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Ed Kless: Hey, Ron, do you think there are a lot of myths in business today?

Ron Baker: I would say so, definitely.

Ed Kless: I think there are some huge myths. I think that they, in a lot of ways, have become more prevalent than the actual facts that are surrounding those same myths. What are your thoughts on that?

Ron Baker: Yeah, no, absolutely. If you look at the conventional wisdom in a lot of business press, I think much of it is far more conventional than actual wisdom.

Ed Kless: What do they call them, "list-icles," all those lists that we have?

Ron Baker: Yes. Even though I know I've seen you do this presentation, and you usually do the top 10, whether or not there's only 10 or there's a lot more, I think you've done a really good job, because obviously some of them overlap and that type of thing. I think you've done a really good job here outlining what the big myths are.

Ed Kless: In a way, the Top 10 Business Myths is itself a self ... It's an internal joke, the fact that we are doing a list-icle about the fact that these list-icles are so prevalent.

Ron Baker: Right. Excellent. We're mocking ...

Ed Kless: That's right. It's self-referential and self-mocking.

Ron Baker: I love it. Okay.

Ed Kless: The first myth that I'd like to talk about here is that differentiation can be achieved by saying that you are customer-focused. This one, I think, is extraordinarily pervasive. There are books written about this. In fact, the whole idea, I think, is Treacy, Jim Treacy, that there's only three basic things that you can do. You can either differentiate on technology, you can differentiate on customer focus, or ... I forget the third one. Oh, low cost. Those are the only three things. What business differentiates on being non-customer-focused?

Ron Baker: Yep. Nobody that I can think of. Ed, for me, studying TQS, total quality service, and really going back and looking at some of the great leaders in customer service like Walt Disney, like Stanley Marcus, and even Conrad Hilton, and Henry Ford, and all these entrepreneurs, they really understood not only that you had to talk it but you actually had to walk it, as well. I don't know about you, but I think that we have really lost great customer service. Not just in this country, but I hear this from people around the world. I would have to say that, we say we live in a service economy, but I'm not so sure that that's true.

Ed Kless: Right. The difference here is that by saying you are customer-focused, not actually being customer-focused. The example that I usually talk about ... in fact, it's a picture on my slide ... is an actual photo of the wire hangers that I get from my dry cleaner, which ... Everybody has seen them. It's a wire hanger, but it's wrapped in paper with a big "We Heart Our Customers" on the hanger. The crazy part is is that if they really hearted me the way they say do, they would do what I've asked them on several occasions if they could do, which is, "Can I give you the plastic hangers from my closet that I much prefer you use rather than you give me new wire hangers, which I end up throwing out every single time, because I don't like wire hangers?" Call me Joan Crawford, but I like the plastic hangers. I'm perfectly willing to give them the exact number of hangers that they're going to need in the little bag that I put my shirts in, as long as they would hang them up. They would box the shirts for me, as well, but whenever I've asked, "Can you put them on these, my plastic hangers?", they're like, "Sorry, we can't do that." It's like, "Then you really don't heart me, do you?"

Ron Baker: Ed, recently I was challenged on this by somebody who said, "Well, customer service isn't really a competitive differentiation because everybody basically claims it." I said, "Yes, but that's the whole point. You can claim it all you want. You can put it on your website, your marketing literature, but do you actually deliver it?" One of the most, I think, enlightening questions that we ask audiences is, "Name for me the businesses that you believe deliver outstanding customer service." The typical names will come up that we've mentioned before on this show: Nordstrom, Zappos, Amazon, Apple, and maybe a dozen more, but then that's it. That's it. Even J.D. Power's does a survey of hundreds of thousands of customers in the United States. It has a list, and I think there's something like 50 companies on it. Fifty. That's it? This idea that good service is ubiquitous is crazy.

Ed Kless: Right. They key here is the very specific words that we used in the myth, which is, "Differentiation can be achieved by saying you are customer-focused." In other words, we find it, in a lot of ways, silly and stupid to put it on your website that you are a customer-focused organization that does blah, blah, blah, blah, blah, blah, blah, blah, blah, because everyone is going to put that. This is where I run into the challenge. I have people challenge me during presentations on this, as, "No, you don't understand. We really are customer- focused." Then I'll ask them, "What is it that you do specifically as an organization, not one individual who happened to do something great for this customer one day, but as a livable, everyday thing that you do to make you say that your organization is somehow differentiated on its customer focus?" Nobody's been able to answer that question. They'll all point to a story that they tell. "My guy once helped somebody in the middle of the night with a payroll problem." Okay, but that's not an organized thing that the entire organization is doing that's making you differentiate your organization as customer-focused.

Ron Baker: Right. Ed, I can think of no better example of this than Disney. When I attended the Disney University in Disney World in Florida back in, I think it was 1997, one of the tours ... They took you on backstage tours, they call, where you're normally not allowed to go. One of it was walking through their catacombs, their below. The whole thing is built on the second story in Disney World, and then there's all these tunnels below. Below, there were all these, along the walls, all these stories of what Disney calls "moments of magic," and how the, quote unquote, "cast members" created moments of magic for their guests. Bringing characters into a sick kid's room, or recovering their lost little passport things, and having all the characters sign it and then mailing it back to them. Just story after story, and pictures accompanying a lot of these things. It literally just brought tears to your eyes. It's just so embedded in their culture that they're delivering happiness and to be totally focused on the customer.

Ed Kless: I've actually seen it live. I was in Disney Land, this was, this past March. As we were leaving the park, this one little girl ... She must have been my daughter's age, about five or so ... She had bought the Mickey Mouse balloon. Her parents had bought the Mickey Mouse balloon. As they were walking out, classically, I don't know how, because they usually tie it onto your wrist, but she lost it, and she started crying. One of the cast members who was dressed like Cinderella saying goodbye to us ... was this very weird, odd stewardess, "Bye bye now" situation ... She was out there, and she saw this happen. She went over, and she grabbed not all but a whole big slew of balloons from one of the vendors, just took it, and gave them all to the little girl.

Ron Baker: Right. Wow.

Ed Kless: You're just like, "Well, there you go."

Ron Baker: Another story that I remember seeing on this was a little girl, her dream was to meet Peter Pan. Out of all the characters that were in the park that day, the one day that she was going to be there, he wasn't there. Word got back to the cast member. They actually located her, brought up Peter Pan. He took her by the hand and said, "Come on, let's go cause some trouble." Took her on the Peter Pan ride and took her around to the different things, and spent a good half hour or 40 minutes with her. I just look at that and go, "You've just not only created a customer for life, but where is she going to take her kids and grandkids?" I guess this goes back to our first show, Ed. That's not efficient. However, it's highly effective.

Ed Kless: Right, and it doesn't happen on accident. You might be thinking, "Am I contradicting myself, because people just tell me stories about how their guy helped somebody with payroll?" Yes, I get it, but that's a one-time event. We're talking here that something like this, these moments of magic, happen at Disney on a regular basis, probably daily in some ways. That is how it's fully embedded in the culture. It's not just a one-off event. It's the way that they live. It's their mode of being that is completely transformative. They don't think about it. They don't have to ask permission to do it. Cinderella didn't have to ask permission to give what was probably 50, 60 dollars' worth of balloons to this little kid. No permission was required. It was just done. Quite possibly, it was written up, whereas someplace else, some other organization, Cinderella gets fired for that.

Ron Baker: Yep, or reprimanded, or it gets taken out of her pay, or you have to go through seven layers of management to get that approved. Yeah, it is, you're right, it's embedded in their culture. It's the way they think, behave, and act on a daily basis. That's really what separates a great service organization from one that's just mediocre.

Ed Kless: The ninth business myth that we're going to talk about is, "The customer is always right." Ron, this is clearly incorrect, because the customer cannot be always right.

Ron Baker: No, I think ... Talk to anybody in tech support and tell me the customer's always right.

Ed Kless: Exactly.

Ron Baker: "I'm sitting here kicking the rat, and I don't ..." "No, it's ... You mean clicking the mouse?"

Ed Kless: Yeah. Why is the customer not always right, Ron?

Ron Baker: Because some customers are just completely unreasonable. I remember reading a story about Southwest Airlines about this one lady who, after every flight ... she was a frequent flyer ... would write a letter and complain to anybody who would listen, not only at the airport but also write a letter back to headquarters, and complain about things like, "The tray table was dirty" and "You hang your toilet paper in the bathroom upside down." I don't know if that meant over or under. "There were stains on the carpet, so if the plane internally is this dirty, how could your engines be any good?", and blah, blah, blah. They started calling her Mrs. Crabapple. They kicked it up to Herb Kelleher, one of her letters, and they said, "Look, we just can't deal with this woman. We've tried everything." You know what a great service organization Southwest is. They tried everything to please this woman, and she was just one of those people that you just can't please. Herb Kelleher didn't spend any time. He basically wrote her a letter and said, "Dear Mrs. Crabapple," ... He used the term they called her internally ... He said, "We will miss you," and basically said, "You can't fly on our airline anymore." He published it in the Southwest newsletter that of course goes out to all the employees. What do you think happened to their morale? Here's a CEO who stood up for them, and the morale jumped. I guess if it's between your customers and your employees, your employees should come first.

Ed Kless: That's a great point. I've often heard that, I think it's Wegmans, the supermarket chain in the Northeast, that has over the entrances to their stores, "The customer comes second." Something to this effect, "The customer comes second," or, "Our employees come first." It's clearly stated that that's how they operate.

Ron Baker: Yep. Absolutely. In fact, there's a great book on this. It's written by Hal [Rosenblom 00:13:15] ... again, we'll get all these books up, folks ... and it's called The Customer Comes Second. He puts his employees first. If you look at any great service organization, they tend to do that, because they figure, "If we treat our employees right, they're going to, in turn, treat our customers right."

Ed Kless: Yeah, the flow is take care of your employees, who take care of the customers, which will then take care of the bottom line or the financial well-being of the organization. Interesting, I think on this "The customer always comes right," the other side of this is, I think, innovation. The customer is rarely innovative. If the customer is always right, then wouldn't that in effect kill innovation, because I think it was ... Henry Ford is purported to have said ... I don't think it's actually true ... that, "Had I given my customers what they wanted, I would have given them a faster horse."

Ron Baker: Right. Yeah, customers don't innovate. That's not their job. They iterate. They iterate, but they don't innovate. It's business's job to innovate and bring us cool new products, like the iPad or the iPod, whatever ...

Ed Kless: Or the Apple watch. We'll have to see if that works.

Ron Baker: Yeah. You could argue maybe that's not the greatest innovation, because it's already out there, but they might have done something better with it.

Ed Kless: Exactly. I think that that's one of the cautions here, is that if the customer is always right, then you could be setting yourself up for a place where you're not going to see much innovation in your organization.

Ron Baker: Ed, just for the professionals in the audience, ... because we work with a lot of professional firms, obviously ... this is really hit home for me, that not all customers are a good fit. We spend a disproportionate amount of our time with low-value customers or customers that don't appreciate our value, are not willing to pay for our value. They're just toxic influences on your firm. They take up a disproportionate amount of capacity. I'm not just talking physical capacity but mental capacity. They're probably a disproportionate liability risk. You're better off without them. Not all customers are created equal. Far from it.

Ed Kless: As Howard and Steve were saying a couple of weeks ago on the show, we have to manage our emotional capacity. I think that there are customers that are toxic and that really do drain your emotional capacity. I know I have had situations, and I'm sure you have, as well, where you have that first phone call at 8 or 9:00 in the morning with somebody who completely drains you emotionally. You're pretty much done for the rest of the day. It's like, "Okay, might as well just hang out on Facebook for the rest of the day," because you're just emotionally drained. Your focus will not be there. I think that that's what we have to be careful of, if we follow this advice of "The customer is always right." By the way, Harry Selfridge did not say it. This is my second busting of a quote that was never really said by someone in industry. It's always attributed to him, by the way, Harry Selfridge.

Ron Baker: Yeah. We could probably do the top 10 misattributed quotes, too, [inaudible 00:16:22]. There's a ton of them.

Ed Kless: Excellent idea. Excellent idea. Moving up, number eight is that business is a science and requires data to make decisions. There's a phrase that describes this, which I absolutely love. It's a highfalutin, two SAT words together, and that is called "logical positivism," which is ... There's a technical definition for it, but the way that I like to bring it down to us mere mortals is essentially this, is because there are numbers and there's math, we think that it's somehow scientific.

Ron Baker: Yes. Friedrich Hayek, the great economist, called this "scienticism," I think, "scientism." That's how he framed this.

Ed Kless: Not Scientology. Scientism.

Ron Baker: Right. Right, right.

Ed Kless: Different show.

Ron Baker: Ed, out of all your myths, I really like this one. In fact, didn't Harvard Business Review quote you on this?

Ed Kless: They didn't quote it exactly this way. It's one of my claims to fame being quoted in Harvard Business Review magazine under the following: "Business ain't science." That was the quote that Harvard Business Review published of me. When they asked me permission to use the quote, I was of course flattered but said, "You know, I've got more stuff, and I'm usually grammatically correct." They're like, "No, no, no, no. We want this one, 'Business ain't science.'"

Ron Baker: It was absolutely great. Just on this topic, because I know you read The Management Myth by Michael Stewart, right?

Ed Kless: Yes, yes.

Ron Baker: Towards the end of that book, one of the things he calls for is to get rid of business schools, because he thinks this attitude, that it's a science, that it's a discipline like physics or something like that, has gone too far and it's turning out people who don't really have human skills. That's always fascinated me, because Peter Drucker called management a liberal art. He thought it was part of the humanities. He thought of himself, by the way, as a social ecologist, which is somebody who manages functioning organizations for both continuity and change. He looked at it from a very humanitarian perspective. I've come to believe, Ed, that we'd be better off without the Harvard Business School and just fold it back into the liberal arts, because I think we're cranking out MBAs who really don't understand people.

Ed Kless: In a lot of ways, that's true. Of course, it's this focus on data, which, as I've said probably in previous shows, I view as a substance abuse problem inside organizations. Managers get and leaders get a little bit of data, and then they want more and more, and they crave more data, to the point where the data becomes actually meaningless. It's so stripped down. Look, this is not to say ... and I hope that people don't misinterpret what we're saying here ... that all data is bad and that one should never look at data to make a decision. That's not what we're saying. The myth here is, again, and the words are important, that business is a science. It's not a science. It's an art, as you said. It's a liberal art, and you made a great point for that. It also doesn't require data to make decisions. I have so oftentimes seen in organizations in my consulting work that I do where businesses basically make up their mind and then just go look for the data that is in alignment with their point.

Ron Baker: Another great point. It leads to, I think, something else that you said about innovation, as well. What data exists on something that's new? This fixation, this fetish for data, we would stop innovating because we wouldn't know if it would work. People don't know they want an iPod or an iPad until they touch it and play with it. [Crosstalk 00:20:31].

Ed Kless: What's the Clayton Christensen quote, about all data is basically about the past? You need a theory to peer into the future.

Ron Baker: Correct. The other point, just to complement that, is statistician, the word "statistician" comes from "status." To count something, they have to be static. Humans aren't static. We're growing, living creatures that change, and our preferences change. Therefore, data is inherently about the past.

Ed Kless: One of my favorite things that I've heard you say ... I don't believe I've ever heard you attribute the quote, but you say something to the effect of, "We're not pictures. We're movies."

Ron Baker: Right. Right, or videos.

Ed Kless: Yeah, we're videos. We're constantly changing, constantly evolving. By the time you get the data to support whatever view that is, it's already too late. This leads back to something that we just talked about, that taking care of your employees is what potentially drives customer satisfaction. Then taking care of your customers is then potentially what drives financial performance. If you notice in that change ... By the way, I'm not totally convinced of that, either, by the way. I think it's an interesting theory, but I'm not convinced that that's purely the case. If you do look at that, you'll notice that in order to improve financial performance, you don't look at a financial metric. You look at a customer metric. In order to improve customer satisfaction, you don't look at customer satisfaction metrics if you want to change them. You look at employee satisfaction metrics. There's the theory you have to take the step backwards. People thinking that by looking at their financial statements in a better way that they can somehow peer into the future, they're nuts. They're absolutely crazy. It is called, and if you think about the word, "accounting." We're "accounting" for it. It's in the past, by definition.

Ron Baker: Customer relationship, customer service ... I think JW Marriott said this ... can't be observed in the numbers. He said you got to go out, talk to people. What a concept. How can you put relationships into numbers? I know we try, and I know there's a Net Promoter Score. I know there's various customer service metrics. At the end of the day, this is all about relationships. You got to get out of your office and go talk to people, and observe what's going on with your customers to really understand if we're exceeding their expectations. I have to say, I've seen Ed do this presentation. He usually does it at conferences. I've seen him do this presentation in an hour. Ed, I know you could spend two days on it [crosstalk 00:23:27].

Ed Kless: Oh, easy.

Ron Baker: It's a little bit unfair to try and cram all 10 of them into one show, so we're not going to do that, folks. We're probably going to end up getting to five of them and then carry over the other five for the next show. I just want to focus, Ed. We left off on this idea that business isn't a science. It's actually a liberal art. I've come to believe that. Your seventh myth is, "The strategic planning begins by determining a revenue target." I have to tell you, as a former recovering CPA, and helping lots and lots of businesses do budgeting, and just a little bit of strategic planning work, we always started with revenue. If you look at professional firms, they start with billable hours. What's wrong with that?

Ed Kless: Because it's the exact wrong thing. It's the exact wrong thing. Here's why, is that if strategic planning begins by determining a revenue target ... This is, I've seen and actually participated, so to be fair, I want to say that I believed this. I participated in meetings where this was the case. I've consulted people that this is where they should start. For those of you who were consulting customers of mine 10 years ago, I'm sorry, and I apologize, because I was wrong. Before about six, seven years ago, I saw every single one of these strategic planning meetings that I was a part of, whether it was a small business that I was consulting with or internally at a large organization of which I'm an employee, we began by saying, "What is our revenue target for the period?", whatever the period of the strategy is, two years, five years, 10 years, doesn't matter. "What's our revenue target?" Then after we answered that question and we fluffed that around for a while ... and usually, as it was put by one accounting partner, "It was reality multiplied by dreams" ... Once we determined what that number was and when, the rest of the strategy that we developed was for, "Okay, how are we going to get to that number? How are we going to get to that target?" It quickly became a conversation about what are all of the things that we, meaning inside the organization, "What are we going to do to make this number happen? How many leads do we have to generate?" Those were all of the questions that we talked about. Very little to no time was spent on the external question of, "What are we going to do for customers?" We may have had a conversation about customers, but it went something like this: "How many new customers do we need to get to that revenue target?" That was the conversation about customers. "How many new customers do we need?" What I came to was what I call the "MOASQ," the "mother of all strategic questions." It's a little abbreviation for that, mother of all strategic questions, MOASQ. This is the MOASQ, so this is where we should begin all strategic planning: "What is the value that we're going to create for our customers in the given strategic period, and how are we going to do that? How is it that we are going to create value?" That turned the conversation 180 degrees from focusing inside the organizations to being focused outside the organization. Eventually, by the way, we do then come back to the question of revenue. I'm not saying that the question of revenue is in and of itself bad. What I am saying is that it's extraordinarily ill-timed in a strategic planning meeting to talk about it first. We first have to talk about the external, which is the value that we're going to create for our customers outside the organization.

Ron Baker: Do you think, Ed, one of the reasons why this continues to be such a myth is because value is subjective? Even though that's probably a myth in and of itself. People think you can actually objectify value and measure it precisely, but it's actually very subjective. Therefore, I can't put numbers on this. As an accountant, I'm sitting here scratching my head, going, "Yeah, but how do I know how much value I'm creating?"

Ed Kless: Yeah. That's what people are very uncomfortable with, the very fact that they can't. They can't know precisely what that value is, and it's uncomfortable. We keep coming back to the statistic, Ron, but it's, what, 70 percent of the world's wealth is not measurable in any financial way?

Ron Baker: Right, 80 percent, actually.

Ed Kless: Eighty percent. Okay, so it's even more. Eighty percent is not measurable by dollars, cents, rubles, whatever standard currency you're looking at. That means that four fifths of the value that gets created by businesses is intangible. It's not something that you can specifically put a number on, but yet it's the very thing that drives our organizations forward, is that value creation step.

Ron Baker: Right. It really does, because one of the things that's grown out of this for me, Ed, is that whole value gap, that we like to make firms go through the exercise of looking at their customers and asking themselves, "How much value are you creating for them? How much value could you be creating for them if you were to provide maybe more of their needs or their wants, or innovate, come up with something new, a new service or something like that?" That really does change the conversation and the focus to, like you say, externally, which is where the value is.

Ed Kless: Yes. That value gap exercise, in a lot of ways ... It's funny, because I think I came to that value gap exercise before the mother of all strategic questions, so it was almost the reverse. Now I realize that the value gap exercise is a great part of the step that should be taking place in having the conversation. Let me explain it, I think, in a little bit more detail, because I think it's a great one, because it's really quite easy to put into practice. It's difficult to do. It's one of those, "It's a simple answer. It's just not easy." This would be for any business to take a list of its customers, and cut that down to some subset, whether it's 10 customers, 50 customers, something that's more manageable, where they're very real customers. These can be across your different segments. Big customers, small customers, retail customers versus wholesale, whatever your business is, it doesn't matter. Just make sure that you do get a smattering from all of the different types and sizes of the organizations that you work with. Then ask yourself, or get from your accounting system, your ERP system, this number: over some discrete period of time, whether this is one year, two years, five years, or life-to-date, ... it can even be a life-to-date number ... how much revenue did you produce for them? This is almost the simplest of reports from any ERP system. I need a couple of customer names and how much revenue have we gotten from them. Then ask yourself this question: retrospectively, how much value did you create for those customers? Looking backwards, if we billed them or charged them 300,000 dollars, how much value did we create for them, and how did we go about doing that? It's really, in a way, what I love about this exercise is that it gets you thinking about this idea of value as subjective. After you do that, then we turn the question around, and we say, "Okay, now let's look at the future. What value could you create you create for this same customer over the strategic period, two years, five years, 10 years, whatever it is, and how would you create that value for them? How much value do you want to create?" Then as a pricer, Ron, you love this one, which is to ask the last question, which is, "All right, and what price could we get for that value, if we created it?"

Ron Baker: Right. Ed, this isn't as difficult as people think it is, because people get so hung up on the numbers. "How do I fill out the numbers? How do I know how much value I'm creating?" Like you said, if you look at your customer from a smattering of all different ... Let's just look at an airplane, just as an analogy. You've obviously got first-class customers, business-class customers, full-fare-coach customers, and then maybe people who shop on Priceline.com or buy way in advance, or maybe even are flying to a funeral, so they get half off. An airline knows, almost by definition, that it's adding far more value to its first-class customers and its business-class customers than it is to its Priceline customers. Any business can do this. You know what type of customers they are, and the ones that you love and that love you, and are willing to pay and buy a lot. Then you know you're adding tremendous value. Then the question becomes, "How can we enhance that value? How can we make it even more?" Walt Disney would call it "plussing." How can we continuously "plus" the experience in the parks to add more value to our customers?

Ed Kless: Right. What I love about this exercise is that one of the things that it removes is ... and I know it's very much in vogue today, this idea of personas. "What's the persona for this customer?", et cetera. We can get rid of that, because we can say, "No, no, no. There's Frank, and Joe, and Sue at this organization. How do we please them? How do we plus them? We know exactly who they are." We can say, "What is it that we need to do to create value for these specific people and this specific customer in the future? What's those future trends going to be?" What I find fascinating about this exercise, and where I think it creates really the most value for you as the business, is it starts to begin to train your brain around the value conversation, because you're thinking about how you did create the value. You're also thinking about potentially how you could create value for customers in the future. What I think it does is it then will allow for that to be part of the conversation when you have very real conversations with customers in the future about that value, because it's something that you have thought about and talked about. If for no other reason ... That was one of the pieces of feedback that I got from somebody who put this into practice. He said, "Look, this was a great exercise if for no other reason than what it did was is it got me thinking about value."

Ron Baker: Right. My experience has been the exact when a firm goes through this or a business goes through this exercise, rather than getting hung up on the numbers, they start to focus externally on the value that they can create. Folks, we'd rather have you be approximately right rather than precisely wrong when it comes to value. Don't get hung up on the precision of the numbers like we accountants do. Focus on the process of, "How do we enhance the value?" That's going to lead to some great insights and probably some great innovations, not to mention a larger share of customer wallet. Ed, we were finishing up with your myth number seven, which is, "Strategic planning begins by determining a revenue target," which is obviously false. You would like to change that to a value target. I thought that was an excellent discussion, by the way. That's been a profound insight for me, by the way, in the last 15 or 20 years as I moved into pricing.

Ed Kless: Yeah. One more thought on that. I go to our late colleague Paul O'Byrne for this one, where he ... What was it, that the measure of an accountant's ignorance is called goodwill?

Ron Baker: Right, because we can't measure value until after a transaction takes place. When you look at a business that sells for above its book value, accountants take that difference, and they plug ... It's a plug number. It goes into goodwill. It is. It's the word that we use to define our ignorance, because we don't have a theory of value that can look forward. We can only record it after the transaction has taken place. It's one of the severe limitations, by the way, of accounting, or, I should say, generally accepted accounting principles.

Ed Kless: What's myth number six, Ron?

Ron Baker: Your myth number six is, "Leadership is about changing others' behavior." Folks, if you listen to our great interview with Howard Hansen, who's Ed's mentor, and Howard's mentor, I guess, Steven Geske, and their great book Healing Leadership, you'll know all about this, because this is their central premise, isn't it, Ed?

Ed Kless: It absolutely is. It's one of those "aha" moments for people. It's funny, the stories behind where some of these myths came to me, or presented themselves as, "Okay, this is something that we need to talk about." This one came to me when my wife [Christine 00:37:25] and I were sharing one night over the books that we were reading. I happened to be reading, I think, Howard and Steve's book at the time, and she was reading something that was along these lines of a parenting book. She said, "You know what? I don't really like this book." I said, "Why don't you like it?" She says, "Because this book is not about changing the kids. It's about changing me. I'm reading this parenting book because I want to change the kids. It's saying no, I don't do this. I got to change me first." This is exactly where I think this myth comes out of this, this idea that leadership is somehow changing, or getting people to do, or manipulating. I think it is. I think it's truly manipulative, but it's oftentimes couched under the idea of, "How is it that I can get somebody to do and make them think it's their idea?" I've got an Irish background, and what we used to call "Irish diplomacy," which is somebody telling you to go to hell but you're looking forward to the trip. That somehow leadership is about getting that to present itself, getting people to say, "Yes, we're all for going to the South Pole and freezing our butts off," and somehow manipulating them. It's not. It's really about changing your behavior, changing who you are and your place in the world, and then allowing people to make a decision as to whether or not they want to participate in that or not.

Ron Baker: It reminds me of a story. I don't know if this is apocryphal or not. It probably is. I've read it in a couple different places, so I have a feeling it's true. A mom took her little boy to see Gandhi in India, the actual leader Gandhi. She was saying, "Can you please help my son? He eats too much sugar. He likes candy. He really needs to cut down on his sugar. Can you explain to him why he needs to do that?" Gandhi looked at her and said, "Bring him back in a week." She brought him back in a week, and he had a talk with him. She asked him, "Why'd you make me bring him back in a week?" He said, "Because I had to knock out sugar for me before I could get your son to change. I had to cut my consumption of sugar." It just goes right to what Howard and Steve were saying about, you got to change yourself before you can think about changing others. What's the Edwin Friedman quote that we love so much?

Ed Kless: Oh, right, about the colossal misunderstanding of our time is the assumption that insight will work with people who are unmotivated to change, and that if you want to change your spouse or significant other, just remain connected to them and change yourself. That is an incredibly powerful statement. I've talked about this before, audience after audience after audience, and there's a collective explosion in the room, like literally all the air just went out, because there's people saying, "But that can't just be it. That can't be it."

Ron Baker: "That can't work. That can't work."

Ed Kless: "That can't be it." Yeah, "There's got to be something else. There's something else. What's the other answer?"

Ron Baker: It goes back to Peter Block's definition of a leader, somebody who confronts somebody with their freedom. Ed, one of the things that this brings up for me, this particular myth, and the way that you're debunking it, is I really do think business people or businesses in general ... and maybe it's organizations, but businesses for sure ... I think they're full of control freaks. I really do. I remember having discussions with my managers back when I worked for a Big 8 accounting firm. She brought all the, what they called, staff in the room. Sounds like an infection, but they put us all in the room. The four or five managers were sitting there, and they said, "How can we manage you better?" I looked up at them and said, "Leave us the hell alone. Get out of our way. Remove obstacles. Remove bureaucracy. Be there when we need you, but don't think that you can sit there and micromanage a knowledge worker." This is a colossal misunderstanding, but that's the only way I think they get their sense of self- worth, is through micromanaging. I think it's a huge issue.

Ed Kless: Yeah. As someone said, you can't prove the value of management. There's been no empirical study that says management is somehow better.

Ron Baker: Yeah, how do you measure the value of management? That whole saying, what you can measure, you can manage. Really? Then tell me how you measure management.

Ed Kless: Right. You just judge it. The whole "Leadership is confronting people with their freedom," so incredibly true, because it is about ... This is the word that's out there, but of course misused. This is where this myth comes into play ... is accountability. Whenever I hear a leader, manager say something like, "We need these people to be accountable," or, "We need to increase the accountability around here," I know immediately that this person doesn't get it, because accountability ... This is Block's point, too, is that accountability and freedom are the same thing. If you want people to be accountable, you give them their freedom, and then they choose to be accountable or they don't. I think that's the thing that people miss on this, is that some people can choose not to be accountable. Then you've got to figure out a way to separate them from the organization. There's nothing evil or wrong about that. They're just not really part of the organization, because they choose not to be accountable.

Ron Baker: Right. I love that Block point. I also like Peter Drucker used to talk about autonomy. Autonomy's a Greek word meaning "self-governance." It's not license. It's not, "Do whatever feels good. Do whatever you want." It's self- governance, but taking the responsibility for your results, as well. It's a much higher level of responsibility than just merely doing whatever feels good.

Ed Kless: Amen. That about wraps this up.  

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