Harvard Advanced Management

Program
This a review of my key learning experiences from the Harvard University Advanced
Management Program, which I attended in September-October 2009.
 Awareness Test
n http://www.youtube.com/watch?v=Ahg6qcgoay4
 Why the video?
n The video is a metaphor for the lessons I
learned at Harvard. Because of the way your
mind works, sometimes you cannot see the most
obvious issues. In the eight weeks that I was
away I had the opportunity to question the ways
that I have approached issues in the past, and
reached some new conclusions about life going
forward.
 Harvard’s Goals:
n Integrated Expertise and Knowledge
n Financial Management, International Economics, Team
Decision Making, Organizational Learning, Leading
Innovation, Corporate Accountability, Strategy Development,
Marketing, Negotiating
n Individual Development and Introspection
n 360 Feedback, Personality Profile, Executive Coach
n Action Planning
n AECI Case Studies: Availability, Project Management,
Strategic Planning
n Global Peer Network

These were the stated goals from Harvard for the program.
The individual development section provided good candid feedback on my own
performance. I had an individual executive coach with whom I met to craft a personal
development plan.
We were encouraged to develop personal case studies, applying what we were
learning to real-world issues back home.
 Students from:
• Airbus, Avery Dennison, Biomerieux, Boeing, Chick-Fil-A,
China Petroleum, Credit Suisse, CSX, Ernst & Young, Federal
Reserve, Foster-Wheeler, Freemantle UK, Great Plains Energy,
Heineken, IBM, IKON, India TV, Itochu Corporation, LVMH,
Malaysia (PM, IP), Mitsubishi, Mitsui, MWH, Northrop
Grumman, Occidental, Ormat, Parker Hannifin, Serbian
Ambassador, Singapore (IP), South Africa Treasury, Stone
Energy, Sumitomo, Stryker, Telegraph Media, Toshiba,
Unilever, Vanguard, Zeppelin and others. 26

My peer network was 160 students from around the world. A few representative
companies are listed.
 My Blog
http://highleyunlikely.blogspot.com
http://highleyunlikely.blogspot.com/
/

I kept a blog of my experiences, and if you really want to learn more about my daily
adventure you can yead it at http://highleyunlikely.blogspot.com
This was my most popular post, an image of Tom Cruise and family gazing at my
dormitory, snapped by one of my classmates. I think I got over 80 unique hits that day.
Most days averaged 20 to 40 unique visitors to the blog, so I know it wasn’t all my
mother!
 Financial Management

One key area of study was Financial Management.

 Financial Management

These were the four main areas of study in Financial Management. I really feel as if I
improved my understanding of finance in these classes.
 Financial Management Lessons
n Importance of Appropriate Staffing
n One unnecessary employee can destroy $1 million in
shareholder value.
n Importance of ruthless cost control
n Value of Equity

I came away with three big impressions from the Financial Management case studies
and my interaction with my classmates.
1) We need to really watch staffing levels and keep them in check. I believe that my
Division has all the people it needs. Rather than add staff we can redeploy the
people we have.
2) We need to be more vigilant on cost control (a colleague at AECI suggested we
focus on “rate control’, which is even better because it implies a cost/benefit
evaluation).
3) We need to recognize the value of our member’s equity is greater than the cost of
our federally-subsidized debt rate.
 Organizational
Learning

Another area of emphasis was leading “organizational learning”.

 Safety - OSHA Incident Rate - Coal
AECI
12
Number of Incidents/200k Work

10

4Q
8

TH
4 Coal Avg.

NM
2
1Q
0
2003 2004 2005 2006 2007 2008

Our safety performance at AECI was the subject of a personal case study in
Organizational Learning
In one case, the incidence of incorrect prescriptions was analyzed for several hospitals.
You would think you would want to send your child to Memorial 3, right? But actually,
Memorial 1 was the “safest” hospital. Their high reporting numbers reflect an
environment where employees feel free to report each and every inconsistency and
non-conformance to procedure. As a result, their performance continues to improve.
Locations with low reported numbers are not necessarily safer, especially if employees
are reluctant to report due to the threat of reprisal.
A new manager arrived in 1999, and encouraged greater reporting of non-
conformance. As a result, the number of reports went up, allowing improvements to
be made. After some time, the system actually improved, with fewer non-
conformance events, leading to lower reported incidents. This is the classis “worse-
before-better” problem.
 Fundamental Attribution Error
n The bias of attributing the observed behavior of
an individual to personality factors rather than
external situational factors.
n e.g. laziness instead of lack of training

This is a classis human response to any non-conformance.

 Developing Psychological Safety
n Don’t waste a good crisis!
n Failure is an opportunity for learning.
n Respond to a failure as if it were data instead of
sabotage.
n (Power Production expanding the use of Intelex,
considering MOSS as an alternative)

We are attempting to begin this practice in our Division. It is already well-established

in our safety and environmental compliance areas. We want to take the same process-
oriented philosophy and apply it to plant non-conformance events such as forced
outages and equipment failures.
(MOSS is the acronym for Microsoft Sharepoint.)
 Negotiation

Another area in which I really improved my understanding was negotiation techniques.

 Negotiation
n Evaluate BATNA, ZOPA
n Underestimation of variance
n Influence of anchoring
n Leverage loss aversion (losses loom larger than gains)
n Status Quo bias (default agreement is sticky)
n Token, unilateral concessions (norm of reciprocity)
n Aggregate losses, disaggregate gains (lots of small wins,
one lump-sum loss)
n Make multiple simultaneous offers
n Assess real options
n Deal with differing expectations via contingent settlements
n Seek post-settlement settlements

These were some key issues we covered. Its all covered in Max Bazerman’s book
“negotiating genius”.
I have seen others successfully use these techniques against us in negotiations. Now I
want to deliver them back.
These topics are based on solid research studies into human interactions.
I was particularly intrigued by the concept of post-settlement settlements. Once the
gloves are off and we’ve shook hands on an agreement, we should offer to revisit our
respective cost curves to see if a better agreement can be crafted between us.
 Team Decision
Making

Another good area of study was the human dynamics of Team Decision Making
We studied Mt. Everest climbers that perished on the mountain, even when there was
clear evidence that they should turn back. We studies the NASA Challenger disaster
(and were visited by their chief engineer to discuss the case in detail). By studying how
teams can fail in decision making, we can better identify our own weaknesses. We had
a number of examples from this page occur during our Norborne discussions.
 Team Decision Making Lesson

n Encourage conflict and dissent in

decision making
n Insure that dissenting opinions have
a voice (observed a great example
at Thomas Hill)
 Strategy Development

This was another key learning area.

This has occurred in our division. We once set the bar for others, now we have
regressed to just “average”. The Red Queen refers to Alice Through the Looking Glass,
in which the Red Queen states that one must run faster and faster, just to stay in the
same place.
 Porter’s “Five Forces” Analysis
1. Supplier Power
2. Buyer Power
3. Barriers to Entry
4. Threat of Substitutes
5. Rivalry (Competition)
6. Complements

Of course Harvard has had to improve upon their own very successful “five forces”
analysis model to expand to a sixth competitive dynamic force. Michael Porter himself
served as guest lecturer to our class.
Professor David Yoffe’s “common pitfalls of strategic planning”.
 AECI Application
n Scenario Planning
n Include a “stress test”
test”
n Sustained recession and limited growth
n Return to fast growth

I recommend adoption of scenario planning. To learn more, see

http://en.wikipedia.org/wiki/Scenario_planning
The chart is from my analysis of avoiding scrubber installation. Red is bad, Green is
good. If gas prices are low relative to coal, and a carbon tax of some type is enacted,
then an investment in scrubbers cannot be economically justified. (the analysis is very
simplistic)
 Strategy
n What are the key drivers of change?
n Look at data
n Can we predict structural change?
n What needs to change? (congruence analysis)
n One sentence strategy:
n What, why, where, when, how
n In a safe, ethical, and environmentally responsible manner,
become and remain the low-cost producer for our members
by relentlessly improving generator performance, reducing
expenses, and maintaining strategic alliances with key
suppliers.

The bottom bullet is a proposed one-sentence strategy statement for our division.
 Leading Innovation

The most useful area of study I encountered was Leading Innovation

 Congruence Analysis
n Mission, Vision, Values
n Measure Congruence in:
n POP Culture (©Scott Crise)
1. People (competence, confidence, caring)

2. Organization (structure)

3. Processes

4. Culture

The concept of congruence analysis suggests that one examines the four areas listed,
and determine if each one is congruent with the organization’s stated mission, vision,
and values. Scott Crise came up with the “pop culture” acronym.
 People: Influence of Tenure on
Team Performance

Are our people skills (competency, confidence, and caring) congruent with excellence
in achieving our mission?
Performance of a team in innovation increases dramatically in the first couple of years
of its existence, flattening out in the middle few years, and then diminishing as the
teams mean tenure increases. This research has been repeated in several industries;
the chemical process industry is shown here. For some industries the time frame may
change, but the tendency for people to get accustomed to business as usual and to
cease to be open to new ideas is universal. We need to think about how we rejuvinate
teams to stop the “red queen” effect discussed earlier, and to allow us to continue
innovation. So how do we maintain innovation in an aging industry such as ours?
 Organizational Structure Analysis

I examined the formal organizational structure of our division, in order to determine if

it were “congruent” with an organization that is focused on operating power plants
with high availability to meet our vision of the low cost producer. I think some changes
are needed to improve that focus.
Also in the area of people, here is the “informal” organization chart of an actual
organization. Number 50 is the CEO. Who has the most influence in this organization?
Probably number 52 and 59. We are conducting this mapping exercise in our own
organization now.
Another example…
 Business Process Analysis

Our business processes must be examined. Are they congruent with excellence in plant
availability?
In our division we have already established an excellent process-based system for
managing safety and environmental compliance. It allows us to track assignments and
insure that important tasks are not overlooked. It forces accountability for project
tasks. This is a model that I wish to export to our plant availability effort.
The most important of the four items People, Organization, Process and Culture is
Culture. You can execute the first three perfectly but still find your change effort failing
if the cultural issues are not addressed. Cultural issues can be relatively easy identify
but they are the hardest to modify. It takes lots of listening, questioning, and
communicating to create an aligned culture. We spent the full eight weeks talking
about the impact culture can have, and various ways for dealing with culture. It was
my single biggest take-away from the course work.
 The problem (culture)
Management Quality Feedback Index

Plant Attribute Overall Departments

New Madrid Lab Electr ic/Ins t Mechanical Operations Yard
>10 Years service 9 31 67 45 59 14 39
1 Overall Satisfied 11 67 67 27 66 78 77
2 Poor Management 13 15 0 33 0 12 25
3 Dis satisfied + Change Seekers 17 32 33 73 33 23 23
4 12-month Progress 19 75 67 45 63 90 75
More work than I can finish 27 20 17 36 25 12 46
5 Your morale 29 59 50 18 50 71 62
6 Department morale 29 37 17 0 17 56 23
AECI m orale 29 35 33 0 25 48 31
7 Satisfaction with supervisor 30 64 50 27 50 85 46
Satisfaction with Plant Mgt 31 71 50 27 59 90 70
Satisfaction with HQ Sr staff 31 64 60 55 58 77 50
8 Commitment to Integrity/Ethics 50 50 9 25 62 70

Composite of 8 measures 63 59 28 55 76 63

Plant Attribute Overall Departments

Thomas Hill Lab Elec trical Instrument Mechanical Operations Yard
>10 Years service 9 48 20 33 57 57 34 68
1 Overall Satisfied 11 50 90 67 43 48 49 38
2 Poor Management 13 33 0 22 17 30 33 50
3 Dis satisfied + Change Seekers 17 50 10 33 57 52 51 62
4 12-month Progress 19 39 80 44 29 20 31 44
More work than I can finish 27 27 60 22 0 19 25 32
5 Your morale 29 43 80 33 0 55 44 35
6 Department morale 29 11 30 22 0 5 6 15
AECI m orale 29 6 10 0 0 0 8 12
7 Satisfaction with supervisor 30 52 70 100 14 57 57 29
Satisfaction with Plant Mgt 31 31 70 33 14 14 27 37
Satisfaction with HQ Sr staff 31 40 67 51 50 18 33 47
8 Commitment to Integrity/Ethics 37 60 33 43 22 38 35

Composite of 8 measures 44 75 56 32 41 43 36

We have a fantastic tool for beginning our cultural assessment: the annual employee
survey. This is an excerpt of our internal analysis of the survey data. This has provided
clues to areas we can address in culture.
 Congruence Analysis of
Performance Gaps
n Root cause analysis
n Why, why, why
n Some questions to ask
n What’
What’s important around here? (culture)
n How are you rewarded? (culture)

n How is your time spent? (culture)

n How is our organization structured? (organization)

n What practices need to change? (process)

n What skills are needed to succeed? (people)

n How do people react to you? (people)

Some more thoughts on how to analyze the congruence of an organization with its
stated goals.
 Leading Change Framework

We are now firmly in phase one, and moving into phase two of our change effort on
plant availability. The change effort on project cost management is just entering phase
one.
 Explore vs. Exploit – an “Ambidextrous” organization

We need to continually exploit our existing strengths and assets, while simultaneously
cultivating a group that continually explores the horizon for other new opportunities.
This is the concept of the ambidextrous organization.
 Social Networks and
New Media

One final area of study that I believe offers great opportunities for our company is
social networks and new media. They offer more ways to communicate our goals and
objectives while seeking feedback from our employees. They are very effective at
“flattening” the organization. No one mode of communication is perfect for everyone.
Some people will read a printed flyer, while others prefer email. Some want a voice
mail, some want an email. Some would turn first to Facebook or Linkedin. Some
would read a blog; others wouldn’t touch it. For us to be effective we have to embrace
all of these forms.
 New Media
n Wikipedia pages – internal Wiki?
n Innocentive – internal innocentive?
n Communication Tools
n Twitter
n Facebook
n Linkedin
n Blogs
n Sharepoint!
Sharepoint!
n AECI needs to manage these media

If we don’t manage these media, someone else will.

For example, we have a corporate page on Linkedin, but we aren’t currently managing
it.
 Corporate
Accountability
(Governance & Ethics)

Our final major area of case studies involved governance and ethics.
There’s that “culture” idea again, you just can’t get away from it.
 Who owns the problem…

I had eight weeks to look in the mirror. Many of the difficult issues we currently face
are a result of my own decisions. Let’s learn from our shortcomings and try to make
the future better. It is within our power to change the future!
 8 Weeks Summarized
n Become a Force for Change. If not you, who?
n Waiting just delays improvement.
n Ruthless pursuit of cost reduction (a.k.a. rate
reduction)
n Importance of culture
n Importance of accountability/measurement
n You can’t over-communicate