Tag Archives: Nobel Prize

Thought Leader in Action: At U. of C.

An organization the size of the University of California system—10 campuses, five medical centers, a student body of 239,000 and nearly 200,000 faculty, staff and other employees—requires the close attention of individuals who help assess and manage risk and insurance. Kevin Confetti, the UC deputy chief risk officer in the Office of the President, is one of those people who keeps the University of California operating and its employees satisfied.

Born and raised in Pittsburg, CA, Confetti grew up in a hardworking blue-collar family with parents who worked at DuPont and at U.S. Steel. While in high school, he aspired to be a teacher and football coach, and he attended UC Davis, where he played on the varsity football team and graduated with a B.A. in rhetoric and communication. After graduation, he hung up his cleats and got his first real job working in claims adjusting for Cal Comp, where he found he really liked the variety of work. That experience led him to promotional opportunities at Fireman’s Fund, Ernst & Young and Octagon Risk Services. Serving for five years as a claim unit manager at Octagon—the UC system’s third-party administrator (TPA) at the time—Confetti was hired by the UC system in 2006. Now, he’s in the process of achieving his ARM (Associate Risk Management) designation.

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Kevin Confetti

Within the UC system, Confetti reports to the chief risk officer, Cheryl Lloyd, and he provides overall management of self-insured workers’ comp (aka “human capital risk”), employment practices, general and auto liability, medical malpractice, construction risks and $50 billion of property risks. Confetti said the UC system’s various campuses and medical and research facilities are actually quite autonomous, while the Office of the President strives to manage the overall risks without using too many mandates. It’s a program that responds to needs as it sees fit, and it helps set up system-wide policies.

To do his job well, he said he needs to be a good communicator, a good listener and someone who facilitates collaboration and cooperation among his various facility risk management teams. He described the job as, essentially, convincing his campus teams that something is the right thing to do.  He loves the variety of what he manages, and his passion is to save the UC system money, whether it’s $1 or $1 million, so those savings can go to the UC system’s mission. Confetti said, “Leadership requires the ability to convince others in the UC system of the value of our propositions and decisions.”

With an in-house risk management staff of 10 to 12, Confetti serves each campus risk management department (ranging from about two to three at UC Merced to 12 at UCLA) as clients. The UC system uses Sedgwick as its TPA for its self-insured programs, which provides in-depth metrics, data mining and monthly and ad hoc reports. Sedgwick also provides assigned analysts in virtually every UC risk area.

Confetti also manages the UC Risk Management Leadership Council, which meets monthly on various campuses. In addition, his office hosts a Risk Summit conference once each year for every campus and facility risk management team. These teams come together to discuss trend statistics and emerging issues that are key risk factors for each unit as well as the overall UC system. While each campus team does things a little differently, they all operate with a similar mindset that fits within the UC system’s overall objectives.

At the moment, Confetti’s biggest area of concern is cyber security; cyber issues can be difficult to identify and prevent and can be one of the most destructive risks, threatening things such as power grids and other infrastructure. The UC system employs several different IT structures, and, because most insurance coverage excludes cyber risk, the risk is extremely dangerous from a risk manager’s perspective—especially given the size and nature of electronic data managed by the UC system.

A second issue Confetti is currently concerned with is the risk to students and faculty from active shooters or other terrorist-minded groups.

A third risk he’s focusing on is the use of drones; Confetti said the federal government, businesses and institutions haven’t been able to effectively manage the growing number of drones operating freely in the U.S.

Confetti said he would tell newcomers to risk management that technology continues to propagate new risks. He advised, “Be willing to take on risks, but learn from your mistakes and know that you don’t have all of the answers. You have to take risks to move forward, but negative experiences should provide the knowledge and skills to mitigate risk more effectively. … Be flexible and open to new ideas. … Avoid reliance on statistics. Data will give you a trail of facts like breadcrumbs to show you what trail you need to follow. But get out of the office and make the rounds to see and hear what’s going on.”

How Milton Friedman Got It Wrong

Add Nobel Prize winner, economist Milton Friedman to the list of smartest guys in the room who said, did and taught the dumbest things.

Just what did Friedman say in 1970 that American leaders in 2015 have become so infatuated with?

Here it is. Word for word.

“When I hear businessmen speak eloquently about the ‘social responsibilities of business in a free-enterprise system,’ I am reminded of the wonderful line about the Frenchman who discovered at the age of 70 that he had been speaking prose all his life. The businessmen believe that they are defending free enterprise when they declaim that business is not concerned ‘merely’ with profit but also with promoting desirable ‘social’ ends; that business has a ‘social conscience’ and takes seriously its responsibilities for providing employment, eliminating discrimination, avoiding pollution and whatever else may be the catchwords of the contemporary crop of reformers. In fact they are — or would be if they or anyone else took them seriously — preaching pure and unadulterated socialism. Businessmen who talk this way are unwitting puppets of the intellectual forces that have been undermining the basis of a free society these past decades.”

Friedman actually said this stuff about businesses having no social responsibility. And American leaders believed it, and then acted on it.

The result?

It took 45 years, but American leadership finally created for today’s knowledge workers– but not themselves, of course — what University of Massachusetts Professor William Lazonick refers to as “profits without prosperity.” The problem isn’t just the fox guarding the hen house. This is the fox in the hen house, waiting for the chickens to come home to roost.

Sadly, both for American employees and for Friedman, the well educated economist’s theory has for years replaced the golden egg (continuously improving people and process, which should have come first) with the smell of rotten eggs (the remnants of command and control). The evidence: America’s all-time-low employee engagement, our virtually stagnant economy and wage deflation.

American leadership’s hen house now appears, instead, to be more of a dog house.

Let’s face it, we can’t compete globally because modern leaders have failed to capture and engage man’s curiosity and creativity. Because if they had, we would have exchanged our arrogance for our humility, and listened to learn rather than tell. We’d be continuously improving people, because learning comes from people, and improvement comes from learning. Which, in turn, comes about from the detection and correction of errors in our thinking. And we’d be using that employee knowledge to show leaders where wasteful activities exist,  destroying the American people, their personal productivity and their well-being.

I suppose it was easier for Friedman to assign blame to the “intellectual forces…undermining the basis of a free society these past decades,” rather than teach executives the true human value of respect and continuous improvement. Especially when today’s executives earn 300 times more than those they serve.

Who could successfully argue that paying executives so much money doesn’t make their companies better?

Maybe Japanese executives like CEO Akio Toyoda of Toyota, who in 2013 earned just $2.9 million on $18 billion of profit. Respecting people; improving people; and improving process and wasteful activities that affect people. And, of course, selling cars to — of all the crazy things — more and more people.

Seems like people do matter, Mr. Friedman. They’re called customers and employees, fathers and mothers, friends and family.

The Japanese circle of Kai and Zen — the art of making change through continuous improvement — is something we need more of in America and throughout the world.

Let’s stop turning to pontificating prognosticators: today’s Tarot card readers using computer-driven analytics. The kind now used to determine people’s job security and personal productivity, especially average people when the time comes for their annual review.

Let’s stop teaching children, employees and, sadly, future leaders, the wrong things about man’s intrinsic motivation.

Let’s stop sending the message to society that man’s intrinsic value is irrelevant. An unnecessary component in improving this strictly extrinsically valued society.

In a 1991 article written by Alan Robinson from University of Massachusetts and Dean Schroeder from Valparaiso University paid close attention to the effective use of employee suggestions. Turns out, man’s intrinsic value in other cultures and countries is extrinsically valuable to leaders and stockholders.

Japanese employees turned in 32.5 suggestions per person. American employees turned in 0.11. American leaders implemented just 37% of the employee’s recommendations, while Japanese leaders implemented 87%.

American employers were too busy to listen, and employees too disengaged to contribute.

Meanwhile, America was losing the luster on her once global competitiveness crown, and she didn’t understand why.

Perhaps emphasizing our need to nurture man’s intrinsic value over his lifetime, not just nurture his extrinsic net worth quarter by quarter, still makes sense. Especially if we’re going to improve one another, ourselves and our ability to compete in the global economy. And in that distinct order.

The results of America’s inability to compete today are simply the consequences from the consistent leadership message sent to the willing workers of today and yesteryear: We have little value for your mind, your heart or your soul. Your value to corporate America is, strictly speaking, only from the neck down. Don’t speak or think; we know what’s best for you.

A message better understood by reading Steven Denning’s, Forbes 2011 article, titled, “The Dumbest Idea In The World — Maximizing Shareholder Value.

Or, if you are really ambitious, and enjoy learning from history, read Out of The Crisis. The anti-gospel to today’s American rhetoric on economic and management theory.

The author, Dr. W. Edwards Deming, railed against American leaders, who, way back beginning in the 1940s, assigned regularly occurring production variances to employee failings. This while leaders continued to miss the true causes behind increasing production costs and poor quality. Deming assigned blame for this directly to American leaders, calling for a radical transformation to how America leadership conducts business.

Deming knocked on American leadership’s door but couldn’t come in. Friedman’s puppets had dead-bolted it shut; double locks; top and bottom.

The unlimited asset of human capital Deming talked about — once free for the asking — has now all but dried up.

Will the first country that really wants our human capital please come forward?

As Professor Lazonick points out in his Harvard Business Review article, “Profits Without Prosperity,” during the previous 45 consecutive years, real wage increases, (wages adjusted for inflation) have not increased more than 2% in any three consecutive years but once. And that was during the Internet bubble of 1997, 1998 and 1999.

To put this in lay terms, my 24-, 22-, 20- and 18-year-old children now earn substantially less per hour for the same job that I performed in 1984. And even when I don’t adjust for inflation.

Got milk?

At least recently?

Mine’s going sour; seems I can’t afford a new gallon.

So what can we do differently to improve America’s ability to compete domestically and abroad?

Let’s turn to history and Gen. Douglas MacArthur, Taichi Ohno and the millions of other leaders and customers who collaboratively helped Japan become the second-most productive nation in the world, very shortly and efficiently, after World War II ended.

Rebuilding a nation ravaged by war, but then greatly improved upon by humans — and almost exclusively from the customer’s point of view — Japan used human capital and man’s intrinsic creativity and curiosity to compete on a global basis. Adding greater and greater value to the products American consumers frequently told the Japanese they wanted more of, by putting their money where American leadership’s mouth once was.

What did Gen. MacArthur demand American leaders (working in Japan to re-build the country and the culture) do with the Japanese’s people’s curiosity, creativity and craftsmanship after WWII ended?

He demanded leaders use the people’s intrinsic cultural talents to create sustainable, corporate and societal advantages. In fact, MacArthur required the culture of Japan — one of a highly curious, creative and respectful people — not be challenged, changed nor interrupted by American occupiers. He feared that creativity — Japan’s cultural backbone — could be lost forever.

Sorry, Mr. Friedman, you were wrong in 1970, and you’re even more wrong today.

People matter. All of them.