Women and the New Business Leadership by Peninah Thomson and Tom Lloyd_1 docx

10 BusIness at a Crossroads evolutionary. To understand how we have got to where we are, we must return to the origins of business and its organizations, and retrace our steps back to the present. Such an exploration of the antecedents of the modern corporation leads us, I will suggest, to the conclusion that one reason why today’s dominant corporate form differs from the form most people want is because it is adapted to an older environment. In Chapter 3, the adaptive pressures on the corporation created by the differences between its EEA in the mid-19th century and today’s environment are examined in more detail. I will suggest that many of the corporation’s original advantages are either less valuable now or have become disadvantages, and the conventional company has thus become vulnerable, in principle, to the invasion of its niche by other, better adapted variants. The conventional corporation has become vulnerable, because it has not changed; has not adapted adequately to changes in the business envi- ronment. It has also become vulnerable in another way, because it has changed – changed for the worse. Chapter 4 explains how the decadence of the corporation, exemplified by the seriously bizarre sums of money paid to executives, threatens the liberal capitalist system that sustains it by undermining the consensus that sustains liberal capitalism. Chapter 5 investigates the causes of this decadence and attributes it not so much to the standard explanation, greed, as to a serious inefficiency in the market for senior executives caused largely by the pyramidal shape of modern corporations. I will argue that this shape is so deeply embedded in modern business culture that no one questions its implicit presumption that, to be successful, a large company requires an exceptionally able and charismatic leader. The consequence of this standard, hierarchical model is that power and pay are invariably drawn, as if by a siphon, to a CEO space at the top insulated from normal market disciplines. Some will argue that there’s another, more prosaic reason for very high levels of CEO pay; namely that CEO work is very difficult and demanding, those who can do it well are as rare as hen’s teeth and their pay simply reflects the market clearing rate for these “rare skills.” Chapter 6 challenges the assertion that the CEOs of large corporations are really worth their weight in gold every year. The role of luck in business success is discussed, various CEO “agency costs” are examined, and the extent to which others, including the company’s workforce as a whole and outside consultants, contribute to the successes for which only the CEO is rewarded, is explored. Part II, “Reforming big business,” begins in Chapter 7 with a discussion of some roads not taken in the evolution of enterprise, which 9780230_230941_02_intro.indd 10 09/09/2009 10:07 IntroduCtIon 11 could have led to a different place. These discarded threads of possi- bility are developed, with the help of complexity theory, into an exam- ination of the prospects for leaderless enterprise, of the kind exemplified by the Linux software system and Wikipedia. This is my third protago- nist – the multi-agent business enterprise; the challenger – the nemesis of the conventional CEO-led company if it fails to adapt. Chapters 8 and 9 each focus on a particular adaptation open to the CEO-led company; appointing more women to senior positions, and so moderating the masculine corporate persona which has become such a liability recently, and reducing CEO omnipotence, by entering into more business partnerships. Finally, in Chapter 10 I sketch out the elements of a “System Restore” procedure for the large company. My main argument is that corporations should become more sensitive to their environment; to the hunger of their employees for self-respect; to the demands of those who shape their political environment for fairness, openness (or “transpar- ency” as modern parlance has it), decency and an acknowledgement of social and environmental responsibilities. I am a great believer in the power of simple rules (for compensation in capital markets, for instance) to steer, channel or nudge people and companies in desirable directions. By adjusting, tuning and thoughtfully tinkering in this way we can create new background conditions that will encourage companies and their leaders, if leaders there must be, always to behave in ways that maintain economic and financial stability, and the essential political consensus that sustains the system of liberal capitalism from which companies derive their licences to operate. Liberal democracy and its economic system, capitalism, is the best system for creating and maintaining free and prosperous societies so far devised. It would be a tragedy if the decadence of its main business institution led us, as voters, to abandon it and exchange some of our freedoms for the promise of a fairer society. The large CEO-led joint stock company can and must be reformed. Reference 1 A Theory of Justice, Harvard University Press, 1971. 9780230_230941_02_intro.indd 11 09/09/2009 10:07 This page intentionally left blank PART I What ails big business 9780230_230941_03_cha01.indd 13 09/09/2009 10:00 This page intentionally left blank 15 1 What people want The most challenging long-term problem facing companies is not the speed of change, although that’s relentless; it is not the growing complexity of business and finance, although that is becoming more convoluted by the month; nor is it the risks that complexity brings with it, although, as the crash showed, they are horrendous. It is not disruptive new technology, although that is coming thick and fast; nor the capri- ciousness of customers, although they’re becoming less and less predict- able; neither is it competition, although that’s intensifying all the time. All these certainly add to the difficulty of the modern management problematique, but all pale into insignificance beside the problem modern businesses have with people; or rather, to put it the right way round, the problems people have with modern businesses. Work can be enjoyable, fascinating, satisfying, and enriching, both intellectually and materially. At the best of times, it’s a source of peak experiences, firm friendships, and illuminating insights into how the human psyche, including your own, and the world work. It can give meaning and purpose to life. It can bring out the best in people. It can be a rich source of self-respect. But there’s also the frustration when you are told to do something you think is wrong or prevented from doing what you feel is right; the humiliation when less able people are promoted and you’re not. There is the unfairness; the bureaucracy; the regimentation; the excessive demands; the shame when your company behaves unethically or unkindly; the sense of powerlessness when the leader reassigns roles and tasks without consulting the people affected, or, on the advice of a few smart “here today, gone tomorrow” consultants who don’t seem to know their arses from their elbows, implements a new strategy any fool can see will be disastrous. Because large companies need specialists, people tend to get stuck in departments or roles that seemed interesting and challenging to begin with, but turn out to be backwaters. Others languish in the ghettos of “non core” or “pink collar” support functions, far from the mainstream. Many feel they are paid less than they’re worth or that they are going 9780230_230941_03_cha01.indd 15 09/09/2009 10:00 16 BUSINESS AT A CROSSROADS nowhere, because the powers that be appear to value political skill more highly than business competence. How many middle managers can honestly say they do not occasion- ally resent the fact that their so-called leaders, who often seem to be reckless or breathtakingly incompetent, are paid hundreds of times more than they are, or have not thought to themselves, “I’m outta here!”, but have buttoned their lips in the interests of those who depend on them? Companies are made by, but not for people. There is always tension and often open conflict between the interests of the organization, and the interests of its employees. If you are the Chief Executive Officer (CEO), things are different, because you have “powers of sovereignty” that your employees lack. But even you may feel the demands of the market and of your investors are unreasonable, and that you have been treated or judged unfairly. Some companies are better places to work than others, but there is no denying that many are seen by their employees these days as being illiberal, unfair, callous, irresponsible, and presumptuous in the demands they make on the time of those who work for them. This may help to explain why there’s so much talk now about an epidemic of work- related stress. A 2000 European Working Conditions Survey found that work- related stress was the second most common work-related health problem in the European Union (EU), after back pain. It has been linked to cardiovascular diseases, musculoskeletal disorders, particularly back pain, and the so-called RSIs (repetitive strain injuries), as well as to absenteeism. It occurs when workers are presented with work demands that exceed their knowledge, skills or abilities, such as time pressure or the amount of work, the difficulty of the work or an inability to show one’s emotions at work. Time pressures at work have been growing. According to a report by the European Foundation for the Improvement of Living and Working Conditions, the percentage of employees working at very high speed rose from 48 percent in 1990, to 56 percent in 2000. The report also found that, of those working continuously at very high speed, 40 percent suffered stress, compared to only 21 percent of those who never worked at very high speed. 1 Causes are linked to the work itself: such as work demands and the lack of freedom to control one’s work (autonomy); combinations of high demands and low autonomy; and combinations of high efforts and 9780230_230941_03_cha01.indd 16 09/09/2009 10:00 1 WHAT PEOPLE WANT 17 low rewards; and the individual’s characteristics, such as an inability to cope with pressure. Stress is particularly strong when an employee’s autonomy is threatened. Fear of underperforming and of its conse- quences causes anxiety, anger, and irritability. Stress is more likely in people who tend to be over committed to their work, and lack self-confidence. Stress is less likely if the employee has a high degree of control over his or her work, and if the work requires a variety of skills. OK, so work-related stress is one of those ailments that tend to become more common when they are named. But there is no doubt work became more stressful after the unilateral repudiations during the downsizings in the early 1990s of the old “loyalty, for security” psycho- logical contract, that the 24/7 rhythm of today’s companies and inten- sifying global competition have increased work pressures, and that the lack of a work–life balance puts hapless employees between the rock of insatiable work demands, and the hard place of family responsibilities. It is not so much hard work itself that causes stress, as the lack of autonomy, and the inability of the employees of large, CEO-led compa- nies to set their own work rhythms and pace. This may go some way toward explaining why, according to U.S. Census Bureau figures, the number of non-employers (mostly self-employed people and small unincorporated businesses) rose by over 35 percent to 21 million between 1997 and 2006, compared to an increase of less than 14 percent to 120 million in the numbers of company employees. The contract between employer and employee increasingly favors the former, and is thus becoming less acceptable to the latter. A new contract is needed, which acknowledges the hunger of employees for self-respect both at home and in the workplace. Self-respect is a primary good Francis Fukuyama suggested, in his book The End of History and the Last Man, 2 that the prime movers in the human journey to what he argued was the political end-state of liberal democracy, were the superi- ority of liberal economics and the human desire for what he called “recognition.” Our desire for recognition was identified by Plato in the Republic where he argued the human soul incorporated a “desiring” part, a “reasoning” part and thymos (“spiritedness”). “Desire induces men to seek things outside themselves,” Fukuyama explained, “reason … shows 9780230_230941_03_cha01.indd 17 09/09/2009 10:00 18 BUSINESS AT A CROSSROADS them the best way to get them. But in addition human beings seek recogni tion of their own worth, or of the people, things or princi ples that they invest with worth.” Fukuyama sees thymos as a desire for self- esteem and as an in nate sense of justice: People believe that they have a cer tain worth and when other people treat them as though they are worth less than that, they experience the emo tion of anger … when people fail to live up to their own sense of worth, they feel shame, and when they are evaluated correctly … they feel pride. The desire for recognition and the … emo tions of anger, shame and pride are parts of the human per sonality . Hegel saw history as man’s “struggle for recognition.” Machiavelli wrote of man’s desire for glory. Hobbes recognized the importance of pride. Rousseau originated the term amour propre. Nietzsche noted physiological evidence of our need for self-respect, by describing man as a “beast with red cheeks.” You do not have to subscribe to Fukuyama’s “end of history” theory to recognize the existence within yourself of thymos; a hunger for recog- nition and self-respect. John Rawls said self-respect was the most impor- tant “primary good.” He defined it as follows: First of all … it includes a person’s sense of his own value, his … conviction that his … plan of life is worth carrying out; … second, self-respect implies confidence in one’s ability to fulfill one’s inten- tions. When we feel that our plans are of little value, we cannot pursue them with pleasure, or take delight in their execution. Nor, plagued by failure and self-doubt, can we continue in our endeavors. It is clear then why self-respect is a primary good. Without it nothing may seem worth doing, or if some things have value for us we lack the will to strive for them. All desire and activity becomes empty and vain, and we sink into apathy and cynicism. 3 Rawls built his philosophy of “justice as fairness” on the primary good of self-respect; Hegel saw the struggle for recognition as the engine of history. Fukuyama saw the hunger for self-respect as one of the drivers of the evolution of human societies toward the political end state of liberal democracy. But although the human hunger for self-respect has been a powerful stimulus of social and political developments, it is too general a hunger on which to build, as I will try to do, a new framework for business organization. We need to unpack it a little, to derive a list of workplace 9780230_230941_03_cha01.indd 18 09/09/2009 10:00 1 WHAT PEOPLE WANT 19 qualities, the presence or absence of which will increase or reduce the chances that those who occupy it will learn to respect themselves. Let us start with a thought experiment. Readers are invited to put themselves in a workplace version of Rawls’s “original situation,” behind a “veil of ignorance,” where they know nothing of their own characters, abilities and attitudes to risk, and nothing about the world of work they’re about to enter, apart from knowing that work they must, to provide for themselves and their families. What workplace qualities would you regard as desirable? Forget how things are, and how it seems they must be, and try to imagine, in general terms, which among all conceivable workplace qualities and arrange- ments you, given the choice, would choose for yourself. If John Rawls had been asked this question he might have concluded that, behind the veil of ignorance, most of us would say we wanted our workplaces to be “free,” “fair,” “reasonable” and “decent.” Free We are constrained by the organizations that employ us, and by our need for the money they pay us. We have to sacrifice and suppress parts of ourselves for the sake of our employing organizations and our careers. We are compromised by our employment, because it can prevent us from realizing our potential, by obliging us to follow only those paths our employers lay out for us, and take only those opportunities they make available to us. We may suspect that, in different circumstances, we could have developed in very different ways and discovered in ourselves different talents and abilities, the development of which might have satisfied us more, and made us feel more fulfilled. But we are trapped by our situations, and the passage of time. We might be proud of our achievements so far and excited by the opportunities open to us, but we can never be sure that the person we have become, and can become, is the best of the persons we could have been, or could become. We can never be sure of that of course, but we know our chances of realizing our potential and maximizing our self-esteem depend, to a large extent, on how open our circumstances are; on how free we are to change our situations. We value freedom highly, because the freer we are, the greater the chance we will find places where we can shine and become fulfilled. We know luck plays a large part in determining where we end up, and how we feel about ourselves, but, more and more nowadays, we are attracted to open situations in the middle, rather than on the banks of the river of fortune. 9780230_230941_03_cha01.indd 19 09/09/2009 10:00 [...]... odds with its own employees, and with other companies and their “peoples.” They lead to rational, but unreasonable behavior, such as predatory pricing and buying, late payment of suppliers’ invoices and other abuses of market power, and threaten the solvency of other companies, and thus the livelihoods of their employees In other words, a decision by a company to acquire another company or to pay its... that do F offer, and from companies that don’t offer, the freedom to change course and experiment with other roles and specialisms as their interests and understanding of their own talents and aptitudes change and develop ■■ airness People will tend to move to companies where they’ve F reason to believe they will be treated (and rewarded) fairly and they are unlikely to be victims of the arbitrary exercise... downsize; that they are not privy to the relevant information, or capable of grasping the thinking that makes such actions “rational”; and that it’s not their place to judge the ways in which their leaders wield their powers of sovereignty But whether or not they can grasp the rationale for their leader’s course of action, and whether or not it is their place to question it, question it they do, according... approximations.” Because they design the dishes, only they can judge whether the presentation is appropriate and the taste has just enough salt or spice The dish is their creation, and they know when it is just right It is like the Japanese master who teaches students, by asking them to copy a character he has drawn Because it’s hard to describe exactly what is desired, the learning 28 Business at a Crossroads... through trials and adjustments The chef has a vision and a style, and it is the job of kitchen staff to learn to achieve it ‘Quality’ lies in the fidelity of replication This is an environment of constant teaching.” The chef says to his apprentices “here’s the taste” and keeps telling them it is too salty or too sweet until they get it right Each sauce will be tasted by the chef and by the person who... leader’s “rationality” excludes the “reasonable,” ignores the interests of employees (embodying the company as a people), and other companies and their employees, and is driven by the leader’s interests, such as a desire for enlargement, prestige and wealth – the differences between the company as a “state” and the company as a “people” may be enormous Interests such as these tend to put a company at... respect of the firm’s own, basic interests, but is “unreasonable” in respect of the interests of its people and other companies and their peoples Peoples have basic interests, such as security, safety, fair rewards and the freedom of their members to pursue their ambitions and realize their full potential, but these interests are confined to those that are “reasonable.” The implications of the difference... Schein called them.” They take pride in the achievements of their apprentices and pupils, in the same way that parents take pride in the accomplishments of their children The reason why student chefs don’t find their masters’ power (even when exercised callously) demeaning, is that their relationship is based on a learning contract Both parties to the relationship are united in their wish for the led to... have argued that the evolution of working arrangements, and thus of the company and the forms of association between working people and companies, are being driven these days by the human hunger for selfrespect This wasn’t always so Until recently other hungers, for security and a minimum level of income, took precedence over self-respect and allowed the emergence of working arrangements and forms of organization... employees understand the reasons for their company’s actions, they will judge them, according to what they regard as “reasonable” and “decent.” Companies are not moral creatures, but people are, and companies will find it hard to recruit and keep good people if they behave in ways that seem to violate common standards of decency This is one of the dilemmas faced by company leaders They have a duty . University Press, 19 71. 9780230_2309 41_ 02_intro.indd 11 09/09/2009 10 :07 This page intentionally left blank PART I What ails big business 9780230_2309 41_ 03_cha 01. indd 13 09/09/2009 10 :00 This page. 9780230_2309 41_ 03_cha 01. indd 17 09/09/2009 10 :00 18 BUSINESS AT A CROSSROADS them the best way to get them. But in addition human beings seek recogni tion of their own worth, or of the people,. the company as a people), and other companies and their employees, and is driven by the leader’s interests, such as a desire for enlargement, prestige and wealth – the differences between the