Author: David Gebler

A new study published in the Annals of Internal Medicine offers insights into what distinguishes high-performing and low performing with regard to deaths of heart attack patients under their care. It’s not the training of the doctors or the investment in high-tech equipment. It’s the organizational culture that makes the greatest difference.

As Dr. Pauline Chen reports in her blog posting in the NY Times this week:

While business executives have long understood the impact of an organization’s culture on the bottom line, it has not been clear if those same qualities could affect how well patients do.

“It’s how people communicate, the level of support and the organizational culture that trump any single intervention or any single strategy that hospitals frequently adopt,” said Elizabeth H. Bradley, senior author and faculty director of the Yale Global Health Leadership Institute at Yale University.

Rather, it was the approach to challenging patient care issues that seemed to set institutions apart. A hospital might discover, for example, that a heart attack patient who returned to the hospital with severe edema, or swelling, might have been discharged without her prescribed diuretic.

At a low-performing hospital, such an error might result in doctors, nurses and pharmacists on the front lines blaming one another and hospital leaders taking care to remain uninvolved. But clinicians and leaders at a high-performing hospital would be eager to address the error, acknowledging it without disparaging one another and working together to re-examine and, if necessary, reconfigure the hospital’s discharge process.

Culture Saves Lives!

It’s ironic that a word like “transparency” can have several confusing meanings, even in a business context. While transparency as a concept is often most visible in the realm of social responsibility and compliance, its real benefit is when it’s seen as a business priority.

Transparency is about information. It is about the ability of the receiver to have full access to the information he wants, not just the information the sender is willing to provide. Transparency embodies honesty and open communication because to be transparent someone must be willing to share information when it is uncomfortable to do so. Transparency is an individual being honest with himself about the actions he is taking. Transparency is also the organization being upfront and visible about the actions it takes, and whether those actions are consistent with its values. What would cause someone act contrary to his or her values? What are the influences and factors inside an organization that cause individuals to veer from actions or decisions that they do not believe are right?

In an organization where there is alignment between their Standards and their Values, there is no fear in raising or disclosing difficult issues. A value of honesty is consistent with the ability to act on one’s concerns, or ask questions. Employees and managers can safely admit mistakes and can openly deal with problems and challenges. There is true open communication. If an engineer raises a concern about product quality, for example, that person is given a chance to be heard and have the issue either resolved. The engineer may not be correct, but there is enough respect that if he or she is wrong, they are given an opportunity to learn why, and the encounter has a positive outcome.

For employees to trust in transparency, they must first feel safe: physically, financially, and emotionally. Undue pressure and fear of losing one’s job make it difficult to take the risk of admitting mistakes or weakness. Employees must feel they have a personal relationship with their leaders to the point where they would feel comfortable having a conversation that involves some risk.

As an example of the strategic importance of transparency, look at the challenges that have plagued Johnson & Johnson in recent years. The manner in which J&J handled the 1982 Tylenol crisis has always been the model of transparency; an organization acting in a manner consistent with its values. J&J immediately pulled the product from the shelves without regard to the cost or public embarrassment, and certainly with no regrets over lost profits. In repeated interviews Jim Burke said that J&J’s Credo made it easy for him and his team to know exactly what to do: J&J’s “first responsibility is to the doctors, nurses, and patients, to the mothers and all the others who use our products and services.”

In stark contrast to how Jim Burke handled the 1982 crisis, McNeil leadership under Colleen Goggins has been described as evasive and not forthcoming. Consultant to over-the-counter drug companies, Donald Riker, was quoted as saying, “At every step in this process J&J has not been transparent. Every bit of information is cagey, secretive, and micromanaged.”

Companies with cultures that are working for them and not against them are ones where transparency is seen as an internal imperative, and not a external disclosure requirement.
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David Gebler is the President of Skout Group, an advisory firm helping global companies use their values to clear the roadblocks to performance. Send your thoughts and feedback to dgebler@skoutgroup.com.

It’s ironic that Charlie Sheen played the character with the ethical conscience in the 1987 film “Wall Street.” Now he’s at the center of a titillating Hollywood scandal that has lessons to teach us about business ethics and the business of Hollywood.

As has been widely reported in the Los Angeles Times and elsewhere, CBS Warner Bros studio announced that TV’s most popular sitcom, “Two and a Half Men” will be suspended, and perhaps canceled, due to the public dispute between the lead star of the show, Charlie Sheen, and the show’s writer-producer, Chuck Lorre.

Television critic Mary McNamera summarized the issue this way in a column this weekend in the LA Times:

If you are the star of a hit comedy on CBS, you can keep your job in spite of accusations of: threatening your pregnant second wife; holding a knife to your third wife’s throat on Christmas Day; and indulging in cocaine-fueled weekends during which your bizarre behavior causes your female companion to fear for her life.

But say mean things about Chuck Lorre and You Are Toast.

It is difficult to feel anything but relief regarding CBS’ recent decision to officially halt production of its hit comedy “Two and a Half Men.” A crazed Charlie Sheen once again took to the radio airwaves this week, this time to denounce the show’s creator, whom the troubled actor accused of stealing from him. Within hours, CBS and Warner Bros. finally put their foot down; for once, the writer trumped the performer, perhaps because Lorre also produces two other very successful comedies on the network, “The Big Bang Theory” and “Mike and Molly.”

The impact of both Sheen’s off-screen behavior as well as his dispute with the producer has significant financial ramifications. Some estimate that the cost of canceling the show could exceed $200 million in lost licensing revenue to Warner Bros.

In most other companies that generate this much revenue, there is clarity as to standards of behavior and accountability to meet those standards, or face the consequences. The stories of numerous CEOs who have been forced to resign for engaging in far less egregious activity are proof. But Hollywood, like many professional sports franchises, have trouble deciding how to treat their stars. Does the business demand that everyone adhere to certain standards, including the stars, or does the franchise revolve around the idiosyncrasies of its stars, apologizing and rationalizing unacceptable behavior? Would the show go on with a new star? There are many examples, in Hollywood and in sports, where the business transcends the personalities, and the franchise has the ability to withstand the personality foibles of any one individual.

Two and a Half Men is a major business. Clarity as to its values and standards would help guide its stakeholders to know how to best protect the value of the franchise for the long-run.

Today’s Wall Street Journal reported the story of the progress BP is making in re-characterizing its culture in the aftermath of the April 2010 Gulf Oil Spill.

According to the Journal, new CEO Bob Dudley has created a new global safety division at BP, a company that also suffered a 15-fatality refinery explosion in Texas five years before the lethal Gulf accident. He has given the division power to intervene in or shut down any operation seen as too hazardous.

The safety issue goes to the heart of BP’s corporate culture, say some critics, who contend that compared with its Big Oil rivals, the company has historically been focused more on deal-making and less on safety and operational excellence. “Other companies were less aggressive on growth and more focused on their safety-management systems,” says John Hofmeister, a former president of Shell Oil Co. “Changing the culture is hard.”

BP is under tremendous pressure to make changes. Reorganization may look good on reports to government regulators, but strategic plans won’t succeed if there aren’t changes in the field. And those changes often involve the way in which individuals are treated, and given incentives.

The Journal reported that Phil Dziubinski became BP’s ethics and compliance leader for Alaska operations in mid-2006, shortly after the company suffered a 4,000-barrel oil spill on the North Slope. That happened a year after the refinery explosion in Texas City, Texas, an accident that led a federal agency called the Chemical Safety Board to suggest BP managers didn’t listen enough to what workers were telling them.

“Reporting bad news was not encouraged,” the report said, “and often Texas City managers did not effectively investigate incidents or take appropriate corrective action.”

Phil earned a reputation as a bulldog, staying after organizational leaders that lagged in implementing safety fixes in Alaska operations.

At a meeting in March 2007, Mr. Dziubinski disagreed with a supervisor’s assessment that the company was on track to fix all safety issues. Mr. Dziubinski said that several problems flagged by workers in the past still hadn’t been addressed, and that BP was taking too long to deal with workers’ current concerns.

“We tend not to listen to the workers,” Mr. Dziubinski said, according to notes of the meeting taken by union leader, Marc Kovac, who was there.

Dziubinski raised tough issues, such as how excessive overtime was linked to safety violations because the sheer exhaustion of employees working repeated 16+ hour shifts. As reported in the Journal, after repeated efforts to raise these issues, Dziubinski’s responsibilities were assigned to others and eventually he was laid off as part of a reorganization in Alaska operations.

Listening is hard. But any serious effort to change the culture of an organization as large as BP’s must start from the ground up. Developing new safety policies is one thing. But real change won’t happen until the organization demands that managers listen to those in field that are living the issues that need to be addressed.

Today’s NY Times reports the story of Kansas City Royals pitcher Gil Meche, who was contractually entitled to $12 million in compensation for 2011, but instead forfeited the money by retiring. As reported by Tyler Kepner, Meche was contractually entitled to the money if he showed up to spring training next week, even if he didn’t end up playing. But Meche didn’t perform well in 2010, and was uncomfortable receiving a star starting pitcher’s salary, even if he was in the bull pen.

As reported in the Times:

“When I signed my contract, my main goal was to earn it,” Meche said this week by phone from Lafayette, La. “Once I started to realize I wasn’t earning my money, I felt bad. I was making a crazy amount of money for not even pitching. Honestly, I didn’t feel like I deserved it. I didn’t want to have those feelings again.”

The Royals fully expected to pay Meche what was due him. “Still, the Royals fully expected Meche to pitch in relief, and to pay him the $12 million — three times more than any other player on the team. If nothing else, they believed, Meche could be a positive influence for a young roster.”

Is Meche showing strong ethical character by rejecting the money? He certainly was entitled to the money, and no one has to feel that his employer was being taken advantage of.

We like ethics heroes. When someone does something extraordinary we like to hold them up as a standard that we can aspire to. So it’s interesting when someone comes along and follows their own conscience and does something right, but it may not be a model for others to follow. Someone could argue just as passionately that the ethical thing to do would be for Meche to receive the benefit of his contract and if he felt bad about it, donate the money to a worthy cause.

I respect Meche for living up to his own values. I am intrigued though that this may be a case where my respect is for his individual integrity and not necessarily for the act itself.

Any thoughts?

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David Gebler is the President of Skout Group, an advisory firm helping global companies use their values to clear the roadblocks to performance. Send your thoughts and feedback to dgebler@skoutgroup.com.

I’m not intentionally picking on Johnson and Johnson. But their current ethical challenges couldn’t be a better case study for the financial impact of not living one’s values.

As reported this morning, Johnson & Johnson, the world’s largest health products company, said fourth-quarter profit fell 12 percent, hurt by product recalls and declining sales. The company forecast 2011 earnings below analysts’ projections.

J&J forecast 2011 earnings excluding some items of $4.80 to $4.90 a share. J&J’s McNeil Consumer Healthcare division has recalled dozens of over-the-counter drugs, including Tylenol and Rolaids, since late 2009. The company was forced to shut down a factory temporarily in Fort Washington, Pennsylvania, in April that may cost J&J $650 million annually in lost sales, Derrick Sung, a Sanford C. Bernstein analyst, wrote in a Jan. 21 note to clients.

“Consumers are reluctant to switch back and are continuing to switch to other brands,” Larry Biegelsen, an analyst at Wells Fargo Securities, wrote in a Jan. 14 note to investors. “If this trend continues, we believe that growing consumer loyalty to new brands or comfort with private labels could slow McNeil recovery relative to expectation.”

Consumers have lost confidence in the brand. Just putting the products back on the shelves is not going to be enough. What questions is the Board of Directors asking of management and are those questions getting to the heart of the matter?

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David Gebler is the President of Skout Group, an advisory firm helping global companies use their values to clear the roadblocks to performance. Send your thoughts and feedback to dgebler@skoutgroup.com

The window is closing for Johnson & Johnson to retain realistic hopes of regaining its trusted position with customers. Customers are moving away from the brand and are increasingly finding suitable substitutes.

Today’s New York Times offers an update on what is happening with J&J. But what is most striking to me is how this industry leader still seems unable to get to the heart of the problem. As reported in today’s article:

Those reassurances [by the company that the worst is behind them], however, have been followed by yet more recalls. What is most perplexing is the seeming inability of executives to solve — and satisfactorily explain — the manufacturing issues that dog the company.

As someone focused on culture and values, the issue seems so clear to me: J&J is not digging deep enough to uncover the root causes of the problem.

As reported in the Times, consumers were complaining as early as April 2008 about moldy-smelling Tylenol capsules manufactured at the Las Piedras, Puerto Rico plant. It J&J 18 months to start a recall of the offending products. In January 2010 the FDA sent a warning letter to J&J criticizing the delay in taking action.

My question is whether J&J has ever undertaken a comprehensive assessment of the culture, both at the Puerto Rico facility, as well as within the McNeil Consumer Healthcare division? Does J&J know why employees were hesitant to come forward? Does J&J know what were the pressures that caused leaders to not respond in a manner consistent with J&J’s Credo? It’s one thing to look at flaws in the supply-chain or in production, but that does not get to the people issue. Individuals must have known what was going on, and they didn’t come forward.

This lack of transparency is certainly one of the factors that is inhibiting the ability of J&J to act effectively, and rebuild its reputation. J&J talks about the corrective actions it is taken. But are they putting only a Band-Aid over the problem, or are they actually getting to the root cause of the problem?

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David Gebler is the President of Skout Group, an advisory firm helping global companies use their values to clear the roadblocks to performance. Send your thoughts and feedback to dgebler@skoutgroup.com.

Today’s business press reports that a lawsuit filed last week on behalf of Johnson & Johnson shareholders accused the company’s directors of ignoring “red flags” foreshadowing product recalls and government probes of manufacturing defects and marketing practices.

The lawsuit alleges that while J&J once set “the gold standard for integrity and excellence,” the directors’ “utter disregard for their fiduciary duties, including permitting and fostering a culture of systemic, calculated and widespread legal violations has destroyed J&J’s hard-earned reputation.”

Bloomberg Business reports that the board received “years of red flag warnings of systemic misconduct,” according to the complaint. “These red flags came in the form of federal and state regulatory investigations, subpoenas and requests for documents, FDA Warning Letters, news articles and the recall of products accounting for hundreds of millions of dollars in corporate losses.”

It will be very important to watch the progress of this lawsuit on several levels:

1. Will Directors be held liable for failing to adequately monitor the culture of the company?
2. How important is the fall of the company’s reputation (in terms of news articles being a “red flag”) in determining directors’ liability.

Stay tuned…

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David Gebler is the President of Skout Group, an advisory firm helping global companies use their values to clear the roadblocks to performance. Send your thoughts and feedback to dgebler@skoutgroup.com.

I have to admit that I have a conflict of interest here. All four of my kids have attended Maimonides School in Brookline, Massachusetts. But the story below from boston.com is a good example of how we can instill values in our kids in ways that matter…to them and to us.

In the last girls’ soccer game of the season at Maimonides School, an underclassman pulled off her uniform and handed her jersey over to an injured teammate.

Senior player Tifara Ramelson had torn ligaments in her knee during her final season, but Shoshana Ehrenkranz, a seventh-grader, wanted Ramelson to have one last chance to play.

Moments like these permeate the athletic program at Maimonides School, a Jewish day school in Brookline.

For its athletes and leaders, it was no surprise they were recognized for good sportsmanship this year.

“For me it’s not about winning the game; it’s about playing well,’’ said Sophie Edelman, the varsity volleyball captain. “I want to have a good relationship with my teammates rather than show them I’m the best server in volleyball.’’

Today, Maimonides will honor its athletic teams at the opening game of the girls’ basketball season by presenting the District Sportsmanship Award.

The school received the award last month at the Massachusetts Interscholastic Athletic Association’s 17th annual Sportsmanship Summit at Gillette Stadium.

The summit recognizes one school in each district for sportsmanship, and Maimonides won the award among private schools, said Peter Smith, the association’s assistant director. The summit has grown in the past several years as more schools are interested in attending, with 1,100 people participating this year, he said.

“This is the type of stuff you take for granted,’’ said Smith. “There are a lot of people out there doing good things, and they’re not things you see in the news.’’

Maimonides won the award after being nominated by Marie Laundry, athletic director at Mount St. Joseph’s Academy, an all-girls Catholic school in Brighton.

“They come prepared all the time. They’re good sports and play hard right up to the last minute,’’ said Laundry, who coaches basketball and soccer against the Maimonides teams. “They never give up, and they encourage each other.’’

Maimonides students, administrators, and coaches all agreed their sportsmanship stems from values the school teaches starting in kindergarten. Half the school day is spent in academic classes, while the other half is spent studying the Torah, administrators said.

Lashon harah, for example, is in Jewish law the prohibition of gossip. It teaches students to be mindful of what they say about others, said Rabbi Dov Huff, assistant principal of general studies.

“In the newspaper, you read about how some schools do terrible things and haze. That just doesn’t happen at Maimonides,’’ said Elan Baskir, a senior who plays soccer, basketball, and baseball.

Baskir said the men’s soccer team made the quarterfinals for the first time in school history this year. It wasn’t easy. One victory, Baskir recalled, came on a freezing, rainy day.

But when the team stood on the brink of losing in those quarterfinals, said Huff, he overheard the players chatting in their huddle, with their captain praising his teammates not only for a great season, but also for respecting others.“To me, it was shocking. . . . What was on their minds is they did it the right way,’’ said Huff.

Rabbi David Ehrenkranz, who teaches the Bible and the Talmud and coaches varsity softball, said he teaches the same concepts in class and during practice.

“Dignity and self-restraint are second nature,’’ said Ehrenkranz. “I see no difference from students in my class, the way they behave in the classroom, compared to my athletes.’’

Athletic Director Hal Borkow said other schools and referees often compliment him on Maimonides students’ behavior, such as when a tough call is made, and the athletes take it in stride.

“The ref made a point to let me know that the kids behaved like mature young adults,’’ said Borkow.

But not everyone has to study the Torah to promote sportsmanship. Students said one of the most important ways to develop good attitudes is to maintain good relationships with teachers.

Huff, who graduated from Maimonides before becoming an administrator, said every grade has a tradition called shabaton, when students will spend the weekend at a teacher’s house, eating meals together and talking about important issues.

“Teachers in the school as a whole play a big role in how to behave,’’ said Tamar Kosowsky, a senior varsity volleyball captain. “Every school should focus on what it means to be athlete on the field.’’

Administrators said receiving the award meant they were doing the right thing, in and out of the classroom.

Judy Boroschek, general studies principal for the school, said, “It felt very affirming of what we’re trying to accomplish — to think school can have that much of an impact.’’

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David Gebler is the President of Skout Group, an advisory firm helping global companies use their values to remove the roadblocks to performance. Send your thoughts and feedback to dgebler@skoutgroup.com.

A powerful tool was made available to the public yesterday. In research reported Thursday in the journal Science, scientists at Harvard University, Massachusetts Institute of Technology, Google and the Encyclopedia Britannica unveiled a database of two billion words and phrases drawn from 5.2 million books in Google’s digital library published during the past 200 years.

Just insert the phrase “business ethics” and see what emerges:

While the increase in the phrase in recent years makes sense, given the increase in the number of business books published. But look at the blip in 1930, just after the Crash of 1929. It didn’t take long for authors to be raising issues about practices on Wall Street.

Hmmm.