Mechanical conscience

I’ve been thinking about how businesses react to ethical transgressions. Some types of transgressions, such as those recorded by electronic messaging (email, file uploads, IMs etc), contributed to a number of large corporate court cases in the US since 2000 and came to influence the way companies store and monitor data.

Messaging supervision is a series of processes and tools put in place by organizations to monitor employee electronic communications with the goal of catching problematic communications either in real time or soon afterwards. Businesses (often those in financial services) implementing messaging supervision are often required, or influenced by regulations including NASD Rule 3010 and SEC Rule 17a-4 when they put such systems in place. Businesses also implement these systems in order to protect intellectual property and catch undesirable employee behavior, hopefully before it gets out of hand. Transgressions are caught by the system’s mechanical conscience.

But really, businesses just want to automate compliance and adhere to regulations efficiently. While no regulatory body requires a software-based system to check for possible transgressions, the sheer volume of email is too large for anything but spot checks from compliance staff. Nor should an organization want to actively review all communications traffic. Instead, the bulk of email communication, website visits, IMs and file downloads are scanned by rule-based software platforms. That means that if compliance staff look at a fixed number of tracked communications daily, use of these systems should increase their probability of finding something problematic without adding extra content volume to view.

What the mechanical conscience cannot do is account for context, intent, or employees who write for the censor’s eye. Also, these supervision systems are used at a corporate level primarily in the US. Interestingly Americans, who are normally considered to be privacy conscious, accept the right of their employers to look at their email. In France, for example, employees are allowed to set up private email folders which cannot legally be read by corporate compliance supervisors, should there be any. Further, employee knowledge of messaging supervision also pushes potential transgressors to other means of unmonitored communication: the cell phone conversation or meeting for a drink, which an industry worker once told me is just what the presence of the system is supposed to do.

Does regulatory compliance lead to a different approach to ethics in organizations?

As customer friendly as an orthopedist's office?

I recently visited an orthopedist's office (I was not the patient).

As I sat in the waiting room I kept noticing that many people, especially older patients, were unable to open the pneumatic office door. Since my seat was near the door I ended up helping several of the people who had trouble. The door was not only very stiff but it also had a handle that was hard to turn. Remember, we are sitting in an orthopedist's office -- the place you go when you have bone injuries. I might be able to accept a door that didn't work in an Eye, Ear, Nose & Throat doctor's office, but in an office where most of the people who come in have a problem with movement?

Things like that are clues about the people who work there. Do they notice? Do they care? Do they know how to solve the problem if they do notice and care? Don't take this posting as a complaint. Instead, take it as a way of evaluating organizations that you may work with.

I told the receptionist about the door. If it's not fixed the next time I visit I might just go get a screwdriver and loosen the pneumatic hinge myself.

Olympic protests

Back in 1995 I was for a while with an NGO that worked to encourage diplomatic recognition between the US and Vietnam. When diplomatic recognition came that summer, there were a few protests in Washington by American Veterans and Vietnamese former refugees. One of the group leaders I was with debated whether to shield the Vietnamese government officials from seeing such protests. He soon relented, believing that there was value for them to see the differences of opinion; that is, on the US side the country had moved to support reestablishment of diplomatic relations but some dissenting voices remained – voices that at times even came into the conference room to demand answers from the officials. As we know, it all turned out fine and those protests are a footnote in the history of the last century.

Countries in the international spotlight must become accustomed to receiving criticism and having questions asked from all sides. The critics may be no better than the criticized, but that does not matter. To a certain degree, hearing criticism and answering questions are healthy exercises that inform of possibilities for improvement and allow people to learn more; but criticism and questions may also be a hallmark of special interests. Whether justified or not, this is a part of life in the spotlight. However, the pro-China Olympic protesters seem to be more concerned with forbidding the right to criticize or ask questions. The pro-China protesters’ focus seems to be one of legitimacy, noting the shortcomings of the pro-Tibet protesters and foreign countries where the torch relay was disrupted.

I look forward to moving past this part of the 2008 Olympics but wonder how long both sides will dwell on their emotional reactions to the other. Moreover, there is a competition over which side can produce the most supporters and the best slogans. These protests are certainly more than a footnote now. They may inform the way Chinese businesses and businesses from the rest of the world think about each other for some time.

Entrepreneurship

I heard Howard Milstein speak recently at Cornell University’s Entrepreneurship@Cornell annual awards event.

Here are a few take-aways from his talk.

Economics:
In one example, Milstein realized that the main hotels in NYC were always full during the work week – there was a shortage of rooms for businesspeople. He then started to raise room prices from $36 at the top end (this was the late 1970s) until top room rates were $125 a night. This price jump occurred within one year. And the other major hotels in NYC increased their prices along with his. Result: hotel still full.

Timing:
In another example, Milstein was able to get commercial airtime for his Milford Plaza Hotel during the Super Bowl by both being well connected to the TV execs looking to sell 30-second advertising slots and able to make a spot decision on whether or not to buy the airtime when they called. Milstein held out for what turned out to be a 90% discount on airtime (he paid $33K for a standard priced $350K / 30 second slot).

DIY:
When Milstein wanted to install cable TV at the Milford Plaza, Time Warner quoted him a price of $10/day/room. Time Warner refused to negotiate and as a result, Milstein started Liberty Cable to provide service to his hotels and later sold service to other buildings in NYC.

Overall a great speech exhibiting the entrepreneurial mindset.

New attraction to the humanities

I have enjoyed reading the recent defense of the study of philosophy and the humanities. In a New Generation of College Students, Many Opt for the Life Examined Stanley Fish’s blog from earlier this year has a different take.

It is heartening to me that these days more students are choosing majors in the humanities. One discipline of the humanities -- history -- has fascinated me since I majored in the subject at Cornell. Over the years I’ve found that you can have nice conversations about many things with people when you travel but if you discuss history, it is easy to get into an argument. Each country puts its own slant on the history taught in elementary and secondary school, stressing, ignoring, changing and reinterpreting events along with the times. And not everyone studies history at university, where there is more likelihood to be exposed to alternative viewpoints.

Many people have asked me how I made a transition from history to technology and business but for me this was never an issue. Many of the big problems in the world today are at some point a disagreement about the interpretation of a common history. Taken with that view, technical questions seem smaller.

In a time when we see worried articles stating that for example, US universities have too few engineering students and that many engineering graduates from emerging nations are not adequately equipped to work upon graduating it is intriguing to see articles like those cited above.

Bear Stearns rescinds MBA job offers

Yes, this is tough news. I remember what it was to be an MBA student looking for a job. While I never had an offer rescinded, I have to say that as tough as it is for the students (as well as the many others involved), Bear Stearns and JPMChase are showing some class here. For example, first year MBAs who would have interned at Bear will receive their standard 10 weeks salary if they go to work for a non-profit this summer. Graduating students now out of a job will keep their signing bonuses.

Those impacted may think that this is far from fair. After all, they competed for, won and were hired for a particular position – a position that is now no longer needed. But in an “employment at will” culture, making these small concessions is not bad.

For the students who are now stuck applying to jobs all over again: don’t worry, you’ll find something. I only recommend that you be more creative in your search and look beyond standard MBA jobs. And maybe when you look back at this years later, you’ll be glad at what you’ve achieved. I wish you the best of luck.

Importance of a story

Part of consulting work is the analysis of data. But typically, the analysis itself is not what is most difficult. The more difficult parts tend to be gaining access to good data and knowing how to interpret the data. From that point, patterns, cause-effect relationships and forecasts are possible. That is also where there is value to the client. So in effect, the value comes from knowing what story the data tell you.

This is very different from starting out with a story or from making up a story.

I was thinking about what is analogous to this in the non-consulting world and I remembered my own experience learning about modern art. Much of the value of a piece of art comes from the depth of the story behind the piece. Let me explain.

One gallery I frequent is Murray Guy in New York. The first time I went to the gallery in 2003 one piece of artwork was almost invisible to me – the piece was a pile of crates. My eyes literally skipped over them and looked elsewhere. But after talking to the gallery owners I learned that those crates were made by Dave Muller, an artist who appreciated the work of Andre Cadere, who in turn was an artist who made painted wooden poles (Barres de Bois) and left them in galleries as a disturbance. Muller, unable to afford to buy one of Cadere’s wooden poles instead made crates that matched them in size, like carrying cases.

Getting access to the data (seeing the crates) and knowing what to do with the data (uncovering the history) led to getting the value (understanding the story).

Artwork, like business data, may be high or low in value to the consumer or client in relation to the story told.