For me personally the most interesting thing that is likely to emerge from this prodigious output will be to see whether the subject engages the interest of an audience.  What often happens in cases like this one is that high visibility initiatives (Transformation of the Army, Transformation of the USPS) consume all of the oxygen in a debate.  When the smart people call them a cliche they become a dead zone of discussion and even if there is nothing to replace them conceptually they become a subject to be avoided.   Here, in interview after interview I talked to the leaders of initiatives who told me that they had no “new” word, that the concept of transformation was an important one to them.  So the question becomes: even if it isn’t news is it valuable to seek to learn what did the leaders of effective transformation efforts find to be most important?

The core concept was to create a “playbook” from the comments that were made by a variety of high level interviewees – ideas and concepts that they had found to be valuable.  Scheduling interviews was maddening.  But once in the room a wide variety of government leaders were more than willing to talk about what worked.

Our concept was that from such a playbook someone could assemble a specific gameplan that would fit the particular setting of the agency and the opportunities they could see before them.

There is no better example of the need to individualize a gameplan than the issue of the timing of the launch.  Leaders talk about the value of a “burning platform” to contribute a sense of urgency to an agency.  Having a compelling reason to act (the platform on which you are standing is burning) makes it easier to encourage action in a typically recalcitrant bureaucracy.  But the problem is that in spite of the heat of the moment, the right time to launch a transformation initiative may be more a function of the needs of the customers and the competitors than the ability to encourage movement from reluctant government managers.  Having the right play to call may make the difference between optimal timing and a lesser choice.

The mantra of the modern Harvard Business School “thinking, doing, reflecting” may be a useful way to think about what comes first and what after that?   The working papers page contains a deck titled “The Transformation Leadership Process.  The concepts are simple.  But that’s the point.

• Thinking – there is a great deal of justifiable excitement that surrounds the discussion of analytics today.  In part, this stems from the possibilities that technology has created for measuring performance on a real time basis.  But analytics start with knowing what should be measured and why?
• Doing - Even with direction that is aligned strategically and an information architecture that can deliver performance information in a reliable, timely manner there will be a need in the modern marketplace to make decisions and to act collaboratively.  Here the “open swaps” decision model is shown to demonstrate an approach to decision-making that can be opened up to stakeholders.  The open swaps method compares multiple options with multiple decision criteria.
• Reflecting – Here five questions that leaders should be asking about their effectiveness are offered as a starting point.

A “way forward” concludes the deck: do you want to consider strategies that emphasize cost reduction and efficiency to make improvements or are they focused on top line growth, on service and quality improvement.

What’s most interesting about revisiting the basics is seeing how important it is to begin by understanding where you are.  Just asking whether you are considering what to do, trying to do it or reviewing what happened offers an accessible starting point.

For me, a crisis in government is now an extremely broad and far reaching concern.  While the concept might have once been limited to natural security crises or the emergencies that are the mission of FEMA.  But today this has been considerably broadened as crises in our lifetime and recent memories range from the Arab Oil Embargo to the financial crisis and from Japan’s Tsunami to Katrina to the BP oil spill.

Crisis in government that generally does not respond with agility is any event where a critical parameter changes by a factor of 10.  The events that occur in the life of any company or government agency that Andy Grove of Intel called Strategic Inflection Points are now the crisis for which we are training future leaders.

The Playbook had at least two important points of intersection where leadership issues and the definition crisis becomes a critical leadership issue:  first, in the case where launching a large scale change program would clearly be suboptimal and second, where being in a crisis mode inevitably leads to a process that will repress innovation.

First, there is the point in time. There has been no comparable time in the past 44 years of government. In January of 1969 Lyndon Johnson, the father of the Great Society left office but by many measures the age of “big” government had not even arrived.

A combination of technology (because we can), natural resource and economic crisis (Arab oil embargo) and political and constitutional crisis (Watergate & Ralph Nader) would conspire to make the government much larger than the Great Society Planners had ever contemplated.

By most estimates, however, we have now met a time of constraints in which the bills for global leadership, resource dependence and our lifestyle are coming due. Government will have to “right size”. There will be federal managers who have to drastically cut their programs but they aren’t going to have constituent groups coming in and showing them how they can do more with less.

Many will know where they need to go. But they will need a pathway to get there.

Yet a review of the 1997 strategic plan shows interestingly that the problems that are creating the crisis today were anticipated years ago.  The plans forecast that mail volume would decline and there was an imperative to rethink the nature of the mission of the agency and the means with which it delivers service.

In the introduction to the 1997 five-year strategic plan the Postal Service presented a vision of the future the follows.

As certain and clear as this path is, the future is not. Ten years from now, this same environment may be transformed by technologies in their infancies today. Ten years from now, the United States Postal Service mission responsibilities may be met only by a new understanding of universal service, access, and how best to deliver them. A decade from today, the Postal Service may have embraced technologies and systems as dramatically different as jet airplanes and robotic package sorters would have seemed to the 19th-century letter carrier.

Because this five-year plan is a living document, conceived to be flexible and adaptive to such environmental shifts, these challenges and external factors will be examined, weighed and — where appropriate — addressed in the years ahead. Ultimately, the philosophy underlying this plan, these goals, and their strategies is to create unique customer value as the Postal Service grows, improves and strengthens its financial foundation. This is a philosophy that embraces change. Because, in change, there will be opportunity for the United States Postal Service to serve its customers better.

Ultimately, government leaders and for that matter, leaders in every sector, are necessarily limited in their capacity to reshape markets, to alter macro economic trends or to change the nature of their agency missions.  Leaders cannot anticipate that their actions will be judged failures if their plans are undercut by massive societal and market shifts.

In coming years there will’s most certainly be frustration with the need to realign government service and to downsize its presence.  Yet, seeing in a larger context, the requirement to publish a formal strategic plan offers an opportunity for proactive leaders to create markers, waypoints on a journey long journey of continuous improvement.

With these simple words the Kansas City Star took on the issue of the future of the Postal Service.
The point that has been lost in many conversations about the future of the Postal Service – and there have been many in the past 2 decades – is that the basic business model of the USPS is not working any more. The postal reform debate has focused on pensions and retirement costs (we will get to that). But the issue of first principles is

• How will the postal business model be sustained in a world in which customers are choosing to communicate differently?

The question facing the USPS – that is currently urgently imploring Congress to address the issue of a pending multi-billion dollar payment that it cannot make - is simply how can future revenues exceed future expenses? Without an answer to this, there is no sustainable business model and someday soon there won’t be a Post Office unless something changes.

The debate over arcane pension and retiree health benefit topics is about whether the law should be changed to reduce the expenses that the USPS is required to pay. The costs are simply too high.

The discussion over regulation, monopoly, universal service and a host of questions that economists like to discuss is all about what rules should guide the generation of revenue? The revenues are too low.

Television ads from the American Postal Workers Union say that no taxes support the USPS, only stamp revenues. There are three reasons why they are presenting a misleading picture. First, the Postal Service receives “implicit subsidies” as Congressman Darrell Issa points out. The Federal Trade Commission recently detailed the way in which the USPS has advantages that a private competitors do not enjoy. (And, to be fair, it has unique burdens too.) Second, the USPS does actually receive appropriation support, although it is admittedly in the form of “reimbursement” as apposed to classic “appropriations”, and in permissions to charge customers. But most importantly, the USPS is running in the red. It’s losing more than $8 billion and stamp revenues are not going to pay for all of the current costs.

So the post office and Congress are going to have to do something because stamp revenues are not enough to afford the labor costs and the current infrastructure. This is why the Kansas City Star is right on target.

The business model is broken and must be fixed. But to do this, America is going to have to face difficult choices about the mission of an institution that is historically at the core of our culture and our economy – but not so much any more.

The law says that the mission of the Postal Service is to “bind the nation together with the correspondence of the people”.

But in an age of electronic communication and social networks its reasonable to ask whether this is a mission that it can fulfill. (Whether it should extend its reach with electronic services like secure email is another question. But the law would have to be changed to permit it to do so. This was put out of reach in 2006, just as the recession and the electronic invoicing and bill payment was about to hit.)

So what should Congress do? Change the business model or change the mission? Something is going to have to give. In an electronic age in which America’s oldest communications infrastructure is now prevented by law from offering electronic services it is not possible to be “businesslike”, to sustain the old ways of doing business, and to bind the nation together – something is going to have to give.

Where you responsible Mr. Murdoch?  No, he answered the people he trusted were responsible and the people that they trusted.

Unfortunately, since there had plainly been wrongdoing in the interest of selling more newspapers, Mr. Murdoch’s answer became the centerpiece of much of the coverage that followed.  Should he have assumed greater responsibility?  Was it even true that he didn’t know what was happening?

For directors who are responsible for protecting the well being of their companies, this answer raised troubling questions (once again) about the nature of moral hazard.  Economists talk about moral hazard (a condition that occurs when a party that is insulated from risk behaves differently than they would if they were exposed to the risk) as a case of information asymmetry.  Insurers need to be protected, according to the theory, from cases where the insured do not behave as they would if they had no insurance, if they were themselves subject to the full risks of their behavior.

In the 17^th Century when insurance companies were first grappling with the concept of risk, they sought to understand whether the people that they insured would behave in a riskier manner as a result of the insurance.  In the case of health insurance today, there is ongoing debate over whether insurance encourages an overconsumption of health care and then there is a debate over whether that’s a bad thing.  Co-payments and other devices are used to encourage the consumer to assume part of the risk.

But in recent years, especially after the financial crises of 2008, the question of risk to the taxpayer became clear as institutions were protected, at taxpayer cost, from behaviors in which they had assumed too much risk.  Directors and national leaders, it was reasoned, would be better able to protect shareholders and taxpayers if the actions of CEOs were less protected and if their decisions were required to be transparent.

Michael Anteby, an associate professor of organizational behavior at Harvard Business School, writes in Working Knowledge, an HBS blog that “many companies today operate like Russian nesting dolls, relying heavily on other companies or external individuals to conduct many of their activities”.  (“Rupert Murdoch and the Seeds of Moral Hazard”)  Anteby expands the concept of agency and moral hazard by looking more broadly at the implications of the interconnectedness of our society.  He is concerned that when companies interconnect the “associated moral hazard often goes unnoticed.  Such risk can prove even greater when the various elements of the ‘delegation chain’ obey different standards.”

Whether or not the Murdochs knew about the phone hacking at the News of the World they were plainly in a situation of “plausible deniability”.  In the food and apparel industries, Anteby argues, there is a need to “secure” all elements of the production chain.  Whether they have in fact recognized this and whether there is a similar requirement in other industries is a debatable point.  But certainly one of the most interesting consequences of Rupert Murdoch’s denial of responsibility for the actions of his agents was to raise once again the question:  If not you, then who is responsible for the actions of your employees?

Future directors will have to think carefully about what these emerging concepts of “responsibility” will mean for them.  Will transparency be sufficient to protect the shareholders and the public?

We have reached a time when every company is an IT company.  Some Boards are beginning to see this and to grapple with the risks associated with information.  They may not yet have reached the point where they are grappling with the risks of information asymmetry and, if transparency is an antidote to the problem of the Russian nesting dolls, the consequences that this form of insurance will convey.

First, the questioning of Rupert Murdoch and his son on live international television was an extraordinary spectacle worthy of, say…Rupert Murdoch.

The opportunity to inquire into the most intimate details of corporate governance of one of the most powerful men in the world is extraordinary theater.

And, in this case, there was an element of human drama that would have been difficult to miss.  Here was Murdoch being asked “what did you know and when did you know it?”  He was given the choice that always dominates discussions like this one – what did you know about this scandal?  What steps did you take?  Obviously, the witness cannot say that he was fully informed and took actions to make things better for his company.  Now that the dam has broken and there is a formal, legal inquiry, any actions taken that were protective have the taint of being conspiratorial.

So what could he say?  He could say that he was a bad manager.  Or he could say that he was foolish or stupid.  Or he could say that he did not know.

But if he didn’t know and if he was a competent manager, then his son must have known.   So there was a human drama of potentially throwing his son under the bus.  Of course, his son was the Chief Executive and perhaps should have taken steps long ago.

Finally, there should be little question that this is not a “UK” problem as much as the Murdocks might have wished that it were.  US law – foreign corrupt practices and licensing before the FCC – make this inquiry a US inquiry as well.

The new ground?  In their answers the Murdochs referred frequently to their reform of the corporate governance committee.   Clearly it would have been better to have had a Management and Standards Committee that reported to the independent directors.   The corporate governance process would have been better protected and that decision may turn out to have been a multibillion dollar decision.

In the end, it’s hard to predict how extensive the damage will turn out to be.  Business analysts everywhere will have to be even better at being able to assess events and processes like this one.

New ground at a minimum, indeed.

In 2011, as a new Republican Congress has begun to review the financial crisis that is pending for the Service, there will again be a new debate that seeks to reform the USPS.

But as the debate emerges, inevitably there will be a question about Round 1.  What was learned from experience with PAEA?  How well did it serve the needs of the USPS?

In 2007 after the first law was passed, I wrote a paper for an international conference sponsored by the Rutgers Center for Research in Regulated Industries.  My co authors were Larry Buc and Pierce Myers, an economist and a lawyer who were as knowledgeable as any professionals working in the postal and delivery industries.  We asked “how should the new law be evaluated?”  As the Postal Reform Debate 2 began to emerge Larry Buc and I wrote another paper for the Eastern Conference of CRRI.  (Click on “paper” to see our 2011 paper.)

We reexamined the criteria from the 2007 paper and concluded that the emerging debate was going to miss the underlying question – what kind of a law will be needed to make the USPS a viable institution in the 21st Century?