leadership assessment helps uncover unintentional and unconscious biases of the people in the organizations, so that new priorities and a vision for the new company emerge as two management teams are connected into one. At first, this is threatening to both management teams. But if encouraged at all levels of the organization as an incremental, organic and self-organizing process, people begin to understand how the merger process works, and why. In this paper we are most concerned with the aspect of connectivity that involves people. In this sense, connectivity is the networks and webs woven by people in organizations that help them get their work done (Wheatley & Kellner-Rogers, 1996b). These webs of connectivity are often self-organized, meaning that people get together on their own, based on what they perceive to be their needs and desires to accomplish goals. The Worldwide Web on the Internet may be the

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most powerful example of a self-organizing network that has achieved very high levels of connectivity among people. Instant messaging on personal computers provided by companies such as AOL, and Microsoft, and Short Messaging (SMS) on cell phones is becoming the connecting method of choice for many people. Also, new emerging players such as Spoke, Linked-In, and Whogle in data and Skype in voice (with two million downloads by November 2003) are introducing peer-to-peer connectivity using the Internet. These platforms permit people not only to communicate but also to connect and network with one another, for professional and social reasons, transcending national, cultural and organizational boundaries. For example, a Chinese automotive executive planning a business trip to Detroit is also interested in skiing. He puts his profile on Whogle and within an hour he receives messages from dozens of automotive types who would be delighted to show him the slopes of northwestern Michigan on his next visit.

Risk is any uncertainty that affects a company’s strategic intent, goals, objectives or outcomes. It is exposure to issues such as financial loss or gain, physical or material injury, or the consequence of pursuing or not pursuing a course of action (Francis & Armstrong, 2003). Material risk involves “harder” assets such as plant, equipment, investment, debt, diversification, and technology. Stakeholder risk is a set of softer and, we would argue, more critical assets that include the interests and well being of customers, suppliers, employees, shareholders and those in the larger community (Francis & Armstrong, 2003). Although risk management is often seen narrowly as the need to mitigate threats to material property, a broader perspective suggests that all risk – material and stakeholder – must be properly managed and have an owner responsible and accountable when a company takes major business decisions. The challenge is to manage both types of risk while achieving connectivity among the people through the processes and systems that unite the organization.

This leads us to the first component of the Diverse ASSET Management model, its four assumptions:

Sustainability is the key to long-term business health, survival and success. Sustainability is a universal principle found in nature that refers to the long-term viability of an organism, and in this case, a business. By sustainability we understand an innate drive for order and balance, as opposed to randomness and excess. One needs only examine the short-lived “business successes” of many dot.com organizations in the late 1990s versus the

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long-term successes of companies such as Nokia (138 years old and counting) or Wells Fargo (also well over the century mark) to quickly understand the meaning of business sustainability. While a few people made millions or billions of dollars when many dotcoms went public during those boom years, within a short time, we realized that most of the companies, their products or services and their business models were not sustainable. Many went bankrupt taking with them the hopes and dreams of investors who, dulled by the prospects of boatloads of money, had forgotten that long-term sustainability is a prerequisite for business success -- not something that is simply “nice-to-have.” Compare these debacles to the companies that have built sustainability into their business models, such as eBay and many blue chip companies, and the principle become clear. The form of economic growth known as “sustainable” development (development that improves the quality of life [business] for successive generations, instead of reducing it) depends upon the innovative and wise use of technology [both technical and social]. (Schwartz, 2003) Business is relationships among people who are working towards high performance, defined in many ways. Business is simply an umbrella term for relationships among people wanting to optimize opportunity and mitigate risk to achieve goals. Except for the legal description and perhaps the facilities, there is no such thing as the business, only the people and the relationships they form to carry on the business. The people -- employees, customers, shareholders, partners or suppliers -- and the relationships they create to conduct business transactions are the most valuable assets a company possesses. The depth of the relationship between people involved in a transaction – the length of the relationship, whether they have interests, knowledge, even friends in common – is a predictor of how trusting and sustainable the business transaction is (Glaeser et al., 1999). Before business law emerged in the 19th century to regulate commercial activity, business occurred almost exclusively based on personal relationships – and in most countries it is still conducted that way. The prosperity of a business is highly dependent on ongoing relationships with suppliers and buyers – in other words, relationships are the foundation upon which sustainable business is built. Asymmetry characterizes all business relationships. In other words, power, resources, etc. are distributed asymmetrically among participants in business relationships. Asymmetry is

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the difference in resources, capabilities, power, management and organizational culture of an organization, such that every organization displays asymmetry when compared with other organizations. This is true whether the asymmetry is in size, market presence, sales, influence, availability, lack of resources, etc. Even companies within the same industry are asymmetrical and different from one another, and asymmetry is one reason why some organizations succeed and others fail (Barney, 1991). In order to get a handle on this ubiquitous condition, we need to understand, accept, and adjust to asymmetry at all levels -organizational, divisional, business unit, departmental, workgroup and individual. Every situation requires people to be aware of the influence of asymmetry on relationships, interactions, transactions, and outcomes. People are appreciating assets by design. They are capable of learning, growing, adapting and hence becoming more valuable over time. People bring their existing experience, competence and skill set to a company, and if nurtured, they will grow and their generalized skill set will become firm-specific. Consequently, they become even more valuable to the company than when they arrived. A company’s stakeholders can increase their value to the company if the company invests time and effort to grow these assets, provides a clear vision and strategy and creates a trusted, supportive infrastructure. A trusted, supportive infrastructure consists of both technical and social technology. The technical includes the range from networking, computing hardware and software to mobile terminals (phones, data terminals, laptops, etc.) to various protocols, transaction standards and security. The social technology, the focus of this paper, includes methodologies for learning such as the Diverse ASSET Management model. Organizations often fail to invest in social technology because they do not have an easily accessible and workable methodology to help them do so.

Next, we explore six guiding principles, or keystones, of the Diverse ASSET Management model. A keystone is the central supporting element of a whole. In architecture, a keystone is the wedge-shaped stone of an arch that locks its parts together. In ecology, it is a building block in an ecosystem that if removed, forces the ecosystem to collapse. Similarly, the six principles of the Diverse ASSET Management model are the keystones that lock the parts of the organizational whole together, and without which the organizational system will

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collapse. Here we name the six keystones, or guiding principles, of the model and then we unpack them further: Diversity Adaptability Simplicity Social capital Ethics Trust

Unpacking Diversity Diversity is difference. As we mentioned in our assumptions above, the individual person is perhaps the most valuable asset of any business, and possibly the only one that can always appreciate over time. Each person brings a different package of parts, experiences and contexts to an organization. These include his or her individual spirit and identity, values and beliefs, cultures, norms and mores, gender, abilities, thoughts, emotions, behaviors and actions. Appreciating that no two people think or act exactly alike, and that no two people see an event in exactly same way, is appreciating diversity. Appreciating diversity is not merely a politically correct platitude. It is a strategy that is critical to business success. Diversity is a principle for competing and innovating, growing and adjusting. Diversity can contribute to improved organizational performance because it attracts and retains the best available talent, brings higher creativity, innovation, and problem solving, and leads to more organizational flexibility (Cox & Blake, 1991). Workforces worldwide are becoming more diverse therefore the cost of not using diversity strategically is increasing. Organizations that do not use diversity in a strategic manner, that is, to attract employees and customers that are representative of the increasingly diverse population, will be at a competitive disadvantage compared to those that do (Cox, 1993).

Diversity is the way that companies can ensure they stay relevant to the ever changing, complex market place with its new demographics, trends, patterns and lifestyles. Organizations with work teams that manage diversity well can make diversity an asset to performance. They do this by ensuring that all members have a chance to contribute, and that communications problems, group cohesion and interpersonal conflict issues are dealt with. (Adler, 1986). Inside the organization, as long as team members have similar ability levels, diverse

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teams tend to be more creative than homogeneous teams (Triandis et al., 1965). People with bilingual ability bring higher levels of divergent thinking and cognitive flexibility than people who speak just one language (Lambert, 1977). The diversity-embracing company will retain those employees who are still striving to contribute in relevant ways while being able to attract and hire the new people needed to pioneer new horizons. The company that embraces diversity will remain in relationship with those who are customers, while attracting those who are not but could be. Perhaps most importantly, organizations that overcome resistance to change in the difficult area of accepting diversity might well be prepared to deal successfully with resistance to other organizational change (Cox, 1993) – often a significant source of risk. So, companies that manage, embrace, and reward diversity will reduce their risk and increase their connectivity ratio and enhance their ability to be successful. Houston-based Shell Oil Company recognized a decade ago that women and people of color were the company’s primary consumers, says Catherine Lamboley, the company’s general counsel. “It only makes sense,” she says “that Shell spends its money with outside law firms that value diversity.” When she addresses those firms Lamboley gives them this short speech: “The lawyers that represent Shell are Shell’s face in the court room, at a mediation, at an arbitration. I expect our law firms to reflect Shell’s values and what Shell stands for.” (Bean, 2003) Unpacking Adaptability Adaptability is the ability to adjust to and manage change – which, ironically, may be the only constant in today’s business environment. Adaptability is the ability to focus strategically on the external environment, and devise new and flexible solutions to meet customers’ and other stakeholders’ needs. A culture that is adaptive promotes norms and beliefs that help people in the organization detect, interpret and translate new signals from the environment into new responses. Adaptive companies react quickly to bid on new projects, quickly restructure, or design and adopt new processes for a new task.

Change brings disruption, and this disruption shifts brain patterns, which if identified, bring opportunities for business success. Honda, Toyota and Nissan saw a new pattern of demand for small cars way ahead of the pack. Nokia and Ericsson saw a different pattern of demand for mobile phones, and Turner Communications saw yet another pattern of demand for 24/7 news coverage. Adaptability requires that we remember that any idea, method or process currently in use is always in some way, shape or form, being tested, improved upon and/or rendered obsolete by someone else somewhere. Adaptability requires the open-mindedness and rigor of the scientist. It requires that we question our assumptions by looking for the places where change is occurring

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so our patterns and processes can adapt to it. Studies have shown that in environments that are quickly changing, the more adaptive, flexible and responsive an organization is, the greater are its chances for organizational growth. Adaptive organizations also tend to demonstrate high quality standards employee satisfaction, and overall performance (Denison & Mishra, 1995). Therefore, companies that can show adaptability will reduce their risk and increase their possibilities for success. Adaptive companies are the organizations that encourage imagination, and they believe, in Albert Einstein’s words, that “imagination is more important than knowledge.”

Often companies are least adaptive when they should be most so. For example, customers’ needs may change precisely because of new products or services the company provided to the customer. These new products, called “solutions,” often create new and complex situations in the customer’s business. New challenges emerge. But often the company that sold the “solution” is too pre-occupied, inattentive, arrogant or simply unaware to comprehend their customer’s changed situations. They miss the opportunity to adapt and may lose even long term customers as a result.

A vivid current example of the need for companies to adapt to change and create a new business model is in the music recording industry. Napster, a company that may not survive to enjoy the fruits of its imagination, created a technology that allowed people to share music files over the Internet for free. This fundamental shift in market behavior screamed at the industry to sit up, pay attention, and adapt. Yet, in an industry dominated by music moguls who have produced platinum albums with stars from their own stables for decades, the only company that has so far flexed its adaptive muscles is a most unlikely player. The adaptive genius is Steve Jobs of Apple Computer who has introduced a pay per track download model versus the pay for the entire album model to which many maladaptive industry leaders are clinging. We’re moving out of an age of control and entering an age of adaptability …the attitude we are shifting into is that the world is chaotic. You’re never going to understand it. You’re never going to control it. Instead you have to be responsive. You have to make sure that when an opportunity arises you can take advantage of it. That’s much more the attitude behind network economies and learning companies, the kind of agile organizational structures that are emerging. What’s important about them is not that they are in control, but that they’re able to adapt quickly, to redefine themselves. (Kelly et al., 2002) Unpacking Simplicity

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Simplicity is not easy. To make things simple requires deep thinking, planning, and above all, empathy. Only if we truly understand what another’s interests are, what their situation is or is going to be can we make things as simple as they need to be. Simplicity is not the same as simplistic, which is often too easy and results in misunderstandings, complications and elitism. Simplicity is the how of things, not the why. Simplicity, much like diversity, is a basic principle of nature. Whether it is the double helix of DNA or the PH balance of the soil, nature abounds in simplicity. Telling the truth to the best of one’s ability is simple because, in the words of Mark Twain, “we do not have to remember too much.” Simplicity is telling others how we feel and what we think in order to get our needs met. It is listening to others and asking them questions in order to understand what their needs are. Simplicity is not being judgmental while hearing another’s point of view. Simplicity is increasing the connectivity between customers and strategists, designers, planners and sales staff. Any company that does things with true simplicity will lead in innovation and customer satisfaction, reduce its risk and increase its chances of sustainable success. • American Airlines showed how to retain frequent travelers by simply providing more legroom in coach. It was a simple solution, albeit costly to implement in terms of space, but it appears to have paid off in customer loyalty. • Intel showed how simple it was to change the rules of competition. In the PC industry dominated at the time by the likes of IBM, Compaq, HP and certain Japanese players, Intel simply shifted the competition from the box or chassis level to the microprocessor level by launching the “Intel Inside” marketing campaign. This move rendered all the IBM, HP, Compaq, Fujitsu, Sony and other boxes and chasses commodities simple and sure. • A new and simple paradigm of social networking has emerged in a field called people-topeople connectivity. Companies and services like Spoke, Linked-In, and Whogle in data and Skype in voice (with two million downloads by November 2003) introduced peer-to-peer connectivity that leverages the Internet and permits people to transcend all sorts of boundaries; cultural, national and organizational, and connect with one another. These services provide a simple method for creating one’s own profile and then sharing it with others for the purpose of matching professional or social interests, and are the latest quintessence of simplicity at work.

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Unpacking Social Capital Social capital is “the ability of people to work together for common purposes in groups and organizations,” according to Coleman (1990). It is the notion that a person’s ability to purposefully associate with others, in the group or organization’s interests, has measurable capital value. A person’s ability to purposefully associate with others and, in the process, enroll them and others in purposeful activity is even more valuable.

Social capital is the process of people connecting purposefully with other people. It occurs quite naturally in domains where the focus of motivation or the field of knowledge is similar. These connections that create a sense of community are called Communities of Practice, a term created by Etienne Wenger (1998) when he studied a Community of Practice of insurance claims adjusters. Lesser & Storck (2001) describe Communities of Practice as the engines for the development of social capital. Many researchers have argued that social capital, often measured by observing levels of trust, influences several significant political and economic and phenomena (Glaeser et al, 1999) and can strongly influence a society’s economic success (Fukuyama, 1995). Similarly, the social capital that resides within Communities of Practice in organizations drives behavioral change, which in turn can have a positive effect on an organization’s performance. There are four areas of performance that, across many industries, are improved by the social capital that develops within these communities: • The learning curve of new employees. Social capital reduces the learning curve of new employees. Incumbent employee groups can be valuable in helping newcomers adjust to the systems and practices, both general and specific, of an organization. New employees can quickly learn where and how to connect with a number of people who have the same or similar responsibilities. Mentoring relationships often form whereby seasoned employees clue-in newcomers to the implicit and explicit nuances of the organization. In an organization where these relationships are intentional and enthusiastically embraced, the benefits can often be amazing. • Responding more quickly to customer needs. Social capital helps a firm respond more quickly to customer needs. The dynamics of social capital can help employees identify the people with the expertise necessary to answer a client’s needs. Lesser & Storck (2001) examined a specialty chemical company in which technical support staff identified a community of researchers who were able to

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identify staff in other locations who faced problems similar to those being faced in another location, thereby helping the latter group solve their customers’ problems quickly and resolutely. • “Rework” is reduced. Social capital reduces “rework” and prevents “reinventing the wheel.” One of social capital’s most important contributions is the ability of its members to easily reuse existing knowledge. Social capital preserves organizational memory. It reduces a person’s tendency to start from scratch when tackling a project that may be new to him or her, since the person can easily use what someone else has learned and apply it somewhere else. Sharing knowledge makes work in general and the delivery of products and services more effective and efficient. • Innovation through new product and service ideas. Social capital breeds innovation through new product and service ideas. Communities of Practice become breeding grounds where people meet, share experiences, and come up with ideas for new products or new solutions to existing problems. Social capital provides a safe environment where people of similar contexts can get together comfortably, share problems and challenges, and not feel that they will be penalized because they don’t have all the answers. Groups fueled by social capital are sounding boards for what may seem to be crazy ideas, but when discussed in the group may result in innovative, marketable opportunities (Lesser & Storck, 2001).

Social capital accrues to individuals working together such that the collective output is greater than the sum of the parts. It is the ability of people to focus on mutual interests, to examine situations from a variety of viewpoints, to consider the ethical dilemmas that confront them, and to contribute to the well being of the parties involved. Perhaps above all, social capital is grounded in the assumption that people can trust each other and therefore work constructively to achieve the goals of their association. Since social capital is such a critical intangible asset, social and technical technologies that support the development of social capital will be increasingly important to firms interested in sustainable business success. There may come a day when organizations will be evaluated, and stock prices will rise and fall, based on the metric of social capital.

Unpacking Ethics The application of ethics to corporate activity is a most complex and often misunderstood aspect of business. Ethics is often seen as something outside of normal business practice, and practicing business ethics is

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perceived as a luxury, given other compelling, more tangible risks that affect a company’s bottom line. It is often assumed that while businesses will not deliberately cause harm or act carelessly, neither will they be expected to pursue greater social good (Kelly et al., 2002). However, we argue that good ethical practice is essential to achieving lasting people-to-people connectivity, good risk management and sustainable organizational performance. Using ethics as a strategy for risk management allows a company to identify potential problems, prevent fraud, protect its reputation, and lessen the possibility of legal penalties (Francis & Armstrong, 2003). Unethical behavior poses significant risks to organizations, and a top-level commitment to ethics tells stakeholders that the company will not compromise its values, policies, codes of conduct and procedures to manage those risks.

How does a company commit to high ethical behavior? First of all, it is important to remember that ethical issues are matters of individual choices and the consequences of those choices. While we may wish to believe that companies establish values and a climate that promotes ethical, or unethical, behavior, it is the people in organizations who ultimately decide which decision is made: Should I pay the bribe or is that a “facilitating payment?” Should our group remove that costly safety feature that is not required by law? Second, ethical dilemmas are what trigger the matters of business ethics. An issue that presents a clear choice of right and wrong is not an ethical dilemma. Right versus wrong decisions are relatively easy: it is not difficult for a manager to decide that it is wrong for his subsidiary to intentionally dump toxic waste in a Third World country where toxic waste laws are lenient. An ethical dilemma is more difficult and complex. It presents two or more courses of action, each of which seem to be simultaneously harmful and harmless: Should we pay a fee to a well-connected representative in a foreign country to help us get a contract? If we don’t pay, we will not be allowed to even bid, and the subsidiary will fail. Third, ethical conflicts are resolved only through a process of individual ethical reasoning. We are raised in our families, schools and religious institutions with beliefs and values, and we draw upon those beliefs to resolve ethical issues in our personal and professional lives. However, more often than not we have not exercised those beliefs and values sufficiently for them to be useful in business situations that present ethical dilemmas. Mostly in those situations we go by “the seats of our pants” and make decisions based on what seems intuitively a fit, when in fact it is often faulty logic and insufficient reasoning. In sum, organizations do not, and cannot, dictate ethics; rather, individual people contribute their ethics to organizations, which in turn comprises the organization’s values, beliefs and behavior.

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Therefore, it is critical that individual employees understand what it means to conduct business ethically. People need executive and management role models, tools, thought-models, decision trees, examples, symbols, metaphors, mentoring, and experience to reinforce the idea that the business, and the people-to-people relationships upon which the business is based, is grounded upon principles of high individual ethical standards. Increasing numbers of business leaders recognize that they, individually, must lead with strong ethical behavior both within and outside of their organizations, for reasons of good business, as well as for reasons of morally defensible conduct. Business leaders and managers must be willing and empowered to reward ethical behavior, to recognize and value those who are willing to challenge assumptions, question conduct and confront what might appear to be unethical practices. Several years ago the Global Business Network took a group of European managers from traditional businesses to visit a Saturn auto dealership [in the U.S.] to see some innovative approaches in a very traditional industry. In the process they asked the franchise owner how his work at Saturn differed from his previous experience working in automobile retail sales. “That’s easy to answer,” he replied. “This move has changed my life. It has brought the person I am at work into harmony with the person I am in the rest of my life. Previously, I was one person at home – father, husband, church volunteer, coach – and a quite different person in my world of work. I didn’t even know how much I had to change my personality twice a day – in the car on my way to work, and again on my way home – until I made this move. Now I’m the same person everywhere and I’ve never been happier.” (Kelly et al., 2002) Customers today have many ways of communicating their approval or disapproval of a company’s behavior. They can quietly boycott products or openly switch to a competitor’s if they believe a company has not acted appropriately. They can find supporting evidence, and contribute their own, on Internet Weblogs that publish stories of questionable corporate behavior. Just as it is unwise for companies to ignore the power of customers, it is equally naïve for companies to rely on simple public relations “spin” to cover their ethical lapses. Company leaders must make a true commitment to ethical reasoning and behavior first at the top, and eventually at all levels of the organization.

Ethical behavior includes ethical speech, or using words that heal and avoiding those that do not. Ethical speech goes beyond telling the truth. It is knowing that seemingly inconsequential statements can have significant negative effects on individual and business reputations. For example, harm may occur when someone repeats a statement about a person or a company without verifying how true it is. Ethical speech requires us to be fastidious in choosing what we say about others. The rule of thumb is that if it may cause

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harm, it is not ethical speech. On the other hand, if an employee or a customer perceives some wrongdoing or questionable ethics in the organization, that person must feel that she can safely call it to management’s attention, that if reasonable it will be investigated, and that there will be no repercussions against her if it is untrue. In other words, a company with a commitment to ethical behavior and speech will establish a clear process that encourages the behavior, and protects and values those who use it. In a small Eastern European town, a man went through the community slandering the rabbi. One day, feeling remorseful, he begged the rabbi for forgiveness and offered to undergo any penance to make amends. The rabbi told him to take a feather pillow from his home, cut it open, scatter the feathers to the wind, and then return to see him. The man did as he was told, then came to the rabbi and asked, “Am I now forgiven?” “Almost,,” came the response. “You just have to do one more thing. Go and gather all the feathers.” “But that’s impossible,” the man protested. “The wind has already scattered them.” “Precisely,” the rabbi answered. “And although you truly wish to correct the evil you have done, it is as impossible to repair the damage done by your words as it is to recover the feathers.”(Telushkin, 1998) The collapse of several major business organizations such as Enron, WorldCom and Arthur Andersen, and the ethical dilemmas that have damaged others such as Union Carbide, Parmalat, Shell Oil and Exxon, suggest that leaders of many companies have not yet committed to strong ethical behavior or to the principles, processes and procedures required to achieve it. To be credible about ethics, corporate leaders must be intentional about ethical behavior. They must inculcate their organizational culture, not with platitudes, placards and posters that advocate ethical codes but with authentic examples of how ethical dilemmas are taken on, grappled with and resolved. They must give people proper training and provide powerful incentives that will direct them toward ethical decision-making. Leadership’s commitment to ethics adds significant value to the company’s only truly appreciating asset, its employees.

Unpacking Trust Trust is the assured reliance on the character, strength, or truth of someone or something. In business, trust is the ability to rely on the strength and truth of a relationship between two or more parties that elect to engage in transactions. This trusting relationship begets a system -- organizational, electronic or mechanical -- that creates dependence, credibility, reliability, and accountability. Over time, the trusting relationship between customers and companies may shift due to industry and market forces, making one more dependent on or more powerful than the other. For example, the Internet’s impact on marketing, distribution, sales, and aftersales service in some industries puts the customer in the better bargaining position. Customers with any doubt about a company’s trustworthiness or integrity may now take their business elsewhere in a flash.

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So, business success is founded on trust. Historically, businesspeople have found that being trustworthy is more lucrative than being self-serving. This is not because business people are inherently good. Rather, it is because the benefits of trust – of being trusting and trustworthy – in everyday transactions are greater than the benefits of distrust. If suppliers and customers assumed that every deal they made would result in breach of contract, faulty goods, or lack of compliance, very little business would get done. James Surowiecki (2002) notes that for a capitalist economy to prosper, people must be confident that the promises and commitments companies make about their products and services will be met. As more companies execute customer-driven business strategies and form true “partnerships” with individual customers, acting in the customer’s interest becomes mission critical. No customer will want to maintain a relationship with a firm that can't be trusted to provide products and services of reasonable quality; trusted to protect the customer's privacy; and trusted not to take undue advantage of the customer through deception or connivance.

Some companies have succeeded by becoming "Trusted Agents" for their customers, making highly relevant offerings that result in customer retention, increased share of customer, and financial success. Trusted Agent companies even make recommendations when the customer's interest and the company's interest are in conflict, at least in the short term. To think in these terms would require a major shift in culture at most firms, but it is by far the most powerful competitive position to occupy. (Peppers & Rogers, 2002) Prior to the development of modern capitalism as we know it, trust in business was dependent on personal relationships – “I trust him because I know him.” But by the 19th century commerce had developed codes, contracts and laws to protect buyers and sellers against unscrupulous parties. British contract law emphasized individual responsibility for agreements, and as a result, institutionalized trust, honesty, and integrity in commercial transactions. Business was no longer just about personal connections: it was about the virtue of mutual exchange. Trust became part of everyday business. Trust in business helps people believe that most transactions will go off without a hitch, not because of the law or possible sanctions, but because that way everyone can prosper in the long run. In the nineteenth century, businesspeople began to see individual transactions as links in a larger chain of profitable business ventures, instead of just one-time opportunities to be exploited to the utmost (Surowiecki, 2002). For a business to be sustainable, return business, word-of-mouth recommendations and ongoing relationships with suppliers and partners are very important. Thus, the value of fair dealing rises and trustworthy business relationships become

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necessary. When it works, the system is a virtuous, self-perpetuating cycle, in which everyday levels of trustworthiness breed everyday levels of trust. So, companies that build trust will achieve connectivity, mitigate risk and be sustainable. Companies will build trustworthy, long-term relationships with customers by delivering on their promises and commitments in a cost effective, productive way. They will build trustworthy relationships with employees so employees will be willing to work more effectively, make appropriate decisions, and support the systems and processes of the organization. Companies will build trustworthy relationships with suppliers so that the supplier knows that the time frame and specifications of an order are accurate, and so that the company knows the supplier will deliver on time and to specifications. Companies will build trustworthy relationships with other partners so that, independent of the symmetry of the relationship – size, equity contribution, etc. –all agreements between them will be optimized in all parties’ best interests and those of their mutual customers. Building trust quickly is imperative, especially in industries where time-to-market is so critical (high tech, telecommunications, etc.). Techniques such as “fast trust,” grounded in basic human values, are emerging to enable asymmetric technology partnerships, many of which involve virtual teams that are temporary, culturally diverse, geographically dispersed, electronically communicating work groups (Blomqvist et al., 2002). Companies will build trust with shareholders, potential investors, government regulators and analysts so they know that the company is working according to publicly honored ethics and values as they promote the perceived value of the company. Trust requires truth, and truth in business is not always easy. Tom Morris (1997) notes “…people nowadays must view the truth as precious, [as] they use it so sparingly.” He asks if, in organizations, we “provide the people who work around us with all the information they might benefit from having? Or do we withhold information until we perceive an absolute need for its dissemination?” Finally, to seal the argument that companies that build trust will achieve connectivity, mitigate their risk and increase their performance, he adds, “There is probably no greater source of wasted time and energy in modern corporate life than the distraction that rises when truth [and hence trust] is not readily available in the workplace.” (Morris, 1997) THE DIVERSE ASSET MANAGEMENT MODEL AT WORK We have just explored the Diverse ASSET Management model by unpacking its contents. Diverse ASSET Management is a method for achieving people-to-people connectivity, mitigating risk and improving performance in global business. It is a heuristic-model, much like an exercise machine that must be learned, explored, used regularly and with discipline to reap its benefits over time. Diverse ASSET Management requires a commitment at all levels of the organization to first learn how and then build and sustain connected

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relationships. It can initiate at any level, but it must include the top management level. The model assumes that people are born with an innate ability to trust. It recognizes, however, that socialization has often allowed fear to emerge, endure, and predominate as the context for business relationships. The Diverse ASSET Management method recognizes that while we may never be able to develop the fully trusting relationships we experienced as newborns, we can develop relationships that are sufficiently trusting and ethical to render our business activities more connected and sustainable, and less susceptible to territorialism, greed, excess, stress, and waste.

We propose that the best way for a business leader to achieve connectivity, mitigate risk and grow in a sustainable way is to co-develop with other organizational members a vision of the company as a global network of people exercising, learning, practicing and producing Diverse ASSET Management. Using this method they can, as individuals and together as a group, adapt to constant change, connect their structures and processes, create ethical and trustworthy relationships, and build social capital while contributing to the company’s sustainable performance.

PUTTING THE MODEL TO WORK The following illustration of how Diverse ASSET Management works is based on a true experience.

Company A is a global high tech company that is entering a new domain. The domain formerly consisted of point products, each of which provided a few benefits to the customer. However, with new technological advances it became clear that a new meta-system that converges all the point products into features of the larger system was feasible and it is what customers want and will pay for.

Company A recognizes that it knows how to design the product, knows what hardware and operating system to use and even what applications are necessary to accomplish the goal. It also knows that time-to-market is crucial since its chief competitors appear to be moving in a similar direction. The team responsible for developing the product, positioning it, pricing it and making sure that it meets and exceeds customer expectations is confident that an application developed by Company B can help them significantly to accomplish their goal.

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Company A is recognized worldwide as a “player.” Its brand is a household word and its logo is sported on clothing, luggage, TV and computer screens from Beijing to Brussels to Boston, and all points in between. Its annual revenues are in the tens of billions of dollars or euros and its profits are the talk of the industry. It has over 50,000 employees at more than 75 sites around the globe. Company B is a Silicon Valley start-up whose founders have used their own, friends and family’s capital to get it off the ground. Their technology is superb and they have also managed to get some angel investors to commit to a round of financing that could keep them going for 6 months at current levels. The leadership and the investors all salivate at the possibility of being able to license their technology to company A.

The Business Development team at Company A contacted the CEO at Company B and asked for a meeting to “explore possibilities.” Company B accepted the invitation and a date was set. The team from Company A wanted to “roll up their sleeves fast” and get a deal in place so co-development could start immediately. They were confident that Company B would be thrilled at the opportunity to work with such a prestigious ally.

The CEO and her team at Company B were excited at the possibility that their technology would be integrated into Company A’s product and rolled out to hundreds of sales people and resellers around the world. However, these were some of the thoughts and issues they identified as they anticipated what hitherto had been a dream:

“If we only had the patent already, that would be brilliant. The process has been so expensive though and so drawn out.” “This is what we wanted to do and our solution could have become a standard but we didn’t have the clout. Now we can do it. But will they want our brand to get any visibility? They are this giant company who everyone knows, why would they even think about helping us?” “How do we know they are not talking to 10 other companies like us and they are just playing us off against each other? How do we know they are not just fishing?” “What if they find out we are living from quarter to quarter as we try to sell our first few products? Will they just wait until we run out of money and then scoop us up?” “The market place seems to indicate that our product is worth a lot. Do they understand that; and if they do will they let us know or will they play hardball?”

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“What if they want an exclusive arrangement, can we afford to tie our hands to one company especially if they are talking to potential competitors. Could we agree and tie them to the exclusivity too or will they laugh at our temerity we are so small and they are so powerful?” “Fact of the matter is that our application will only really fulfill its true value if more companies license it, an exclusive arrangement would not be good.”

The two companies’ teams met and started to talk. Imagine the surprise and relief experienced by the team from Company B when Company A led off the discussions by not only naming asymmetry as an issue but asking about what anxieties, if any, or potential problems Company B was anticipating. Imagine the efficiency of the process when Company A demonstrated its understanding of asymmetry as an inevitable condition by volunteering information, outlining possible protective scenarios and inviting Company B to set the agenda, to determine the timeline and to act as an equal partner notwithstanding the incredible differences.

As it turned out, the two teams talked at length about their values and beliefs and what they valued. They talked about their vision for the product and soon they both realized that they could truly benefit from working together. They shared and looked for their true interests and abandoned positional negotiating in the process. They developed a common vocabulary and built trust quickly. Sooner than either imagined, they had achieved what both of them wanted with dignity and respect and with lots of learning and lots of laughter along the way. The companies began shipping the combined product as this is written and all indications are that it will be a huge success.

These two companies showed that connecting with others is more than merely exchanging business cards. It is the open acknowledgment of business as people-to-people relationships, and the asymmetrical nature of those relationships. This creates a basis for empathy, understanding and compassion that can strengthen any and all efforts to work together, to communicate effectively and to manage employees, partners or other stakeholders. REPACKING THE MODEL Now that we have unpacked the luggage that we have called Diverse ASSET Management, and now that its logic has been explained and understood, it should be easy to repack it and prepare it for future use. We explained in this paper that business organizations are fundamentally about people-to-people relationships. We

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suggest that the Diverse ASSET Management model will help those relationships become more adaptable and simple, generative of social capital, ethical, trustworthy, trusted and trusting. During the next several decades, the business climate will undergo significant changes as more diverse types of people -- women, people of color, gays, lesbians and re-energized men -- play new roles in a world of shifting competition and exciting innovation. We offered a powerful method, a heuristic-model called Diverse ASSET Management, that business leaders, managers and practitioners can use to exercise their capabilities to purposefully connect their companies’ most diverse and valuable asset; its people. Diverse ASSET Management is a method that, if diligently followed, can lead to an end result of increased people-to-people connectivity, quality risk management and high organizational performance.

Finally, we insist that Diverse ASSET Management must be rigorously exercised. It needs to be pulled out, just as one would retrieve the golf putter, the yoga mat, the Nautilus machine, or the tennis racket, and worked regularly and with discipline to achieve the outcomes. With practice and diligent exercise, the guiding principles of Adaptability, Simplicity, Social Capital, Ethics, and Trust can become the framework that underpins a company’s strategy. The relentless social, economic and political risks faced by business suggest that new methods of doing business are always needed. The actions of one single company can be transformational, since business environments are so dynamic and uncertain. By using Diverse ASSET Management companies can truly connect their people, manage risk and reach high performance, and thus radical, transformational change in business can begin to occur, one business at a time.

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