All Posts in Office Politics

|In: Industry Commentary|Last Updated:

The Declaration of Independence and Constitution of the United States — our two most important founding documents — are remarkably secular. Rebukes to English governance, which claimed its legitimacy from God through the divine right of kings, they state with complete clarity that the legitimacy of governments is obtained, not from Heaven, but from the consent of the governed.

The words are clear and accessible to anyone who is at all literate and has the patience to read them. That this was the consensus of this nation’s founders is not in serious doubt.

Also not in serious doubt is the respect our nation’s founders had for consensus itself, perhaps because it is the purest form of the governed’s consent. In each case they spent a very long time discussing and debating what they should think and how that thinking should be expressed; also in each case, different factions compromised to reach the final decisions. Both documents were results with which each group and faction might not completely agree, but to which they could and did completely commit.

It’s become popular to consider the Constitution’s framers as selfish, wealthy, racist landowners interested solely in preserving their status. But this oversimplifies the complexity of their circumstances. When they led the Revolutionary War, they had quite literally risked their lives and fortunes to gain independence from England. Their sincerity of purpose in creating a resilient nation seems more likely than otherwise.

As for slavery, it is beyond doubt that many of the framers abhorred it (many with more moral courage than, for example, Jefferson, who abhorred slavery in principle but not so strongly as to suffer the personal inconveniences to be experienced from its elimination). The Constitution’s allowance of slavery demonstrates the nature of consensus better than any of its other features: Even those who hated it the most valued preservation of the nation even more. They understood, perfectly, the need to give way on some points — even those held very strongly — to achieve the larger result.

Consensus is falling out of fashion in leadership circles these days, and we’re the poorer for it. Three reasons seem to dominate this shift, all the result of too-limited understanding of the subject:

  • Wrong definition: Consensus is the form of decision-making in which a group might not fully agree with the final decision, but does commit to the final decision specifically because it is the decision of the group. It is not what some detractors call consensus — a process in which a group argues until it gives lip service to a decision which those who approve adhere to and those who don’t feel free to ignore.
  • Wrong priority: Achieving consensus is not a quick process. To those who participated, the Constitutional Convention seemed eternal; it did, in fact, require almost four months.Consensus is the wrong process to be used when speed is essential. Conversely, speed is sometimes the wrong priority for leaders to choose — there are many times when commitment is more important than velocity. In business, excessive speed can lead to undesirable results, among them “leaders” who leave those who are supposed to be following too far behind them; and leaders able to win every battle while fighting the wrong war.Metaphorically speaking.
  • Wrong technique: Voting is the process where everyone argues, and then tallies up preferences so that the majority wins and the rest lose. Consensus requires an expectation that everyone involved has to give way on some points. It also requires that all concerned do more than allow others to speak while they formulate their rebuttals. It requires actual listening — working to understand the other person’s point of view. That, in turn requires patience, an art practiced extensively by those who participated in our nation’s founding, as the prevalent style of speaking at the time was both windier and more formal than what we practice today.

In general, consensus results in more commitment, but to a relatively poor quality result. Because consensus requires compromise, this generality can’t be entirely avoided. But listening — recognizing that others have wisdom as well — can offset the effects of compromise, making the final result better than what any single individual can achieve.

It’s been said that no committee ever painted the Mona Lisa. That is, of course, true. It’s also true, though, that it was a committee that wrote the Constitution of the United States — a document that is, in its own way, as much a work of art as anything ever created.

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|In: Business Ethics|Last Updated:

I fell in love with a client’s CEO a couple of weeks ago.

Platonically, that is. He’s an immensely successful entrepreneur, and we were discussing the value of his instincts for the business. “I don’t believe in instinct,” he told me. “I believe in evidence.”

Which brings up the recurring subject of Sarbanes-Oxley, why so many implementations spiral into out-of-control fiascoes, and what you can do to avoid that fate if you’re on the hot seat for bringing your company into SOX compliance.

At the KJR Conference last March, Jeff Sakamoto, then-CFO of Cyanotech Corporation, and Danielle Stariha, Director of Internal Audit for Gander Mountain Company shared their thoughts on the subject. Since they both managed to bring their companies into compliance on time and within budget, their thinking was well worth hearing.

I’m not going to try to summarize everything they said. They provided too much valuable content to easily summarize in a column or two, and much of what they had to say is similar to what’s been published elsewhere on the subject. Here are a few points you might not have encountered before, that will help you through your own efforts to become and stay SOX compliant:

  • It’s basically a good idea — having clean books and effective controls. What SOX requires of publicly held companies are practices they should already have in place. If you start your SOX program with that philosophy you’ll make much more progress much more smoothly than if you start with the attitude that it’s something you’re doing for the Feds.
  • It isn’t a good implementation of a good idea. Regrettably, like so many good ideas voted into place by our elected representatives, the good ideas were turned into a furball of documentation requirements. With SOX, if it isn’t documented it isn’t happening. Live with it.
  • It’s a project. Scratch that — it’s a program, which is to say it has multiple threads of effort (initiatives) each of which consists of multiple projects, each of which must be managed well, just like any other project. It’s banal, it’s obvious, it isn’t worth saying … except that it must be, because one reason many SOX efforts go bad is a failure of basic project management.
  • Master the subject. Your audit partner or some other SOX consulting experts will do a lot of the heavy lifting for you. That makes it an outsource, and like any other outsource, if you don’t know what’s going on you deserve whatever happens next. Another name for Sarbanes-Oxley is the Full Employment for Auditors Act. That doesn’t mean you have to be the one providing them with full employment.
  • Your CEO’s attitude tells the story. If your CEO is like our client, preferring evidence to instinct, you have a chance. The starting point for SOX compliance is a CEO who uses the accounting system as a tool to help understand What’s Really Going On Out There.

We have Sarbanes-Oxley because too many CEOs consider their company’s shares of stock to be a product, and their financial reports to be a marketing tool for that product. Marketing is about persuasion — about spotlighting the most favorable facts, de-emphasizing the least favorable facts, and describing those that are open to interpretation from their most favorable angle.

The other reason for Sarbanes-Oxley is that many CEOs make it known throughout the enterprise that Bad News Isn’t Welcome Here. Never mind shareholders and the Wall Street Analysts shareholders listen to. Their desire to hear what they want to hear instead of what they need to hear is overpowering. They trust their gut, believe in their instincts, and if the facts say otherwise then you’d better adjust the facts to match their reality.

The question is what to do if you work for a CEO like that (and here I’m going beyond what Jeff and Danielle presented: Neither described their CEOs this way).

Being responsible for SOX compliance doesn’t empower you to fire the CEO, much as you might want to. Your choices … your choices if you want to be effective, at least … are limited to one: persuasion.

Start with the first tool of the effective persuader — empathy. Say, “I don’t like it either, but we have to do it the SOX way whether we like it or not, and SOX doesn’t have a lot of wiggle room. We might as well be as efficient about it as we can.” And if you don’t feel any empathy, that’s okay — you don’t have to.

Pretend.

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