TurnAroundDuo
Bahman Yazdanfar John Berling Hardy

The Circle Square Pattern:
The Hidden Key to Spontaneous Organizational Change
By
John Berling Hardy, C.A.


1. The Ideal Organization

By using the word "ideal," it may seem as though I am envisioning an organization that does not exist, or for which there is no template, thus contradicting my assertion that, like Machiavelli, we need to understand the world not as we wish it to be but as it exists today. In approaching this problem, we are challenged to simultaneously define our goal - the ideal organization - and identify an existing example.

Organizations are made up of individuals. Individuals, by their nature, possess a dual nature: they are dedicated to the success of the organization and they are dedicated to their own personal success. To varying degrees, these drives may be in conflict or they may be in harmony, depending upon the balance of each. For example, in a colony of honeybees, there is an astounding lack of "self-centeredness." Bees completely suppress any trace of individuality for the common good. They work together without internal conflict. It is to this model that military organizations aspire - to be a collection of individual actors who are all "on the same page" and who, without intellectualizing or seeking personal gain, act together as one organic whole.

At the opposite spectrum, one may point to Wall Street investors, who, while they act as a group in a common arena, are Players driven purely by self-interest and, if it were not for the fear of prosecution, would gleefully cheat each other. They know no common goal, only the individual goal of self-enrichment at any cost.


The Antwerp Diamond Market

We seek a model of an organization that has achieved an organic balance between the drive for individual self-enrichment (an excess of which leads to decadence and criminality) and the beehive model of drone behavior (which leads to rigidity and stagnation). In fact, this balanced model has been in continuous existence for some five hundred years in Flanders, in the old diamond market in Antwerp.

To the uninformed bystander the market appears to be nothing more than another immaculately restored square in the old town, not noticeably different from any of those around it. Meanwhile, walking to and fro across the square in plain view to all, messengers in the traditional orthodox long black robes of the Orthodox Jews convey millions of dollars of uncut diamonds in small pouches tucked in their pockets. Only the speed of their gait and the severity of their demeanor reveal any hint of their purpose. The physical security of the market is provided by undercover police, who are disguised as shopkeepers, shoppers, a pair of lovers sitting at a café, etc. When the messengers meet, pouches are exchanged, with each then proceeding on their way. No paper changes hands; no inspection of the merchandise takes place - it is all done on trust.

The invisibility of the security measures makes it very difficult for any would-be thieves to assess how well the market is secured. The fact that all the diamond merchants belong to families who have been in this business for centuries and whose entire livelihood depends on their maintaining the absolute trust of their peers ensures that none are tempted by the short-term gain that might be had by overstating the contents of their sacks.

The Antwerp diamond market is the model of perfect control without restrictions. It is formless form, precisely what controls should be. The flow of transactions is completely fluid, without compromising security. During the centuries that this market has been in this square, great technological advances have been made in our society. We passed from the agricultural through the industrial, into the electronic and information ages. Nonetheless, this low-tech marketplace remains unsurpassed in the world in terms of its efficiency, security and simplicity. This is the perfect model for any company to follow: the needs of the individual are met, while the organization is a perfect example of form following function. There are no wasted assets, no needless expenses, only the leanest possible structure that permits the organization's mission to be met.

Within their universe, the diamond merchants of Antwerp are Masters. There are no Players and there are no Drones. As individuals, they wield wealth and power judiciously. They act both in self-interest and for the common good. They do not believe in a zero-sum game; that is, they do not believe that for me to win, you have to lose. They trust each other. Mistakes and the occasion lapse into criminal behavior are dealt with discreetly. And perhaps most importantly, Players - should one or more infiltrate the community - are banished.


The Prince of Volterra

Any reasonable person, in trying to project the model of the Antwerp Diamond Exchange onto a contemporary corporation, would insist that the Antwerp model is too horizontal, and that to avoid chaos some degree of vertical beehive-like control is necessary.

Given that some vertical control is necessary, it is important to create or define a realistic template of the human overseer. Let us consider the Prince of Volterra.

Perched in the midst of the undulating Tuscan landscape, lies the walled town of Volterra. Today it is a priceless museum of Renaissance and Etruscan culture. However, its immense fortifications bear witness to the fact that in days of yore it was a powerful city-state. Life in the town has a beautiful, even tempo. People are dressed elegantly, but not ostentatiously. All have their own style, yet it all blends together in a very pleasing tableau. The city and its people emanate balance and harmony. People greet one another in the street.

In the middle of the town is an obscure little gateway that opens to an ancient stone path leading up a gradual slope and then turning sharply at the top. Once at the top, you discover yourself to be in a beautiful, expansive park. The topography of the park is gentle and undulating with a slight swell in the center. As you look outwards from that small hillock you can see the hills of Tuscany stretching toward the horizon in all directions. The park cannot be seen from the town, nor does one see the town from the park.

I always imagined the Prince of Volterra living in this park. He would spend his time in quiet reverie; every couple of days, he would disguise himself as a typical town dweller, descend the steps of the ancient path towards the gateway, and wait for an opportune moment, when no one was watching, to enter the town. There would typically be no real purpose to his visit, other than to pleasurably pass the time, in the process observing the general tempo of life. If he should spot something amiss - witness someone mistreating another, or sense some tension beneath the surface as he spoke with one of the townspeople - he would make careful note of it in his mind. Later, upon his return, he would have his agents discover the cause of the discord. Then, in the deftest manner, the situation would be restored to balance. The townspeople would be none the wiser for what took place; it would be as if the situation naturally resolved itself.

The Prince of Volterra is an authentic leader. The job of the authentic leader of a company is the most difficult and least rewarded there is. He or she operates quietly, with little fanfare. It is "egoless" leadership. The Prince of Volterra does not care from where comes a good idea; he does not care about the source of a mistake. All he cares about is maintaining a state of positive harmony in his town. Creativity and innovation are encouraged; generosity is rewarded; mistakes are gently corrected. Players are not tolerated.

The authentic or true leader carries responsibility for the welfare of all those in their charge. This implies caring about them as living, breathing human beings whose aspirations, concerns, and passions, become his or her own. For as long as there is a single individual within the company whose dignity is not respected, who cannot adequately provide for their family, the leader has not done their job.

By contrast the performance of a false leader is quite the opposite - one has little to do other than manage perceptions and devise ever-new accounting policies to increase one's bonuses. The false leader is concerned with getting credit; with appearing to be in charge; with asserting managerial authority; with eliminating rivals; and with flattering those above him or her in the organization.

Regrettably, organizations and corporations around the world are full of false leaders who are concerned only with avoiding mistakes and receiving credit for any positive development. They are Players, myopic individuals who see only as far as the next quarter or bonus period. They are concerned only with short-term gains and they exhibit a peculiar set of contradictory traits: they are fearful of setting long-term goals and sticking to them; they are rigid in their beliefs; and yet they are eager to embrace dubious schemes that promise short-term profits.

Regrettably, the recent history of some segments of U.S. corporate society reveals the corrosive influence of Players. This is perhaps no more starkly illustrated than the contrast, from 1970 to 2010, of the performance of General Motors versus Toyota. For forty years the Mesozoic GM was in the grip of Players: executives who were blinded by past success; rigid in their thinking; incapable of long-term planning; concerned only with their personal enrichment; and arrogant in their relationships with customers, workers, and suppliers. At GM, if you were not a Player, you were a Drone. As a Drone, your job was to shut up, follow orders, put in your hours, and cash your hefty union paycheck. Thinking was for the Players.

During this same period, Toyota grew from a humble regional manufacturer to the world's number one automaker. They were Masters. They created long-term strategies that were more important than quarterly profits; they listened to customers; they did not engage in superficial marketing schemes; they fine-tuned their products over a period of years. They did not treat their line workers as Drones; managers solicited input and kept communication open.

The low point for GM came in November 2008, when CEO Rick Wagoner flew his $36 million company jet to a hearing in Washington to make his case that GM was running out of cash and needed $12 billion in taxpayer money to avoid bankruptcy. Like lumbering, overfed dinosaurs, all three Detroit CEOs - Wagoner of GM, Alan Mulally of Ford, and Robert Nardelli of Chrysler - arrived in lavish corporate jets to plead before the Senate Banking Committee. The cost of Wagoner's flight was estimated to be $20,000. This is when the Players became jokes; they were kings who wore no clothes.

But there is always hope. Players can be removed, and people can change - sometimes dramatically. Today, General Motors, like Lazarus rising from the grave, is a company transformed. Their products are innovative and quality is improving. In February 2011 GM reported net income of $4.7 billion, or $2.89 per share, for 2010, its first annual profit since 2004. Revenue for the year totaled $135.6 billion. Profits were fueled by sales in the U.S. and China, the world's largest market for car and trucks. With a good performance in 2011, the company could even reclaim the title of world's largest automaker from Toyota, and the U.S. taxpayers could recover more of the $49.5 billion they gave the company in 2009 to save it from collapse.

Is GM now in the hands of Masters? Only time will tell.

Copyright©2011 John Berling Hardy. All rights reserved
No part of this book may be reproduced in any form or by any electronic or mechanical means including information storage and retrieval systems, without permission in writing from the author.
The only exception is by a reviewer, who may quote short excerpts in a published review. The information presented herein represents the views of the author as of the date of publication.
This book is presented for informational purposes only. Due to the rate at which conditions change, the author reserves the right to alter and update his opinions at any time.
While every attempt has been made to verify the information in this book, the author does not assume any responsibility for errors, inaccuracies, or omissions.

Meet your Turnaround Duo!

BerlingHardy@gmail.com John Berling Hardy is a seasoned professional problem solver and crisis manager with ability to operate in volatile environments ....More Bahman@Canaglobe.ca Bahman Yazdanfar's life can truly be called a journey, whether one uses that expression to mean physical travel, emotional challenges, ....More

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