To be a successful business leader, executives need to make values-based problem solving a habit of mind, argue management experts and Notre Dame professors Viva Bartkus and Ed Conlon. In Getting It Right, Bartkus and Conlon draw on insights from consulting, management, and academia to deliver a powerful message: no matter how chaotic the marketplace, leaders can still address even the most staggering challenges in a calm and confident manner.

Getting It Right

Notre Dame on Leadership and Judgment in Business

---

By Viva Bartkus Ed Conlon

Jossey-Bass

Copyright © 2008 Viva Bartkus
All right reserved.
ISBN: 978-0-470-24588-0

---

Chapter One

STARTING FROM VALUES

A Tale of Values Conflicts

"No women. No minorities."

Within days of the start of the Mississippi Blood Services Organization (BSO) project, the general manager demanded that both I and my Chinese American teammate, Kevin, be replaced. He simply would not tolerate women and minorities on a team serving his organization.

It was the spring of 1993, and I had just moved from graduate school to the Upper East Side of Manhattan for my first real job, as an analyst with a major management consulting fi rm. Shortly after my arrival I had received a call. "You're going to Mississippi," Chris, the staffing coordinator, had told me.

My first reactions? "Mississippi-how do I get there from here?" "How hot is it down there?" "Will I understand their accents?"

"You'll be joining the team that is helping the Blood Services Organization of Mississippi get out of its financial problems," Bill, the partner and most senior leader on the project, had barked, also over the phone.

Our team's charter was to solve the financial problems facing the Mississippi BSO. For nearly half a century, the BSO had been collecting, processing, and delivering blood products to area hospitals. It was one of the pillars of the community, like the local university and major area hospitals. However, it was suffering from shrinking revenues, escalating costs, and mounting financial losses, not to mention low morale and departures of talent. In fact, it now sustained $22 million in annual expenses on only $20 million in revenues. It was hemorrhaging cash. Without a successful, substantial improvement in performance, the BSO would have to shut its doors.

Friends had warned me that the first few weeks, and especially the first few days, of a new job and a new project could be a bit unnerving. They were right. After quick phone conversations with teammate Glenn, the day-to-day project manager, and teammate Kevin, the business analyst, I tried to make sense of the facts (as I understood them) about the BSO. This Mississippi organization supplied blood products in-state by collecting voluntary blood donations and then testing, processing, and distributing these products to area hospitals. However, in the previous year or so the BSO's profits had swung into losses. The newly appointed chief executive of the national BSO was old friends with Bill, the partner in our firm. Both having come from the pharmaceutical industry, they had worked together on health care issues over the preceding ten years. The new BSO executive asked Bill to put a team together to assess and help turn around the deteriorating situation.

At least that is what I thought before I got to Mississippi. Once there, the challenge seemed to become that the general manager wanted neither women nor minorities on the team that would serve his BSO.

Growing up rather sheltered in Indiana, I had never encountered such outright prejudice. Shocked, I tried to determine how I might have caused the manager's reaction. Because it was only my first week on the job, I finally concluded that I had not had enough time to offend him. Then I was furious. How could the same person who had nearly bankrupted the BSO now think he could impose his beliefs-and prejudices-on the team dedicated to turning around his organization? From my perspective, he and his BSO were damn fortunate to get our talented, dedicated team.

After calming down, I quietly watched what happened. On the one hand, everything I had seen in our consulting firm-both on paper and in the way that everyone interacted-emphasized the importance of merit and serving clients well. On the other hand, Bill was a young partner under huge pressure, and the Mississippi BSO was our demonstration project for an entire network of potential future health care clients. Then, too, Mississippi was a long way from our home office in New York, and Glenn, Kevin, and I were very junior staff with little influence within our firm.

To his enormous credit, the following day Bill told the general manager that we were the best team to save his beloved BSO, and BSO could take it or leave it.

Although I did not fully appreciate Bill's courage until many years later, his stance earned him Kevin's loyalty and mine. My feelings for the general manager and his Mississippi BSO? Well, I felt a deep respect for the mission and good works of the BSO. And then there was my stubborn pride.

We stayed to prove our worth.

Values and Problem-Solving Efforts

A problem-solving effort begins and ends with values. Without some integrated system of values, one cannot say a proposed solution is optimal or even appropriate; one cannot even establish goals for a problem-solving effort. Values influence the division and prioritization of analytical work. In fact, without values, what is the reason to take the problem on?

By values, we mean the principles, standards, or qualities that you consider worthwhile or desirable. By norms we mean the principles of right action that guide and regulate proper and acceptable behavior within a society or organization. We argue that all problem-solving efforts encounter values conflicts. Consequently, you as the problem solver must examine your own values. But just knowing these is not sufficient. We argue that you must also stay true to them-first to your values, and then, if possible, to the norms of your organization.

We introduce practical approaches to resolving conflicts either among the values of different individuals or between individual values and organizational or societal norms. One can, and indeed must, harness values and norms toward developing pragmatic solutions to complex business challenges. Other scholars have written eloquently on business ethics and broader societal norms; where appropriate, we draw on their work and direct you to their contributions.

Values Conflicts in Setting Goals and Allocating Work

Bill's decision about the BSO team got me to closely observe the personal convictions of my teammates and the norms of our consulting firm.

Regarding goals and work allocation, right off we faced potential values conflicts even within our four-person team. Our day-to-day project manager, Glenn, wanted to complete the work as efficiently and quickly as possible. For efficiency's sake, he could have made Kevin responsible for building the financial model of BSO's operations by which we could test turnaround scenarios, analyze the profitability of products and customer accounts, and assess pricing and other opportunities. It would have been easy to do that, because Kevin, the more junior business analyst, had been staffed on the team as an expert in spreadsheet analysis and financial modeling from previous projects. But Kevin wanted to move beyond his current expertise. He wanted to interact more with clients, interview customers, broaden his experience.

Glenn did not take the easier, more efficient path, because our consulting firm also valued professional development. One could argue that it was one of our core organizational norms. As long as there was no negative impact on client service, partners encouraged teams to allocate project activities so as to build and broaden members' skills. Both Glenn and Bill, the partner, believed in and respected this norm. So Bill took Kevin to interviews and coached him on client interactions while Glenn and I sorted out the financials.

Values Conflicts in Prioritizing Options and Deciding on Potential Solutions

Bill, Glenn, Kevin, and I shared values (often implicitly) that helped us to prioritize options for BSO's financial turnaround. We stuck to the facts of the case, open to wherever our data and analysis might lead. We attempted to prioritize options in a straightforward, fact-based way. According to size and speed of potential impact, difficulty, and risk, we identified sufficient opportunities to return the BSO to financial solvency. Chapters Two and Three describe the problem-solving framework and process we followed. Specific solutions included cost reductions (in the nursing staff, laboratory procedures, and administrative functions) and revenue increases through improved blood product inventory management.

But from early on, there was a serious chance that the BSO general manager might reject our proposals because of the ongoing conflicts in values that went beyond the original ones over race and gender. Numerous BSO managers stubbornly opposed many rather straightforward ideas. After some reflection, I began to understand that the BSO managers were afraid that our team would make them look incompetent, harming their professional reputations and careers.

We eventually overcame this opposition by framing our recommendations in the context of the one fundamental value on which everyone agreed: the broad Mississippi community's benefits from a local blood supply. In retrospect, the confluence seems obvious: the community valued a local blood supply, especially in times of disaster and need. Mississippi BSO's mission actually rested on this goal, and at some level every employee's and consultant's personal convictions supported it.

Having discovered this overarching common good, we set out to turn the BSO around as humanely as possible, trying to avoid major layoffs. Fortunately, most of the savings could come from eliminating overtime expenses for nurses during blood drives, so BSO could avoid laying off its three hundred dedicated nurses.

Values Conflicts and Bottom-Line Trade-Offs

The preceding discussion raises the question of what leaders should do when adherence to personal values might compromise the bottom-line objectives of the firm-as was Peter's experience as CEO of the global health care company in the introductory tale.

As another example, take a publicly traded, major retailer that consistently provides value for customers while-unlike its competitors-also granting employees such generous health care and other benefits that applications for positions far exceed hiring needs. Despite growth and profitability that also far exceed the competitors', Wall Street analysts consistently criticize the CEO for higher-than-necessary expenses. To date, the CEO has weathered criticism and garnered praise for affirming his company's norm of fairly treating employees. But the bottom-line fact remains: the CEO's tenure depends on the company's delivery of excellent economic value to its shareholders. Were performance to deteriorate, all improvement options would certainly be on the table, including benefit reduction. At that point, the CEO might be forced to compromise the fair treatment principle to the extent required to lift shareholder returns.

Articulating Your Own Bedrock Values

The bedrock of leadership and problem solving lies in the values that each of us holds dear. Yet sometimes it is difficult to know just what those values are. This section may aid your examination of your own values and surrounding norms. We begin by discussing four cardinal virtues that influence business decisions, then take on the tough topic of motivation, before continuing with a few ways to deepen your understanding and commitment to values.

Personal Values and the Four Cardinal Virtues

Values are principles that individuals may hold worthwhile; virtues are those values that a society deems right. Aristotle, Aquinas, and many other philosophers in the Western tradition have argued moral character rests on four main ("cardinal") virtues: prudence, justice, temperance, and courage. Basically, prudence is a strong, steady disposition to choose appropriate means toward good ends. Justice is the continuing commitment to render unto each his or her due. Temperance is the rational disciplining of desires. And courage enables one to do the right thing despite the threat of personal injury or loss. We maintain that these four cardinal virtues are essential to sound business judgment.

I still greatly respect the tough nursing manager at Mississippi BSO for how she handled my difficult messages regarding the high costs of her nursing department. A major portion of the BSO turnaround depended on modifying scheduling procedures for blood drives to eliminate most overtime nursing costs-which was deeply unpalatable to nurses wanting overtime pay. The nursing manager displayed all four cardinal virtues in handling the decision. Prudently, she did no more and no less than was necessary, but she did eliminate all overtime pay. She was eminently just in the way she accomplished this, not looking at seniority or performance or even her favorites in the nursing staff, but applying the policy equally to all. She displayed temperance in patiently explaining why her decision was correct and appropriate, given BSO's overall challenges. Finally, she showed tremendous courage in abolishing overtime pay despite loud resistance from the nursing union.

Aristotle, Hobbes, and Human Motivation

My often comical experiences in the world of investment banking illuminate two opposing perspectives on human motivation and on related contrasts in organizational norms. Aristotle and Thomas Hobbes defined the basic distinction: whether people's motives lean more toward cooperation or competition. The orientation can be attributed to an individual's nature or to the social context.

About 2,400 years ago, Aristotle made the case for cooperation as the basic human motivation, arguing, "Man is by nature a political [social] creature," designed to live in the polis or society. The state, he said, is a creation of nature whose purpose is to teach its citizens how to live a virtuous life.

Contrarily, about two millennia after Aristotle, Thomas Hobbes argued that humans are basically more competitive than collaborative. Without a strong power to keep all forces in check, a situation of "... war of everyone against everyone" naturally ensues. Government, Hobbes maintained, is based on the need for security, not-as Aristotle contended-on fostering the good life. Absent some central authority to keep man's natural aggression in check, said Hobbes, "... the life of man [is] solitary, poor, nasty, brutish, and short."

Understanding your own natural disposition and the motivation of colleagues is a way to determine the degree of harmony or conflict in your work environment. As for me, I was an Aristotelian in my mind, living in a Hobbesian world. That, in a nutshell, was my challenge when serving a large New York City bank in 1995.

My Indiana, Catholic, and immigrant upbringing emphasized helping neighbors, friends, colleagues, and those in need. Naively, I assumed the same in others. I quickly learned these expectations were completely inappropriate on the trading floor and among international banking executives whose success depended on fostering raw competition and conflict.

Of course, no industry or organization is entirely cooperative or competitive. Contrast the ruthless vendor management of American car manufacturers with the more Aristotelian cooperation across the automotive supply chain of their Japanese counterparts-with vastly different long-term results. In many industries and companies, the sales force's performance incentives are specifically designed to encourage competition. By contrast, however, in rapidly evolving industries in which intellectual capital and creativity are a competitive advantage, companies specifically foster cooperation to ensure the combination and exchange of knowledge.

In the absence of values, there is nothing inherently right or wrong with either an Aristotelian or Hobbesian organizational mindset. Still, we would not be two Notre Dame professors if we did not argue for rather more Aristotelian approaches.

Neoclassical economists took a page directly from Hobbes in developing their assumptions: that humans are selfish, rational, and atomistic. Yet Hobbesian rationality and competition cannot provide the full foundation for all economic activity. For example, no matter how detailed, contracts cannot foresee every possible future contingency, and are thus incomplete. Under conditions of cooperation and basic trust, transaction costs among individuals and firms will be lower, because every contingency need not be written into a contract. As one of our colleagues pointed out, even economists cooperate.

(Continues...)

---

Excerpted from Getting It Right by Viva Bartkus Ed Conlon Copyright © 2008 by Viva Bartkus. Excerpted by permission.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.

---

Viva Ona Bartkus, is an associate professor of management at the University of Notre Dame. Prior to joining the faculty at the University of Notre Dame, Dr. Bartkus spent ten years at the global management consulting firm of McKinsey & Company—the last four years as a partner.

Edward J. Conlon, joined the faculty of Notre Dame in 1992, served as chair of the management department until 1998, and as Associate Dean for Graduate programs since 2003. In addition to teaching in the Executive MBA program at Notre Dame, he has conducted executive development workshops with leading organizations.