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No World Borders editorial comment: We should remember what got us to the point of having Wall Street executives being micromanged – a lack of financial transparency required the ARRA and the TARP.  And when the government ended up with the majority ownership in AIG it became the shareholder to which the board and CEO are accountable.   That means that even an outspoken, opinionated CEO like Mr. Benmosche is accountable to the American people.   Granted, financial incentives to top talent must be considered.

However, the Fed is having to do more cleanup: it will be buying AIG Mortgage Backed Securities (MBS).  See related Seeking Alpha post here.

We submit for your review a link to three past No World Borders blog posts on the topic of transparency and approaches to improving it. To view the blog links, click here.

From Market Talk’s blog: AIG chief Robert Benmosche threatening to step down only three months after taking the job shouldn’t come as a surprise considering his personality and all the restrictions hindering his ability to lead the government-controlled insurer.

The executive is chafing under constraints imposed by AIG’s government overseers, particularly a recent compensation review by the Obama administration’s pay czar, Kenneth Feinberg, according to the people. AIG, 80% government owned since a rescue last year, is one of the companies under Mr. Feinberg’s purview.

Last week, Mr. Benmosche and other AIG board members met with Mr. Feinberg in New York. During the three-hour meeting, board members discussed difficulties of complying with pay policies and retaining talent at the company. Mr. Benmosche’s frustrations “hit a crescendo,” said a person familiar with the matter. “Bob feels he is in an impossible situation,” the person added.

Related blogs from No World Borders on transparency: click here

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BusinessWeek published one of the first articles we have seen about a trend we commented on last year – social media inside the enterprise.  Social Media will provide a powerful new way to enable organizational development and change management inside companies, particularly those with borders created by siloes.  No World Borders has been following these trends for years and it is gratifying to see main stream media cover them and legitimize them now.

“At Ford, Scott Monty is using social media to remake the automaker’s image—and reinvigorate its culture 

It started out with a simple question, on blogs, Facebook, and Twitter: Who should we profile as a Voice of Innovation for social media? Names poured in. Some commenters treated it as a vote, some as an essay contest. Others, including marketing maven Seth Godin, objected to the whole exercise. “Sorry to be a curmudgeon,” he wrote. “But I really like BW best when they lead the discussion, not referee it.”

Still, this process was bringing in names—lots we’d never heard of—and telling us about people doing all sorts of things with social media. What was wrong with that? Only one thing. As some commenters pointed out, we cast too wide a net. Social media, after all, extends from freewheeling entrepreneurs who build new software applications to consultants laboring inside giant corporations. It includes people who use it to push a product and those who use it to further an idea or just themselves. How could all of these innovators fit into a single category? They couldn’t.

So we divided social media into four categories and picked a representative of each. They are:

1) Toolmasters: Imaginative techies whose schemes and applications open new doors and lead to insights. Our toolmaster is Noah Brier, who works days in New York at Barbarian Group, an interactive marketing shop. By night, Brier, 26,pieces together new social-media apps, including Brand Tags, a Web page that shows brand names and invites visitors to describe each with a single word or phrase. The more a word is repeated, the bigger its type, making it simple to see what folks think.

2) Eyes to the World: People innovating with social media to help others. Beth Kanter is our pick. She uses every avenue on the World Wide Web to raise funds for Cambodian childrenthrough her own charity, the Sharing Foundation. And she shares what she learns with nonprofits everywhere. Kanter, 52, is also a Net pioneer. A longtime employee of the Boston Symphony, she plunged into the Internet in the early 1990s. She started tapping friends—and friends of friends—through her blog while adopting two Cambodian children in 2000.

3) Crowdstrappers: Entrepreneurs or consultants who harness new approaches in social media to reposition or invigorate businesses—either their clients’ or their own. Here we selectEric Brown, who has turned his apartment business in Royal Oak, Mich., into a social media laboratory. Brown, 49, has no training in social media. But he believes in openness and hopes that the ease of communicating through blogs, Twitter, and Facebook, can turn him into a better landlord.

4) Hidden heroes: These are people working inside old-style enterprises and use social media to change the culture and operations. Our choice is Scott Monty, who heads up social media at Ford Motor (F).

You’ll see more on the first three nearby. Meantime, here’s a fuller story on Monty.

When Ford came looking last year for a social media maven, Scott Monty had an answer for the auto giant: No. Monty, a consultant in Joseph Jaffe’s Crayon consulting company, had been living in Boston for 20 years. He got to work with lots of blue-chip clients, from Coca-Cola (KO) to American Airlines (AMR). Why move to work inside an auto company—in Detroit?

Then he started thinking. “Here was one of the most storied brands in American culture asking me to do what I liked doing specifically for them, and I said no. I’m still shaking my head about that.” When he reconnected with Ford, he said yes—and since July, Monty has been busy on blogs, on Twitter, and in the hallways of Ford trying to revive the culture of a suffering industrial giant. His boss, Chief Executive Alan Mullaly, compares the transformation of Ford to “changing the tires on a car going 60 miles per hour.”

Monty’s challenge, as he sees it, is to communicate to the rest of the world the same lesson that he learned himself: that Ford is not a stodgy company tied to the past. “I realized that I’d fallen victim to the very thing that Ford was trying to combat,” he says. “There were assumptions I’d made that just weren’t true anymore. These are the things I struggle with every day. We’ve got a big perception problem to overcome.”

His first goal is to “humanize the brand, giving Ford as many faces as possible.” The most prominent face, of course, is Mulally himself, who appears to be a willing experimenter. Last month at the Detroit auto show, Monty says, he collared the CEO coming out of a meeting and asked if he would answer some questions on Twitter.

“What’s Twitter?” Mulally asked.

After Monty explained, he asked his followers on Twitter for questions for the Ford CEO. Mulally stayed with him and gamely answered a few. (True, there’s no sign of him yet on Twitter, but that could be a good thing: The guy is dealing with 2008 annual losses of $14.6 billion, and sales that fell 40% in January.)

Monty says he wants to “democratize social media” within Ford, deputizing tens of thousands of employees to represent the company. They have blogs, of course, and have reached out to all tech and green bloggers. But the challenge is less about technology, Monty says, than changing the culture of an organization, making it so that people aren’t afraid to speak up. “It’s like being at a dinner party,” Monty says. “If someone says something derogatory about Ford, do you just sit there? No, you respond.”

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Indifference, hostility, and isolation are among the major obstacles to a healthy innovation environment

BusinessWeek said it well. “In most companies, just about all the cards are stacked against the nurturing of innovation, especially the kinds of new ideas and disruptive innovations that generally lead to major changes in the marketplace and within the business.

Following are some of the behaviors observed in companies throughout the years that have convinced us how difficult it is to create an environment in which innovation can flourish.

Indifference

While just about every CEO and senior executive of a company pays lip service to innovation, many do not really mean it. They mouth the words—it would be politically incorrect not to embrace innovation—but they do little beyond that.

That’s not because they are not good, smart, and highly competent people. It’s just that innovation is not a part of their DNA. The majority of executives make it to top positions by being very good operational managers: meeting sales objectives, improving products and services to keep up with competitors, supporting existing customers and acquiring new ones, managing mergers and acquisitions, achieving the required financial results quarter after quarter, and so on. These management jobs are very tough and getting tougher, given our rapidly changing, fiercely competitive, global business environment. Being a good manager takes very hard work, attention to detail, and organizational discipline.

But as executives rise up in the organization, other skills become increasingly important. They need to transition from being a manager to being a leader.

Management is about business results and processes. Leadership is about people. The key quality you need in good leadership is passion—the urgency to attack and solve the complex problems that all organizations face. To do so, you need to be surrounded by highly talented people, and you need to find a way to transmit your passion to them, so they will buy into your vision of the future, perform at the highest possible levels, and come up with innovative solutions to the challenges of achieving the vision.

When skies are blue, a company might be able to cruise along with top managers who are indifferent leaders. Such managers are typically executing tactical, incremental strategies where the critical ingredients are good, disciplined management as well as operational excellence. But once the skies begin to darken, as they inevitably do, such managers will get into deep trouble, and often end up taking a business down with them. Their most talented innovators and strategists, those whose skills are now badly needed to help set the business on the proper course, have either long departed or become so disenchanted that they have nothing left to give.

Hostility

In general, managers who do not actively encourage new ideas and innovations in their organizations do so because of indifference. They will typically listen politely to your new idea, provide some encouragement, and offer good advice. If they are being honest, they will tell you they barely have the time, energy, and budget to help much beyond a pat on the back now and then.

But some managers go beyond indifference. Their initial reaction to any new idea is negative, if not downright hostile. This is particularly true if the idea comes from someone outside their own organization.

Some of them also exhibit characteristics that many of us would associate with being a bully. Typically, the corporate bullies I have met have achieved their high management positions because, despite their poor interpersonal skills, they are very good at other parts of the job. Sometimes, they are excellent innovators themselves, but given their autocratic tendencies, innovation for them is a one-man or one-woman show. They tend to be poor team players: Collaborative innovation is not for them.

Such hostile behavior is hugely detrimental to a healthy innovation environment. People championing new ideas, especially if they are potentially disruptive new ideas, are going against the grain of what the business is currently doing. Rejection is painful, especially coming from people in positions of authority. Senior managers can nurture those new ideas through positive words and actions, or they can stop them on their tracks by being overly negative and combative.

Isolation

I strongly believe innovation is a team sport. The 2004 National Innovation Initiative report observed that innovation “is multidisciplinary and technologically complex. It arises from the intersections of different fields or spheres of activity.” That is why it often takes a group of people who are not only highly talented but who bring together diverse skills and points of view in order to successfully tackle the kinds of complex problems we face in the 21st century.

But perhaps even more important, a collaborative approach to innovation helps provide the energy and emotional support that new ideas need in their very early stages. New ideas are almost always rough and ill-formed at first. In my experience, nothing works better than bouncing ideas off other, supportive people. This back-and-forth dialog is crucial in helping to shape the idea into something more concrete, understandable, and actionable. Then it is more ready to face the tougher challenges and criticisms from line management and others in the organization.

That is why isolating people in organizational silos is one of the biggest obstacles to innovation. Companies that are serious about innovation do everything possible to break down silos and encourage communication and collaboration across the organization and beyond.

Fostering innovation is very hard, especially if the innovation is disruptive in nature. A spirit of innovation and collaboration does not come naturally to an organization. For such a spirit to take hold, it must become an integral part of the company’s culture. None of this is easy, but it is what a company must do if it truly wants to create a healthy environment in which innovation can flourish.

Inspired by BusinessWeek and Irving Wladawsky-Berger, who retired from IBM last year after a 37-year career at the company. He is presently working on technology and innovation with IBM and Citigroup, and is a visiting professor at MIT and Imperial College.

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Yale University research reports that Most people prefer to have their rewards immediately, rather than have to wait for them, but would what if the rewards of the future are greater than the rewards available now – would you be prepared to wait? What if you were offered £20 now, or you could wait and have £100 in six months time – what would you choose? Being able wait for more valuable rewards is associated with higher intelligence, and now researchers believe they have found a region of the brain that is involved in both intelligence and what psychologists call “delay discounting” – the inability to resist the temptation of a smaller reward in lieu of recieving a larger reward at a later date. Discounting future rewards too much is a form of impulsivity, and an important way in which we can neglect to exert self-control.

Previous research suggests that higher intelligence is related to better self-control, but the reasons for this link are unknown. Psychologists Noah A. Shamosh and Jeremy R. Gray, from Yale University, and their colleagues, were interested in testing the idea that certain brain regions supporting short-term memory play a critical role in this relationship.

The results show that participants with the greatest activation in the brain region known as the anterior prefrontal cortex also scored the highest on intelligence tests and exhibited the best self-control during the financial reward test. This was the only brain region to show this relation. The results appear in the September issue of Psychological Science, a journal of the Association for Psychological Science.

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I recently read and enjoyed Paul Sloane’s latest book, The Innovative Leader. Here are a list of just some of the gems from this book. It’s available at Amazon.com (click the title of the link above and go directly to the page on the Amazon web site).

1. Have a vision for change
You cannot expect your team to be innovative if they do not know the direction in which they are heading. Innovation has to have a purpose. It is up to the leader to set the course and give a bearing for the future.
You need one overarching statement that defines the direction for the business and that people will readily understand and remember.
Great leaders spend time illustrating the vision, goals and challenges. They explain to people how their role is crucial in fulfilling the vision and meeting the challenges. They inspire men and women to become passionate entrepreneurs, finding innovative routes to success.

2. Fight the fear of change
Innovative leaders constantly evangelise the need for change. They replace the comfort of complacency with the hunger of ambition. They’ll say, “we are doing well but we cannot rest on our laurels, we need to do even better.” They explain that while trying new ventures is risky, standing still is even riskier. They must paint a picture that shows an appealing future that is worth taking risks to achieve. The prospect involves perils and opportunities. The only way to get there is by embracing change.

3. Think like a venture capitalist
VCs use a portfolio approach and balance the risk of losing with the upside of winning. They like to consider lots of proposals. They are comfortable with the knowledge that many of the ideas they back will fail. These are all important lessons for corporate executives who typically consider only a handful of proposals and who abhor failure.

4. Have a dynamic suggestion scheme
Great suggestion schemes are focused, easy to use, well resourced, responsive and open to all. They do not need to offer huge rewards. Recognition and response are generally more important. Above all, they have to have the whole-hearted commitment of the senior team to keep them fresh, properly managed and successful.

5. Break the rules
To achieve radical innovation you have to challenge the assumptions that govern how things should look in your environment. Business is not like sport, with its well defined rules and referees. It is more like art and is rife with opportunity for the lateral thinker who can create new ways to provide the goods and services customers want.

6. Give everyone two jobs
Give all your people two key objectives. Ask them to run their current jobs in the most effective way possible and at the same time to find completely new ways to do the job. Encourage your employees to ask themselves—what is the essential purpose of my role? What is the outcome that I deliver that is of real value to my clients (internal and external)? Is there a better way to deliver that value or purpose? The answer is always “yes”, but most people never ask the question.

7. Collaborate
Many CEOs see collaboration as key to their success with innovation. They know they cannot do it all using internal resources. So they look outside for other organisations to partner with. A good example is the Mercedes and Swatch collaboration, which produced the Smart car. Each brought different skills and experiences to the team.

8. Welcome failure
The innovative leader encourages a culture of experimentation. You must teach people that each failure is a step along the road to success. To be truly agile, you must give people the freedom to innovate, experiment and to succeed. That means you must give them the freedom to fail, too.

9. Build prototypes
People’s Bank has a refreshingly original attitude to new ideas. “Don’t debate it, test it,” is the motto of this innovative American financial services organisation. Try the new idea at low cost in a section of the market and see what the customers’ reactions are. You will learn far more in the real world than you will in the test laboratory or with focus groups.

10. Be passionate
Focus on the things that you want to change, the most important challenges you face and be passionate about overcoming them. Your energy and drive will translate itself into direction and inspiration for your people. It is no good filling your bus with contented, complacent passengers. You want evangelists, passionate supporters. You want people who believe that reaching the destination is really worthwhile. If you want to inspire people to innovate, to change the way they do things and to achieve extraordinary results, then you have to be passionate about what you believe in and you have to communicate that passion every time you speak..

Paul Sloane is an Advisor to No World Borders, and the founder of Destination Innovation (www.destination-innovation.com). He writes and speaks on lateral thinking and innovation. His book, The Innovative Leader, is published by Kogan-Page.

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