Thursday, August 20, 2020

Is it time to return to campus?

The pandemic has us questioning the safety of just about everything we took for granted just a few months ago.  With the school year upon us, we must now worry about the safety not only of our children but also ourselves as those wee ones may not get sick but could act as carriers of the virus.  The opening of college campuses poses an even greater risk as students travel from all parts of the country.

The possibility of converting college education to an online -- rather than in person -- experience, has many questioning the cost of a college degree.  Of course, if such a conversion caused a reduction in tuition, the universities would still be stuck with the massive overhead of the land and buildings they own.

The debate is not new.  Following the Great Recession, many questioned the value proposition of a college degree as many graduates couldn't find jobs with incomes sufficient to pay off their student loans.  Historical data continues to support the value of a degree in terms of lifetime income differentials between those that have one and those that don't.  But past is not prologue.

I have been questioning the value of a college degree for some time.  I first wrote about it in 2012 (Is the education we want the education we need?), pointing out that industrial powerhouse Germany relies on an apprentice program to enable the middle class to obtain good-paying jobs. 

In the following year, my headline read "Don't Send Your Kids to College."  In that post, I suggested we not take it as an article of faith that a degree will provide the skills to get a good job and recommended parents and students take "responsibility for the outcome, discovering what employers want" to get the training and education that's right for the job market. 

In 2015, I suggested we replace our expensive universities with a lower overhead model that combined online education with semi-annual visits to lower cost facilities in "It's time to replace our universities with...

Later, I asked the rhetorical question "When will the university bubble burst?"  Perhaps the time is NOW!

WHO WILL LEAD?






Friday, July 31, 2020

Ending police abuses requires culture change NOT systemic change

This post was published in the Rochester Beacon on July 26, 2020

There has long been a law prescribing it is illegal to shoot someone in the back.  But that law did not save Walter Scott.  Although unarmed and not threatening his killer, he was shot in the back by a South Carolina policeman while running away during a routine traffic stop.  It is certainly appropriate to ban chokeholds by the police in the wake of George Floyd’s death.  But I doubt the law will save anyone’s life.  Laws by themselves haven’t been shown to protect people of color.  Hence the call for “systemic change.”  

But what is systemic change? And, how will it change the outcomes for millions of African-Americans who have suffered not only the abuse of police officers but also ongoing discrimination in their pursuit of economic opportunity – from housing, to banking, to employment.  

The challenge for legislators, particularly at a federal level, is that there is little they can do to change outcomes that hasn’t already been done.  We have extensive legislation backed up by the courts that prevent discrimination in every arena.  Victims of discrimination can – and have – pursue(d) remedies in court and win.  Beginning with major civil rights legislation in the 1960’s and continuing as educational, business and government opportunities opened up for African-Americans, the system can be said to have already changed.  And yet, discrimination persists. 

While “systems” must continue to be examined to root out discriminatory practices.  The primary focus of leadership, particularly in municipal governments and police departments should be on culture.  While training and routine practices define the system, behavior and language define the culture.  In some cities, the behavior of police is less a function of race than it is of police department culture and its momentum.  

Consider the case of Freddie Gray.  He died in the back of a Baltimore paddy wagon because of the negligence of police officers involved in his arrest.  Six officers were criminally charged.  Three of those officers were African-American, as were the city’s police commissioner and mayor.  No reasonable person would assume any of them were guilty of racial bias against members of their own race.  Yet, Freddie Gray still died.  

The question now is how do we change the outcomes?  Not only how do we prevent police from doing harm but also how do we modify the behavior of thousands of educators, bureaucrats and employers to ensure people of color have the opportunity to improve their lives?

While federal legislation is important in signaling direction, we must rely on thousands of cities and towns to examine their own institutional behavior.  It is unlikely that such dramatic change will occur spontaneously and simultaneously.  We must hope there will be a handful of local governments that will experiment boldly, have some success and serve as examples to others.  Change management is hard work and few organizational leaders have a clear understanding how to achieve it.  Success in this realm requires a willingness to challenge orthodoxy, take on powerful people and suffer the slings and arrows of detractors all while maintaining focus.  

Numerous business turnarounds have been documented in academic studies and the Turnaround Management Association certifies professional businesspeople with expertise in business turnarounds.  Consultancies that specialize in municipal turnarounds are fewer in number.  Nevertheless, there are concepts that translate from commercial turnarounds that would serve in the effort to change police department culture.

Communication

Leaders must constantly communicate to be effective.  Consistency and clarity are essential. The chief executive and his or her lieutenants should all have the same brief stump speech telling everyone “where we’re going (goal), why we’re going there (purpose) and how we’re going to get there (plan).”  The same short speech should be delivered whenever the subject comes up.  It should be repeated so often that subordinates begin to roll their eyes when they hear it.  

Of course, a speech has no meaning unless it’s backed up by action.  A plan should be developed that is clear on what will be done, who is accountable to do it, and how success will be measured.  It’s easy to lose sight of goals in the throes of getting it done.  So, it’s also incumbent upon leadership to celebrate each milestone achieved in the context of the stump speech: where we’re going, why we’re going there, how we’ll get there.

Change the metrics

Police officers who are fast, proficient and productive are highly rated in many police departments.  But the measures by which productivity is measured are based upon crime statistics.  Such measures as response time and clearance rates are widely accepted as prime measures of effectiveness particularly when coupled with a reduction in  crime rates.  The data required to calculate those measures are easy to collect.

But these measures are only part of what makes a good police officer in the minds of community members.  Officers must have the soft skills and emotional intelligence necessary to engage with the community and gain the trust of its members.  In Rochester, the current police chief was a prime mover in the development of a new set of metrics before rising to his current role.  The document outlines more than a dozen new measures in the categories of Community Engagement and Service.  

New metrics and leaders who hold officers accountable to them are essential to any effort to improve police effectiveness.  By themselves, however, such an upgrade will not change the culture of a police department. 

Break up power centers

No chief executive (or police chief) wants to be dragged into day to day management of the detailed activities of their organization.  So, they often rely upon those who have more influence than their position would normally indicate.  They may have achieved their status by some combination of expertise, tenure, effectiveness and relationships developed over a long career.  They are the kind of people on which chief executives of businesses, government bureaucracies and police departments come to rely.  They make the trains run on time.  

Such people represent the status quo. They have an entrenched interest in continuing the momentum of an organization.  As important as they are, they are also the people who should lose their jobs.  That is not to say they should be fired.  A bigger title, a move into a senior advisory role or a promotion may be required to keep them in the fold and to curb their natural tendency to fight the changes leadership endeavors to make.  

Breaking up power centers forces leaders to become engaged, to learn the details and to engage with key people on the front lines.  A new perspective will be gained.  An understanding of how things must change will be emerge.  Relationships with the people delivering critical services (police officers in this example) will improve.

In any turnaround, this is the most difficult phase to affect.  Allies will falter.  Doubt will be sown.  Opponents will engage in disinformation.  This is where resolve and true leadership is required. 

Find peer group leaders

Enlightened leadership – new metrics, organization changes, front line engagement – will excite some of the participants.  For sure, many will demur and many more will fight change tooth and nail.  But some will be surprised – delighted even – at the effectiveness of a new program and the opportunities it presents.  Most police officers, after all, are initially motivated to pursue their careers by a desire to serve.  

Senior leaders must find those acolytes and highlight their successes.  Awards should be given, publicity should highlight their results, and, over time, those who have delivered on the new program should be promoted.  Their peers will follow their lead if they see them as supported by senior leadership.

Ground truth

It’s easy to ascertain the effectiveness of corporate programs.  Customers will be pleased; more units will be sold, and, prices can be raised.  Life’s not that easy for government leaders.  No matter who or how many citizens are pleased, the loudest voices will come from detractors.

The ground truth – the real impact of any set of change programs – can only be validated by leaders getting out and engaging with community leaders and members.  How are they feeling about what’s happening?  Have they noticed the changes?  Are their expectations of the police being met?  Are there examples of something that pleased them?

The simple act of asking such questions will have a positive impact not only on the community but also, by extension, on the police officers themselves. 

Listen

President Harry Truman famously kept a sign his desk saying, “The Buck Stops Here.”  It’s a simple phrase conveying that he was accountable for not only his successes but also his failures.  True leaders take responsibility for all of it.  True leaders don’t play the blame game.  True leaders listen to those on the front lines.  They admit mistakes.  They adjust their sails and find a new course.

Any new program will be seriously flawed.  Mistakes will be made.  They may be big mistakes.  They may be small mistakes.   But mistakes will be made.  Community leaders should be transparent about what’s going right and what’s going wrong.  Failure to admit mistakes will undermine any progress that’s been made and risk loss of support from subordinates and the public.  

This list is not exhaustive.  But it is foundational.  Any change management program – any effort to change organizational culture – will vary depending upon the circumstances of each city and town.  But these concepts must be included.  Only leaders who make an honest assessment and take bold action will succeed in the effort to improve the lives of people of color.  

Many of these themes are echoed by Rochester’s police chief LaRon Singletary.  In an interview published in the Beacon, the Chief outlined the thrust of his Community Policing Plan and the importance of accountability and engaging members of the community.  The challenge, of course, is that the real results are difficult if not impossible to measure.  For members of the most affected communities, the question might be, “how do you feel when you see a cop coming down the street?”  If one feels safer because of his or her presence, it’s a mark of success.  If one feels as though they should run away, there is more work to do.  

WHO WILL LEAD?





Sunday, July 19, 2020

Now is the time to invest in green energy

The following post was published in the July 17, 2020 edition of the Rochester Business Journal

The pandemic has knocked a surging economy flat on its back.  Predictions on its recovery range from the V-shaped curve we’d all like to see to the forecast by the Congressional Budget Office that implies it will take a decade to return to our former glory.  Many, including Wall Street Journal columnist John Stoll suggest we put our green dreams on hold saying, “businesses that were trying to save the world are now simply trying to save themselves.”  It’s a fair point.  But it ignores some fundamental principles of how we should analyze our businesses at the bottom of the cycle and make strategic investment decisions.

Guiding a company out of distress into a stable and competitive future is no small task.  Survivors will have spent time reevaluating their companies with an eye toward eliminating unproductive activities and unprofitable products and services.  The outcome for those who succeed will no doubt be a leaner, more efficient enterprise.  A disciplined approach to restructuring balance sheets and operations will yield an opportunity to develop new strategies for the future.  And, those new strategies should include green energy and carbon neutrality.  

We all know the big picture.  Nicely summarized by the Trump administration’s National Climate Assessment“Human-induced climate change means much more than just hotter weather… These changes… [will] affect human health, water supply, agriculture, transportation, energy… with increasingly adverse impacts on the American economy…”  The Boston Consulting Group has quantified the impact in a report titled “How to Change Course on Climate.” BCG projects a 30% decline in per capita GDP by mid-Century if we do nothing to address climate change.   Reversal of that decline calls for us – all of us, locally, nationally and globally – to eliminate carbon emissions by achieving carbon neutrality in our operations.  

Fortunately, we have reached a point where it is not only economically feasible but also advantageous to deploy green energy.  There are local businesses offering community solar power with no upfront investment at a cost lower than conventional energy.  Others will help you electrify your fleet.  The Greater Rochester Regional Economic Development website provides examples of local companies who have improved their businesses as well as their carbon footprint by deploying green energy. 

Resources are available and the table has been set.  The next step is to include green energy and carbon neutrality as critical strategies for your business.  Raising the consciousness of your management team, exploring green options and implementing those that place you on a more sustainable path will undoubtedly improve your results both in the near term and long term.  
No one solution applies to every business.  But there is a solution for your business.  

WHO WILL LEAD? 



Sunday, June 21, 2020

The Conservative Approach to Defunding the Police


This post was published in Rochester's daily newspaper, The Democrat & Chronicle, on June 21, 2020


Will Hurd is the only black Republican in the House of Representatives.  In a Wall Street Journal op-ed, he laid out his proposal for reforming the police.  Included was the implementation of best practices for police departments to be eligible to receive their portion of the $2 billion the federal government provides to police departments annually.  Implicitly, Rep. Hurd is saying Congress will defund police departments that don’t meet federal standards.

 

The clarion call to defund the police sounds like one end of a binary choice: either eliminate police department budgets or leave things as they are.  Of course, neither of those options are acceptable.  

 

At a local level, defunding the police will take a different form in every community.  In 2013, the city of Camden NJ dissolved its unionized police department and signed a service agreement with the county to provide shared services according to Bloomberg News.  The police were trained in non-crisis intervention and provided with body cameras.  The result has been a reduction in crime and improved community relations.  Last week, Camden police marched in solidarity with #blacklivesmatter protestors.  

 

Would Camden’s solution work in Rochester?  

 

The best approach is for each city to adopt solutions well-suited to their specific communities.  Can the federal government extrapolate a single, one-size-fits-all solution for the nation?  Would connecting that solution to funding have its intended purpose?  It’s unlikely. 

 

There are effective resources the federal government can apply to assist communities.  However, the very nature of large, well-funded federal programs attracts influencers who would undermine its intent and render it ineffective.  By the time lobbyists for police unions and lawyers for social justice organizations got through with it, there would be nothing left of Rep. Hurd’s good intentions.  Bureaucrats would create a set of rules, mayors would declare themselves in compliance, police chiefs would issue carefully worded policies, and nothing would change.  


How about this?  Eliminate the $2 billion in federal funding altogether.  The overall system of taxing Americans and redistributing the funds through federal programs is inefficient, ineffective and unresponsive to the needs of our communities. It would be better to leave the funds in our communities and trust local leaders to affect change.  They would be more responsive and more likely to craft something that works.   


Of course, that’s my libertarian fantasy.  It’s not as though eliminating $2 billion in funding would return that money to taxpayers or the cities we live in.  Two billion dollars is a rounding error on a federal deficit funded by funny money created by the Federal Reserve.  So, we must have our portion of the $2 billion.  But I would rather trust our African-American mayor and local community leaders address our need for reform.  Central planning doesn’t work.  Never has; never will. 

 

WHO WILL LEAD? 






Monday, June 1, 2020

Bailouts, bankruptcies and the Middle Class


Our pre-pandemic stop in the Atlanta suburbs to visit my brother and his wife began a months-long dialog about the state of the nation.  On that occasion, we shared wine and political views --  simultaneously.  That can be a deadly combination but we somehow, we managed our way through it without resorting to violence.  Kidding aside, we had no major differences of opinion largely because we are members of the American, suburban middle-class. 

Our political views are affected by our shared values.  What the suburban middle class has always had in common is our desire to provide a secure home for our families, to support our children’s aspirations and to be financially secure in our retirement. Yes, we have that in common with others who are not in like socioeconomic circumstances.  But the middle class have shared experiences that bind us.  We have endured the ups and downs of the economy, job losses, mortgage crises without an expectation that a government bailout will carry us through.  My brother and I both have been small business owners.  We have gone through years of reduced or no income and still managed to pay the mortgage and save for our kids’ college education.  

I have always assumed we were in good company – that our neighbors shared our values and habits.  But, as I wrote last year (Borrowing Our Way to the American Dream), middle-class families are carrying more debt than they should to maintain their lifestyle.  Middle class living became more luxurious as two income families became prevalent.  Two jobs mean you need two reliable cars (we had one when I was a kid). All that hard work deserves a bigger house and bigger houses mean the kids no longer have to share bedrooms (as we did).  After school activities require big expenditures for travel and sports equipment (it was free, or we didn’t do it).  

In a recent email from my brother, he expressed his astonishment (okay, he ranted a bit) over a news report “showing long lines at food banks.”  The report was a public service call for contributions to keep the food bank stocked. Unemployed middle-class people were understandably concerned their children might go hungry.  His reaction matched my own although he was more eloquent: “You’re driving a frickin’ new SUV and you don’t have enough cash to buy food?”  

It’s hard for me to imagine that the combination of weekly unemployment checks and a $600 kicker from the federal government will cover all their expenses.  So, yeah, they’re suffering, at least in the short term.  But, as my brother ranted, “I made personal sacrifices to save money and plan for contingencies.  Now, these people are asking for my money to feed their kids.   These are the same people that claim they can’t afford health insurance and college is too expensive.   Their priorities are clear.  They want that brand-new SUV, but they want someone else to be their safety net.  I [have] the same anger when I hear politicians talk about ‘college for all.’  Wait a minute, I [sacrificed] to save in a 529 account.  Why can’t they do that?”

We now live in Bailout Nation.  Our government overextends itself in good times and, therefore, lacks the capacity to respond to crises.  And, the same can be said for families and businesses.  Our last firewall against total disaster is – as it was during the 2008/09 financial crisis – the Federal Reserve.  During this pandemic, those in government have the same rational fear as a decade ago.  The crisis may be more than our economy can endure.  So, we flood it with newly minted cash.  

But this time is different. In the weekly newsletter of the American Institute for Economic Research, Scott Burns describes how the Fed has used its emergency powers in this crisis.  The last crisis affected the financial system.  This one is in the “real economy.”  That has cast the Fed in the role of commercial bankers lending to businesses by purchasing corporate bonds and extending credit directly to companies a banker wouldn’t touch.  Something the Fed has never been good at.

Much like my brother, the companies that have managed their balance sheets well don’t need and won’t get relief.  Those that have been profligate get a bailout under favorable terms.  Our economic future would be made more secure if those companies were to go through Chapter 11 reorganization under the bankruptcy code.  The shareholders would lose everything; the bankers would take a haircut.  But the companies’ operations would continue under new ownership, ownership that would be more careful to avoid that same fate.  And, a hard lesson would be learned by the next generation of corporate leadership. 


Of course, crisis conditions place us at risk were we to allow this to happen.  Were too many companies to fail all at once, it could cause a supply shock to the economy accompanied by massive unemployment.  The depth of economic harm could cause another Great Depression.  

So, how did we get here and how should we move forward?

Burns refers to the work of George Selgin on this matter.  It’s difficult to summarize his 322-page whitepaper in a few sentences.  But I’ll give it a try.  Just STOP!  The Fed should outline its operating framework in such a way that those who run banks and industrial companies know what facilities might be available to them under crisis conditions – PERIOD.  

Oh, and there’s one more thing.  One should ask why so many corporations have placed themselves in jeopardy.  The answer is they are doing what the federal tax code incentivizes them to do.  Capital gains are taxed at a lower rate than personal or corporate income.  So, companies engage in extensive borrowing at the aforementioned zero interest rate and use the cash – not to invest it in building a better company – but rather to buy back their own stock, raising the price and lining the pockets of officers, directors and shareholders.  

Raise interest rates to a more normal range, eliminate the disparity in the tax code and watch what happens.  By the time of the next crisis, we might be better prepared.  

WHO WILL LEAD? 

Monday, May 18, 2020

Your choice: Democrat ineffectiveness or Republican hypocrisy

Sometimes you read something so obvious you can’t believe you didn’t figure it out for yourself.  Such was my experience when I read Russ Roberts’ piece on Medium titled “The Economist as Scapegoat.”  Roberts doesn’t just punch holes in a habitual argument.  Rather, he slams you between the eyes with a two-by-four.  He presents data that contradicts the idea that life has gotten worse for many Americans because of Reagan era policies based upon the philosophy of Nobel-winning economist Milton Freidman.  In other words, this convenient trope is not borne out by reality.  

In reality, Freidman’s proposals have never been implemented.  During the so-called Reagan era (the last 40 years), the nation’s budget has been managed more by the prescription of liberal politicians than conservatives, even – or especially – when Republicans are running the government. 

Over the last 50 years, government spending has increased both in real nominal terms… 



Government regulations have increased not decreased… 


And, out-of-pocket healthcare costs have decreased while government spending on healthcare has increased.  



Roberts argument motivated me to do some digging.  What about other liberal tropes?  Do they stand up to scrutiny.  The press likes to trumpet that the wealthy don’t pay their fair share of taxes. Here’s what the Congressional Budget Office has to say: 


Another persistent trope is the comparison to the economies of Europe and the progressivity of our tax code.  This analysis compiled by Bloomberg from OECD data presents an interesting, if complex, picture.  


The figures in the left-hand column are those most often quoted in the press.  But the figures in the right-hand column tell the tale.  The larger the ratio, the more progressive the tax code.  The largest economies in Europe, including the Scandinavian countries, have tax codes that weigh more heavily on the middle class than the wealthy.  

The Bloomberg article goes further to show how the generous benefits of European countries are financed in large part by consumption taxes (Value-Added Tax in Europe; sales taxes in the U.S.) that affect the poor and middle class more than the wealthy.  


American politicians want us to believe the system is rigged against us.  It’s only fair to tax the wealthy to pay the bill, right? Europeans follow a more moral path:  citizens who want government benefits are willing to pay for them.  

All of which suggests to me that what has failed us is not a decline in government investment but rather the persistent failure of the welfare state to address the needs of those who need it most while threatening to bankrupt the economy in the process.  So, perhaps, it’s a good idea to examine what got us here and consider restructuring our efforts.  The challenge, of course, is that doing so relies upon an overthrow of highly educated people who have promoted the idea they are omniscient and, therefore, worth every penny they are paid to spout nonsense.  This faulty presumption leads to bold predictions about how a large, unmeasurable, complex system (the American economy) will respond to government inputs (fiscal policy and regulations).  To be clear, I’m talking about how wrong our politicians and policy elites get things on an ongoing basis.

While the data support the idea that the welfare state has failed, the other side of the coin is perhaps more telling.  Far from following the “starve the beast” philosophy defined during the Reagan administration, Republicans have hypocritically done the opposite.  They have consistently voted for bigger and bigger deficits.  Far from reducing the size of government, they have allowed liberals to tempt Americans into an addiction to government programs while promoting their own brand of addiction: lower taxes.  

WHO WILL LEAD? 





Tuesday, May 5, 2020

A serious personality disorder

In a moment of frustration, an old friend (a consultant in organizational development) blurted out: “in order to be CEO of a major corporation in America, one has to have a serious personality disorder and broadcast it widely.”  We were in my office and, after we had a few laughs about it, I replied, “Truth is… everyone has a serious personality disorder.  It’s just that, when you’re a CEO, it’s broadcast widely.”  I might have added, “even more so if you’re a political leader.”

Whether in politics or corporate life, the chief executive is rarely the expert on what to do.  However, he or she must be the expert on how to communicate what to do.  The absence of clear, credible communication leaves people in a state of fear which, in turn, leads to panic and the spread of misinformation.  People need to believe what their leaders are saying in order act responsibly and hang together as a community. 

Clear communication means being honest about what is known and what is not.  It means being open about what’s being done to find the answers and achieve the best outcomes.  And, the pronouncements from on high must match the ground level reality.  It does not reassure the public to say we can test everyone for coronavirus when everyone knows that’s not true.  Indeed, it makes matters worse.  It’s a breach of trust that leads to people not trusting anyone. 

There is not a clear path to containing coronavirus, keeping the public safe or balancing the risk of disease against the need to keep the economy moving.  In matters as complex as the pandemic, our leaders should encourage us to shed our tendency toward binary choices: extreme action versus fiddling while Rome burns.  In such times, it’s important to be guided by principles and values.  Despite our differences on fairness and the role of government, we share common values.  We believe in the sanctity of human life; the reciprocal obligations within our communities; and, respect for the rights, differences and dignity of others. 

So, what must be communicated?  In a word – Hope!  Hope makes our current situation more bearable.  Hope provides motivation to contribute our efforts to our community.  Hope links our current difficulties to a better future.  During this pandemic, what we hold dear is what is most challenged.  Our economic future is challenged; the health of our families is challenged; and, our psychological well-being is challenged.  A message for a hopeful
future must connect our current situation to a brighter future by being honest about what’s happening; communicating our plans to restore our communities; and, assuring the public of a consistent effort that marshals all our resources.

All of that can be communicated and should be communicated in spite of our personality disorders. 

WHO WILL LEAD?