One shouldn’t too often say ‘I told you so’, but sometimes the warning you issued was so strong, and so wilfully ignored, that the temptation is overwhelming. This year is the tenth anniversary of the publication of Unshrink, which I co-wrote with Max Mckeown. In the light of the subsequent heroic failures of the likes of Sir Fred Goodwin and Dick Fuld, it is interesting to reprise the following excerpt. Note too how fashionable it was to trash the collective German industrial model – an approach others are now scrambling to emulate. More excerpts to follow in this anniversary year, including a warning about risky mega-mergers.

From Unshrink, Max Mckeown & Philip Whiteley Pearson 2002:

Where the “Boss is Superhuman” is a truly damaging myth is where it becomes addiction to the notion of a ruthless, omniscient leader who eschews consultation and whose buccaneering sword can work miracles in our lives. The management writer Jeffrey Pfeffer has charted the dizzying obsession of investors and journalists with “hero chief executives”. Those who were aggressively opposed to trade unions were particularly feted. Whether or not they were any good was immaterial.

In business, the desire for a buccaneering hero who can rescue shareholders remains strong. Consider the following extract from the Financial Times, dated 28 November 2001:

“Josef Ackermann [at Deutsche Bank] wants to strengthen the senior manager’s role and turn it into something akin to a strong US-style chief executive. Executives say that he runs Deutsche’s investment banking division with an ‘iron fist’”

It adds: “The writing is on the wall for Germany’s traditional Vorstand [management by collective responsibility]. ‘The old consensus model is a hurdle to quick decision-making,’ says Dieter Hein at Credit Lyonnais Securities. ‘A strong CEO and clear lines of executive responsibility are a natural next step’.”

The plea of the executives referred to in this report is “give me more power because I want it”. One would imagine that, given this enormous political pressure to rip out checks and balances on the influence of chief executives, that there is a body of scientific knowledge demonstrating that an autocratic boss is better for shareholders, for staff and for society, than others. Those of us who hear the negative voice in our mind “Others know more than me” can assume that the writer of this news piece is onto something that we are too dim to understand. But the truth is, he isn’t. There isn’t such a body of knowledge. Management thinker Henry Mintzberg has been charting what actually happens to hero chief executives and their companies over the last ten years. He finds an extraordinary rate of failure. Moreover those with MBAs, the highly prestigious badge of executive respectability, were no more likely to succeed than others.

At this point, a reader may think: “Ah but that doesn’t mean that Germany has solved all the problems and that every company should be run by a committee.” This is true, but it misses the point: it focuses on structures, which are unimportant, rather than people, who are important. Of course it is better to have one good chief executive than five mediocre ones. But it is also better to have five good chief executives than one mediocre one. Leadership, teamwork and achievement are not the result of formulae or structural diagrams that can be drawn on pieces of paper. They result from mutual respect, allowing each other to grow. They are a function of people.” Unshrink by Max Mckeown & Philip Whiteley, (c) Pearson 2002.

Links: www.maxmckeown.com

My new blog: http://radical-shift.net/

Moral capitalism comes from within

This is a longer version of an article that appeared in the London Evening Standard on 20 January 2012:

All three party political leaders in the UK are vying with one another to produce the most attractive soundbites and policy initiatives on reforming capitalism. Their actions illustrate the influence but also the limitations of government interventions on business and markets.

The bigger picture is that the politicians and their think-tanks are struggling to acknowledge the enormity of recent events. What we are seeing is the collapse of a belief system that has been fashionable for the past few decades: the idea that exploiting workers and the environment maximises profits and market efficiency. This is the ‘neo-liberal’ belief that has permeated economics and management theory for the past few decades. It was also shared by the left and the trade unions, who concluded as a consequence that regulation and state action were the only ways to protect workers. When Sir Fred Goodwin was dubbed ‘the shred’ it was assumed that being ruthless and being successful were synonymous, but he failed in purely commercial terms: the shareholders were wiped out and the Royal Bank of Scotland suffered the humiliation of forced nationalisation.

The Conservatives, Labour and Liberal Democrats see themselves as being in competition with one another, but I find much to agree with on all their recent initiatives in this area. It should be easier to set up cooperatives (David Cameron), and having a worker on the salary board (Ed Miliband) will help the company, unless the individual is a cynical Trotskyite.

What is lacking is the ideology. The principles of sustainable, successful business leadership have been established, with a strong evidence base, for decades, but have been undermined by cynical economic theories of left and right. This explains why Labour and Conservative party members overlook the significance, while Liberal Democrats talk too little about economic matters. All parties talk too much about the law. For example, employee commitment is as important for companies that are not constituted as cooperatives as for those that are.

The principles of sustainable capitalism are:

• Commitment to employee engagement as a core discipline: low morale and high staff turnover tend to cost far more than more easily measurable costs.
• Commitment to integrity – this lowers risk of corruption and fraud, as well as helping customer service.
• Treating workers and the environment as stakeholders to be nurtured, not resources to be exploited. This is a commercial consideration, not only an ethical one.

The Government has supported the MacLeod Review into employee engagement, but it is disappointingly low profile. Moreover, there is no acknowledgement of how the findings around engagement undermine the unspoken beliefs of many backbench MPs and trade unionists.

The really big change will come about slowly, if ethical capitalism is taught rigorously on MBA courses, just as unethical capitalism was taught on too many campuses since the ‘maximising shareholder value’ cult began in the 1970s with the Chicago economic school.

• There is more discussion of these ideas on my new blog Radical Shift, co-authored with Neela Bettridge. http://radical-shift.net

The state of the great office

As a card-carrying geek, I do pub quizzes (a Spanish friend of mine who loves the arts cannot understand this British obsession with trivial knowledge). The same question has come up in two forums in the past couple of months: who is the only British politician to have held all four of the Great Offices of State? I enjoy this question, not only because I know the answer, but because it sets me thinking. What is a ‘Great Office of State’? Who decided, when, and on what basis? Why are the policy areas that I’m most interested in not covered? Does this matter?

I’m not so much of a geek, nor do I have so much time on my hands, that I can answer all the historical questions, but it seems fairly clear that the concept of the ‘Great Office’ is 19^th Century and imperial: the Prime Minister, Home Office, Foreign Office and Chancellor make the big decisions of a colonial state that rules a quarter of the world’s land mass. They carry the most kudos.

But for a mid-ranking trading nation I think the concept of the ‘Great Office’ is as antiquated as a top hat. The UK has to earn its way in an inter-connected world where the most important asset is human capital, not ownership of colonies. So the notion that the offices of Business or Education are ‘lesser’ is an anachronism. The world will not be run by white westerners in the 21^st Century, and that’s a liberating development. It means that countries like Britain have to adapt: learn more languages, develop more skills, become more outward looking; think globally, in the term Sue Bloch coined as we were working on The Global You book. The very concept of a ‘nation’ is blurred in the inter-connected trading world.

There is a similar problem in business, where many analysts think that the business consists of the ‘Great Offices’ of the structure and the owned assets, whereas in the real trading world the company is the people that customers and suppliers deal with.

I do not wish to belittle the achievement of James Callaghan, who was a rather under-rated and unlucky Prime Minister. But it would be wonderful if the departments responsible for developing a nation’s human capital were to get promotion.

• Please see the new blog Radical Shift for more discussion on the new agenda for business in the inter-connected world.

Was Christ a liberal or a conservative? Or both?

As it’s still, just, the Christmas period, I thought I’d begin a regular religious slot – regular as in once a year. On Christmas Day, listening to a Radio 4 broadcast by Giles Fraser, the former Canon Chancellor of St Paul’s who resigned over his support for the Occupy movement, I’m moved to comment. I’m not qualified on theology, but I seem to have a better grasp of the sweep of Christian history.

The synopsis was: the Emperor Constantine, by co-opting Christianity into the Roman Empire, stripped it of its radical, campaigning edge and turned it into an establishment religion. This is evident in the content of the Creed drafted at the conference of Nicea, and still recited weekly in Catholic and Anglican services. It refers to the birth and sacrifice of Jesus Christ, but not to his radical teaching, such as the Sermon on the Mount.

So far, so conventional and up to a point I agree, but I kept waiting for the health warning. Canon Fraser presented this thesis as though it were some novelty, rather than a recurring narrative within Christendom over the centuries, and the dominant one in the English-speaking world since at least the 1640s and the British revolution. This perspective has encouraged some benign movements, such as the Franciscans and the Methodists, but also extreme sectarian attitudes and acts, such as Cromwell and his followers, who massacred fallen women at Naseby and Papists at Drogheda. When anti-Rome campaigners become allied with the mob, they can cause as much injustice and suffering as any empire.

And even within the Biblical texts, the radical Jesus is more complex than presented here. He stresses justice but he also urges philanthropy, threatening eternal punishment for those who do not practise it (Matthew 25: 31-46). Not very meek and mild, then. He also defends or praises stalwarts of the Roman Empire, such as tax-collectors and even a Centurion – Jesus healed the officer’s servant, but didn’t set him free. References to over-turning of established order tend to be metaphorical or other-worldly, and do not constitute a clearly defined programme of political action. When Margaret Thatcher made the observation that the Good Samaritan was only able to be of help to the crime victim because he had some personal means, and could arrange a stay in the inn, her comments caused outrage among left-wing Christians. But why? We may quote selectively, but conservatives may not, seemed to be the gist.

I’m not sure that Jesus can be easily conscripted to the left or right-wing cause, in the way that they are defined today. Both sides have their good Christians. And their monsters.

Review of The Economics of Enough

I’ve been engaged in online debate about the Occupy Wall Street/Occupy LSX protests, saying that to protest is not enough – you have to propose an alternative to the neo-liberal economic theory that has caused so much damage. One of the problems is that a coherent alternative means tough choices and patient work. Having either taken part in, or observed, protest for a quarter of a century, I have yet to see even a glimmer of productive endeavour arising from these initiatives.

There are ideas out there, however. I’m engaged in my own endeavour with Neela Bettridge at the new blog Radical Shift. A major contribution comes from Diane Coyle in the book The Economics of Enough. My review is published here, and an excerpt follows:

The Economics of Enough is a clear, challenging and impressively broad description of the momentous challenges facing societies, especially western economies, including some perfectly practical suggestions for reform. It is customary at this point in a review to comment that the book ‘ought to be required reading for policy-makers’ – but this immediately prompts the thought: why isn’t it? In a sane world, The Economics of Enough would not just be required reading; much of the content would be cut and paste from the text to the speeches and policies of those in power and the think tanks that inform them … Coyle herself hints at the reason: some of the implications for policy choice are just too painful. Perhaps another, equally unsatisfactory, reason lies in the psychology of the powers that are on and behind the throne in capitals such as London and Washington: the economics of ‘enough’ just isn’t going to set the pulses racing of the wee bairns that draft the policies and the major speeches. In such febrile environments, a ‘solution’ is always sought, whereas The Economics of Enough calls for understanding.

Link: Enlightenment Economics, by Diane Coyle.

There is (still) no alternative

Many lapsed socialists can recall where they were, and what they were doing, when they lost the faith. I was listening to Tony Benn, leading orator of the British left, in a hall in Chesterfield in 1987. He eloquently denounced the policies of the then Thatcher Government, and rounded on the way in which the coal miners had been treated. They didn’t want to work for a nationalised industry run by people like Ian McGregor [the conservative American industrialist hired by Margaret Thatcher]; nor did they want a return to privately run mines. Great, I thought: I’m finally going to hear about an alternative form of organisation that married organisational effectiveness with social justice. Nothing.

A couple of years later I watched Michael Moore’s documentary Roger and Me. The ‘Roger’ in question was Roger B Smith, chairman of General Motors, which had laid off 30,000 auto workers in Flint, Moore’s home town. It was a shocking but at times comedic portrait of an industrial town in decline and the efforts people were making to earn a living. This included the road-side stall of a woman who bred rabbits. You could buy one as a pet, or if you were feeling hungry …. (children please look away).

As with Benn’s speech, I awaited an outline of a plan to ensure better innovation and productivity at GM, such that it could keep people their jobs and keep the community alive. Again, nothing.

I realised then that when Thatcher had declared: ‘There is no alternative’ to her neo-liberal policies, she was actually correct. There was no alternative, because the left did not develop one, and has not aspired to – before or since (see also the 26 September post ‘Anti-business unions and anti-worker business’). In a competition between a bad theory and no theory, the bad theory always wins. This is on the basis of the ‘Yes Minister’ principle: Jim Hacker, the minister in the satirical sitcom once famously thundered to his civil servants: ‘Something must be done about it! This is something, so let’s do it.’

So the current protests at Wall Street, which ought to be heartening, are also troubling. Investment banks have been guilty of colossal miscalculation and outright fraud. They tested the neo-liberal model to destruction and the result was destruction. But we do need an alternative, and I don’t see one yet. One banner even read: ‘The corporation is not people.’ Pure neo-liberalism. Milton Friedman would be proud.

• PS Yes, I am trying to articulate an alternative myself, in partnership with others, set out in the blog Radical Shift.

Anti-business unions, and anti-worker business

In the 19^th and early 20^th centuries, it was relatively common for industrialists such as Joseph Rowntree, Andrew Carnegie, and Sir Titus Salt to involve themselves very much in society. It was also customary for groups of working folk to set up businesses on cooperative principles – the Co-op, mutual societies, and so on.

Somewhere along the line (historians please advise me on why and how), the trade union movement gave up on building mutual organisations, while business ditched society in favour of ‘maximising shareholder value’. Trade unions became anti-business, and business became anti-worker. This has been disastrous; each polarised, extreme opinion fuelling the other, while organisation-building and community-building have been abandoned as political ambitions.

The sole ambitions of the left, nowadays, are to spend public money and pass workplace regulations. During the boom years, they could get away with this and still look more or less ‘progressive’, in spite of much waste, but now the money has run out and there is precious little to offer. There will be plenty of anti-government invective at this week’s British Labour Party conference, but I’ve given up hoping for a credible alternative.

The most immediate cause of the current crisis is deregulated capital and the myopic cult of ‘maximising shareholder value’. But the equally abject failure of the left and trade union movement to offer an alternative demands greater scrutiny.

The one glimmer of hope comes from an unexpected source: campaigning NGOs working with major corporations to create sustainable supply chains. In these ingenious arrangements, everyone wins. The latest Radical Shift blog notes:

“The achievements … are multiple: better pay for workers, better yields for farmers, better protection of wildlife, more reliable supplies, high quality goods for supermarkets, reduced carbon output from smarter use of transport – leading also to reduced costs, reduced waste through re-use of by-products. The ‘old normal’, in which it was assumed that commercial success had to come with human or environmental victims, is exposed as a cynical and damaging belief.”

McDonalds now uses Rainforest Alliance Certified farms for its coffee. When the biggest and baddest fast-food behemoth starts to look more progressive than left-wing institutions, some serious questions need to be asked.

Radical shift and the good that business can do

Just a quick blog to state that output has been limited recently as I’ve been exceptionally busy with other work. Among other projects is a new blog with Neela Bettridge of Article13, called Radical Shift. Click here. This is a highlight from the newest entry:

One of the aims of this blog is to promote the ethical role that business can and does play; not only by producing socially useful products – from cell phones that help economic development in sub-Saharan Africa to medical devices that enhance quality of life for elderly frail people – but also by creating careers, and innovating sustainable supply chain practices, and the wealth to pay for the welfare state.
If the problem is a lack of awareness of the good that business can do, does the fault lie entirely with misplaced idealism of the young, and campaigns for public spending programmes by the trade unions?

Not quite. The main reason that business appears to be divorced from society and good works is that that has been the way business wanted it. That is the way the MBA has been taught. The notion that the shareholders ‘own’ the company and the assets (if this were true, it would almost amount to slavery, as Charles Handy tellingly points out in this interview with Simon Caulkin); and that the sole purpose of the executive is to maximise their returns, and all the misanthropic baggage that accompanies this approach, did not spring up out of nowhere. It was taught. There was no evidence or logic to support it, and it has caused immense and avoidable damage to society, but it was taught, all the same. You can read the summary of this ideology in the seminal New York Times feature by the late Milton Friedman, published in 1970.

Spin city and the riots

In 1998, I had a nice little exclusive story as head of the news desk on Personnel Today, concerning an emerging problem with the Labour Government’s New Deal programme. This initiative was the flagship policy of the new Blair administration. Funded by a windfall tax on the utilities, its aim was to reduce youth unemployment by providing training and work placements with employers. Our story was that a major retailer had pulled out of the scheme, citing problems with behaviour, attitude and lack of work ethic among many of the new recruits. Some of the youngsters did not see that they had to turn up on time in order to be paid, or perform the duties asked of them. Others dropped out after a few days; some had behavioural problems such as heavy drug use.

On a professional or ‘trade’ publication, it’s nice to have a scoop on a story with wider significance, as you can often get yourself a mention in the national papers or in the Commons. We duly put out a press release and expected at least a couple of mentions by education and political correspondents. What happened was perhaps the most shocking and depressing sequence of events I’ve encountered in my career. The head of the press office at the Education & Employment Department got hold of the issue before any widespread coverage and subjected me to a series of bullying phone calls: our story was wrong, he shouted, because the retailer in question was still a signatory so it had not ‘pulled out’. Without doubt the same loathsome individual called all the national newspaper correspondents also, who meekly complied with his aggressive demands.

The story was efficiently spiked. A social phenomenon of significant numbers of young people with no aptitude for employment, and an indifferent or hostile attitude to authority, was surely a matter that required urgent and far-reaching discussion, but the spin doctors made sure that this was not going to happen. As a point of detail: this was a civil service press officer, who should have been serving the public, not the Labour Party.

Just suppose if, 13 years ago, the papers had gone to town on our story and that, instead of suppressing discussion, Labour ministers and their supporters had said to themselves: hold on a minute, this problem isn’t just about employment; it’s about employability. It’s not just about opportunity, it’s also about attitude. It’s not just about economics, it’s about parenting, schooling and the community. A national conversation could at the very least have begun. Instead, the problem festered and appears to have grown. As we can see from recent events, our little story on Personnel Today was not so little, after all.

We’re not rechargeable batteries

There are two kinds of finding in social research: the extremely unlikely and the blindingly obvious. Into the latter category fall the numerous earnestly prepared studies that ‘prove’ that rich people have more opportunities than poor people.

An example of the former has attracted huge press coverage this summer in the UK (I suspect many studies are reverse-engineered to produce a certain type of headline): this was the finding that holidays don’t do us much good. Researcher Jessica de Bloom measured health and happiness before, during and after holidays, and revealed that after a week or two of returning to work, energy and mood levels had returned to normal.

I don’t doubt the findings, but the arbitrary narrowness of the terms of reference renders the study pointless. The purpose of a holiday is not to recharge the battery. We are not machines. The purposes of a holiday are multiple: fun; new environments; new experiences; above all, shared experiences. This is particularly important for a family, and especially where one or both parents work long hours. For children blessed with good parents, the holiday memories are some of the most precious, and last a lifetime.

And then there are the books. A new tome can add an enriching dimension to help us see the world in a different way. For me, reading Carl Jung while back-packing in France 25 years ago; or The Open Veins of Latin America, while spending four days on a boat travelling up the River Paraguay, or Wuthering Heights while on a ship in the Med, were formative experiences. I doubt that they would have made such an impression as a bed-time read.

Anyway, having failed to have a holiday last year, for various reasons, I am about to go for a week in the sun, by a pool and a beach. I have not the slightest doubt that my ‘energy levels’ will be about the same a week after as they are now. Fine. I get tired after a game of football, too.