The Violin Theorem

Nothing lasts forever. Not even cold November rain.

Honestly Lay Bare is an expert practitioner in the fine and under appreciated art of hotel room dancing.

What is that you ask and how in the world can the art of something that sounds very suspect (it isn't!) have anything to do with the proper and consistent execution of internal controls, risk management or corporate governance.

Firstly what is hotel room dancing?

For those of us that travel for our work we have four exercise choices - firstly to not do any; secondly to exercise in the hotel's gym; thirdly to go for a run / walk outside or lastly to exercise in one's room.

And this is where hotel room dancing comes into play.

One needs only an iPod; some daggy clothes (note for anyone so thinking - the business class pjs given by the airlines are on the border of appropriate attire even for hotel room dancing!) and a bed to jump on at appropriate times throughout one's hotel room dancing routine.

The aim of what is known in the trade as a HRDS - as in hotel room dancing session (apologies to those readers that were already aware of that abbreviation) is to pick the precise songs that one can do intense jumping; dancing; air guitar; air drums; and mosh pit diving.

Therein lies the need for a comfy bed to jump on ... one needs to make sure that the bed will take the full force of a grown man or woman jumping onto it from a distance of at least two feet away!

A HRDS usually lasts about 10 minutes after which time you can rest easy in the knowledge that you have done your exercise for the day ... and if you haven't closed the curtains ... you have kindly given the office workers in the next tower a story to tell for many years to come!

**

Now every HRD (as in Hotel Room Dancer)'s iPod selection will be different - for some it will be classical music; for others country.

For Honestly Lay Bare it is anything that ... for a reason that Honestly Lay Bare cannot really explain ... has a violin (or violin sounding) section somewhere embedded into the song.

(For the record, Honestly Lay Bare has one exception to this - being U2's "Where the Streets Have No Name" which is surely one of the great introductions to a song in the history of rock).

Honestly Lay Bare isnt dancing to the tune that Ludwig van Beethoven knocked out in 1806 ... the Concerto for Violin and Orchestra in D major, Opus 61.

For Honestly Lay Bare it is more likely to be November Rain by Gun's and Roses past God Only Knows by the Beach Boys; up against ColdPlay's Viva la Vida through to Beautiful by James Blunt (yes - Honestly Lay Bare has wide tastes!).

And as much as Honestly Lay Bare knows that the readership is interested in its musical tastes that - surprisingly - is not the focus of this update.

Rather it is an examination of why it is that certain environments (or in the instance of HRD - certain songs) produce a reaction in the reviewer (or the listener) that are consistently positive.

So translatting that to internal controls - one needs to look for a particular piece of the controls jigsaw that you consider is present in every efficient and effective internal control environment.

What is your internal controls violin and how do you identify it?

Perhaps more importantly how do you know when there is an internal control environment that has its "violin" but is neither an efficient or effective environment in managing an organisation's risks.

Honestly Lay Bare knows intuitively that there are songs with violin sections that cannot be particularly good and definitely are not suitable to hotel room dancing. For some reason we are deaf to these songs and their presence doesn't negate - in our mind at least - the fact that all good songs have a violin section.

The challenge therefore in what Honestly Lay Bare will christen the Violin Theorem of internal controls is to be sufficiently self aware to be able to sort the good from the bad.

Something Fishy

Labeling any item to be something it's not is a classic deceptive practice

Fresh wild salmon from West Coast waters used to have a low profile on the east coast of the United States - it generally migrated eastward in cans.

But a growing concern about the safety of farm-raised fish has given fresh wild salmon cachet. It has become the darling of chefs, who praise its texture and flavor as superior to the fatty, neutral-tasting farmed variety, and many shoppers are willing to pay far more for it than for farmed salmon.

Today, "fresh wild salmon" is abundant, even in the winter when little of it is caught. In fact, it seems a little too abundant to be true.

***

It was.

Today, Honestly Lay Bare finds itself in the library archives reading an April 2005 edition of the New York Times - and the subject, fish fraud.

Tests performed for The New York Times on salmon sold as wild by eight New York City stores, going for as much as $29 a pound, showed that the fish at six of the eight were farm raised. Farmed salmon, available year round, sells for $5 to $12 a pound in the city.

The findings mirrored suspicions of many in the seafood business that wild salmon could not be so available from November to March, the off-season.

Wild and farmed salmon fillets and steaks look similar because farmed fish are fed artificial coloring that makes them pink, but that coloring can be measured in laboratory testing.

With East Coast wild salmon all but extinct and West Coast wild catches restricted by quotas, farmed fish constitute 90 percent of the United States' salmon sales.

Yet in March 2005, when fresh wild salmon should have been scarce, 23 of 25 stores checked by The Times said they had it in stock.

The Times sent random samples of salmon for testing and comparison of levels of natural and artificial pigments, a method that scientists at the Food and Drug Administration have used to identify wild and farmed salmon.

Officials at the stores had a variety of explanations.

Peter Leonard, an owner of Leonard's, said that his records did not go back as far as March 9, but that his sales clerks "must have gotten the salmon from the wrong pile in the back."

William Lettier, the vice president for retail operations at Dean & DeLuca, said four of his vendors could not provide him with their paper trail. He said he now wanted proof of the source of the fish from his vendors and would have his salmon spot-tested.

Jonathan Meyer, a partner in Wild Edibles, said he had narrowed the source of his fish to two Northwest vendors and had suspended business connections with both.

At M. Slavin & Sons in Brooklyn, the store manager, Phil Cohen, said: "Our salmon is from Canada. All wild salmon in Canada is farm raised."

But it can't be both.

Margaret Wittenberg, the vice president for marketing and public affairs at Whole Foods, said its wild salmon was properly labeled and came from the trolling of California's wild king salmon.

Wild salmon become pink by eating sea creatures like krill, which contain a carotenoid called astaxanthin. Farmed salmon are naturally grayish but turn pink when they are fed various sources of astaxanthin, including one that is chemically synthesized and others that originate from yeast or microalgae.

Joseph Catalano, a partner at Eli's and the Vinegar Factory who is responsible for the fish those markets sell, said he was not surprised by the test results. "The bottom line on all this is money," he said.

Faced with fillets of wild and farmed salmon, even renowned chefs who pay top dollar for the choicest seafood, could not visually distinguish one from the other. After the fillets were cooked, however, they could taste the difference.

"The most obvious clue is flavor," said Ms. Fleming of the Alaskan agency, "but by that time it's too late."

***

As much as Honestly Lay Bare loves its salmon (we are not ... yet! ... sufficiently cultured to be able to tell the difference between farm bred and wild salmon), this is a story about much more than poorly labelled fish.

As noted above - the underlying reason that this switching / poor labelling occurs is about money.

And therein lies the link to the origins of a great many deceptions.

Be they deceptions in the consumer experience to make money or deceptions in the construction of a sound internal control environment to save money the end result is the same.

The end user (whether it be the fish consumer or the employee working within an internal control framework) may be deceived for a period of time and indeed may be ignorant throughout the totality of their interaction.

At the moment, however, that the end user finds out that they have been deceived the true price of deception is apparent - you have lost that person's trust.

Good luck in trying to win it back.

Post based on "Stores Say Wild Salmon, but Tests Say Farm Bred" New York Times 10 April 2005 by Marian Burros

The Doctor Fox Lecture

It is the sign of a competent crap detector that he is not completely captivated by the arbitrary abstractions of the community in which he happened to grow up

At page 630 of the July 1973 / Volume 48 edition of the Journal of Medical Education is a paper that has the potential to destroy the expertise foundation upon which any intellectually specialised subjective discipline – like say for example, internal audit, risk management and corporate governance – is based.

Today we sit in on a lecture by Dr Myron L Fox.

The authors of the July 1973 article had a hypothesis – given a sufficiently impressive lecture environment, an experienced group of educators participating in a new learning situation can feel satisfied that they have learned despite irrelevant, conflicting, and meaningless content conveyed by the lecturer.

To test the hypothesis, the authors selected a professional actor who looked distinguished and sounded authoritative; provided him with a sufficiently ambiguous title, Dr. Myron L. Fox, an authority on the application of mathematics to human behavior; dressed him up with a fictitious but impressive curriculum vitae, and presented him to a group of highly trained educators.

Dr. Fox's topic was to be "Mathematical Game Theory as Applied to Physician Education."

His source material was derived from a complex but sufficiently understandable scientific article geared to lay readers.

One of the authors of the article, on two separate occasions, coached the lecturer to present his topic and conduct his question and answer period with an excessive use of double talk, neologisms, non sequiturs, and contradictory statements. All this was to be interspersed with humor and meaningless references to unrelated topics.

Eleven psychiatrists, psychologists, and social-worker educators who were gathered for a teacher training conference in continuing education comprised the learner group.

The purpose of the conference was to help this group be more effective educators of other health professionals by providing them various instructional goals, media, and experiences. Dr. Fox was introduced as "the real McCoy" to this unsuspecting group; and he presented his one-hour lecture in the manner described, followed by a half hour discussion period which was hardly more substantive.

At the end of his performance an authentic looking satisfaction questionnaire was distributed to which all 11 mental health educators were asked to respond anonymously. The introduction of the lecturer as well as his lecture and discussion were videotaped for use with other groups.

Significantly, more favorable than unfavorable responses to the questionnaire were obtained. The one item with most favorable responses was the first, "Did he dwell upon the obvious?" It was the feeling of half the group that he did. The remaining items received a majority of favorable responses. No respondent reported having read Dr. Fox's publications.

Subjective responses included the following:

Excellent presentation, enjoyed listening. Has warm manner. Good flow, seems enthusiastic. What about the two types of games, zero-sum and non-zero sum? Too intellectual a presentation. My orientation is more pragmatic.

Intrigued the authors tried the experiment again.

A second group consisted of 11 subjects who were psychiatrists, psychologists, and psychiatric social workers, all identified as mental health educators. A videotape of the previously described lecture and discussion period as well as the preparatory introduction was shown to the group.

After the presentation group members responded to it using the same questionnaire as did the first group. Favorable responses far outweighed unfavorable. All responded favorably to the first item, which means that they felt he did not "dwell upon the obvious." There were also significantly more favorable than unfavorable responses to the other items and one respondent reported having read the lecturer's publications. Some subjective statements were:

Did not carry it far enough. Lack of visual materials to relate it to psychiatry. Too much gesturing. Left out relevant examples. He misses the last few phrases which I believe would have tied together his ideas for me.

Still more subjects were sought to further test the hypothesis.

The third group was different in that it consisted of 33 educators and administrators enrolled in a graduate level university educational philosophy course.

Of the 33 subjects in this group, 21 held master's degrees, eight had bachelor's degrees, and four had other degrees which were not specified. Most of these educators were not specifically mental health professionals but had been identified as having counseling experience in their respective schools. The videotape of the lecture was again presented to this group, after which the educators responded to it by using the same questionnaire as the first two groups.

Again the number of favorable responses was significantly greater than the number of unfavorable responses. The majority of respondents from Group III also did not feel the lecturer dwelt upon the obvious, and they also responded favorably for the most part to the other items.

Subjective responses, when given, were again interesting. Some were:

Lively examples. His relaxed manner of presentation was a large factor in holding my interest. Extremely articulate. Interesting, wish he dwelled more on background. Good analysis of subject that has been personally studied before. Very dramatic presentation. He was certainly captivating. Somewhat disorganized. Frustratingly boring. Unorganized and ineffective. Articulate. Knowledgeable.

The notion that students, even if they are professional educators, can be effectively "seduced" into an illusion of having learned if the lecturer simulates a style of authority and wit is certainly not new.

Previous studies had suggested that "it is the sign of a competent crap detector that he is not completely captivated by the arbitrary abstractions of the community in which he happened to grow up."

The three groups of learners in this study, all of whom had grown up in the academic community and were experienced educators, obviously failed as "competent crap detectors" and were seduced by the style of Dr. Fox's presentation. Considering the educational sophistication of the subjects, it is striking that none of them detected the lecture for what it was.

In addition to testing the hypothesis, the authors sought to provide these professional educators with an example of being educationally seduced and to demonstrate that there is much more to teaching than making students happy, The authors concluded that a balanced combination of knowledge and personality are needed for effective teaching even if the student does not require the former to sustain the illusion that he has learned.

If the group were more sophisticated about a more concrete aspect of the lecturer's subject matter, in this case mathematics, would he have been as successful in seducing the respondents into an illusion of having learned?

Probably not.

Or at least the lecturer would have to be extremely skillful to be successful.

The study also raises the larger issue of what mix of style and substance in the lecture method is optimal for not just integrating information in a meaningful way but for providing learning motivation as well.

Although the study was not specifically addressed to this question, the fact that no respondents saw through the hoax of the lecture, that all respondents had significantly more favorable than unfavorable responses, and that one even believed he read Dr. Fox's publications suggests that for these learners "style" was more influential than "content" in providing learner satisfaction.

**

And herein is where Honestly Lay Bare calls out the warning signs to the disciplines – internal audit, risk management and corporate governance – that it holds so dear.

How many times have we as practitioners of our trade attended conferences / presented at conferences / read publications where we have been “educated” by so called experts in our field – a field for which there is no universally recognised criteria against which to measure the quality and experience of the practitioner?

What is the criteria by which we grant expert status in our areas of … how shall we say … expertise?

One could argue that this is a dilemma that confronts all disciplines and professions – to that Honestly Lay Bare would respectfully disagree.

Other professions such as medicine, law, engineering and accounting have clear and unambiguous criteria against which entrants can be measured both by their peers and by the lay community before they can call themselves a doctor; a lawyer; an engineer or an accountant.

Risk management, corporate governance and to a lesser extent internal audit do not have such criteria.

Most definitely one can do risk management studies; can attend corporate governance training and can even sit the Certified Internal Auditor certification.

But – equally – one can practice risk management, corporate governance and internal audit without having ever having even known of such educational opportunities.

The challenge that “Dr Fox” set out in 1973 is one that risk management, corporate governance and internal audit have not yet fully responded to.

Until such time as it does we are practitioners in a field that is no more than an area of interest – definitely not yet a profession and definitely prone to the Dr Fox syndrome afflicting the expansion of our learning.

Description of the Dr Fox experiment taken from The Doctor Fox Lecture: A Paradigm of Educational Seduction; Donald Naftulin, John Ware Jr and Frank Donnelly; Journal of Medical Education; Volume 48; July 1973; page 630 – 635.

Cry Wolf

Leadership is defined as the ability to hide your panic from others

Until last Friday, Honestly Lay Bare had never heard of Dr Jeannette Young.

Dr Young is the Chief Medical Officer in the Australian state of Queensland.

As the worldwide media interest in swine flu erupted last week, Dr Young stood at the podium of a Queensland Government press conference and urged people to stockpile food to reduce the number of times that they have to go to the shops in case there is an outbreak.

“Have it in your house ready just in preparation – some stocks of tinned food and frozen vegetables in the freezer, that sort of thing” she said before adding “there’s no need to stockpile water.”

"We'll be telling people to try and maintain distances from other people use the one-metre rule, because it's the spread of droplets in the air that infect people," she continued.

"So if you stand a metre away from someone else, you're less likely to get infected."

**

If Australia was in the midst of a full blown flu pandemic with multiple deaths and hospital wards filling with the insufferably sick it would be difficult to argue with Dr Young’s advice.

But Australia isn’t.

As at the time of the abovementioned press conference last Friday, there were no confirmed cases of swine flu in Australia.

Indeed the Australian Government’s Health Minister needed to come out at odds with the advice of Dr Young.

**

Honestly Lay Bare is not scientifically (or come to think of it ethically, legally or perhaps most importantly medically!) qualified to comment on whether we are at the start of the great pandemic of our times or whether it is media hype in a slow news week.

What Honestly Lay Bare is interested in is what the actions of Dr Young teach us all about a pandemic response of a country; a state or an organisation.

Perhaps we at Honestly Lay Bare are naive but we always thought that the first; last and most essential instruction with regards to a crisis is clear, informed and consistent communication that educates and doesn’t panic.

Yet here we have the situation where the most senior medical officer of Australia’s third largest state is calling for – essentially – a run on the frozen food aisle of the supermarket in response to something that was but an image on our television screens.

Similarly, it is hard to imagine why the Egyptian authorities are adamant on killing the entire Egyptian pig population when the World Health Organisation has said categorically that swine flu cannot be transmitted from pigs to humans.

**

And therein perhaps lies the lesson of this swine flu episode for us all.

Not that we should all wear face masks as we crowd the supermarket aisle albeit one metre away from each other – but that moments of crisis bring out a guttural need for people to be seen to be doing something.

This is despite that sometimes the most effective thing is to do nothing.

We as a society expect of our elected officials and their appointed representatives that they will be able to give unemotional, clear and consistent advice in times when we most need them to.

In organisations we expect the same of our leaders.

**

The most damaging aspect of last week’s news conference is that – when that moment inevitably comes, whether it be because of swine flu or another menace – when the health of a nation or a company is in grave danger, will we trust the advice of those that are there to protect us.

A modern day Aesop fable!