The Global Warming Wager


By Jack and Suzy Welch Virtually every scientist agrees that global warming is destroying our planet. But I've heard you suggest that the verdict is still out. You can't actually feel that way, can you? — Heidi Boncher, New York

In general, we tend to have a "not so fast" attitude when any controversial topic is part of the juggernaut of a political party's agenda. The state of the U.S. economy is a case in point. Democrats claim it's weak and its benefits uneven. The Republicans claim it's booming with broad income improvement. Or take the war in Iraq. Some Democrats claim we've been defeated and need to withdraw; many Republicans say victory is within reach, and a troop surge is our best and final chance for a free Iraq. With each of these hot-button topics, the debate is less about facts and more about party lines, President Bush, and the election of 2008.

And so it goes with global warming. Yes, a recent report from the Intergovernmental Panel on Climate Change is worrying, both for what it says about the causes of global warming and its environmental impact. That story, ominous in tone, played as the lead on the front page of The New York Times. But within days, a Wall Street Journal editorial asserted that the document's underlying scientific findings actually suggest that global warming is hardly the apocalypse. Indeed, the Journal opined, some new scientific data in the report indicate all the sound and fury about global warming could end up being...well, just that.

So, to your question then, what do we believe? You sensed right—we simply don't know. But that doesn't mean we would recommend companies do nothing. Just the opposite. In fact, we believe that, whether the impact of global warming ends up being mild or severe, companies have to adopt a "here it comes" mind-set and mount a well-reasoned plan. Any other response would be bad business.

Our reasoning is hardly original. It's the same as Pascal's Wager. Back in 1670, basically using game theory, the French philosopher argued that it was a better bet to believe in God because the expected value of believing is always greater than the expected value of not believing.

The same goes for global warming. If you accept it as reality, adapting your strategy and practices, your plants will use less energy and emit fewer effluents. Your packaging will be more biodegradable, and your new products will be able to capture any markets created by severe weather effects. Yes, global warming may not be as damaging as some predict, and you might have invested more than you needed, but it's just as Pascal said: Given all the possible outcomes, the upside of being ready and prepared for a "fearsome event" surely beats the alternative.

The perfect analogy is globalization. Thirty years ago, rumbling began about the coming world marketplace where costs would migrate to the lowest bidder. Some companies put on blinders and insisted that their quality would prevent competition from the likes of Mexican and Asian factories. Eventually, of course, many of these companies got religion and changed their practices. But years of progress, profits, and jobs were lost in their delay.

Only time will tell if global warming will be minor or catastrophic; if it can be mitigated or will destroy the planet, to use your phrase. But one thing is certain. Companies shouldn't wait to find out.

Most of us in the corporate world have to deal with a yearly review, and we hate it. How about just letting employees know when they are performing way under or way beyond expectations? That would save companies a lot of wasted time. Is it a good idea? — Haihui Niu, Naperville, Ill.

With all due respect, we think it's a terrible idea! Look, companies can't win without great people, and you can't develop great people without performance appraisals. Now, we're not talking about elaborate forms and piles of paperwork. That's way too bureaucratic. All managers need to do is sit down with each direct report and share with him or her a single page that says: "Here's what you do well," and "Here's what you can do better." And that should happen not once a year but—brace yourself—three or four times, particularly with every raise, bonus, or promotion.

We've said in this column before that managers have many jobs. In the question above we've even added preparing for global warming to the list. But at the end of the day, almost no managerial responsibility trumps building the best team. And to do that, you can't just connect with the outliers. Everyone needs to know where he or she stands, and often.

Jack and Suzy Welch look forward to answering your questions about business, company, or career challenges. Please e-mail them at thewelchway@BusinessWeek.com For their podcast discussion of this column, go to www.businessweek.com/search/podcasting.htm


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