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February 18, 2005
Trust the One You're With
Three stories caught my eye this week. The first is Citigroup's effort to change its corporate culture in the wake of scandals in the private bank in Japan and on the trading desk in London. The second is the revelation that a fraud ring has penetrated the computer system of consumer credit information house Choice Point, leaving up to 100,000 people vulnerable to identity theft. The third is the continuing controversy at my alma mater, Harvard University, whose president, Larry Summers, is being hammered over off the record comments made about the paucity of senior female scientists in academia (he suggested there may be genetic disadvantages for women at play) with a possible non-confidence vote scheduled next week by the faculty.
Citigroup is requiring all 300,000 of its global staff to go to the movies on the week of March 1 to view a 25 minute film, The Story of Citigroup. This will be followed by employee meetings in each market, where according to the Financial Times, "there will be a discussion of resonsibilities staff owe to clients, its franchise and to each other." Coincident with this education campaign will be a reordering of incentive compensation to "pay for the right values." Can this company change its cowboy self-image and hell for leather culture? It seems to me that there will have to be a general acceptance of a simple fact: there is less tolerance today for companies operating at the edge of public acceptability on matters of ethics. This initiative, imposed by top management, will succeed only if it is complemented by a horizontal, peer to peer communications effort as mid-level Citi employees share their experiences in getting bonuses for achieving non-financial goals such as client satisfaction or giving back to the local community.
The theft of consumer information, namely credit reports and social security numbers, is an important warning to technology companies and to those companies that will become part of the ubiquitous computing universe in the next five years. Understand that Forrester Research expects that there will be 14 billion appliances hooked up to the Internet by 2010. These will include refrigerators, television sets, vacuum cleaners, etc. Privacy is going to be the most pressing issue for companies seeking to participate in the revolution. How comfortable will consumers be with business having easy access to eating habits, TV viewing behavior or other parts of daily life? If the business community is smart, it will get moving on a code of conduct which governs use of this information. Business will have to work closely with consumer advocates and non-governmental organizations to socialize these rules in order to generate credibility prior to introduction. Europe will be the most difficult region to gain consumer acceptance of this new world of ubiquitous computing according to experts at a lunch at the World Economic Forum in January.
The Harvard controversy pains me deeply. I have three daughters and an accomplished wife. In fact, my eldest will be going to Harvard in the fall. I also know Larry Summers, not well but well enough. He is a decent man, a serious intellectual, a person who loves a debate and does not shy away from tough decisions. His remarks, as he has acknowledged, were inappropriate, even more so because his position is so important in the world of education. I believe it was a fundamental mistake to delay the release of his remarks, because it has provided his opponents with a completely new "news cycle". Great chief executives have recovered from initial missteps by apologizing for their errors (he has done that), laying out a specific series of markers by which they can be judged, then meeting these goals. Summers has important ideas, including undergraduates spending a year abroad and assuring that undergraduate education is truly well rounded with serious science requirements for those in liberal arts and vice versa (small personal confession--I left Harvard a science ignoramus with one course in my freshman year on ecology, in which I received my one and only C). Summers will survive this firestorm and will earn trust from his key constituencies by consulting them on future plans, establishing the goals, then meeting them.
The lesson from these three quite diverse cases must be the necessity of soft power (phrase coined by Prof. Joseph Nye, and yes he is at Harvard's Kennedy School). Trust in institutions is just as important as hard power aspects such as compensation, stock price or efficient operations. Without it, we will not be able to make fundamental change, whether in the structure of undergraduate education at Harvard or in the spread of ubiquitous computing.
Posted by Edelman at February 18, 2005 4:04 PM
Comments
Yesterday's Harvard faculty vote to censure Larry Summers came as a surprise, even to its proponents.
You certainly must be equally surprised.
The vote speaks to systemic problems in Summers' high-handed sytle far more than the hot-button female/science issue that sparked this firestorm. We had a peak of this problem when the conflict with Cornell West flared. At the time, many might have concluded that this was conflict for which West held equal blame. Now we know that Summers has cultivated much enmity which has all come home to burn.
Do you think the fire can still be controlled or is it time to call in the fire inspectors?
Posted by: Dorian Dale at March 17, 2005 9:28 AM