Where Value Really Resides

Companies are prone to confusing ‘activity’ with ‘value’, ‘technicalities’ with the real ‘adaption’ required to solve real problems.

Our company Sensei focuses on improving business results by improving human performance. You would therefore think I’m a fan of human capital management strategies. Well I’m not a fan of any strategies decoupled from real value.

As an example from a not-too-distant past, Shell was known as a leader in progressive people management initiatives. They set up a corporate learning university, they developed intranet systems for sharing knowledge, and more. But tools don’t provide results in and of themselves. It depends on how you use them.

Now if you spend your time crowing about the technical quality of your intranet, or the “professionalism” of your internal university, you can get seduced by irrelevant metrics. Check out actual performance and see if there’s any correlation.

Shell over declared proven reserves by 20%, had a major expense overrun (in the billions of dollars) in Canada, lost its chairman, was pilloried in the business press for a cumbersome bureaucracy and a prickly intransigence to outside views and inputs. Many factors doubtless conspired to produce some of these unfortunate results. But in “human capital” terms the over declaration of oil reserves, for example,  was a stark indictment of either probity, or internal communication (intranet or not), or the absence of a reality-facing culture (where messengers aren’t shot).

The knock-on effect of this affected their share price, depletion rate assessments, costs of finding and developing new fields and more.  Shell has now hopefully moved on. This is only relevant as a demonstration that despite Shell clearly being awash with talented people, somehow those people were not  coming together with their capabilities to produce the right type of overall corporate performance or competence.

In a nutshell, that’s the rub, in companies far and wide. Talent often isn’t being converted effectively into collective competence.

Non-value advocates, people who propose ‘initiatives’ in the abstract, always prefer to go for less intellectually taxing or emotionally demanding solutions — those that require less leadership adaptation. But leadership adaptation is inescapable, and only that will ripple out into adaptations in the behavior of individuals and teams throughout the organization.

Staying with the same industry, BP doubled its corporate advertising budget in a $150 million bid to portray a “greener” image (circa 2005).  When value gets downgraded as a consideration, particularly if it will call on an expenditure of leadership energy in a personal way, then spin seems particularly attractive. When a major refinery leak took place in Texas and then more recently in Alaska, one wonders what that did to BP’s green credentials. Perhaps some of the money might have been better spent towards actual environmental safe-guards and less on appearances! Not having done so preventively, they ended up committing over a billion dollars to US operations subsequently, including very notably into “pipe replacement”.

Larger lesson: don’t get waylaid by activity posing as results, or initiatives without a clear line of sight to business value. The cosmetics of leadership can be purchased. The reality of leadership engagement, the type that leads to real business success, can only be earned. And one of the best ways of earning it is to look for where the real value in your business resides, and to spend the best of your talent, your energy, and your leadership, there.