Internalizing external costs

An interesting thought came to mind yesterday in discussion with a colleague of mine over coffee. He is pursuing a path in executive coaching and writing on healthy organizations and leadership. He made the point that, often, companies with poor organizational health and weak leadership don’t pay the price for quite some time – the financial numbers and reports often don’t reflect the long-term impact of the organizational dysfunction.

Our current environmental issues are very much about external costs not being recognized in the actual cost of the service or good produced – societal costs such as pollution, waste, greenhouse gases, and other human negative impacts. I’m a big proponent of allowing the market to find its equilibrium but only after such external costs have been internalized such that the cost of the good sold reflects ALL costs of its production, not just the direct and indirect financial costs. 

So this is where the interesting thought came up . It would be interesting to discuss and explore whether or not a price could be placed on the long-term impact of organizational dysfunction such that it could be reflected in the financial statements, and thus be integrated into the market judgement of the worthiness of the firm? Why must firms that focus on lowering their emissions, or supporting leadership development, or focusing on employee health and well-being, all at their own expense, face a penalty in the market because of lower profits than their peers?

By internalizing the external costs of bad management, could we see a scenario in which all of the costs of running the firm poorly are reflected in the market valuation of the firm? Over the long-term, the true costs are probably reflected in either corporate collapse or a buy-out, but in the short run, it would be more effective if the market valuation had a mechanism for taking external costs into account.

What’s your passion?

Passion | ManagerTools.com

This post on the Manager Tools blog caught my attention because it deals with one of my favourite interview questions – “So what’s your passion? What are you passionate about? What gets you sparked and out of bed on a good day?”

Years ago, when I was joining a small firm here in Calgary, one of the principals asked me the same question. He wasn’t interested in my answer so much as he was trying to see how I would light up and spark on something – it didn’t matter what it was. I took that to heart, and when hiring for a development team in later years, I’ve tried my best to ask the question, and to hire passionate people. 

Some were passionate about their family, others were passionate about their hobbies or sports pursuits, one was passionate about wine, another was passionate about travelling. And yes, some were passionate about their work, about coding or testing or designing or planning. It matters less to you that your team is passionate about work, it only matters that they’re passionate about something in their lives. That’s because, chances are, if they’re fired up and passionate about one thing, you can probably get them fired up and passionate about the project.

Look for passion in your hires – try to see the spark in their eye, the rapid-fire speech, the heightened intensity, when they talk about something of interest to them. Get them talking about their interests, and you’ll see it.

Trends for 2009

With the arrival of the new year, I got thinking yesterday of the anticipated trends for 2009. Looking around the web produced some interesting results. 

From Baselinemag.com on IT infrastructure:

Software as a service; Virtualization; Energy-efficient data centers; Security, risk and compliance; Enterprise mobility; Social networking; Web 2.0; Document management and e-discovery; Project and portfolio management; Web and video collaboration

Looking at this list makes me wonder if they simply recycled the list from 2008. With the exception of “Project and portfolio management”, none of these seem new. An increase in the development and availability of project and portfolio management tools would be welcome, although simply having more tools for this doesn’t necessarily mean that corporate executives will necessarily make the right decisions. Looking at this list also makes me wonder when it was written – it doesn’t seem to reflect the downturn in the business cycle with little mention of the anticipated pressure on IT to lower costs in the short run.

From Gartner on strategic technologies:

Virtualization; Cloud computing; Beyond blade servers; Green IT; Web-oriented architectures; Enterprise mashups; Specialized systems; Social software and social networking; Unified communications; Business intelligence

This list seems to reflect better the state of IT currently – all of these topics can directly or indirectly lead to cost reductions for IT or improvements in business processes for cost reductions elsewhere in the enterprise. 

From McKinsey Quarterly on business technology trends:

Distributing cocreation; Using consumers as innovators; Tapping into a world of talent; Extracting more value from interactions; Expanding the frontiers of automation; Unbounding production from delivery; Putting more science into management; Making business from information

This list is obviously taking a viewpoint from a more abstract level, but it’s an interesting read, paralleling some similar thoughts from The Economist earlier this year in their special report on innovation. “Distributing cocreation” is “open innovation” to others, as is “Tapping into a world of talent” and “Using consumers as innovators”.

Obviously these predictions need to be taken with a grain of salt – given the uncertainty of the current business climate, anything could happen in IT in 2009! Let the challenges begin!