Practical Dharma

Practical Dharma

Anthony O. Putman, Ph.D.

The Dharma of Organizations

Part I

This is the third in an on-going series on Practical Dharma, exploring the order and logic inherent in human interactions. The author’s approach is fundamentally practical and rooted in common sense – no belief required. Whether it’s useful or makes sense, of course, is for the reader to decide.

Organizations in America are failing at an alarming rate.

Organizations are everywhere in our society, the means through which anything of scope or significance is accomplished. The great management thinker Peter Drucker flatly asserted over 35 years ago: “Our children will have to learn organizations in the same way our fathers had to learn farming.”

Based on results to date, a great deal of learning about organizations still needs to be done. General Motors (where Drucker did his first published study) proved unable to avoid the train-wreck of bankruptcy despite decades of clear warnings that drastic change was needed. Every week brings news of another major school system failing miserably in its attempts to educate its students while vastly over-spending its financial resources. A tidal-wave of newspaper closings has devastated the industry; independent store owners are a dying breed; medical and insurance organizations routinely fail at balancing quality care and health care costs. What we are finding is that – like farming – organizations are complex and hard to get right when the going gets tough.

We can attribute much of this recent difficulty for organizations to tough conditions and changing times – much, but not all. When earthquakes hit, the houses that fall are most often the ones built without proper consideration for gravity. When hard times hit, the organizations that fall are most often the ones built without proper consideration for dharma.

What exactly is dharma, and how does it apply to organizations? Dharma refers to the inherent order and logic that arises from an organization's specific combination of purposes, people, structure and relationships. This order – this dharma – is like gravity, inherent in our world whether or not we know about it or believe in it. Like gravity, it is fundamentally practical: We take dharma into account not because we should, but because we must. Acting in accord with dharma is crucial for success in any endeavor. You can ignore dharma if you like, or even violate it, but that rarely results in a good outcome – and sometimes the results are very bad indeed.

Every organization has its own particular dharma, establishing specific bounds on which actions are appropriate or inappropriate, required or optional, allowed or forbidden, expected or surprising, relevant or irrelevant. But some core aspects of dharma arise from the fundamental purpose of organizations, and are shared by all.

First, the obvious: every organization is a community of people with a shared purpose. As such, it has all the complexity of any community, importantly including the human ability to see the world from differing perspectives.

What is the “shared purpose” of an organization? Why do people, instead of merely acting independently, come together in a community of effort? Fundamentally:

An organization exists to create value.

Individual effort can only accomplish so much on its own. An organization is required to accomplish anything of scope or significance. People participate in an organization because they see it as a means to create value – the particular value this specific organization exists to create. Acting in accord with dharma requires individuals, to the best of their ability, to direct their efforts toward creating that value.

Things get tricky when we try to define exactly what that value is, because value looks different depending on who is doing the looking.

Here’s an example:

Some years ago I facilitated a trouble-shooting meeting in a school district. Teachers, principals and School Board members were terminally deadlocked over an extremely thorny curriculum issue, with three absolutely incompatible views on what to do. Each group had presented its viewpoint and rationale, and opened themselves to questioning from the others (keeping that from turning into bloody warfare had been challenging). To conclude this round of information sharing, I asked each group to answer one question: “At bedrock, what do you believe makes your solution the right solution?”

All three groups responded without hesitation: “It best serves our customers.”

All three groups were right.

All three had different “customers” in mind.

At first I thought I had stepped into the Twilight Zone. Then it struck me: I wasn’t just herding cats. These were tigers – fiercely committed to creating value through their organization’s efforts. But they all had different views of what value to create!

So which was the “real” value? The simple answer is: none of them, and all of them. Organizations share a peculiarly human complexity: everybody has a view of the organization, but nobody has the view. Nobody can somehow see the organization in its full complexity, as it “really is” – everybody’s view is from their own particular perspective.

For the teachers, the ultimate customers were the students; the ultimate customer for the principals were the state and district administrators who set policy and guidelines; and the School Board members took as their ultimate customers the parents and other local taxpayers who ultimately paid everyone’s salaries. With such diverse “customers”, it is not surprising that the best curriculum to create value looked very different to the three groups. As one observer remarked, they might as well have been living in three different worlds.

While “living in three different worlds” may be a bit extreme, we can straightforwardly take it that we are dealing with three distinct views of the organization. This situation is depicted as follows:

Each circle represents the set of good answers to the question, “What should our curriculum be?” from the viewpoint of (A) teachers, (B) principals and (C) School Board members. The best answer from each group’s viewpoint is represented as A*, B* and C*, respectively. Note the obvious:

The best answers are not the same from group to group;

The best answer from the School Board’s point of view, C*, is not even among the good answers for the other two groups.

No “best answer” is a good answer for all three groups.

Any answer that does not fall into the “good answer” category for one group will not receive commitment and participation from that group.

Notice that there is a small area, D, which falls within the “good answer” category for all three groups. Based on our understanding of organization dharma, one who would lead in this situation will direct the group’s attention to D and help them choose a path from among the D answers – because all three groups can commit to and participate in D. And note that not just any answer will do – it must be one that looks good to all three.

This strategy – looking at value from all viewpoints and searching only for answers that look good from all viewpoints – can align an organization with its dharma by giving all committed participants the value they require. To bring it off requires understanding and acting in accord with some other core aspects of organizational dharma – leading, authority, communication, diversity, et. al. – which we will explore further as this Practical Dharma series unfolds.

NEXT: The Dharma of Organizations Part II

No part of this material may be reproduced without prior written permission.

"Practical Dharma" is a service mark of Anthony O. Putman, Ph.D.

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The Dharma of Business

This is the second in an on-going series on Practical Dharma, exploring the order and logic inherent in human interactions. The author’s approach is fundamentally practical and rooted in common sense – no belief required. Whether it’s useful or makes sense, of course, is for the reader to decide.

“Business.”

In many quarters today this has become a dirty word, suggesting greed, excess, rampant ego and ruthless exploitation. A scene from the recent action-thriller film Taken neatly illustrates an extreme example of this conception:

An elegantly dressed villain lies battered and bloody in an elevator, looking up at our hero. The villain had kidnapped the hero’s teenage daughter, addicted her to drugs, sold her into sexual slavery, and then casually ordered his thugs to kill the hero/father. The hero escaped, killing the thugs and beating the villain who pleads: “You have to understand: it was never personal. It was strictly business.”

(As he shoots the villain in the head, the hero replies: “For me it was always personal.”)

Is this really what business is about: the cold, impersonal, essentially immoral pursuit of advantage? I respectfully suggest that it is not. This common and unfortunately well-deserved reputation is in fact the result of routine violation of the inherent nature of business. Business has an inherent order – a practical dharma – which many business people violate through ignorance or arrogance. Restoring the reputation, and more significantly the value, of business will require us to discern and act in accord with this dharma of business.

Let’s begin by clarifying something important: our revulsion at the villain’s activities in Taken has nothing to do with practical dharma. We condemn kidnapping, forcible drug addiction, sexual slavery and murder because they are morally wrong. Anyone who cares about doing what is right – regardless of their particular culture or ethical code – will refuse to do these, and will refuse to look the other way when someone does. Of course, not everyone actually cares about the morality of their actions, or gives ethics proper weight in their assessments; many of us need reminding or correction, for which we have codes of ethics, standards, law, regulation, enforcement and the like.

But ignoring ethics is not unique to business: it occurs in all our institutions. How often do we hear about politicians using their office to line their own pockets, clergy abusing young parishioners, police taking bribes to protect drug dealers, doctors prescribing pills for celebrity addicts? Some people consistently choose personal advantage over ethical behavior; it doesn’t happen just in business, and we have ethical and moral codes to guide us in dealing with this when it occurs. This is the realm of ethics, not of practical dharma.

So what is practical dharma – from here on, just “dharma” for short – if it’s not just another word for ethics? And how does it apply to business?

Dharma refers to the order and logic inherent in human interactions. Every interaction takes place in the context of specific relationships – social, business, personal, familial or some combination – and that relationship establishes specific bounds on which actions are appropriate or inappropriate, required or optional, allowed or forbidden, expected or surprising, relevant or irrelevant.

This order – this dharma – is like gravity, inherent in our world whether or not we know about it or believe in it. Like gravity, it is fundamentally practical: We take dharma into account not because we should, but because we must. Acting in accord with dharma is crucial for success in any endeavor. You can ignore dharma if you like, or even violate it, but that rarely results in a good outcome – and sometimes the results are very bad indeed.

What is the dharma of business? Put another way, what characterizes a sound, successful business by contrast with a business that struggles and fails? We might be tempted to look at some huge, undeniably successful businesses like IBM or GE or P&G to see what is their “secret sauce”; this is a common move in business books these days. But even if we could come up with a stable list (we all know how many “star” companies have recently moved from good to great to gone) we would be looking in the wrong place: The dharma of business is what all successful businesses have in common. We can see it most easily by looking at the other end of the spectrum: the myriad small businesses that comprise the backbone of every market economy.

As it happens, over the past 25+ years I have been privileged to have a front-row seat at hundreds of such businesses. In every case, when people come to me for help in becoming highly effective marketers of their own services, they say essentially: “I’m really good at what I do, and my clients are very satisfied. But I’m having a tough time making my business work.” And while every person has a distinctive mix of strengths and blind spots, they all have one thing in common: They have not discerned and aligned themselves with the dharma of their business. Until that happens, nothing they do succeeds long-term; once they discern and align with their business dharma, sustainable success becomes – well, certainly not easy, but at least doable.

Every business is an organization – small though it may be – and as such exists to create value. Its organizational dharma emerges from its specific combination of purposes, people, structure and relationships. (The Dharma of Organizations will be examined in depth in the third installment in this series.) Every business is also part of an exchange economy, in which the value the business creates is exchanged for value received, and as such it is subject to both the dharma and the ethics of the exchange economy (see The Dharma of Lending for an example of how badly things can go wrong when businesses ignore this dharma.) Both of these facts are important aspects of the dharma of business, but they also apply to many enterprises that are not businesses.

What specifically distinguishes the dharma of business is this:

Business requires us to respect the organization’s resources, deploying them to create maximum value and ensuring that the exchange results in both a return and an increase of the resources.

This simple, core aspect of business dharma has many implications.

First, notice how this differs from other similar but non-business organizations. Government organizations and non-profit service organizations allocate their resources to best fulfill their mission of serving a client population. They get resources via funding, and when their resources are used up, they look for more funding. They do not consider how to get a return on these resources from the people receiving the services – any fees they charge are at most supplemental, not meant to cover their costs – and they certainly do not look to make profit from serving their clients, nor should they: After all, they are not businesses. Their dharma is different.

Next: the respect within business for preserving and increasing resources demands discipline in allocating and accounting for resources. This is the initial stumbling block for most people striving to make a business out of practicing their profession. They are trained to consider solely the quality and effectiveness of their service and to consider their “fees” as an essentially separate matter. On adopting a business perspective they discover another, equally important consideration: the need to recover the cost of providing the service, along with an appropriate margin (a more appropriate term than profit, according to the great management thinker Peter Drucker. Drucker never used the term Practical Dharma, but his work reflects a deep appreciation of and alignment with it.)

Finally, and obviously: money is central to business. It would be absurdly difficult to insist that the “return and increase” of resources be literally in kind. Customers cannot replace the materials, time etc. that went into creating the value they received, so they do the best actually possible thing: they give the business money. This means that a business must know what it costs to create and provide its products or services, which means that the business must do its best to “monetize” – assign a monetary value to – the resources that go into its value-creation.

And therein lies the rub – and the risk – because since money is so easy to measure, in many businesses it becomes the only thing that matters (or, to be fair, the one thing that trumps all others.) Some resources are easy to assign a monetary value to, but others are not. (This is also examined in depth in The Dharma of Organizations.) Trouble begins when a business loses track of the fact that monetizing simply results in a more-or-less workable model of the resources the organization uses to create value, and begins to treat the model as the thing itself.

This is the first and fateful step out of alignment with dharma, and it can lead to some dangerous beliefs and practices:

In business that is out of alignment with dharma, the only thing that matters is profit: the return and increase of money. Everything else is secondary. If a course of action creates profit, it is good, and the more profit, the better. This can lead to the absurd notion that business, with its core concern for profit, is somehow not subject to other considerations such as ethics: “If it’s good for business (which is to say, if it makes money) it’s good.” I suggest that this one move is at the root of the common well-deserved bad reputation of business.

When monetary profit is everything, good business practice becomes what you can get away with. Anything that is not specifically prohibited (and inspected and enforced!) is allowed; damage done to reputation, natural resources, workers, communities or anything else is irrelevant. Greed and unbridled self-seeking thrive in this environment.

Valuing solely that which can be easily monetized leads to undervaluing – and eventually losing – that which cannot. It is notoriously difficult to put a price on such factors as enthusiasm, commitment, loyalty and creativity – but try creating anything of value without them. Paying for hours and rewarding achievements helps some, but not nearly enough to sustain success.

So what’s a business to do? First, let’s remind ourselves that money and profit are not somehow inherently evil. Money and profit are good and important; a business must pay attention to and respect its financial “bottom line.” But the “bottom line” is not the finish line, nor is money the whole story. Value seen through financial lenses looks like money and profit, but that is only one aspect of value. It may be easier to reduce everything to money, but it’s also easier to not fix the potholes in the road: both inevitably set you up for a rough ride.

Learning to see and assess value as a whole, integrating the distinct but relevant views of value, is crucial to discerning and aligning with the dharma of business. We will examine this in depth in the next installment of the Practical Dharma series, The Dharma of Organizations.

No part of this material may be reproduced without prior written permission.

"Practical Dharma" is a service mark of Anthony O. Putman, Ph.D.

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The Dharma of Lending

This is the first in an on-going series on Practical Dharma, exploring the order and logic inherent in human interactions. The author’s approach is fundamentally practical and rooted in common sense – no belief required. Whether it’s useful or makes sense, of course, is for the reader to decide.

Bear Sterns and Lehman Brothers collapse…Merrill Lynch absorbed by Bank of America… Fannie Mae and Freddy Mac taken over by the government…stock markets world-wide go into free-fall…

What went wrong? How could so many financial institutions wind up losing massive fortunes in the collapse of the sub-prime mortgage market? It will take years to sort out the full story; thousands of studies and books will be written about it; but the root cause is already painfully clear:

The mortgage markets collapsed because they violated the dharma of lending.

This order – this dharma – is like gravity, inherent in our world whether or not we know about it or believe in it. Like gravity, it is fundamentally practical. We take dharma into account not because we should, but because we must. Acting in accord with dharma is crucial for success in any endeavor. You can ignore dharma if you like, or even violate it, but that rarely results in a good outcome – and sometimes the results are very bad indeed. You ignore dharma at your own peril.

Ignoring the dharma of lending proved to be very perilous indeed.

Let’s take a moment to review some very basic facts. Lending is a core transaction among people. It creates a relationship between borrower and lender. And the dharma of lending is inherent in that relationship.

Specifically, lending requires both parties to make a cost-benefit assessment. The lender must assess (at least) the reward reflected in the interest, the opportunity cost of using the funds for lending instead of for something else, and the risk of not being repaid. The lender accepts the risk and absorbs the opportunity cost in exchange for the reward; loan terms are set such that the lender sees the reward as worth the risk. All this is a straightforward picture of lending in accordance with dharma.

But most mortgage lending has not been in accordance with dharma for some time. Lenders generally do not keep the risk and reward themselves; they “securitize” their loans, bundling loans together and selling them as a package to brokers, transferring the risks and rewards in exchange for a fee. This simple piece of financial engineering has powered a massive increase in available loans, because the people making the loans no longer absorb the risk – they transfer it to someone else. Inevitably, this has broken the initial calculations by the lender: if you are not taking a risk by loaning money but instead are earning a certain reward, why would you be meticulous about terms? Offer terms that get the deal done and let someone else worry about the risk: after all, the people buying these bundles are financial wizards with massively deep pockets; they surely have already built into their equations a certain level of anticipated default …

And so many, many loans were made that never would have been made had the lender in fact taken on the risk for the reward.

But mortgage lenders were not alone in violating the dharma of lending. Investment bankers for decades have lent other people’s money instead of their own, getting rich through fees and bonuses instead of through appreciation of their own capital; watchdog rating agencies like Standard and Poor’s didn’t bother to independently research complex derivative-based securities, instead handing out A ratings on offerings they did not even understand. Everyone was doing it, after all, and the money to be made was truly staggering; why on earth would you not get your piece?

And like a building built without regard for the forces of gravity, the financial structures built without regard for the dharma of lending have inevitably come crashing down.

Violating dharma is inherently, practically perilous.

Please Note: I have borrowed the Sanskrit word “dharma” to refer to this inherent order and logic because we lack a robust term in the English language. In borrowing the word, I do not intend to borrow anything else from the Hindu or Buddhist traditions; this use of “dharma” is purely practical and does not include the “divine origin” aspect of dharma in the eastern traditions. The many deep and profound teachings about dharma in Eastern traditions have no intended relevance to the concept and practice of Practical Dharma.

No part of this material may be reproduced without prior written permission.

"Practical Dharma" is a service mark of Anthony O. Putman, Ph.D.

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