Adapting to Technological Changes

The fastest growing part of our organization is our ecommerce unit. By enabling us to sell many items for substantially more than they would sell for in a Goodwill store, our ecommerce operations enable us to be better stewards of the goods people give us. The growth of our ecommerce operations has also created a lot of jobs, as we currently have nearly 100 employees at clickgoodwill.com – over twice as many as we had at the beginning of this year.

Down through the years, technological changes have eliminated some jobs and created new ones. At Goodwill, for example, when I started my career we repaired radios and television sets. Doing so wasn't too difficult in those days. The sets used vacuum tubes (younger readers, look it up on Wikipedia), and we had a tube tester. Check the tubes, replace the bad ones, and many of the sets would work just fine. Vacuum tubes were eventually replaced by solid state electronics, and this effectively put an end to our repairing radios and TVs.

During those same years, we also repaired toasters and other small appliances. Over time, though, technological improvements in the manufacturing processes and increased sophistication of the products, coupled with rising labor costs, made many new small appliances less expensive than the cost of repairing broken ones. Fortunately, in more recent years, technological improvements have also helped create recycling and secondary markets for many products that can no longer be repaired economically.

Another example: From 1974 till 1992, we manufactured high quality oak file boxes for 3×5 and 5×8 cards for the federal government. For quite a few years we had 18 employees – most of them people with disabilities – who produced an average of 50,000 boxes a year. But over time, as the use of personal computers rose, the use of file cards fell and, consequently, the government didn’t need as many of the boxes. Eventually, the volume declined to the point where we exited that business.

Our involvement in online retailing began very slowly about twelve years ago after Goodwill in Orange County, CA created shopgoodwill.com. The Orange County Goodwill continues to maintain that 7-day auction site, which is designed to enable any Goodwill organization to post items on it. About five years ago, we began to increase our use of shopgoodwill.com, and we also began posting some books on several book-selling Web sites. We subsequently added CDs, DVDs, video games, and jewelry to the array of items we could effectively sell online. Better software and packaging equipment have improved our efficiencies to a remarkable degree, and we believe there is enormous additional growth potential in that part of our organization.

Of course, as is the case at most relatively large organizations, new technologies have created other entirely new departments at Goodwill. Known in many companies as IT (Information Technology), in our organization it’s TS (Technology Solutions). Composed of bright, talented people, TS keeps us connected, helps develop and optimize uses of technology to improve our effectiveness, and helps us be good stewards of our resources. As the organization continues to evolve, so too do the services of the Technology Solutions department.

While we’ve come a long way, we can be sure that technological changes will continue to create new challenges and opportunities for us. We can also be sure that if we do not adapt well enough to those changes, we will be left behind – less effective, perhaps irrelevant, and in a worst-case scenario maybe even extinct.

The Five Basic Principles

Individuals who want to have a good reputation need to follow some pretty basic rules, such as:

  • Don’t lie, steal, or cheat
  • Do what you say you will do
  • Never do anything you wouldn’t want posted on the Internet for all to see

Organizations that want to maintain a good reputation must have people who follow the same basic rules. But organizations also need a culture based on a set of articulated values that, when exemplified in the way people go about their work, result in the desired performance. The culture must be one in which people understand that while achieving the business goals is important, how you achieve them is equally important.

As Collins and Porras reported in Built to Last – Successful Habits of Visionary Companies, companies that have managed to thrive over long periods of time have constancy of purpose and a few core values. But everything else changes over time.

Whatever the articulated values, it is essential to have an effective way to link the values with the business goals and ingrain those values into the culture. In our central Indiana Goodwill organization, the approach we take today started in the early 1990s when we articulated five basic principles we should apply in all of our work:

  • Respect for people. We strive to treat everyone in a respectful manner.
  • Customer satisfaction. We strive to meet or exceed the expectations customers, donors, and users of our services have of us.
  • Informed decision-making. We gather useful information and, to the extent possible, make decisions based on facts.
  • Innovation and improvement. We continuously seek better ways to grow, improve, and increase our impact.
  • Good stewardship. We are responsible stewards of all our resources.

For the next ten years or so, we didn’t do much with this set of basic principles. Then we decided to build our culture around and manage by them. They are incorporated into our recruitment and hiring, new employee on-boarding, and performance development review processes. We take these principles very seriously. We talk about them a lot, and over the last decade these five basic principles have become ingrained in our culture. I frequently hear employees refer to them in conversation.

We’ve also found that it’s a lot easier and more effective to manage according to a small number of values and basic principles than a thick book of rules and regulations. We have to have some of those, but we try to keep them to a minimum.

We’re far from perfect, of course. We have nearly 2500 employees, and all of us make mistakes. Still, with occasional exceptions, our employees apply the five basic principles day in and day out. If that were not the case, I’m quite sure we would not have enjoyed the kind of successes we’ve had over the past decade.

Employing people with limited options

Employing people with limited options – Nothing we do is more important

At Goodwill, the collection and sale of used goods has always been a means to an end rather than an end in itself. The organization grew out of an effort to provide an earned income stream for unemployed people – most of them recent immigrants – in the south end of Boston at the beginning of the 20th century. Jobs were scarce, and there was no government safety net. The founder of Goodwill, Edgar Helms, went to the wealthy areas of Boston and asked people to give him the goods they no longer wanted. He put people to work repairing the goods, sold the goods to the public, and used the money to pay wages to the workers.

Today, at Goodwill Industries in central Indiana, we have nearly 2,500 employees, over 1,400 of whom work in our retail system. That system includes 50 retail stores, three warehouse and distribution centers, recycling and secondary market operations, and a rapidly growing e-commerce unit. Largely because of the growth of that system in recent years, we have 1,000 more employees in our organization than we did five years ago.

More significantly, 68% of our employees have limited work options because of disability, criminal history, or lack of a high school diploma. And it’s particularly important to note that for 50% of our employees we are the primary source of income in their households. That places an enormous responsibility on those of us in senior positions to run the organization well enough that we will be able to continue providing a livelihood for all of those people who are counting on us. And we take that responsibility very seriously.

Our retail system is also the financial backbone of the entire organization, and in that system our business and mission objectives are tightly woven together. In addition, cash from retail operations helps support other Goodwill services that do not generate enough revenue to sustain themselves.

While Goodwill adds value in the community in several ways, nothing we do is more important than providing jobs for people with limited options. Certainly, the importance of that role is magnified during periods of relatively high unemployment. We also have a responsibility to provide as many opportunities as possible for those individuals to improve their education and/or enhance their skills so they might eventually qualify for higher paying jobs with us or with another employer.

Of course, our ability to employ people over long periods of time is dependent on our ability to operate businesses well over a long period of time. If those businesses are growing, we can often employ more people. Fortunately, we’ve been able to do that for quite a few decades.

It’s particularly noteworthy that the part of our organization that employs the largest number of people has been with us from the start. It’s survived wars, the Great Depression, several recessions, and many other changes in the economy, demographics, technology, competition, laws and regulations, as well as occasional natural disasters. But the future of that business is not guaranteed. We must take nothing for granted.

Three Essential Characteristics of Good Organizational Leadership

Organizations that excel over long periods of time typically have been able to sustain strong leadership over a relatively long period of time. They have good governing bodies and effective chief executives, and they aspire to become something better than they are. They are constantly learning, building on their experiences, developing their people, and improving their results. For them, “good enough” never is. The most effective boards and the most effective executives go hand in hand. You won’t find one without the other for very long. Unfortunately, the converse is also true. The perpetually troubled organizations have neither effective boards nor effective executives.

While the public, for-profit, and not-for-profit sectors differ in some significant ways, I believe there are some characteristics of good organizational leadership that are applicable regardless of the sector. These include:

Good Governance– the role of the board of directors or other official governing body.

    In any institution that excels, there will be a framework of values and principles that foster a culture of achievement and adherence to high ethical standards – that tend to bring out the best in people, discourage negative behaviors, and improve the ability of people to work well with each other. An effective governing body will ensure that such a framework exists and will also ensure that structures and mechanisms are in place to help people develop and utilize their potential as fully as possible to optimize the organization’s performance in furtherance of its mission.
    In addition to performing the governance functions required by law or dictated by best practices, the best boards focus more on the long range and strategic than on the short term and tactical. They are concerned more with matters of paramount importance than with the ordinary and with policy rather than operational procedures.
    A good board generally has some responsibility for the allocation of resources – primarily through the budgeting process and review of large expenditures that fall outside the approved budgets or that would create significant long term obligations. The board will also monitor key metrics and have a mechanism for reviewing how well management is doing its job.

Good Management

    It is the job of the CEO and other paid leaders to translate goals into action and make resources productive.

High Aspirations (Vision) – in many cases articulated primarily by the CEO, the aspirations must be embraced at all levels throughout the organization.

    An organization that has a good board and good management will also have high aspirations for what the organization strives to accomplish over time. To be meaningful, however, those aspirations must be translated into actionable goals toward which the organization’s resources can be aligned.

The need for these three elements – good governance, good management, and high aspirations – applies at every level and in every sector of society – in companies, not-for-profit organizations, schools, communities, states, and countries. Unfortunately, in too many places, these elements are conspicuous by their absence.

Three essential characteristics of a highly successful social enterprise

Over the years I have read countless books and articles on topics related to organizations, leadership, and management, and I have learned more from the writings of Peter Drucker than any other author.  In part, that may be because he wrote for so long. In fact, in 1997, when Drucker was 87 years old, Forbes magazine featured him in a cover story titled, “Still the Youngest Mind.”

Despite all that I’ve learned from Drucker’s writings, though, the one book that has (so far) been the most helpful to me is Built to Last – Successful Habits of Visionary Companies by Jim Collins and Jerry Porras, published in 1994.  In it the authors described the commonalities they found among companies that had managed to thrive over long periods of time.  One of those commonalities was that the visionary companies did not brutalize themselves with “the tyranny of the OR – the view that you can be ‘A’ or ‘B’, but not both.  Instead, the visionary companies embraced “the genius of the AND – the paradoxical view that you can be ‘A’ and ‘B’, even if they are seemingly contradictory notions.  This insight helped me solidify my view that to excel in our organization, we had to be outstanding from both business and mission perspectives – not one or the other.

From that view, we arrived at an overall objective of maximizing mission-related impact while maintaining a financial position that enhances the organization’s long-tem viability.  In other words, we must have significant impact and be financially sustainable.

IMPACT is a function of your mission-related services.  How many people are benefiting, and to what extent are their lives being changed for the better?   Measures of real impact are much deeper than activity metrics such as “number of people served”  which may indicate you were busy, but tell us nothing about whether you actually made a difference.

SUSTAINABILITY is a function of the organization’s financial strength.  Do you have sufficient strength to be able to weather periodic downturns and occasional external shocks?  Organizations that are constantly struggling to keep their heads above water financially rarely do a good job accomplishing their mission.  They are too focused on simply surviving.  Neither are organizations that lack adequate financial strength likely to be able to invest in initiatives that might improve their impact and/or accelerate growth.

Even if a successful social enterprise such as Goodwill is having substantial impact and is strong financially, to remain successful over time a third characteristic is necessary:

ADAPTABILITY, which is largely a function of the organization’s culture.  Can you respond quickly and effectively as new needs, opportunities, or threats arise and as the external environment changes?  Organizations that cannot adapt well enough run a strong risk of becoming ineffective or extinct.  Actually, it’s better if they become extinct rather than ineffective.  At least when they’re extinct they no longer consume resources.

Even if you’re highly successful today, it’s wise to remember an old proverb Drucker frequently quoted, “Whom the gods would destroy they give 40 years of success.”  Organizations with a long period of success may be particularly vulnerable to the demons of inertia, complacency, myopia, and/or arrogance that could eventually lead to their demise.   With the pace of change today, this can happen much quicker than forty years.   The wise leader is aware and alert, as well as adaptable.