Business school lecture: a force for good or harm?
Book review: Confronting Managerialism: How the Business Elite and Their Schools Threw Our Lives Out of Balance by Robert R. Locke and J.-C. Spender
One of the striking characteristics of the debate about the economic crisis is the ease with which the epithet “anti-capitalist” is used to describe even the mildest critique of the status quo. Even David Cameron (a fleeting champion of “moral capitalism”) was at it last week, condemning as “anti-business” people who argue that the bosses of large corporations should restrain themselves from accepting obscene pay awards when the performance of their companies has been poor.
The project was an opportunity for me to take further my life-long interest in narrative. My background to this was as a journalist who naturally makes sense of things through shaping events and information into stories. When I first experienced coaching, I was drawn to becoming a practitioner because I noticed an affinity with my earlier career as a reporter – asking challenging and open questions, cutting to the chase, synthesising and summarising on the fly. While my approach has changed since then, I realised that this story-driven frame of reference was still influencing my style as a coach, even though I wasn’t consciously nor explicitly make it a part of my coaching model. So I decided to use my research project to bring some rigour to my belief in the relevance of narrative to coaching.
We’ve recently completed a project with the National Portrait Gallery, who engaged us to develop a draft social value model. We spoke to people at all levels of the National Portrait Gallery’s staff as well as external stakeholders such as corporate sponsors.
We found this a striking instance of the specifity of making a social value case. It’s tempting to think in generic terms about the social value of any given sector. But each institution is different. The National Portrait Gallery has unique characteristics which differentiate it from other galleries and museums. These are rooted in its founding purpose, which was to tell the story of Britain through portraits of men and women of achievement. Unusually for an art gallery, this means that the subject of the artworks is of greater importance than their artistic merit. Is the National Portrait Gallery, therefore, most similar to other galleries in their role as custodians of arts or to museums which curate artifacts of historic interest? To what extent should it stay true to its Victorian mission to tell a canonical story of Britain versus a contemporary, post-modern one to foster critique of hegemonic narratives and encourage a more inclusive portrayal of Britain?
The answer to these question are determined in part by the view one takes of the social value that the Gallery should deliver under different scenarios of how the economic crisis will play out.
Eurostar: slow to board the social media bandwagon
Book review: Who Cares Wins: Why Good Business is Better Business by David Jones.
Who Cares Wins by David Jones is the latest contribution to an increasingly crowded publishing niche focussed on how business can do well by doing good. Jones, who is chief executive of the advertising agency Havas, shares the view of us here at Vogel Wakefield that the rise of social media is an important driver of social responsibility in business. He points to a tweeter using the name @BPGlobalPR who outpaced the official BP Twitter account in the wake of the Deepwater Horizon spill.
The idea that business should create social value, not just shareholder value, is fast becoming the common sense of our time. One could interpret this as a delayed corrective to the crisis in capitalism brought about by the credit crunch. But there was no inevitability about it. Even at the start of the year, when Michael Porter published his Harvard Business Review article on creating shared value, his argument was greeted with scepticism as much as agreement.
Since then, we’ve had the Arab Spring, public disgust with the press brought about by the phone hacking scandal and now the Leveson hearings, riots in England over the summer, the Occupy protests, and the looming threat of financial and social collapse in the euro zone. These events have given voice to public unease with corporate elites who seem out of control and political elites who have no answers to our current predicament.
Few organisations know how to focus on their core purpose. The technology company, Apple, is one. Its chief executive, Steve Jobs, is famously obsessive about focus. Apple infuriates as many people as it delights by stripping away that which it considers inessential. But it is now worth more than a number of its close competitors combined. “People think focus means saying yes to the thing you’ve got to focus on,” said Jobs in 2008. “But that’s not what it means at all. It means saying no to the hundred other good ideas that there are. You have to pick carefully.”
How many arts organisations would see their purpose in these terms? My guess is that focus would be an underrated virtue in many. This may be the case for two reasons: either the organisation is not very clear about its purpose and therefore finds it hard to know what should be the object of its focus, or the leadership has clarity about the corporate purpose, but does not know how to align the organisation’s activities behind the mission.
Mr Murdoch’s audience is understandably confused. If you set any store by the fad for corporate bosses to demonstrate their “authenticity” then the “authentic” Mr Murdoch was the ruthless mogul of July 3, the day before the outrage over the hacking of murder victim Milly Dowler’s phone broke, or the smiling patriarch, toughing it out with his arm round Ms Brooks earlier this week…
For some months I’ve had occasional thoughts of writing a blog post about the phone hacking scandal at News International. The reason I never got round to doing so until now is instructive. At some level, I doubted the point of deconstructing News International’s venality as this has appeared so self-evident to me since I was a schoolboy delivering newspapers that it seemed unremarkable.
In recent days, the pace of events has been so fast and the volume of commentary so large, that I doubted that I had anything distinctive to contribute. However, the affair prompts me to pull together some thoughts on the social purpose of business and why I’m convinced this is an increasingly important focus of leadership.
Carnegie funded hundreds of public libraries, like this one in Teddington
The Economist draws on the centenaries of two major institutions – the technology company IBM and the philanthropic Carnegie Corporation – to assess whether the commercial organisation or the charity has contributed more to society.
An analysis of highly ranked MBA programs by the Public Relations Society of America showed that only 16 percent offer a single course in crisis and conflict management, strategic communications, public relations, or whatever label one chooses to describe management of a precious organizational asset: reputation. Even that course is likely to be an elective. So glaring is this omission that it’s typical for MBA-holding executives to assume “reputation management” or “public relations” is the black art of spinning an alternative version of reality, as though that works in today’s wide-open, relentlessly scrutinized, electron-speed information environment.
A healthy emotional climate is a competitive advantage
Organisations are emotionally-charged places. But little of this ever reaches the boardroom. This means that directors cut themselves off from some of the most important knowledge they need to hear.
Some organisations have a knack for creating great places to work which get the best out of their people.
John Timpson, the chairman of the Timpson chain of shoe repair shops, swears by his system of “upside-down management”. He believes the people in his shops have the best knowledge about the business and that it is his job is to get management out of their way. He insists on as few rules as possible and gives staff the freedom to set prices, deal with complaints and decide their own training needs.
The John Lewis Partnership makes everyone in the company an owner, conferring on each of them a responsibility not just to do their jobs but to contribute to the leadership of the firm. One John Lewis employee – quoted in The Guardian – speaks of:
The “passion and commitment” that come from “being engaged, because you have a vested interest in making sure it works, for you and for the people you work with.”
These companies – both doing well in difficult economic circumstances – are successful examples of what the writer, Bob Garratt, calls the emotional climate of an organisation. They make the emotional climate a source of competitive advantage, by ensuring that employee behaviours deliver excellent customer experience.
Market economies are always vulnerable to chancers and spivs who sell overpriced goods to ill-informed customers and seem to promise things they do not intend to deliver. If such behaviour becomes a dominant business style, you end up with the economies of Nigeria and Haiti, where rampant opportunism makes it almost prohibitively difficult for honest people to do business. Our prosperity depends on a self-enforcing culture of ethical business values, in which traders value their reputation and seek to develop long-term commercial relationships. That is the culture in which banks used to operate: it is time they did so again.
He is reviewing a book by a Canadian academic, Roger Martin, which appears to be a polemic against linking CEO pay to company share price. But it’s interesting also for the background on how the tide has turned on the shareholder value movement:
Prof Martin’s central concern is that the pursuit of shareholder value “simply fails as a unifying theory to produce value in business”
Given that even Jack Welch, the high priest of shareholder value creation while chief executive of General Electric, has since dismissed its strategic primacy as “the dumbest idea in the world”, this argument sounds a little out of date. But Prof Martin is right that the theory continues to distort corporate strategy and that chief executives need to step off the consensus earnings treadmill. “I do think there’s room for leaders to lead, not to be led by the nose-ring by analysts,” he told me recently.
The idea that companies’ principal aim should be to maximise profits for owners came from Michael Jensen and William Meckling’s 1976 paper on the “principal-agent problem”, caused by chief executives allegedly enriching themselves at shareholders’ expense. But Prof Martin’s own research has shown that in the 20 years before 1980, when the shareholder value movement took root, CEO compensation per dollar of income earned at the biggest US companies actually fell. Between 1980 and 1990, it doubled and between 1990 and 2000, when Mr Welch and others were in their pomp, it quadrupled. Returns for shareholders, meanwhile, were better before 1980.
Hill highlights some interesting recommendations from Martin on improving the role of directors:
Recast board directors (who are as susceptible to the principal-agent problem as chief executives) as public servants. Encourage companies to rebuild the civil foundations of business for the mutual benefit of society. Readjust priorities to focus on customers over shareholders.
Cynics may roll their eyes at such prescriptions. But one of the insidious effects of the quest to hit quarterly targets is that it distances executives from the real reasons they are in business. In Prof Martin’s words, it makes them “indifferent to their communities”.
Ai Weiwei on a video link shortly before his detention
The FT reports on Huawei’s difficulties breaking into the US market. Over the past decade, the Chinese firm has risen to become the world’s number two supplier of network equipment with growth in most major markets outside America. But America’s growing distrust of China is proving a huge obstacle and it has failed to win any major contract with a leading US telecoms network: Read More »
In relation to the US study, the RI found that the excellent companies were:
2.5 times more likely to have the CEO set the strategy for their enterprise positioning
1.5 times more likely to include reputation metrics as part of their senior management “dashboard”
15 times more likely to manage corporate reputation across company functions
1.7 times more likely to use an outside partner to assist with corporate reputation management
There’s some interesting detail on how reputation affects consumers’ buying decisions. The RI found that people take into account their whole impression of a company, not just their view of its products or services, when deciding whether to buy:
Since the start of 2011, I’ve been noticing increasingly common references to the social purpose of business – an idea which, until recently, many would have regarded as an oxymoron.
The first sighting was a Harvard Business Review cover article by Michael Porter and Mark Kramer called Creating Social Value. This argues that capitalism is facing a crisis of legitimacy which can be overcome only if businesses put aside the notion that there is an inherent trade-off between profitability and attention to social needs.
After that, references came grouped together like buses. Matthew Taylor referred to Porter and Kramer in a blog post he wrote on the contribution businesses could make to David Cameron’s Big Society (they have potential to deploy their brands and their product development on encouraging socially desirable behavioural change).
There’s some interesting coverage today of the reputational fallout of Britain’s relationship with Libya.
Philip Stephens, in the FT, examines London’s status as a place where dictators can launder their image. He portrays a city where it is just so much a part of the everyday culture of business to deal with unsavoury regimes that the risks are normalised.
Britain, he says, has become a “coin-operated laundry for the reputationally challenged.” He’s referring not only to the PR agencies which cast dictators in a more benign light, but the investment advisors, hedge funds and private banks that help them recycle ill-gotten money into more legitimate vehicles.
Today, it is uncontroversial to point out that a leading university of the social sciences might be compromised by accepting money from the family of a pernicious dictator. Saif Gaddafi’s bellicose statement last week in support of his father’s regime in Libya has seen to that. But when the decision was taken – only seven weeks ago – the calculation must have looked very different.
The report highlights the cases of ten people who suffered grievous neglect. Many of them were fit, active and healthy before treatment but all but one died during or soon after the events they experienced in the care of the NHS, and in circumstances which caused distress and anger to the patients and their families.
Nobody likes cuts. But is it too outlandish to see an upside to financial uncertainty? Perhaps not. Organisations that navigate the storms ahead may gain more autonomy to set their own destiny. A possible outcome could be that they reconnect with their fundamental purpose and refresh how they deliver value to audiences.
This may sound panglossian. In austerity, our energies concentrate simply on survival and the niceties of maintaining and delivering a vision recede to the sidelines. But it can be a mistake to treat the values that inform an organisation as too costly a luxury to merit attention at a time like this. Clarity about what an organisation exists to achieve is central to making good decisions in the face of challenge.
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