Better Way to Think About Leadership

Leadership is measured through tools like ROI and EBIT, but they only look at the tangible. Kaizen helps focus on the intangible, too.


In "Colin's Kaizen Corner"--a 26-part learning series, I explain the principles of kaizen, lean manufacturing and respect for people -- each a cornerstone for transforming a culture, improving productivity and implementing a continuous improvement program.

In addition, each week I'll digest a principle of kaizen to achieve these outcomes, explain what we're doing today, what happens when we get it wrong, what happens when we do it better and why it matters today more than ever, to stay on a continuous journey of improvement.

The value of a new corporate improvement or strategic acquisition is easily estimated for most investors. Calculating future anticipated cash flows, measured over a specific period in today's dollars, yields the improvement's net present value.

But leadership isn't so easily measured, nor is the future value that an effective or ineffective leader begets.

Sure, tools like return on investment (ROI) and earnings before interest and taxes (EBIT) help us measure whether executives are investing money wisely to maximize dollars that may sustain the future of the company. But the tools are based solely on what we know, not what we don't. Of course, there's no way to value something you don't know exists; that is, until someone discovers it does.

Valuing human productivity and the intrinsic satisfaction employees receive from being able to do their jobs well doesn't show up anywhere on even the most complex of income statements. Neither does the value created or destroyed from a lifetime of leaders who either nurtured man's most important attributes, or ruined them altogether.

The problem is that ROI, EBIT and similar tools do nothing to help place a value on, and encourage, man's discovery of the unknown. To identify and fix that which isn't broken. To look outside the box.

It is this intrinsic curiosity-our yearning for learning-that makes us unique within the mammalian class. We aren't just members of a "clade of endothermic amniotes distinguished from reptiles and birds by the possession of hair, three middle ear bones, mammary glands and a neocortex" (as Wikipedia defines mammals). Nor do we just survive on instinct as other mammals do.

We're provided with daily opportunities to detect and correct errors in our thinking. Our intrinsic yearning for learning constantly encourages us to explore that which we think we understand.

Man has the choice to continuously improve upon his own knowledge base, or demand that others accept pre-determined answers-a radical difference in leadership style between those who lead by kaizen and those who lead by control.

Like scientific discovery, effective leadership creates for the curious a culturally acceptable and true belief in the ignorance of experts.

But man's creativity and curiosity still don't show up as direct value or loss through the eyes of a customer. And they're certainly not measurable; that is, without the proper tools.

And that's why ROI and EBIT -- the preferred tools for modern investing and modern valuation -- are precisely the wrong tools for measuring human productivity, the value of an acquisition and the value of a business itself.

For if human capacity is assumed to be x, and man's true capacity is actually y, without regular corporate and personal discovery neither man nor machine gets its best chance at material improvement.

Using ROI and EBIT, we've created a culture of mind-numbed business robots. Really smart children, teenagers and adults, being robbed of their intrinsic motivation because of diminishing human valuations. It's as if they were rusting old farm equipment, with just a few years of straight line depreciation left on an otherwise highly appreciable asset.

Nothing could be further from the truth. People have exponential value.

Years of poor parenting, leadership, primary education systems and business school professors have finally brought our chickens home to roost. In fact, as Dr. W. Edwards Deming said nearly 50 years ago, if the U.S. wanted to destroy a country, then all it had to do was export its business management and leadership practices.

Today, we know the enemy even better, and it is still us.

An enemy where large lots of wasteful activities exist, yet few executives are visible to help employees improve; an enemy where waste prevents employees from doing their jobs with purpose, joy, accuracy and speed.

Sadly, more executives today than ever before are searching for value within a spreadsheet or income statement. We fail one another when we refuse to look for loss at the precise location where value is created and where crimes of waste are most frequently reported.

To create a better opportunity for human development and true personal productivity, let's turn to respect. Because respect leads productivity by a long shot as the single most important aspect of man's institutional existence.

Let's provide an institutional daily dose of improvement that is eloquently simple: Continuously help me change, and always help me make it for the better. Because good change nurtures and replenishes my mind, heart, body and soul's constant need for continuous improvement.

By appreciating systems thinking and human psychology-only two parts of a four-part system, but integral components nonetheless-we can easily find opportunities for mankind to improve.

An entirely new system, which identifies what value means to customers rather than stakeholders, can easily bring about a different culture. A culture that even our most seasoned leaders currently don't believe in, currently can't measure and clearly don't currently understand. A culture that should be helping everyone improve that which we cannot see or measure.

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