Scanlon Principles

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Joe Scanlon and Dr. Carl Frost developed time-tested practices and principles that transform organization’s culture for the highest engagement of employees in learning and effectiveness. These principles create better business practices, providing whole organization, executive learning and networking opportunities.

“I see the Scanlon Principles as allowing us to unleash the tremendous energy within the company through participation… to direct the beam toward the desired target through Principles of identity, to constantly keep the powerful beam in tune through equity, and to continually strengthen the beam through competence.”

Dwane Baumgardner, Chairman of the Board and CEO, Donnelly Corporation

Scanlon is Based on Four Fundamental Principles and Processes

The First Principle is Identity

The Principle of Identity is based on three assumptions:

  1. Change is a universal given and is our only hope.
  2. A person’s performance/behavior is a consequence of how they have been treated.
  3. Every person and organization is in the process of becoming better or worse.

Scanlon leaders create Identity through a process of education. Their curriculum includes the organization’s mandate, customers, competitive challenges, etc.

Practices that support Identity: Wide sharing of information including financial data “open-book management”, accessible leadership, open forums, visits to customers, suppliers, and investors.

Questions about Identity:

  • Is there a need to change?
  • What is the right job for me to be doing?
  • How do I know when I am doing the job right?

Participation is the Second Principle.


Participation is defined as the opportunity, which only management can give, and the responsibility, which only employees can accept, to influence decisions in their areas of competence.

Practices that support Participation: employee involvement, participative management, teams, flat organizations, suggestion systems.

Questions about Participation:

  • Do I encourage others to make decisions?
  • Do I take the responsibility for my decisions?

Equity is the Third Principle


Equity is defined as a genuine commitment to account for the needs of all constituents including customers, investors, and employees.

The process of Equity is accountability. Scanlon leaders regularly report the organization’s performance relative to customers, investors, and employees needs.

Practices that support Equity: gainsharing, goalsharing, profit-sharing, balanced scorecards,tracking and reporting of performance results.

Questions about Equity:

  • Are the Equity needs of all constituents in balance?
  • How do we know what organizational performances, practices, relationships, will fulfill the Equity needs of all constituents?
  • How do we use Equity to hold ourselves and our organization accountable?

Competence is the Fourth Principle


Competence is defined as the ability to respond to the constant demand for improvement and change. It requires a commitment to be in a state of becoming something that you never were before.

Practices that support Competence: training, development, job enlargement, Learning Organizations.

Questions about Competence:

  • Am I willing to help others become more competent?
  • Am I willing to commit to make myself better every day?

Leadership Network

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As a member of the Scanlon Leadership Network, you will be where the best ideas come together. You will tap into our wealth of experience as you network with organizations that pioneered gainsharing, employee involvement, business leadership and open-book management practices. You will be on the leading edge as you participate in our network’s Best Practices program. The Scanlon approach opens doors to communication and removes barriers to sharing ideas. Scanlon organizations have significantly higher customer, employee and investor satisfaction. Our members have superior quality, are more productive, and are better able to adapt to change. Because we focus on timeless principles and processes, we are able to avoid the short-term thinking that often undermines organizations.

The Scanlon Leadership Network is a member-led nonprofit corporation. Therefore, we are able to quickly and economically provide the tools you need to become world-class. By drawing upon the expertise of our network, you will avoid the expense of developing programs and the cost of mistakes and false starts. Our approved consultants are the best in their field. Together we can save you thousands of dollars in consulting and training fees. When you join the Scanlon Leadership Network you become part of a tradition of excellence that has given Scanlon organizations a distinct advantage for more than half a century.

When your organization becomes a member of the Scanlon Leadership Network, you’ll be joining forces with many of the most progressive, successful companies — each of which is dedicated to the Scanlon Principles. Our members are frequently listed among the best companies to work for in North America. A recent book on the 36 best business leaders featured four with Scanlon experience. The opportunity to network with this kind of talent is priceless. While the sharing of ideas and experiences with world-class companies is at the heart of the Scanlon Leadership Network, you’ll also be able to take advantage of many other benefits designed to help you become a leader in your industry.

Networking: We learn from each other and from other world-class organizations. We provide numerous structured networking opportunities where members freely share their leading edge practices with each other.

Best Practices: Each year we collect, evaluate, and distribute a book featuring the best ideas of our members. Included in the book are names and contact information of members willing to help you learn more about their practices and help you adapt them to your organization. We recognize great ideas at an awards banquet each year.

Satisfaction Surveys: A customized employee satisfaction survey is included with your membership. This survey allows you to assess your employees’ satisfaction and benchmark with other members.

Training Materials: As a member, you’ll receive free materials to help you apply Scanlon Principles. Among them are: Team Building, Listening Skills, Lean Manufacturing, Costing Suggestions, Business Literacy and Leadership Programs.

Conference: Our Conference is one of the oldest continuing gatherings of business people in North America. You’ll hear world-class speakers and share thoughts and ideas with other members. As an organizational development tool, the conference provides an opportunity for employees at all levels of a company to learn together and to transfer that learning back to the workplace.

Newsletters: You’ll receive a regularly published newsletter featuring information and ideas on how to make Scanlon Principles work even better for you.

Web Site & Resource Library: As a member, you’ll receive a password to our award-winning web site. Twenty-four hours a day, you’ll be able to download training materials, plan examples, research reports and best practices. Our office contains extensive files, books, training materials and videos related to the Scanlon Principles.

Public Relations: We coordinate speaking engagements for members. We also serve as a clearinghouse for news media interested in gainsharing, employee involvement and open-book management. Articles on members have appeared in many of America’s most respected newspapers and journals.

Certified Consultants: We have taken the risk out of finding good consulting help. We work with a small group of the best independent consultants. All have successfully installed Scanlon Plans or are proven in their field.

Landscape Forms Recognized as one of the Top 15 Small Workplaces for 2008 by the Wall Street Journal and Winning Workplaces

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The Wall Street Journal has announced that Scanlon Leadership Network Member Landscape Forms is one of the Top 15 Small Workplaces for 2008, the second annual list of the best small workplaces in the U.S.

The Top Small Workplaces list, compiled in partnership with Winning Workplaces, a nonprofit whose mission is to help small and midsize organizations create better workplaces, showcases exceptional employers, including private, nonprofit and publicly held organizations that have built workplace environments that foster teamwork, flexibility, and professional growth while providing an atmosphere and benefits that encourage employee loyalty.

“These small businesses are leading innovators and role models for larger companies,” said Larry Rout, editor of the Journal Reports, The Wall Street Journal. “At a time when most employers are cutting back on employee benefits it is important to recognize those organizations that are creating environments that encourage productive behavior and expanding programs to keep employees happy.”

“The Top Small Workplaces have been in business an average of 42 years and have demonstrated that they can survive difficult economic times,” said Ken Lehman, Winning Workplaces’ founder and board chair. “By building strong cultures and gaining employee commitment to the success of the business, these organizations have thrived in good times and weathered bad ones. It is at times like these, with our nation facing almost unprecedented financial and economic challenges, that the real mettle of a strong workplace is demonstrated.”

The Journal and Winning Workplaces began accepting nominations last fall, receiving 782 eligible nominations, which were pared down to 35 finalists. To select the 15 Top Small Workplace winners, a national panel of small business experts chosen by the Journal and Winning Workplaces judged the finalists based on specific metrics and qualitative assessments of their success in creating workplaces that nurture, challenge and reward employees.

News articles, slide shows and videos about the selection process and winners are available on As part of its continuing coverage of this year’s Top Small Workplaces, the Journal will be interviewing leaders of the winning companies every week in coming weeks on “Independent Street,”’s small business blog.

Hoshin Five AlignmentsBill Main, President of Landscape Forms (pictured) stated, “We are thrilled to receive this award, and developing our business according to the Scanlon Principles has helped us get here. But this is also a reflection of our incredible workforce. We’ve invested heavily in each other’s success, and I think the results speak for themselves. All of us at Landscape Forms look forward to continue learning from this proven method of creating and conducting business.”

Congratulations on this much deserved honor!

Scanlon Leadership Network Best Practices

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Each year the Scanlon Leadership Network collects, evaluates, documents and prints a book of our members’ Best Practices. The yearly book contains examples of the Best Practice and the phone, fax and email number of a contact person familiar with the practice. Members may download copies of the Best Practices Books from the member only area of our web site. Copies for members are also available from the Office by calling (517) 332-8927 or by email The Best Practices Books are available only to Network Members.

The Scanlon Leadership Network needs your good ideas for the 2008 Best Practices Book! To be considered for the 2008 Book ideas must be received by January 31, 2008. Your idea can help others more effectively practice the Scanlon Principles and Processes. We are looking for ideas that are:

  • tied to the Scanlon Principles/Processes
  • useful throughout the Scanlon Leadership Network (not one company specific)
  • effective in the company that submitted them
  • documented and can be clearly communicated (able to be shared)

Every idea has value. If you submit your idea you will automatically receive the 2008 Best Practices Book with hundreds of great ideas from Scanlon companies from throughout North America.

Best Practice Awards:

Each year, the Best Practices Strategic Action Team, composed of members of the Scanlon Leadership Network designates gold, sliver, and bronze awards for outstanding “Best Practices” related to Identity/Education, Participation/Responsibility, Equity/Accountability, Competence/Commitment, and for an Overall category. Awards will be presented at the Annual Conference Reception.

How to Submit a Best Practice:
Your ideas will be considered for the 2008 Best Practice Book.

We want to make submitting a Best Practice quick and easy. The Network office will work with you to help you submit your idea. We have developed a simple one-page form to make sure that we gather the necessary information.

To submit your Best Practice use the on-line form to your left under Best Practices. [Note: SPAM bots have discovered our on-line submission form.  We have deactivated it until November 2007 when we will turn it back on.  We apologize.]


How to Submit a nomination for the Stewardship Award

The Stewardship Award is the highest award given by the Scanlon Leadership Network. The Best Practices Team recognizes truly exceptional individuals with the Scanlon Stewardship Award. The award is given to those who:

  • Have contributed over time to the Scanlon Principles
  • Have contributed over time to the Network
  • Have demonstrated the Scanlon Principles in their profession and community

Past recipients include Richard Ruch, Dwane Baumgardner, Carl Frost, D.J., Hugh and Max DePree, Buzz Kersman, Bill Greenwood and Pat Thompson, Dick LeVan and John Chipman, Tim Tindall and Myron Marsh.

To confidentially submit a nomination for the award please email the scanlon office at


Frost Beacon Award

Beacon: somebody or something that inspires or guides others

Dr. Carl Frost created the Frost/Scanlon Principles and Processes.  He worked with Joe Scanlon at MIT and then brought Scanlon ideas to Michigan State University, where he devoted his professional life to the study and application of Scanlon ideas.

Dr. Frost helped to create the Scanlon Leadership Network.  Dr. Frost became a friend and guide to those interested in creating better places to work.  He worked with all levels in organizations. Many CEO’s became his friends.

However he always had a special place in his heart for front-line employees.  They in turn cared about him.  (At Herman Miller they bought Dr. Frost a Buick through payroll deduction because his car was constantly breaking down).

The Frost Beacon Award honors those who like Dr. Frost have worked to bring Scanlon Principles into companies and who serve and guide others.

Description of the Award:

The Frost Award is given by the Scanlon Network on behalf of a sponsoring member company to those who exemplify the spirit of caring servant leadership as demonstrated by Dr. Carl Frost.   While any one is eligible to receive the award special consideration should be given to those on the front lines of their organizations.

Criteria for the Award – the sponsored employee must be someone who has:

  • contributed over time to the Frost/Scanlon Principles/Processes in their company
  • lived the Frost/Scanlon Principles in their work
  • a servant’s heart as exemplified in the life and work of Dr. Carl Frost

Process for granting the Award
Frost Award recipients are sponsored by member organizations of the Scanlon Leadership Network.  Organizations that wish to have the award given to one of their employees must do the following:

1) Submit a letter explaining why the person(s) should receive the award, including specific examples of how s/he has demonstrated support of the Principles/Processes.  The letter should include testimonials from those in the organization who know the person.
2) Agree to sponsor the award recipient by sending them to the annual conference to receive their award.

Note:  Member companies may sponsor one Frost Beacon recipient each year.

Two Scanlon Consultants to Speak on Innovation at Midwest’s first Entrepreneur Conference

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The Ideas Enterprise (TiE) Detroit is hosting the first ever TiECon Midwest 2008, a two-day conference on Friday, November 21st and Saturday, November 22nd at the Westin Southfield. TiE, formed in Silicon Valley, is the world’s largest nonprofit organization dedicated to entrepreneurship, boasting 52 chapters in 11 countries. Paul Davis, Scanlon Steward and Consultant, and Approved Scanlon Consultant Praveen Gupta will sit on an Innovation panel.

The theme for the conference is “Succeeding in a Dynamic Global Market Place”. With panels in 3 tracks on “IT”, “Manufacturing” and “Emerging Industries”, TiECon Midwest 2008 presents distinguished speakers from several reputed companies, all over the world.

Sponsored by MicroSoft, TiECon Midwest 2008 aims to encourage candid discussions on industry trends and opportunities, facilitate networking amongst focus groups, and motivate aspiring entrepreneurs. This is a great place to connect with some of the leading minds of our time.

This event ensures that the talent of tomorrow meets the talent of today. TiECon Midwest 2008 is an extraordinary opportunity for entrepreneurs to gain knowledge, derive inspiration, and develop a valuable network.

To network with luminaries, listen to expert, form partnerships, build and expand your business, don’t miss out this grand occasion at Westin Southfield on Friday, November 21, 2008 and Saturday, November 22, 2008.

The conference will feature several keynote addresses, panel sessions and focused networking receptions. The conference will also encompass a business plan competition and an awards banquet during which business and community leaders will be recognized. An entertainment filled gala will conclude the two-day conference.

Scanlon Executives will Dive Deep into ‘Compression’ at Executive Retreat

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The business world is just starting to get a feel for how important the issue of sustainability has become. On December 15-16, 2008, Scanlon executives will get a rare chance to examine in-depth the challenges of sustainability and more by studying ‘Compression’ at the Scanlon Leadership Network Executive Leadership Retreat, which will be held in Lansing, MI.

Coined by AME founder Doc Hall, the term Compression refers to how we can “globally create at least the same quality of life as in industrial societies today, while using less than half the energy and virgin raw materials, and cutting toxic releases to nearly zero.” It takes sustainability to a whole new level.

Doc has literally written the book on Compression, which will be published soon. The book will serve as the conversational springboard to a greater exploration of how these concepts impact our lives and businesses, and how employing the Scanlon Principles will help us march closer to the goal. Chapters from the Compression manuscript will be emailed bi-weekly to leaders from within the Scanlon Community. Reading the manuscript in advance will enable everyone to hit the ground running on December 15.

Doc Hall will serve as the main presenter. David Veech, Executive Director of the Institute for Lean Systems, will facilitate. (See more about the Institute for Lean Systems)

The Network is also thrilled to have secured a tour of Christman Co. in downtown Lansing. Christman, a commercial construction corporation, is a leader in sustainable/high performance buildings. In fact, they were awarded the worlds only double-platinum LEED (Leadership in Energy and Environmental Design) certification for their recently renovated headquarters. This will provide participants a close-up view of how Compression can be accomplished.

The Business of Innovation and Scanlon Studied at IIT

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On September 8 – 10, 2008 Innovation thought leaders and businesses from around the world gathered at the Illinois Institute of Technology (IIT), Rice Campus in Wheaton Illinois. The Business Innovation Conference brought entrepreneurs, engineers, executives, academia and government together to share their methods, challenges, and lessons learned as they collectively raised the understanding of the innovation process. (Praveen is pictured above left, with Brett Trusko of the Mayo Clinic)

The conference was organized by Accelper Consulting, and hosted by the Illinois Institute of Technology. Praveen Gupta, the driving force behind the event, commented that “the conference turned out to be a great event because of the great speakers, the participant’s hunger for learning innovation, and the academic environment at IIT. I salute everyone who invested their precious time and resources in promoting innovation and helping others better themselves.” Praveen is a long time Scanlon supporter and Consultant, and is author of Business Innovation in the 21st Century.

Scanlon Steward and Consultant Paul Davis led a breakout sessionon “Creating Cultures of Innovation”, which has been a hallmark of Scanlon Members for decades. The Network’s information booth was manned by Scanlon President Wayne Lindholm (pictured right), who spent many years working for 3M, which is widely considered one of the world’s most innovative companies.

Other conference attendees offered these opinions:

“It was a smashing success! Not only was it extremely informative and useful, the caliber of the speakers was top notch and the networking opportunities were extremely beneficial.” Milt Hayes, Director, CIT Planning, Abbott Labs

“It was the very best business conference I have ever attended in my 35+ years in the business world. The speakers were truly business innovation experts as were many of the attendees. The atmosphere was genuinely optimistic. People were willing to share their successes and failures so that everyone could benefit.” Terrence Luczak, Six Sigma Black Belt, formerly with Siemens Building Technologies

“I felt like my synapses have been touched by a live wire. I went home buzzing every day with ideas I generated while I was at the conference.” Brenda Hernandez, Allstate

Network staff and consultants continue to spread the word on how to create innovative organizations. Praveen has launched the international journal of innovation, the Network’s innovation Simulation was recently facilitated by Kim Johnson at Johnstech in Minneapolis, making learning about innovation fun and interactive. Paul Davis will be spreading the Scanlon message of innovation to the Prestressed Concrete Institute’s International Conference, where he will be leading several workshops with the CEO’s of the concrete industry on how to create truly innovative organizations.

“It is interesting that people do not realize how truly innovative Joe Scanlon’s ideas were and how innovative they still are. Almost all the experts on innovation mentioned how important it is to create trust in organizations for innovation to succeed. Scanlon methods are the most proven and innovative ways to build trust. That is why innovative companies from around the world are interested in Scanlon methods,” said Paul Davis.

The next Business Innovation Conference has been scheduled for Oct. 5 – 7, 2009 at the same venue.

The People Side of Lean in Las Vegas

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On September 15-17, I was given the honor of representing the Scanlon Network at their exhibit booth at the Lean Accounting Summit in Las Vegas. This 4th annual Summit focused on the “People” aspect of Lean. It was an excellent opportunity to discuss the values of Scanlon.

I was impressed by the number of participants, probably 500 or more. I spoke with many attendees, especially after Bob Chapman’s keynote address. Bob is the Chairman and CEO of Barry-Wehmiller and spoke primarily about the people side of Lean. He was a very motivational speaker and I could see that he really had the attention of the audience. He shared many great examples of Identity, Participation, Equity, and Competence at his company. Although he used different terms, I was able to convey to the many people that stopped at the Scanlon booth that the Network could help them turn their organization into one like Bob spoke about. Many people also grabbed the Network informational brochures.

A lot of people took advantage of their Pre-Conference Workshops … probably 200 or more. Considering these workshops were anywhere from $300 to $500, and the current economy, this spoke well of the session’s value. I had the Scanlon booth set up early on this first day, so I was able to meet and greet many of the people attending them.

I believe the Summit as a whole was very valuable, and all companies should consider sending a small “cross-functional team” to the event; e.g., a person from manufacturing, accounting, QA, and the like. In my opinion the company would get a lot more for their money than if they only send their accountants. The whole Lean issue needs to be embraced by everyone; getting more people involved would be of much more benefit.

Opportunities to exhibit at events such as the Lean Summit are an excellent way to get the Scanlon organization out there in front of companies that are looking for any help they can get developing their people skills so desperately needed for “Lean” and many other organizational improvement programs.

I appreciated the opportunity to go and represent Scanlon and work with Jahn Ballard, the Scanlon consultant from Performance Management Institute, Inc. (Marge and Jahn are pictured above)

We owe great thanks to Summit organizer Dwayne Butcher (pictured right) for providing the opportunity!

Building a Tacit Knowledge Capture and Leverage System to Support the Integration of the Scanlon Principles

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What if the tacit knowledge of every member of the team can be elicited, recorded and made transparently available to everyone? What would it mean for a business if the core knowledge of its people were accessible as a more and more coherent whole? One can only imagine the kinds of satisfaction, creativity, productivity and profitability generated in such a situation. However, if we agree that the consistent transfer knowledge is the core challenge as written in the Harvard Press book Deep Smarts, then we also have to accept Barry-Wehmiller CEO Bob Chapman’s assertion that ‘People-Centric Lean’ is the only way to go, because all tacit knowledge is found in individual human beings.

This is actually what people-centered lean practices are doing. Standard work evolves as existing and new tacit operational knowledge becomes explicit. Now, if we are to have a complete and sustainable transformation, the challenge is to apply lean principles to the domains of Strategy and Finance, plus all the back-office support functions, in addition to continuous improvement in Operations. In the August Scanlon E-zine (link?) I described how a ‘Captain’s Reality Check’ could allow the CEO to lay out the border and the pieces of the multi-thousand piece jigsaw puzzle that is a business enterprise. I also briefly discussed the practice of Nimiwashi, which could be translated as ‘preparing the soil for transplanting the seedling’. This highly developed set of practices for internal diplomacy among functions creates a policy environment where the groundwork for a decision is laid so thoroughly that when they actually get in the room to make the policy, the process is easy, rapid, and consistently optimized.

JM Juran, one of the founders of Total Quality Management, noted in 1948 that “To be in a state of Self-Control, a person must know what is expected of them; know how well they are doing; know what resources/options are available to improve.” If any of these three are lacking, Juran wrote, “a person can’t be held responsible.” Yet all too often enterprises hold people responsible without equipping them to be responsible.

Gil Friend, founder of Natural Logic, says it this way –

“To be successful, one needs to have AND know the:
– Goals and Aspirations for oneself and one’s organization
– Results created and Metrics for measuring them
– Resources to carry out the tasks and Capacity to do them
This means fully integrated Strategy, Feedback, and Implementation/Execution.”

When, and if, in the ‘C’ Suites and manager’s offices, North American companies figure out how to succeed at Gil’s challenge, we will enter a new era of business self-management, and start to fully compete with the new standard Toyota Motor Company has set over the last few decades. 

Bill Hewlett got to the crux of the matter as clearly as anyone- “If you want me to tell you how somebody’s going to behave, tell me how they are measured”. In addition to the see-with-your-own-eyes reality of processes on the floor (known in lean circles as the Gemba), we also need a method to consistently discover the Organizational Design, Strategic, Operational and Financial Gemba as a whole. This see-with-your-own-eyes reality has to live in consistent and constructive conversation and collaboration among all the stakeholders in every discipline and reporting level of the organization. Or as Doc Hall would say, as a “functioning high-velocity learning culture.”

This kind of virtually-impossible-to-imagine cooperation and whole system stewardship of resources may only be able to happen if the people who lead and do the actual work become the drivers and co-architects of an evolving measurement system, with the CEO, CFO and senior leadership providing the environment in which it that continuous design and testing process can flourish.

Laying the foundation efficiently and effectively for building a Tacit Knowledge Engine (capture and leveraging system) requires a launch sequence of highly focused whole system measurement design and dialogue. The first step is a 1 -2 day CEO (Captain’s) Reality Check, which lays out the puzzle border in the form of a draft transparent model of how the organization’s behavior becomes the financial results, as well as defines and prioritizes business mandates.

Following that, in two half-day Measurement System Kaizens (collaborative problem-solving events), capacity for growing shared business acumen is developed through the people who lead operations and do the actual work. These people create together a model of how the enterprise is actually functioning, guided by the CEO and CFO’s outputs from the Reality Check. As this is happening in the room, the CEO and CFO are drafting a ‘sacred glossary’ of shared language and core practices that add all the disconnects in hand-offs through the overall value chain, behavior scoring options and intangibles to existing language about core intellectual property, core capital, values & mission.

Iterating the model as a team six times in weekly or monthly ‘Huddles’ sets up a working Key Performance Indicator (KPI) matrix in which hypothesis creation, assumptions definition and testing, and then KPI refinement, can be conducted using the scientific method. When the whole team creates its own model and define its own language, the connection of results to behavior begins to consistently be more clear to everyone, so it becomes possible to consistently leverage the biggest ‘bang for the buck’ on constrained resources as well as for aligned initiative to be taken at all levels, thus installing the foundation for whole-organization Nimiwashi.

Further Development Steps are then prioritized and driven by launch sequence to fully execute the integration of Equity, Participation, Identity and Competence. These include:

· Rationalizing the total company conversation through meeting grid and meeting map development, as well as facilitation specifications for a participative culture.
· Specifying decision-support linkages to legacy IT infrastructure
· Cascading basic acumen foundation through whole system practical transparency practices to all stakeholders – the floor and the board, the bankers, investors and accountants, and then the customers and marketplace as appropriate.

How Can We Address our Current Crisis of Collective Will?

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The current economic and environmental crisis challenges us to initiate what will need to be the greatest explosion of creativity, innovation and cooperation in recorded history. As the actual status of the earth’s climate and biological situation have become more revealed, we are seeing the beginning of the same dynamic as the actual facts of the economic situation, which has been moving in the same direction for years.

Only now is it being seen for the instability and destructiveness that has actually present for some time. One part of it, rarely mentioned in the commentaries, that helped put things over the edge, were the changes in bankruptcy law. Pushed through by the money-center banks in 2005, over the virtually unanimous objection of every bankruptcy judge in the country, this lead to even more risky credit card and mortgage activity. This is described in the forthcoming book from Bob Booth and Ed Morler, Good People, Bad Credit.

As the events that led to the bank bailout become more unpacked, the role of poor to terrible transparency should emerge front and center as a key driver of their risk management failure. In fact, this recognition is essential, if a real conversation about positive change in objective economic reality is going to start. Within organizations, the almost universally absent transparency is how behavior and decisions create financial results. This is destructive across the board, perniciously undermining almost everything people are trying to accomplish at every level. This situation tends to be invisible to many, from the boardroom to operations team meetings, because it is a function of absence, not presence.

In many cases, the story could be written as ‘Good Companies, Bad Numbers’. This is a situation that Joe Scanlon addressed directly in his day, and with which Scanlon companies still struggle today.

The pivotal fact, that standard financial data is fragmented and incomplete, means the objective facts of property and contract cannot be included in the thinking by all parties. In business conversations, and in the creative process of problem solving, not having an accessible and common-sense shared language often hampers optimal outcomes. This missing overall ‘score’ should be something that everyone can glance at as often as needed for an impersonal reference point to the discussions at hand. Doing business without that is akin to attempting to play championship football on a round field with no 50-yard line or yard markers, and goal posts that tend to move for no particular reason. Bowling through a curtain in front of the pins is a common metaphor used to describe the impact of current accounting and finance practice. All the participants on both the professional and the customer sides are unknowing victims of a divisive system they had no part in creating.

It can be demonstrated with guaranteed predictability that a transformation of this invisible and incalculably destructive pattern of missing organizational practice and behavior can be launched in one day with an intact senior leadership group. Improbable as it may sound, providing a simple and scalable model of the economic reality everyone can understand will release unlimited enthusiasm and collaboration that has been blocked heretofore. Thankfully, all the information required to execute on the finance side is already imbedded in the existing data, and simply requires using the 50 years of resources that already exist to support the full implementation and use of Financial Accounting Standards Board regulation 95. With full linkage of the bank account to the accrual statements, it then becomes possible to employ the scientific method as a tool for collaborative maturing of the entire measurement system; so all stakeholders can support the base business model to evolve.

According to Jim Huntzinger, founding thought leader of Lean Accounting (See Fresh Ideas: Accountants as Change Agents in the February E-Zine), the base business model is a crucial element in this situation. “I have found that a so-so executed “flow” business model will significantly outperform a very well executed “batch” business model. I have actually witnessed this from a plant/operation level. But to take the business model to its needed level, the leadership has to not just be on board; but understand functionally, and execute to the better business model. Very, very few realize this, let alone have the experience and knowledge to achieve this”. This is especially true due to the issue Scanlon so directly addressed; the people doing the work have crucial insight that leadership does not know how to use. Jim’s insights are now being demonstrated in both the service and public sectors as well. These non-manufacturing cases are now beginning to be chronicled in The Assocation. for Manufacturing Excellence’s Target Magazine.

The current-practice absence of a common sense, usable picture of financial reality, and evolving measurement maturity then contributes a fundamental instability to attempting genuine and sustained collaboration at virtually every level of the private sector, civil society and public institutions. Ever wonder why meetings tend to be so painful and unproductive so much of the time? There are two basic reasons. One is the absence of the impersonal and objective facts of the money, with the behaviors that are creating it, presented with relevant and practical transparency. The second is absence of virtually any collaboration on the design and execution of meetings by the people in them, to actually achieve consistently outstanding results with optimum use of the available wisdom and very efficient use of time.

Any meeting or conference can be a direct experience of group genius, using a fusion of methodologies drawn primarily from the Technology Participation and Integral Operations Finance, plus use of World Café, Open Space Technology and the Collaborative Operation System, and with thorough pre-planning. A meeting can capture in writing all the available wisdom in the room, especially people’s strategic insight and tactical clarity, ending with real-time documentation completed and available almost immediately. Unless and until meetings and conferences become collaboration exercises that deliver a directly felt experience by every participant of fully giving their gifts, not wasting their time, and receiving the gifts of everyone else’s experience, effective and sustained development and execution of collective will will continue to elude us.

We in the Performance Management Institute’s network and at The Commons call for the further development and market-wide adoption of an Integrated Business and Institutional Leadership Structure. One that builds on the foundation Scanlon laid. One that provides a fundamental framework to address the twin challenges of practical transparency and sustained collaboration, and capacity to quickly transfer ability to execute to CEOs and their teams. This is an opportunity for the United States to resume its centuries-old role as the driver of new and unlimited possibilities for human beings to pursue their own destinies as they also steward the larger society of which they are part.

We declare our willingness to use our Intellectual Property in collaboration with any individual or group that practices the values of Asset Stewardship on behalf of themselves and the whole society, along with a Fundamental and Behaved Respect for the ability of all human beings to engage their spirit in service to their enterprises, loved ones, the greater community and the whole.

All power to those who care,

Jahn Ballard