Interview: Getting to know Gerry Kraines and his career using Elliott Jaques's Requisite Organization

Speaker A Introduce yourself and tell us little bit about your life before Elliot briefly, and then when you met him and some of the impact. And if you came across Wilford Brown or others, that's fine because it's Elliot and Wilford or other people in the BIOS community.

Speaker B I'm Jerry Cranus. I'm the CEO of the Levinson Institute and have been since 1990. When I took over from Harry Levinson, who founded the Institute in the mid 1960s, my route towards getting to know Elliot Jackson, his work was somewhat circuitous, although in hindsight, I think it was probably faded. My interest has always been in systems, and as an undergraduate at Oberlin College, I was an organic chemistry major because of the wonderful symmetry between structure and function and process. And while I had intended to go to medical school anyway, when I was applying, I looked around and found that Case Western Reserve Medical School in Cleveland was the only medical school that had rewritten the curriculum to teach medicine from a system's point of view. And while I was a third year medical student there, I spent a summer in Nicaragua doing public health work under the leadership of chief resident, who was Nicaraguan, and began to really learn about public health systems. And I think those things together led to my doing some work in the public health Service, taking a straight medical internship in one of the best public health programs in the country, and then coming to Harvard to do my psychiatric residency because they were affiliated with the School of Public Health. And I was able, when I completed my residency, to get a certification in community mental health. And that's where the plot thickens, because one of my professors at the Laboratory of Community Psychiatry, which was run by Gerald Kaplan, who was a contemporary of Harry Levinson's, was Ralph Hershowitz. And Ralph Hershowitz was a South African emigrate who was really my mentor during my fellowship in community mental health. And a couple of years after I completed my time in the Public Health Service and served as a medical director for Mental Health Center in New Hampshire, ralph asked me if I would meet with Harry Levinson to consider becoming one of the instructors on leadership program. And as preparation for that, in 1979, Harry Levinson asked me to come and observe a seminar he taught with Elliot Jacks called Modern Organization. And it was through that initial contact when Elliot Jacks had a great deal of theory but had not developed an integrated approach to designing and implementing leadership systems, that I became intrigued, but had very little contact with Elliot. Until ten years later, in 1990, when Harry Levinson had asked me if I would consider closing my private practice of psychiatry in New Hampshire, moving back to Boston, taking over the Levinson Institute. And it was in the context of doing that due diligence that I went out with Harry and Elliot for three days with the CEO of Olincorp and his executive team to hear them give an updated version of modern organization but really to hear Elliot Jacks for my first time develop his entire system of requisite organization. And what was particularly exciting for me in that three day event in 1990 is that he and the army Research institute had just broken the code on their research to essentially validate that their system for directly assessing someone's mental process correlated nearly one to one with the judgments managers made of people's current potential. And it was on that three day seminar that I had the most profound transformation in my life in which I decided to take up Eric Levinson's offer to take over the Levinson Institute but to refocus its energies less on the psychology of leadership and more on the leadership system. So that's how I've come to be acquainted in the circle of influence of Elliot Jacks. Could you talk a little bit more.

Speaker A About you said you had a transformative experience there that it really could you talk about the nature of that and what appealed or shocked or maybe displaced some of the previous beliefs or assumptions you'd been making?

Speaker B Harry levinson presented the only model I knew about leadership for the ten years before this second encounter with l. H. Acts. And that conception was basically the translation of clinical concepts to better understand the motivation of people in the world of work and the relationship between managers and their subordinates in the workplace. And it was and remains a useful model for increasing the manager's radar about people and to enhance their skilled knowledge in communicating with people. But I recognized very early that there was no system of leadership in what Harry Levinson had written about and how he consulted and with the opportunity to take over the Levinson institute if it were just to essentially practice another version of psychiatric counseling to executives I really had no interest in that. But with that three day program and Elliot Jacks, having, over the decade of the 80s, pulled together a dozen disparate components of what eventually he called requisite organization into a unified field theory, intellectually, I found that enormously stimulating. And in terms of my basic bias and interest in trying to understand the whole system, I was very much committed to primary public health prevention when I was the medical director of a mental health center. While the organization wanted my presence to provide the psychiatric expertise my interest was in transforming the organization into being a better public health firm or agent. With Elliot Jack's model I saw the potential to have the most powerful public health model in the place where human beings are both most vulnerable and where the opportunity for them to become most capable are the greatest. I had since come to think of leadership in the general sense as being synonymous with leverage because that's what leadership is. It's about leveraging the potential of many more people than yourself to accomplish things that you might be able to envision but you couldn't complete on your own. And with the emergence of a leadership system that, just as I studied the human being in medical school, begins with the conception of an anatomy that is aligned with the function that's required anatomy that supports the processes necessary. For the functioning and translating that structure into a model that allows us to find the right people for the right roles and then discerning what the requisite leadership practices must be in any managerial system in order to best leverage the potential of those people. I finally had the model that I'd been looking for that would allow me to apply my public health values in the world of work. And it's my contention, as it was Elliot's, that that is the place that can do the most harm and the most good. And by applying these principles, applications and practices. I believe in the last 1516 years I've been able to have an impact, substantial impact on the lives of many hundreds of thousands of people, which I never would have been able to have as a practicing psychiatrist or even someone who was a medical director of a mental health center. So it was the simple elegance of a model that demonstrated all of the components of a true system. Unlike Peter Sengi's work, who has written about, sometimes eloquently about the importance of viewing the workplace as a system, he really doesn't have anything to back that up other than a notion of causal loops and the interrelationship between functions. But he has no real model that begins with the anatomy physiology, translating that into the requirements, translating that into capabilities, and finally with a discrete and replicable model of leadership practices. So that's what just got me extremely excited. I had not seen the book Requisite Organization, which had just been published about three months earlier, and got a copy of that book that night, or the night that I finished, went back home and took off the next two days and read it with four different color highlighters. And I remember it was actually frightening. At one point, about 36 hours into the book, I had my first and only hypomanic episode where I felt I could see the core of the universe in a flash of insight about this unified field theory. And it was just quite striking. And so the rest, as they say, is history. Thank you.

Speaker A I was wondering if we go on. I say I see you brought a picture of yourself and Harry Levinson and just talk about your relationship, maybe how Harry and Elliot worked together for ten years and your relationship.

Speaker B I have two photographs or posters sitting over my desk in my office in New Hampshire which connect me with two of the three most important mentors in my life. The first is with Harry Levinson. That was taken some twelve years ago here in Bedford at our conference center where we put on our public seminars. And it is a photograph that is a bittersweet memory. Harry Levinson, in his time, was a giant. And it's striking that he's a very short man. But he was a giant in the field of leadership in that at the end of World War II when he was doing his internship in clinical psychology, where he received his PhD at the University of Kansas, and he was doing his internship at the Meninger Foundation. And Roy Meninger, who had been the chief of Army Psychiatry during World War II, together with Harry, got interested in the possible applications of clinical knowledge. People under stress, under fire, if you will, which is a good metaphor for the workplace, the clinical applicability of knowledge about how people cope and how officers relate to the people in the workplace, to their privates in battle. The question was how much applicability would there be to bringing that knowledge into the private workplace, into the government workplace? And he set Harry Levinson out for a couple of years, found in a relationship with Kantas Power and Light. And out of that came Harry's first book, and in particular where he coined the expression the psychological contract. And over the next 20 years, Harry Levinson wrote a dozen books, wrote 30 articles in the Harvard Business Review, and I believe, along with two or three others, created what is generally accepted modern knowledge about enlightened leadership, psychologically enlightened leadership. And it was because of his persisting dedication to bringing clinical concepts to managers to improve their own leadership effectiveness that I got connected to the Institute, as I had described earlier. Ralph Hershowitz, who was one of my professors at the Harvard School of Public Health gerald Kaplan's Laboratory of Community Psychiatry was a principal consultant in the Institute, and he brought me in to do some training. And Harry Levinson developed an elegant model of translating notions of motivation and psychological needs and adult development into a construct that managers of all persuasions could use to get a better fix on who people were in the process getting them more engaged in developing strong psychological contracts with their people and in general, enhancing their confidence and competence in communicating with people. And it was a very powerful model, very elegant model. I was very eager to teach. And so in short order, I began to teach all of the different programs. But it was in that context that Harry Levinson saw me as a good educator, a person with enthusiasm, someone who had built up a thriving psychiatric practice and a group practice. And he thought that I would be the kind of person not only to take over the Institute and grow it, but to grow it in the model and the image that he had created. And that's where the irony, or perhaps the sadness, set in. In that it was in exposing me a second time to Elliot Jacks in 1990 and seeing the tremendous progress that Elliot Jacks had made in the previous eleven. In the subsequent eleven years to my first encounter with him that I really saw taking over the institute as a means to further the work of Elliot Jacks. And that became a source of great disappointment for Harry Levinson, who had assumed that I shared his fervor for psychoanalytic notion and orientation to transform organizations, rather than that being a tool which informed me about behavior, but not as the kernel of a whole approach to developing leadership systems. And over the course of the ten years that we worked together in this new capacity with Harry as chairman and with me as the president and CEO, our relationship gradually became more and more strained. And the photograph of Harry is probably maybe three years into the Institute while our relationship was still strong. And I regret to say he's a man I admire enormously. He has given me tremendous opportunity and I regret that the direction that the Institute has taken has not been as exciting for him as it has been for me. But he's a wonderful man. He was a genius, sort of a Paul Tillich well before his time and made and continues to reap the benefits of tremendous impact on leadership in the US. The second picture that I have in my office is a picture of me and Elliot Jack's, a photograph that was taken to promote a series of seminars he and I gave in Buenos Aires, Argentina during the early 1990s. I was very fortunate to take over the Levinson Institute at one of the only times in Elliot's life when he was between major projects. He had just been finishing off his work with the US Army Research Institute and with CRA Mining in Australia when I began to work with a client in Argentina, asindar, which was the second largest steel company in Argentina, who had been sending executives to Boston for the previous ten years to take our on leadership seminar. And with Argentina coming out of the hyperinflation of the dictatorship, with a new president and a new director of the economy who was opening up markets, asindar knew that it needed to move its management and leadership into the 20th century from being a patriarchal and autocratic form of management. So they asked Harry and me if we could put on seminars in late 1990 for their managers. This would have been level seven, six, five and four managers, and some level three managers, about 150 managers altogether. So Harry and I and two other faculty members of the Institute began to put on these seminars using simultaneous interpreters. And that's when I first became aware that whenever I used the word responsibility, it got translated into responsibility dodd. Whenever I use the word accountability, it also got translated into responsibility dodd and that triggered for me a clear memory of one of Elliot Jackson's comments that there should be a clear distinction in people's minds between what they have a sense of personal responsibility to accomplish and what, organizationally, they're accountable for accomplishing. Well, during that training, I, based on that insight, began to talk more than I normally would about the work of Elliot Jacks, which really intrigued both the CEO and the chairman of the board. This was a third generation, family held company, very successful, and based on that, they wanted to meet Elliot. And Harry, being the businessman, always seeking opportunity, said, well, we'll bring him down and put on a Modern Organization seminar for you. At the end of that seminar week, I remember distinctly Arturo Acevedo, the chairman, and Carlos Leone, the CEO, sat down with Elliot and me and said, we want to do that. And that began a three and a half year undertaking with Elliot and me going down to Buenos Aires every six weeks for a week or two and began simultaneously a three and a half year, nearly full time apprenticeship for me to learn at the feet of the master about not just the principles but the application in real time. And it was the experience of a lifetime learning from Elliot Jacks as an adult in mid career. I was 45 at the time, well established in my psychiatric knowledge and career was a mixed blessing because Elliot had no tolerance for thinking that he considered to be sloppy or counterproductive, and yet he had tremendous respect for capability and the desire to acquire good knowledge. So I would find myself with that project and two or three other large projects I brought him in on. I would find myself three or four nights at dinner with Elliot, recounting the day's work, being driven to tears by his brutal feedback as to my sloppy thinking, my inaccurate perceptions, and at the same time turning right around. Once I stopped fighting and began to ask questions with infinite patience, helping me to understand what was a proper approach to understanding a body of knowledge, to approach it in a systematic and scientific way. So I consider that a kind of brainwashing that occurred over three years, and because I'm fairly strong willed and stubborn, probably was much tougher on me than it would have been on someone else. But my relationship with Elliot was always stormy. I think at the beginning we had enormous respect for each other. Probably one of my two or three contributions to Elliot's thinking occurred in early 1991 when Elliot and his wife Catherine Kason and my wife Cincy Cranis, were having dinner in Manhattan in one of these fancy restaurants. And I was trying to explain to Elliot that his conception of effectiveness at the time current mental process and skilled knowledge and commitment and wisdom and absence of negative temperament really was not the underlying equation, because wisdom, when one thinks about it, is simply a combination of skilled knowledge and matured capability. And we had an argument that almost came to physical blows. We were shouting at each other. The entire restaurant was looking what was going on? Elliot stormed out. At the end of dinner, 06:00 a.m. The next morning, I got a call from him. You're right. And I remember that from then on, he changed his formula. So he was a man who demanded rigor, who had great passion about his beliefs once he established them. But once he found a flaw in whatever model he had created, his intellectual honesty was so great that if that flaw bothered him, he would work it and work it and gladly scrap anything that he had previously developed if it made for a more parsimonious explanation of the nature of things. That was really typical of my interactions with Elliot. One of my other fondest memories of Elliot had to do with how extraordinarily silly he could become when he was relaxed and a little bit tired. There are days and days and days that Cinci and Robert Crock, who's our vice President of Knowledge Management at the Levington Institute. And I can recall where Elliot would be in our office here in Boston, or we'd be with him in Detroit when he and I were working in Ford or in Argentina. And we'd be working late into the night, into the early morning, preparing our growth charts, our talent curves, our Post it notes, whatever it took for the next day's work. And as each evening would progress, he would get sillier and sillier. It usually took the form of puns. Elliot was a great punter, but the other thing was that it was great to tease Elliot about his very poor skills in Spanish. He was actually quite fluent in French, although he was not natively fluent of Francophone. He learned it as a teenager when he went to boarding school in Switzerland. But his notion of speaking Spanish was to speak English and add an O at the end of every word. And when he would get tired and silly, he would start coming out with these most outrageous sentences in pigeon English with O's at the end of every word, and he'd have us in stitches. He was a man who was very complicated, could be very caring, but his mode of expressing caring, in the main, was one of the most disciplined coach who would be unrelenting in demanding of each of his players that he worked to his full potential. And for that I will be forever grateful to Elliot. He really helped me move into a space in my life that I couldn't ever have imagined achieving without his knowledge and without his mentorship. The other side of Elliot is that his Achilles heel was his very strong ego, and that Elliot would, paradoxically, at times, wish that his knowledge could become universally understood and accepted, and was, at the outset of our relationship with him, constantly saying, feel free to use and copy and duplicate any of my materials as long as you give good academic style. Attribution. I want this material to be disseminated. But somewhere around 1994, Elliot began to switch gears and became much more concerned about the proprietary nature of his work and caused a number of very embarrassing situations for me and my clients when we were working together, because I was, at that point, essentially his principal employer, even though he was the lead consultant and I was apprenticing under him. These were basically my clients that he was working for. And it began to create a strain, which eventually caused him to say that the institute no longer had permission to use his work. And really about the mid or late 1994, my relationship with Elliot essentially ended. It was a moment, an occasion of great sadness and loss for me because he had such a profound impact. But I will always be grateful that he got me to a point, even if it had been six months earlier, if we had a falling out, I wouldn't have been ready. He got me to a point where I was ready to go on my own and probably also the best thing that ever happened to me because it forced me to recast not only the pedagogy, but the very fundamental formulations with a new language, new way of teaching it, a new way of engaging the client around it. But at the core of what we do and my book, Accountability Leadership, at the core, it is 90% Elliot Jacks, and he is a man of brilliance that's unparalleled. I believe in the field of leadership. I think he will remain someone on the order of Albert Einstein or Richard Feynman in the world of physics for the world of leadership. As many of you who may have worked with Elliot know that he was often his worst enemy and would, at the drop of a hat, go into a diatribe about all of the management gurus and snake oil salesmen. And I think he managed to offend just about every legitimate management academician other than Jerry Harvey, which really is why he is neither better known nor understood nor accepted in general in the major business schools. Jerry Harvey, because he's an iconoclast, saw through the haranguing. And his article, his chapter in the book called who in the Hell Is Elliot Jacks? Is one of the finest tongue in cheek explications of why the current culture of management consulting and training actually fears Elliot Jacks. But I think he's actually giving them too much credit. I think the reality is they just don't know what he stands for.

Speaker A If you could go back to that one of your contributions to Elliot thinking, where he took the concept and put.

Speaker B It together with there were several elements there are several elements of requisite organization that I have found difficult to teach, difficult to explain, and difficult to translate into practice. The first and probably most fundamental and about which Elliot and I had days and days of violent arguments was the nature of accountability. Elliot would often say a manager is accountable for subordinate output. And I would ask, well, does that mean that the subordinate is not accountable for his output? And he would go back and forth and back and forth, because I would always add, Elliot, you say you can't have two people accountable for the same thing. And he would say, and I think correctly eventually, that a subordinate can only be accountable for delivering on output, no surprises. That if conditions change that make it impossible for a subordinate to achieve that Qqtr, then he must go back, but the manager is the one who must decide whether or not to change it. And in that manner the manager is accountable for the output as a whole. The subordinate is accountable for completing the output, no surprises. And I found that very unsatisfying. I then was greatly troubled by his going back and forth on, well, what do we hold people accountable for the outputs or effectiveness? And he would say, well, can't really compensate people based on outputs, because those can always be renegotiated. It's got to be effectiveness. Went back and forth. It took me about five years from the time that La and I sort of parted company in 1994 until the late 90s, before I was able to take his language for what an employee was accountable for, and say there's really two components. One is a fixed component, things you can measure outputs throughputs, adherence to policy, adherence to regulation. The other are things you can't measure. And that has to do with effectiveness. And effectiveness involves a subjective judgment on the part of managers about the aggregate value an employee is creating. And since effectiveness can't be measured, it can only be judged, but it has to be judged relative to the level of complexity of the role. So in the late ninety s and through 2001, I began to teach accountability has a dual nature fixed accountabilities, relative accountabilities. It wasn't until about four months after my book was published that I finally realized fixed accountabilities are all about keeping your word, no surprises. And the relative accountabilities effectiveness are all about earning your keep. Well, since I had that insight, training managers at any level of the organization, from frontline shop supervisors with a high school education or barely a high school education, to Fortune 500 CEOs, the whole notion that accountability is not a single thing, but it's about both keeping your word, no surprises, and earning your keep. I've been able to cut through so much of the mythology and so much of the dysfunction that most organizations have when they try to implement accountability. So that for me, it may seem obvious once you say it, that in any human enterprise, if someone gives his word, he ought to keep his word. And that in an employment organization, when one is given a role of a certain weight that that person has to earn his keep. That, that was my first breakthrough and understanding the second, which I would say is still I'm still on the cutting edge of evolving, was trying to help my clients deal with what Elliot called tears and tires. Tires are what managers do with their subordinates. They assign things. So tires are task assigning role relationships and tiers, which he called task initiating role relationships. He had six different items and he and I used to debate for hours on end about what the tears were really about. And some of the last discussions we had prior to our divorce was that advising was really about informing people, monitoring and coordinating was really around persuading people, auditing was really around instructing people. And in the ten years since I stopped working with Elliot, we've recast that whole notion into direct and indirect accountabilities. And we've developed a model for taking a group through any critical process and dealing with the direct and indirect accountabilities. And I would say we're about 85% there. But the concept now is much more readily taught and understood than with tears and tires. Most of my colleagues who have moved into the field of records organization tell me they have a great deal of trouble with their clients trying to get the tears and tires. I feel that that's another area in which I've been able to take the intention that Elliot had further refine it. But those people who've worked with Elliot all say the same thing, that these clashes of the mind around debating ideas and clarifying and refining ideal ideas are just they are among the most stimulating intellectual exercises anyone could ever have. He was a brilliant man with a great mind and unrelenting passion about bringing clarity into everything and anything he studied. I'm often asked by people what my role relationship with Elliot was like. Not just my human relationship, and I liken it to Elliot being a physicist and I'm an engineer, and he's discerned a number of fundamental laws of physics and began to describe and have prototypes of the engineering applications. I think my expertise has been in a much more rigorous and pragmatic engineering of those principles into methods and practices. So in addition to sharpening the concepts of accountability and direct and indirect types of accountabilities, the whole notion of stewarding systems, we've taken the array of leadership practices that Elliot probably best describes in Executive Leadership that he wrote with Steve Clement. And we've made them a discipline of communication and developed very effective models for people to understand the discipline, to practice it, to rehearse it, to vetted in their day to day leadership practices. Setting context, I believe, is the single most valuable source of leverage that a manager has. And I believe some of our enormous success with clients in helping them to become successful has been in bringing in a sustainable methodology for setting context. Getting ambitious but achievable. Qqtr is. Defined staying on top of that, bringing in some of the knowledge and the practices that Harry Levinson had worked out around behaviorally anchored feedback, and a much more rigorous approach to coaching and mentoring than Elliot had described. I found, as I talked with Elliot about what he had done at CRA Mining and other places, he would essentially throw out the idea, but leave it to each organization to develop their own modes of teaching it, their own modes of implementing it. And when I would speak with people from those companies, essentially it was abandoned. If you don't provide people the scaffolding with which to hold the walls up, they crumble very quickly. So we've been quite diligent in developing ways of teaching what we call accountability leadership that start from a very different premise. Elliot would build the model as a physicist for his audience, and he would start with some basic premises and work inward. What I learned observing Elliot as a teacher is that he would lose half of the audience right off the bat, and then the other half that would stay with him. When they would ask questions that reflected their lack of understanding really what he had said, he would get angry with them. And it caused me to realize that because he developed this knowledge, he had very little conception of the difficulty taking people from an existing mindset and frame of view of the world into his. And so our teaching involves a great deal of exercises and videos to help people surface their assumptions and begin to understand the difference between responsibility and accountability, to help them understand the difference between keeping your word and earning your keep the different kinds of consequences. So I think that we've done an excellent job in finding ways to first give people good knowledge at many different levels. And in our faculty, typically, I will work with the most senior levels. And then we've got people who are very good at the level four and three level, and then we've got folks that are very good at the level three, level two level. And some of our clients in the late 90s were so committed to this that they asked us to develop a train, the trainer methodology, certifying instructors within their own company. And we hired a world class instructional designer and spent four or five months. And so we've now caused to be trained tens of thousands of people. And we have personally trained twenty s and thirty s of thousands of people in this. So I think that the first thing is that we've been able to make the concepts much more accessible, much more practical, much more understandable, and to make the actual practices a more practical thing to implement. The next area in which I think Elliott left people to their own devices without a lot of satisfying is the basis for effectiveness appraisal. He called it personal effectiveness appraisal. We refer to it as demonstrated effectiveness appraisal. And this came about after ten years of very empirical attempts to give managers a framework and give them a methodology with which to articulate their perception about people's effectiveness and to make sure that the different components that go into effectiveness are described in a similar way by all managers, about all of their people. And the basic construct that we've ended up with in the last three or four years has just been very powerful and has caused our clients to have enough confidence in the effectiveness appraisal process that they're beginning to use it as the basis for differential compensation. And the whole notion of tying pay to outputs is gradually dying down in our organization. As long as people keep their word, no surprises. So I would say that's another area it's bringing in as straightforward a methodology in the evaluation of effectiveness, which is inherently subjective, as Elliot had already developed about the evaluation of potential, which, although it's subjective, it's around a physical entity, someone's mental process. The final area in which I believe we've made great progress has been in the development of software. I was very intrigued with the software that Elliot and Catherine and her son had developed in the late 80s, but it really, while it was an interesting way to view information, was not very practical, didn't allow an organization to use it to effectively and richly manage their pipelines of potential. And in maybe 1992, I began working with Elliot and Catherine to set out the specifications of a richer and more robust software application, which was beginning to reflect the ways I had working with Elliot, improved with post it notes and wall charts, our client's ability to assess potential and effectiveness. And as I began to describe the requirements of the software, catherine's son started a second effort. And I was pleased to note that on their flash screen, they gave me credit for the contribution of a number of those. But it was around the mid 1994 that my relationship with Elliot and Catherine was beginning to suffer, and it was clear that we were not going to be able to work together on the software. And I began with one of my clients, my first effort to build software, because the software wonks need acronyms. They like three letter words. And at that point, we were calling our methodology Essential Organization. So we called the software Leo Levinson Essential Organization, and we began to work with the client. They invested over a million dollars in developing the software, and it was with a firm that really was not doing its homework well. And so all of that money went down the drain, but it taught me a lot. So beginning about six years ago, I began to work with David Jackson, who was an It director in that same company, who had left the company and started to moonlight for me to begin to develop, at least as a consultancy tool. If not an HRIT tool, the software. And that's just gradually become more and more robust. We've used it with 25 or 30 clients. It is a curious thing because it's still in sort of beta format. We've never charged for it. And the net effective is we're able to do the work in half the time, so we charge less and the client gets a much better product. But what began happening about three years ago is our client said we want that software ourselves to manage our pool of talent. And so we began with some of our clients money to build a manager interface for it. And it's been sort of patched together. We're now working on a third generation of what I think will be the be all and the end all, and we're planning to build it as a product, and we think that we would license it to the other practitioners of this. And it's one that will assist in all aspects of diagnosing an organization, designing it, building from the processes, up and functions and levels, and all of the talent management, including tracking, accountabilities and context. These are some of the ways in which I believe we've engineered the physics of requisite organization as Elliot Jackson developed it. Now, that leads to just a general discussion of what has it been like to transform an organization built in Harry Levinson's model. It was approximately 22 years old when I took it over, and we've gone another 16 years. And at the time it was probably just past its prime as the preeminent leadership development firm providing leadership seminars to enhance the personal leadership effectiveness of managers and executives. I would say during the early to late 80s, it was at its prime. It was just without parallel. And over the course of the nearly 40 years now, we've trained over 40,000 managers and executives in that particular approach to leadership. And all of the consultants and faculty that he acquired were either PhD psychologists or psychiatrists, because the model had faculty teaching concepts that were essentially modified clinical concepts and then running small groups where each participant would present a case. So entered Cranus in 1990 to begin to transform the Levinson Institute admittedly for the first three or four years with a very naive view of what requisite organization was about, and as a matter of fact, a very naive view about business. I knew nothing about business before working with Elliot, and I tried unsuccessfully for the first five years to convert our clinical staff into becoming organizational consultants. An organizational consultant applying this methodology when hearing about a problem will begin with the question, well, who's accountable for what? A Levinson Institute clinical consultant would start with the question, how does that make you feel? And there was just no meeting of the minds. Ken Shepard up in Canada had put together a number of seminars with Elliot Jacks that was pure Elliot Jacks, and I paid to bring up a half a dozen or more of my staff and they enjoyed the time. But I don't believe any one of them has really solidly understood the whole notion. Which is not to say they aren't tremendous in their work as executive coaches and people doing assessments, but what I discovered over time is I was not going to be able to develop a pool of consultants from that group. And as it happened, my subsequent consultants all came from clients that we worked with. And so whenever we would work with a client for two or three years implementing what Elliot would call a requisite project, at the end of that time, one out of three times the project lead within the client would ask their owner if they could start moonlighting for us or even start to work for us. And so essentially, all of our organizational consulting, all of our accountability leadership training faculty are people that have come from being our clients. Now, that hasn't been too much of a problem because and this relates to a long standing discussion elliot and I would have on these long flights back and forth from the States to Argentina, it was his belief that no consultancy firm could build on a McKinsey like model and apply these concepts. The McKinsey like model being you have a fairly routinized strategic planning process with 25 young MBAs and get them all crunching numbers on a spreadsheet and you can charge a great deal of money. The work, and I believe he is correct, the work is largely, at least the first quarter of the work, high level individual contributor work to assess the key problems of an organization in requisite terms and to begin the diagnostic process leading to the organizational modeling process. And so because we've not really had many more clients than we could handle, just enough to keep me a little too busy, we've never really had the need to develop a large stable of organizational consultants. The problem has been that the organizational consulting work that has come to the Levington Institute over the last 15 years has by and large come from people who have attended our seminars. And as I have spent far less time than Harry Levinson trying to build and sustain our seminar enrollment, so has the number of people coming to the seminars diminished, and so has the frequency with which people have been asking to have major organizational projects to value leadership, what in the UK they call man management. If the CEO is simply interested in strategy or finance or technology, this is not for him because this is a people intensive process. It's one that places its bets on leveraging the potential of many people, which means you've got to actively work to engage their commitment, align their judgment, develop their capabilities. That's number one. Number two, as he and his team had experienced a day before, this is not a cakewalk. You can't be a little bit accountable anymore than you can be a little bit pregnant. And so one has to really value the rigor and be committed to applying it in a rigorous manner. The third is that as with any system, it has to begin with the behavior of the CEO. The CEO has to walk the talk of setting context, of making sure accountabilities are ambitious, but achievable, of getting the right indirect and direct accountability set out for his team and the next level down. And fourth, the CEO has to be prepared to hold each of his subordinate executives accountable, not only for their personal effectiveness, but for their effectiveness as managers, namely for their subordinates outputs and effectiveness, and has to hold them accountable for holding their subordinate managers accountable because it is again, a human process. And fifth, the CEO has to be willing to invest in the training, constructing the proper systems, going through the careful diagnostic phase, the modeling phase, and making sure the intention of that structure is well communicated and all actions are consistent with it. That has been for me, my own personal guiding criteria. I would say one out of four potential clients that come to me, I reject because I don't believe that the CEO has at least three of those five capabilities or those attributes in terms of the power of this model. I've got a couple of anecdotes that I think are very impressing and compelling. Two years ago, I got a call from the senior vice president of Honeywell, which was the Honeywell Allied Signal merger, and I had worked with him in the past. One of the large business units within their automation and control segment had just completed a half a billion dollar acquisition of a competitors sensing and control division. And the CEO of Honeywell wanted the redesign of the merged organization to not follow the typical Honeywell model, which was to simply fire the top two levels of the acquired organization and simply fold the rest of the organization into their existing structure. Dave Cody had just come on board. He wanted to change the typical Honeywell approach. And Jay Klustaber, who was the Senior vice president then and is now the executive vice president at AES Energy in Washington, he knew about our system, and this was just before Thanksgiving when he called and he said, this is a combined 7000 person organization. We want to make sure that the top 200 positions are filled with the very best people from both organizations and that we need a business model that is a structure that will reflect the best possible business model. And I asked him how long we were given to do all of that and he said Four months. I said, I don't know if I can do it in four months, but I'd be willing to try. So this meant we basically had December and January, february and March. A week later, after we began, we actually worked over Thanksgiving. The CEO said, no, I want it done in two months. So we had to do this project in essentially nine weeks. And with the use of our software, with the use of a web conferencing system, they were using the precursor to Microsoft's Live meeting with their global conference calling system, and judicious use of face to face training and group sessions. In two and a half weeks, we were able to get an accurate read of the existing structure of each organization in terms of functions, functional alignments and levels of complexity, and understanding how they define their markets. In about two and a half weeks, we were able to reconstruct the organization models as they existed. Probably starting in the end of the second week, we began a series of Iterative organizational design conferences. Every other day we had a two or three hour conference call with all the 15 heads of each of the functions around the world using our software and my laptop, driving it, walking through various structural analogs, different ways of defining the markets. So by the end of the fifth week, we had narrowed it down to two possible structures. By the end of the fourth week, we began the process of assessing the current future potential and the effectiveness of the top 400 people in the organization. By the end of the 8th week, we had gotten agreement about the final structure, the role sizes of the top 200 roles, the assessment of the top 400 executives, and one massive day and a half session in Phoenix, we essentially did a huge NHL draft. And we got through the filling of the top 200 roles. And not only did they fill those 200 roles with fewer than 50% of the executives coming from Honeywell and over 25% from the acquired company, but because they had such clarity about what each new role required and such confidence in the assessment of those top 400 employees. They concluded they could not fill a quarter of the roles among those existing 400 executives. And they then instituted a very disciplined search, first within the Honeywell community, to get those roles effectively filled. This nine week project was implemented, according to the senior vice president and the CEO, better than any acquisition they could recall in Honeywell's history in the previous ten years. We did it in nine weeks. Not only that, Honeywell is one of those companies very concerned about age discrimination. Their batting average was that whenever they would have a downsizing, one in four people downsized over the age of 50 would sue. So it was a terrible problem for them. We worked with their labor council to essentially have her there in real time during the process, and worked with the head of the division to in real time with each round of draft picks, make sure we were tracking the progress of selecting people who were essentially in protected classes. And so the lawyer was able to sign off at the end of that day and a half, rather than the usual two weeks later, we can't accept this. So it was an extremely successful project. In a short period of time, I would say our clearest, most public success has been working with Elgoma Steel in Sue St. Marie, Canada. Dennis Turcott, who is the CEO, had been a mill manager ten years ago in a division of Tembec Pulp and Paper Company. He had been the mill manager of an old Kimberly Clark plant up in Cappas Casing, Ontario. And when he was trying to get some leadership development, spoke with his VP of sales who years earlier had come to one of the Levinson seminars. When he was at Kimberly Clark, said it was the best thing that had ever happened to him. And so I first met Turcott back in 1994 in Boston here at this conference center, and we hit it off. He came back a year later to take our Strategic Organization seminar, and we began working for the next year and a half to transform the paper company. Then when he became the executive vice president at Tembek in Temiskamine, we followed him there, did work with him, and as he was thinking over the offer from Algoma Steel to switch In Industries and take over Algoma Steel which was coming out of its second bankruptcy in ten years, called a CCAA in Canada. He spent a lot of time helping me think through what would need to happen to help this company reverse its fortunes. And in fact, a month before he began, he sent the VP of HR and the VP of Operations here to our seminar in Boston to take the Strategic Organization seminar just to get a sense of how they would react to something very much at ODS with their existing culture. And they midweek said, we need to get started right away. At the time Turcott took over of OMA Steele, its stock valuation was essentially negative because the worth of the physical asset, minus the debt owed to the pension plan was a negative. So the stock was literally worth pennies. Within a year and a half of beginning the project, the stock was trading at eight or $9. And that was written about in the financial community as clearly the maximum that Algoma Steel could ever have. No one thought it would ever get that high. And in a year and a half. Turkat and I believed that most of that improvement in the stock value was simply due to the rising price of steel in China. With the tremendous demand and we had just barely begun to scratch the surface in the improved productive effectiveness. And Turcott believed he could at least double that, maybe triple that. Two and a half years, it was trading at $30. And in essence working with the Levinson Institute and our Strategic Organization Methodology, and an industrial engineering firm called USC from the States to take a look at some of the production processes during that two and a half years time while reducing simply by attrition the number of employees from 3800 to 3000. Productivity went up progressively about 15% every quarter and it is now operating 40% higher than its peak capacity ever. With fewer people with quality that is far and away the best. And it is now the most profitable steel company in North America having been the one that was nearly certain to die. How did he do this? Well, first of all he's a CEO that has all five of those characteristics. He is a person who is passionate about developing people and systems to their full potential. He's a person who is intellectually curious and rigorous. He's a person who is very clear about setting context expecting people to engage in him in honest, tough two way discussions about assignments and about what's possible and what isn't. And he set in motion immediately a diagnostic review of the structure. We knew right off the bat they had three levels too many in the manufacturing part of the organization. We looked at the functional alignment between the commercial and the manufacturing organization saw some critical changes that needed to be made in how to drive a customer based rather than manufacturing based profitability model. And we immediately began a process of defining effectiveness. Assessing effectiveness and assessing potential. During the first year the people who had developed a career of learning how to work the system and essentially try to make themselves indispensable or invisible and extort the system or exploit it those people were very quickly flushed out of the brush and told they had to make a choice. But half of them chose to leave. The other half have become extremely high performers. Those people who were essentially chronically demoralized because of the failure of leadership over the previous 20 years were gradually induced to see that they would in fact benefit from managers who were adding more value and in return for that were expected to keep their word and earn their keep. Saw that as a fair renegotiation of the psychological contract. We had massive training of the top 700 managers in the organization and senior individual contributors. And the first effectiveness appraisal, the first honest one which I always predict is going to create a tremendous shock to the system indeed created a tremendous shock that compared to the standards that the CEO was articulating fewer than 5% even came halfway to meeting that standard. The entire culture went from a state of numb disbelief to gradual curiosity to within two years tremendous excitement about continuing to find every opportunity to improve the productive effectiveness of the organization. So with the Honeywell model, organizations that need to make rapid, dramatic changes in structure and personnel have a methodology that can help them within a couple of months make significant, lasting and enduring change with the cost that is probably about a 10th of what they would be charged from the Big McKinsey's and will deliver four or five times the value that they would have gotten from that. And companies that are embarked on a long journey towards harnessing every ounce of value in an organization have a robust, rich model that includes training, dramatic change in behaviors that allows for the construction of a number of HR systems that are fully aligned with both the strategy and the accountability principles. I would say those two examples illustrate two facets of the application of Elliott's Requisite organization. On the other hand, there are, in my estimation, far fewer CEOs that have the wisdom and the knowledge to undertake such a process. And the more frequent requests that we get from clients have to do with a desire to improve their succession planning, a desire to raise the level of capability of their pipelines of talent and our ability to train managers. Within a half a day to understand the notions of levels of complexity, to understand the notions of potential and effectiveness, to take them through gearing process, to accurately size their organization and assess their people's potential and effectiveness and to quickly build the model of their existing talent. With our software, with our training, with our very successful use of web enabled conferences, we have been able to accomplish things that, when I began working with Elliot, would take months and months and months in a matter of weeks. Two years ago, Honeywell made a half a billion dollar acquisition and we were asked by the head of HR to help them merge the two. By designing an entirely new organizational structure, by assessing the top 400 people and getting the best possible people in the best role using requisite organization principles using the Levinson Institute's Leo software, we were able to get that done ahead of time, far exceeding the client's expectations and getting a kickstart to the organization that they've never had before. Three years ago, Dennis Turkat, the CEO of Algoma Steel, engaged the Levinson Institute to help him restructure the company, assess and develop their pipelines of talent and completely change its culture. During that period of time, using straightforward methodology, training 700 managers, Algoma Steel has gone from a net worth of just over $100 million to now, where it is $1.4 billion. All through leadership, there are fewer people, no new technology. Those transformations were due to the application of requisite organizational principles and practices to Okoma Steel. Thank you.