Harvard Advanced Management Harvard Advanced Management ProgramProgram

This a review of my key learning experiences from the Harvard University Advanced Management Program, which I attended in September-October 2009.

Awareness TestAwareness Test

nn http://www.youtube.com/watch?v=Ahg6qcgoay4http://www.youtube.com/watch?v=Ahg6qcgoay4

Why the video?Why the video?

nn The video is a metaphor for the lessons I The video is a metaphor for the lessons I learned at Harvard. Because of the way your learned at Harvard. Because of the way your mind works, sometimes you cannot see the most mind works, sometimes you cannot see the most obvious issues. In the eight weeks that I was obvious issues. In the eight weeks that I was away I had the opportunity to question the ways away I had the opportunity to question the ways that I have approached issues in the past, and that I have approached issues in the past, and reached some new conclusions about life going reached some new conclusions about life going forward.forward.

HarvardHarvard’’s Goals:s Goals:nn Integrated Expertise and KnowledgeIntegrated Expertise and Knowledge

nn Financial Management, International Economics, Team Financial Management, International Economics, Team Decision Making, Organizational Learning, Leading Decision Making, Organizational Learning, Leading Innovation, Corporate Accountability, Strategy Development, Innovation, Corporate Accountability, Strategy Development, Marketing, NegotiatingMarketing, Negotiating

nn Individual Development and IntrospectionIndividual Development and Introspectionnn 360 Feedback, Personality Profile, Executive Coach360 Feedback, Personality Profile, Executive Coach

nn Action PlanningAction Planningnn AECI Case Studies: Availability, Project Management, AECI Case Studies: Availability, Project Management,

Strategic PlanningStrategic Planningnn Global Peer NetworkGlobal Peer Network

These were the stated goals from Harvard for the program.

The individual development section provided good candid feedback on my own performance. I had an individual executive coach with whom I met to craft a personal development plan.

We were encouraged to develop personal case studies, applying what we were learning to real-world issues back home.

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Students from:• Airbus, Avery Dennison, Biomerieux, Boeing, Chick-Fil-A,

China Petroleum, Credit Suisse, CSX, Ernst & Young, Federal Reserve, Foster-Wheeler, Freemantle UK, Great Plains Energy, Heineken, IBM, IKON, India TV, Itochu Corporation, LVMH, Malaysia (PM, IP), Mitsubishi, Mitsui, MWH, Northrop Grumman, Occidental, Ormat, Parker Hannifin, Serbian Ambassador, Singapore (IP), South Africa Treasury, Stone Energy, Sumitomo, Stryker, Telegraph Media, Toshiba, Unilever, Vanguard, Zeppelin and others.

My peer network was 160 students from around the world. A few representative companies are listed.

These were the industries represented by the participants in the program.

The “North America” part was almost entirely from the United States (there were a few Canadians).

My Living Group:My Living Group:nn BancoBanco BradescoBradesco MDMDnn KurrarayKurraray EVPEVPnn Costa Coffee CEOCosta Coffee CEOnn ProactProact CEOCEOnn Pakistan Investment CEOPakistan Investment CEOnn Malaysia Malaysia PMPM’’ss Office Office

Secretary of DevelopmentSecretary of Developmentnn RS Asia COORS Asia COOnn Electric Coop Production Electric Coop Production

DirectorDirector

We were divided into living groups of eight members each. We basically lived together like college dorm-mates and shared a common kitchen/lounge area. Their industries are listed on the slide.

My BlogMy Bloghttp://http://highleyunlikely.blogspot.comhighleyunlikely.blogspot.com//

I kept a blog of my experiences, and if you really want to learn more about my daily adventure you can yead it at http://highleyunlikely.blogspot.com

This was my most popular post, an image of Tom Cruise and family gazing at my dormitory, snapped by one of my classmates. I think I got over 80 unique hits that day. Most days averaged 20 to 40 unique visitors to the blog, so I know it wasn’t all my mother!

Financial ManagementFinancial Management

One key area of study was Financial Management.

Financial ManagementFinancial Management

These were the four main areas of study in Financial Management. I really feel as if I improved my understanding of finance in these classes.

Financial Management LessonsFinancial Management Lessons

nn Importance of Appropriate StaffingImportance of Appropriate Staffingnn One unnecessary employee can destroy $1 million in One unnecessary employee can destroy $1 million in

shareholder value.shareholder value.

nn Importance of ruthless cost controlImportance of ruthless cost controlnn Value of EquityValue of Equity

I came away with three big impressions from the Financial Management case studies and my interaction with my classmates.

1) We need to really watch staffing levels and keep them in check. I believe that my Division has all the people it needs. Rather than add staff we can redeploy the people we have.

2) We need to be more vigilant on cost control (a colleague at AECI suggested we focus on “rate control’, which is even better because it implies a cost/benefit evaluation).

3) We need to recognize the value of our member’s equity is greater than the cost of our federally-subsidized debt rate.

Organizational Organizational LearningLearning

Another area of emphasis was leading “organizational learning”.

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Our safety performance at AECI was the subject of a personal case study in Organizational Learning

In one case, the incidence of incorrect prescriptions was analyzed for several hospitals. You would think you would want to send your child to Memorial 3, right? But actually, Memorial 1 was the “safest” hospital. Their high reporting numbers reflect an environment where employees feel free to report each and every inconsistency and non-conformance to procedure. As a result, their performance continues to improve. Locations with low reported numbers are not necessarily safer, especially if employees are reluctant to report due to the threat of reprisal.

A new manager arrived in 1999, and encouraged greater reporting of non-conformance. As a result, the number of reports went up, allowing improvements to be made. After some time, the system actually improved, with fewer non-conformance events, leading to lower reported incidents. This is the classis “worse-before-better” problem.

Fundamental Attribution ErrorFundamental Attribution Error

nn The bias of attributing the observed behavior of The bias of attributing the observed behavior of an individual to personality factors rather than an individual to personality factors rather than external situational factors.external situational factors.nn e.g. laziness instead of lack of traininge.g. laziness instead of lack of training

This is a classis human response to any non-conformance.

Developing Psychological SafetyDeveloping Psychological Safety

nn DonDon’’t waste a good crisis!t waste a good crisis!nn Failure is an opportunity for learning. Failure is an opportunity for learning. nn Respond to a failure as if it were Respond to a failure as if it were data data instead of instead of

sabotagesabotage..nn (Power Production expanding the use of (Power Production expanding the use of IntelexIntelex, ,

considering MOSS as an alternative)considering MOSS as an alternative)

We are attempting to begin this practice in our Division. It is already well-established in our safety and environmental compliance areas. We want to take the same process-oriented philosophy and apply it to plant non-conformance events such as forced outages and equipment failures.

(MOSS is the acronym for Microsoft Sharepoint.)

NegotiationNegotiation

Another area in which I really improved my understanding was negotiation techniques.

NegotiationNegotiationnn Evaluate BATNA, ZOPAEvaluate BATNA, ZOPAnn Underestimation of varianceUnderestimation of variancenn Influence of anchoringInfluence of anchoringnn Leverage loss aversion (losses loom larger than gains)Leverage loss aversion (losses loom larger than gains)nn Status Quo bias (default agreement is sticky)Status Quo bias (default agreement is sticky)nn Token, unilateral concessions (norm of reciprocity)Token, unilateral concessions (norm of reciprocity)nn Aggregate losses, disaggregate gains (lots of small wins, Aggregate losses, disaggregate gains (lots of small wins,

one lumpone lump--sum loss)sum loss)nn Make multiple simultaneous offersMake multiple simultaneous offersnn Assess real optionsAssess real optionsnn Deal with differing expectations via contingent settlementsDeal with differing expectations via contingent settlementsnn Seek postSeek post--settlement settlementssettlement settlements

These were some key issues we covered. Its all covered in Max Bazerman’s book “negotiating genius”.

I have seen others successfully use these techniques against us in negotiations. Now I want to deliver them back.

These topics are based on solid research studies into human interactions.

I was particularly intrigued by the concept of post-settlement settlements. Once the gloves are off and we’ve shook hands on an agreement, we should offer to revisit our respective cost curves to see if a better agreement can be crafted between us.

Team Decision Team Decision MakingMaking

Another good area of study was the human dynamics of Team Decision Making

We studied Mt. Everest climbers that perished on the mountain, even when there was clear evidence that they should turn back. We studies the NASA Challenger disaster (and were visited by their chief engineer to discuss the case in detail). By studying how teams can fail in decision making, we can better identify our own weaknesses. We had a number of examples from this page occur during our Norborne discussions.

Team Decision Making LessonTeam Decision Making Lesson

nnEncourageEncourage conflict and dissent in conflict and dissent in decision makingdecision makingnn Insure Insure that dissenting opinions have that dissenting opinions have

a voice (observed a great example a voice (observed a great example at Thomas Hill)at Thomas Hill)

Strategy DevelopmentStrategy Development

This was another key learning area.

This has occurred in our division. We once set the bar for others, now we have regressed to just “average”. The Red Queen refers to Alice Through the Looking Glass, in which the Red Queen states that one must run faster and faster, just to stay in the same place.

PorterPorter’’s s ““Five ForcesFive Forces”” AnalysisAnalysis

1.1. Supplier PowerSupplier Power2.2. Buyer PowerBuyer Power3.3. Barriers to EntryBarriers to Entry4.4. Threat of SubstitutesThreat of Substitutes5.5. Rivalry (Competition)Rivalry (Competition)6.6. ComplementsComplements

Of course Harvard has had to improve upon their own very successful “five forces”analysis model to expand to a sixth competitive dynamic force. Michael Porter himself served as guest lecturer to our class.

Professor David Yoffe’s “common pitfalls of strategic planning”.

AECI ApplicationAECI Applicationnn Scenario PlanningScenario Planning

nn Include a Include a ““stress teststress test””nn Sustained recession and limited growthSustained recession and limited growthnn Return to fast growthReturn to fast growth

I recommend adoption of scenario planning. To learn more, see http://en.wikipedia.org/wiki/Scenario_planning

The chart is from my analysis of avoiding scrubber installation. Red is bad, Green is good. If gas prices are low relative to coal, and a carbon tax of some type is enacted, then an investment in scrubbers cannot be economically justified. (the analysis is very simplistic)

StrategyStrategynn What are the key drivers of change?What are the key drivers of change?

nn Look at dataLook at datann Can we predict structural change?Can we predict structural change?nn What needs to change? (congruence analysis)What needs to change? (congruence analysis)nn One sentence strategy:One sentence strategy:

nn What, why, where, when, howWhat, why, where, when, hownn In a safe, ethical, and environmentally responsible manner, In a safe, ethical, and environmentally responsible manner,

become and remain the lowbecome and remain the low--cost producer for our members cost producer for our members by relentlessly improving generator performance, reducing by relentlessly improving generator performance, reducing expenses, and maintaining strategic alliances with key expenses, and maintaining strategic alliances with key suppliers.suppliers.

The bottom bullet is a proposed one-sentence strategy statement for our division.

Leading InnovationLeading Innovation

The most useful area of study I encountered was Leading Innovation

Congruence AnalysisCongruence Analysis

nn Mission, Vision, ValuesMission, Vision, Valuesnn Measure Congruence in:Measure Congruence in:nn POP Culture POP Culture ((©©Scott Crise)Scott Crise)

1.1. People (competence, confidence, caring)People (competence, confidence, caring)2.2. Organization (structure)Organization (structure)3.3. ProcessesProcesses4.4. CultureCulture

The concept of congruence analysis suggests that one examines the four areas listed, and determine if each one is congruent with the organization’s stated mission, vision, and values. Scott Crise came up with the “pop culture” acronym.

People: Influence of Tenure on People: Influence of Tenure on Team PerformanceTeam Performance

Are our people skills (competency, confidence, and caring) congruent with excellence in achieving our mission?

Performance of a team in innovation increases dramatically in the first couple of years of its existence, flattening out in the middle few years, and then diminishing as the teams mean tenure increases. This research has been repeated in several industries; the chemical process industry is shown here. For some industries the time frame may change, but the tendency for people to get accustomed to business as usual and to cease to be open to new ideas is universal. We need to think about how we rejuvinate teams to stop the “red queen” effect discussed earlier, and to allow us to continue innovation. So how do we maintain innovation in an aging industry such as ours?

Organizational Structure AnalysisOrganizational Structure Analysis

I examined the formal organizational structure of our division, in order to determine if it were “congruent” with an organization that is focused on operating power plants with high availability to meet our vision of the low cost producer. I think some changes are needed to improve that focus.

Also in the area of people, here is the “informal” organization chart of an actual organization. Number 50 is the CEO. Who has the most influence in this organization? Probably number 52 and 59. We are conducting this mapping exercise in our own organization now.

Another example…

Business Process AnalysisBusiness Process Analysis

Our business processes must be examined. Are they congruent with excellence in plant availability?

In our division we have already established an excellent process-based system for managing safety and environmental compliance. It allows us to track assignments and insure that important tasks are not overlooked. It forces accountability for project tasks. This is a model that I wish to export to our plant availability effort.

The most important of the four items People, Organization, Process and Culture is Culture. You can execute the first three perfectly but still find your change effort failing if the cultural issues are not addressed. Cultural issues can be relatively easy identify but they are the hardest to modify. It takes lots of listening, questioning, and communicating to create an aligned culture. We spent the full eight weeks talking about the impact culture can have, and various ways for dealing with culture. It was my single biggest take-away from the course work.

The problem (culture)The problem (culture)Management Quality Feedback Index

Plant OverallNew Madrid Lab Electric/Inst Mechanical Operations Yard

>10 Years service 9 31 67 45 59 14 391 Overall Satisfied 11 67 67 27 66 78 772 Poor Management 13 15 0 33 0 12 253 Dissatisfied + Change Seekers 17 32 33 73 33 23 234 12-month Progress 19 75 67 45 63 90 75

More work than I can finish 27 20 17 36 25 12 465 Your morale 29 59 50 18 50 71 626 Department morale 29 37 17 0 17 56 23

AECI morale 29 35 33 0 25 48 317 Satisfaction with supervisor 30 64 50 27 50 85 46

Satisfaction with Plant Mgt 31 71 50 27 59 90 70Satisfaction with HQ Sr staff 31 64 60 55 58 77 50

8 Commitment to Integrity/Ethics 50 50 9 25 62 70

Composite of 8 measures 63 59 28 55 76 63

Plant OverallThomas Hill Lab Electrical Instrument Mechanical Operations Yard

>10 Years service 9 48 20 33 57 57 34 681 Overall Satisfied 11 50 90 67 43 48 49 382 Poor Management 13 33 0 22 17 30 33 503 Dissatisfied + Change Seekers 17 50 10 33 57 52 51 624 12-month Progress 19 39 80 44 29 20 31 44

More work than I can finish 27 27 60 22 0 19 25 325 Your morale 29 43 80 33 0 55 44 356 Department morale 29 11 30 22 0 5 6 15

AECI morale 29 6 10 0 0 0 8 127 Satisfaction with supervisor 30 52 70 100 14 57 57 29

Satisfaction with Plant Mgt 31 31 70 33 14 14 27 37Satisfaction with HQ Sr staff 31 40 67 51 50 18 33 47

8 Commitment to Integrity/Ethics 37 60 33 43 22 38 35

Composite of 8 measures 44 75 56 32 41 43 36

DepartmentsAttribute

DepartmentsAttribute

We have a fantastic tool for beginning our cultural assessment: the annual employee survey. This is an excerpt of our internal analysis of the survey data. This has provided clues to areas we can address in culture.

Congruence Analysis of Congruence Analysis of Performance GapsPerformance Gaps

nn Root cause analysisRoot cause analysisnn Why, why, whyWhy, why, why

nn Some questions to askSome questions to asknn WhatWhat’’s important around here? (culture)s important around here? (culture)nn How are you rewarded? (culture)How are you rewarded? (culture)nn How is your time spent? (culture)How is your time spent? (culture)nn How is our organization structured? (organization)How is our organization structured? (organization)nn What practices need to change? (process)What practices need to change? (process)nn What skills are needed to succeed? (people)What skills are needed to succeed? (people)nn How do people react to you? (people)How do people react to you? (people)

Some more thoughts on how to analyze the congruence of an organization with its stated goals.

Leading Change FrameworkLeading Change Framework

We are now firmly in phase one, and moving into phase two of our change effort on plant availability. The change effort on project cost management is just entering phase one.

Explore vs. Exploit – an “Ambidextrous” organization

We need to continually exploit our existing strengths and assets, while simultaneously cultivating a group that continually explores the horizon for other new opportunities. This is the concept of the ambidextrous organization.

Social Networks and Social Networks and New MediaNew Media

One final area of study that I believe offers great opportunities for our company is social networks and new media. They offer more ways to communicate our goals and objectives while seeking feedback from our employees. They are very effective at “flattening” the organization. No one mode of communication is perfect for everyone. Some people will read a printed flyer, while others prefer email. Some want a voice mail, some want an email. Some would turn first to Facebook or Linkedin. Some would read a blog; others wouldn’t touch it. For us to be effective we have to embrace all of these forms.

New MediaNew Media

nn Wikipedia pages Wikipedia pages –– internal Wiki?internal Wiki?nn InnocentiveInnocentive –– internal internal innocentiveinnocentive??nn Communication ToolsCommunication Toolsnn TwitterTwitternn FacebookFacebooknn LinkedinLinkedinnn BlogsBlogsnn SharepointSharepoint!!

nn AECI needs to manage these mediaAECI needs to manage these media

If we don’t manage these media, someone else will.

For example, we have a corporate page on Linkedin, but we aren’t currently managing it.

Corporate Corporate AccountabilityAccountability

(Governance & Ethics)(Governance & Ethics)

Our final major area of case studies involved governance and ethics.

There’s that “culture” idea again, you just can’t get away from it.

Who owns the problemWho owns the problem……

I had eight weeks to look in the mirror. Many of the difficult issues we currently face are a result of my own decisions. Let’s learn from our shortcomings and try to make the future better. It is within our power to change the future!

8 Weeks Summarized8 Weeks Summarized

nn Become a Force for Change. If not Become a Force for Change. If not youyou, who?, who?nn Waiting just delays improvement.Waiting just delays improvement.

nn Ruthless pursuit of cost reduction (a.k.a. rate Ruthless pursuit of cost reduction (a.k.a. rate reduction)reduction)

nn Importance of cultureImportance of culturenn Importance of accountability/measurementImportance of accountability/measurementnn You canYou can’’t overt over--communicatecommunicate