Ten interesting things we read this week
Some of the most fascinating topics covered this week are: Leadership (Team management lessons from a naval captain), Business (When bosses shared their profits; Make your next pitch instantly more compelling by using this one philosopher's framework), Technology (India Inc wakes up to march of the machines) and Productivity (You need to ask yourself this question every day)
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At Ambit, we spend a lot of time reading articles that cover a wide gamut of topics, ranging from zeitgeist to futuristic, and encapsulate them in our weekly ‘Ten Interesting Things’ product. Some of the most fascinating topics covered this week are: Leadership (Team management lessons from a naval captain), Business (When bosses shared their profits; Make your next pitch instantly more compelling by using this one philosopher's framework), Technology (India Inc wakes up to march of the machines) and Productivity (You need to ask yourself this question every day).
Here are the ten most interesting pieces that we read this week, ended July 24, 2020-
1) Leadership lessons from Captain Abrashoff [Source: mastersinvest.com]
This article talks about one of the best books on management as per Peter Kaufman, Chairman and CEO of Glenair, a business whom Charlie Munger classifies as one of the best three operating companies he’s aware of. 'It’s Your Ship’ is the story of Captain D. Michael Abrashoff, the commanding officer of USS Benfold. The book outlines how, by unconventional means, Abrashoff tapped into the latent human potential aboard Benfold to turn it into the ‘gem of the ocean’.
The Captain challenged Navy procedure to transform a complex organisation. He improvised techniques to build morale and unity. He created a new environment comprising a company of collaborators who flourished in a spirit of relaxed discipline, creativity humour and pride. Benfold went on to beat nearly every metric in the Pacific fleet and frequently the crew beat the existing record.
On empowerment, Mr. Abrashoff writes, “I found the more control I gave up, the more control I got. In the beginning, people kept asking my permission to do things. Eventually, I told the crew, ‘It’s your ship. You’re responsible for it. Make a decision and see what happens.’ Hence the Benfold watchword was ‘It’s your ship.’ Every sailor felt that Benfold was his or her responsibility. Show me an organization in which employees take ownership, and I will show you one that beats its competitors.” The characteristics that defined USS Benfold’s success weren’t quantitative. They were qualitative and they were all about people. The physical asset, the ship, was no different to any other in the fleet; it was the people that made all the difference. Isn’t that same with businesses?
2) A managerial quality that is hard to define but important to possess [Source: The Economist]
In this pandemic, many have taken a lot of tough decisions. Managers, faced with tough calls like which parts of their operations to close, have not been spared. Politicians had to take calls on extending the lockdown. Companies on laying off or cutting salaries. Good judgment is a quality everyone would like to have. But it is remarkably difficult to define precisely, and many people are not sure whether they personally possess it. Sir Andrew Likierman of the London Business School has spent a long time talking to leaders in a wide range of fields, from business and the army to the law and medicine, in an effort to create a framework for understanding judgment.
He suggests that judgment is “the combination of personal qualities with relevant knowledge and experience to form opinions and take decisions”. Expertise can be useful in making judgments. But it is not the same thing. “Academics have expertise,” Sir Andrew observes. “They don’t necessarily have judgment.” People with judgment know when they are out of their depth in making a decision and typically then seek the advice of someone who has the right background and knowledge. The world is full of people whose lack of judgment brought their careers or personal life crashing down. Many made the common mistake of assuming everything was fine.
As artificial intelligence gets used for more and more routine tasks in the service sector, exercising judgment may be one area where humans retain an edge over machines. This is far from certain, however. What people perceive as good judgment may stem from the ability to spot certain cues in the environment. This ability may be unconscious, just as a dog can catch a Frisbee in mid-air without knowing how to calculate wind speed and air resistance. As machines can be taught, so do humans. In the long run, one of the trickiest aspects of human judgment may be knowing precisely when to let machines take decisions and when to leave it to people.
3) When bosses shared their profits [Source: NY Times]
Businesses should resume their profit-sharing model which has declined since 1980s. That’s what the author of this piece thinks. The original idea for businesses to share profits with workers emerged from the tumultuous period when America shifted from farm to factory. He talks about Sears, Roebuck and Co., one of America’s largest corporations, with 30,000 to 40,000 employees, which announced a major experiment in profit-sharing in 1916. The company would contribute 5% of net earnings, without deduction of dividends to shareholders, into a profit-sharing fund. Sears’s plan was admirably egalitarian. By the 1950s, Sears workers owned a quarter of the company. By 1968, the typical Sears salesman could retire with a nest egg worth well over $1 million in today’s dollars.
Profit-sharing did give workers an incentive to be more productive. It also reduced the need for layoffs during recessions, because payroll costs dropped as profits did. But it subjected workers to the risk that when profits were down, their paychecks would shrink. And if a company went bankrupt, they’d lose all their investments in it. The best profit-sharing plans came in the form of cash bonuses that employees could invest however they wished, on top of predictable base wages. Since 2000, the portion of total national income going to American workers has dropped farther than in other rich nations. A steadily larger portion has gone into corporate profits, which have been reflected in higher share prices. But a buoyant stock market doesn’t help most Americans. The richest 1 percent now own half the value of all shares of stock; the richest 10 percent, 92 percent.
If Amazon’s 840,000 employees owned the same proportion of their employer’s stock as Sears workers did in the 1950s, a quarter of the company, each would now own shares worth an average of about $386,904. According to the author, there are many ways to encourage profit-sharing. During this pandemic, for example, Congress should prohibit the Treasury or the Federal Reserve from bailing out any corporation that doesn’t share its profits with its employees. Sharing the profits with all workers is a logical and necessary first step to making capitalism work for the many, not the few.
