First Posted October 14, 2011.
Near the end of my father's career, the company for whom he had worked for over 35 years, was purchased, and, not so slowly, its assets drawn off and exploited for use by the parent company.
I remember him telling me of the day that he was on a management recruiting trip in Pennsylvania, and received a phone call that the company was not going to make payroll that week. He returned home to help usher through the closing of the company and be the last executive remaining as he handled the outstanding employee medical and benefit claims against the company. He was of an age where he could retire. It was a sad day for him. He had worked for the company his entire career.
My dad's story is not unusual. It is symptomatic of the time we are living in. I thought of my father as I watched last year's under-appreciated film, The Company Men. It is a story of executives and their families coping with change as their corporation goes through a series of downsizes simply to raise the share price. Like my father's experience, the film illustrates a very common experience of change. Here's a clip of a meeting where decisions are being made as to who is to be let go.
This has become a very normal experience for people. Even with a nice severance package, the emotional trauma of being fired is something that doesn't quickly go away. What lies behind this approach to quantifying the value of a company is a way of thinking about organizations that I believe is ultimately destructive rather than a path to sustainability. The logical outcome from over a century of this way of thinking has been the narrowing of the value of a company to something short term and specifically related to its financial value.
Consider the executive's rationale for downsizing staff and eliminating a division of the company in this exchange between Tommy Lee Jones and Craig T. Nelson's characters from the movie. .
Nelson: "Stock is stalled and revenue is flat."
Jones: "Entire economy is flat. We are in the middle of a recession."
N: "I only closed two of the shipyards. Should have closed all three of them. Stock is in the toilet."
J: "Everybody's stock is in the toilet."
N: "Well, the stockholders would like to see their share value maximized."
J: "Heh, Heh, Heh, Well ... sell the Degas'. ... three thousand jobs?"
N: "Gene, we aren't some little shipyard any more. I'm not going to keep pouring money into a losing operation."
J: "We innovate, retool ..."
N: "American heavy manufacturing is dead. Steel, auto, shipbuilding ... the future is in healthcare infrastructure and power generation."
J: "I have to be involved in any decision that affects one of my divisions."
N: "You wouldn't have approved the cut. ... You'd go behind my back to the board again, right?"
J: "They were good people, Jim."
Both men are backed up against a wall. They are caught by a way of thinking about the value of companies that worked in times where growth was relatively assured. Now, the competition is tougher, more astute and far more flexible in their ability to adapt to changing circumstances.
Do you think they could have seen this coming? I'm not sure. It goes back to how to you determine the value of a company. I'm not talking about how Wall Street values it, but the people who are touched by the company in some manner. How do they value the company?
Can the value of a company be reduced to one thing, like the share price, or the charismatic leadership of the CEO or a design innovation? Or is the value embedded in the whole structure and context of the organization?
We are in a time of global transition in all aspects of life. Short-term, reductive, passive aggressive, reactive thinking is not going to lead us out of a recession into a new era of peace and prosperity. Instead, we need to realize that our approach is failing, and that we need a new way to think about how organizations function. It must start with the willingness to be different, to think differently, and invest in changes that provide for long term development.
The Context of Change
The ancient Greeks had a word for change which is metanoia. Literally, it means a change of mind, but it has come to mean something much larger and more comprehensive. Metanoia points to a change of orientation, perspective and direction. There is a sense in the meaning that the change of mind is accompanied by some regret. So the change, upon reflection, is a choice to follow a different path. People choosing to turn toward different values and new ways of expressing them. Metanoia is a change that embraces the whole person, the mind, feelings and will, and is expressed in action that is change.
This change of mind is an awareness that the path we have been on is no longer sustainable. As I wrote in my post, The End and The Beginning, this change marks an end of an era in several ways. The nature of this redirection means that the recent past is no longer an adequate guide for understanding what we must do in the future. As I began in that post,
What if our past experience instead of illuminating the future, obscures it? What if the way we have always approached a problem, or the conduct of a single day, or the organization of our work makes it more likely that we end up not accomplishing what we envision?
The continuity between the recent past and the near future has broken down. This is a turning point for us. The 20th century may provide our most immediate experiential memory, but for the purpose of understanding the future, it is now ancient history.
Reflect upon the attacks on 9/11, our response to them, and the global recession of past three years, and our response to it. Can you see how the tried-and-true methods of the last century have not worked. Neither peace nor prosperity are being restored, in fact, the world is less peaceful and prosperous than it was a decade ago. Terrorism maybe contained upon our shores, but it still festers in places of poverty throughout the world.
Fear, doubt and diminishment in the confidence in our leaders and institutions are increasing. Greater diversity, interconnectivity, and, yes, even greater business efficiencies, are not answering the question about what it is that we must do.
We are now at a crossroads that requires metanoia, a change that is comprehensive and whole. This change of mind requires us to begin to see businesses as a whole organizations, rather than as a collection of interchangeable, discardable, transferable, value-specific parts. The company in The Company Men was dying because it too, like my father's company, was just a collection of assets to be exploited. There is no future in this way of thinking. To have a future requires us to change our minds and see things differently.
To change our minds, we need to make Three Turns of perception, understanding and orientation.
The Moral Turn In the first clip from The Company Men, above, Tommy Lee Jones' character raises questions about the selection of people to be let go. His response, that there is an ethical question involved, is met with a legalistic answer.
By reducing the decision to a question of share price and what is required under the law, the company is not just making a business decision, but also a moral choice.
What is a company that no longer manufactures its products? Is it now a money machine for its share holders as long as the money holds out?
The moral turn is first and foremost about the purpose or mission of the company.
Does a company whose actual purpose is share price encourage confidence and trust?
Does a company whose primary focus is share price understand its connection to the people who work in the business and the communities where they are physically located?
Is a company more than its financials?
Does a company have a responsibility that goes beyond i ts shareholders, and what is defined by what is strictly legal?
Every organization exists in a context that is greater than the sum of the parts of the organization. There is a culture that is physical, ideological, technological and social.
For example, what distinguishes an insurance company in London to one based in Sao Paulo or Detroit is geography and culture. Yes, they each ofter insurance plans. Yes, they each have customers. Yes, they each generate revenue. The difference is the local context that helps to define the culture of the business.
As a result ...
a company is not primarily its mission or purpose, but its values that are embedded in ideas and relationships within the context, culture and structure of the organization.
Values permeate the whole of the business, including those persons and organizations outside of the business who are influenced by it. Values inform its purpose, its vision of impact, its relationships with all those who are touched by the company, and how the company measures its impact.
The mission of a company is a product of its values.
When the purpose of the company is more than its financial value to shareholders, it is no longer, just a reservoir of assets to be exploited, but a context in which to create the future.
Recently I heard a presenter during in an organizational development workshop describe organizations that are mission driven as organizations on the rise. He used a diagram similar to this one that I use to describe organizations in transition.
When a company reaches a point of maturity or stabilization or equilibrium, the importance of its mission as a guide often fades. What follows is an increasing focus on its financial assets as its primary purpose. The presenter was convinced that once an organization shifts from a mission focus to a financial focus, it has entered a stage of decline. In effect, they no longer see how a company can grow, but rather be sold.
The moral turn that a company needs to make is to reaffirm its values and reestablish its mission as the driving force of the company as a whole.
The Social Turn When the value of a company is reduced to its share price, the company loses the value that exists within its social structure. Not every member of the organization benefits from a rise in the share price. As a result, the company fragments into internally competitive parts to see who will survive the company's disintegration.
For example, as a Boston Red Sox fan for over 45 years, I was particularly disappointed in their collapse this year. It was not that old patterns of attitudes and behaviors that had hampered the team in the past had returned. Rather, it was the squandering of the talent and potential that existed on paper, at least, at the beginning of the season.
By all appearances, the social environment of the team is the core reason for their decline. At the beginning of the season, they were the odds on favorite to win the World Series. Great pitching, the acquisition of two all-star hitters, and a coaching staff that had produced two World Series championships held great promise for the upcoming season. Yet all that collapsed into a mess in what appears to be based in a collective selfishness and lack of accountability for the team's social environment and on field performance.
The Social Turn is the recovery of the human dimension in organizations. As human beings we are social beings through which our individuality develops. Much of the fragmentation of modern business organizations isolates individuals and business units into individualized roles that make collaborative team work more difficult. As a result, the connections that exist between people in the workplace are treated as having marginal value.
In The Company Men, when Ben Affleck is fired, the stated reason is that his position is redundant. In effect, the company was recouping a cost that it viewed was exceptional rather than necessary. The company also loses in this kind of fragmenting of the social structure of the business. Affleck's character was not just a person in a cubicle, but was a connection point in a network of relationships that provided information and influence beyond the company. The value may be redundant, but it is a redundancy that creates strength and resilience, not weakness.
Social fragmentation is not just found in businesses, but in global society at large. Its destructiveness finds its way into companies and organizations, weakening their ability to marshal the talent that exists. The Social Turn is one that values relationships of honor, respect, humility, trust and mutual reciprocity. These values function to create a social fabric that allows for diversity and interconnectivity that creates the sustainability that businesses and communities need.
The Structural Turn The industrial model of business was conceptualized around the idea that a business is filled with a few smart people and a lot of laborers. The world has changed, yet the structures of organizations have not. Still the structure is a hierarchy of decision-makers "leading" a larger number of decision-implementers.
This approach does not work as well as it once did. Here are just a few reasons.
1. Technology levels the information playing field.
2. Advances in public education, and the expansion of higher education has created a society of workers who are much better informed and equipped to do decision-making type work.
3. The complexity of working in a global environment of diverse cultures makes it more difficult for a few people to know everything they need to know about the issues that confront their business.
4. The skills required for leadership and management of business are much more accessible to far more people than every before.
5. Hierarchical structures are organized for control through compartmentalization and standardization.
The Structure Turn that is taking place elevates personal initiative, network collaboration, and adaptive learning as the keys to the organization and leadership of businesses.
Instead of a structure organized around compartmentalized roles and defined areas of responsibility, the emerging structure is an open environment where the skills and resources needed for the work of the business is acquired through a network relationship structure.
In this structure each person is responsible for the whole of the project, not just their segment. Each person can function in the role of leader, while not having a title as one.
In this networked structure, the premium skills are placed upon thinking skills that are both analytical and intuitive.
As I recently commented to Dana Leman of RandomKid,
"Imagine Proctor & Gamble without bosses and managers, and everyone is a leader."
Leadership ceases to be a title, and becomes a set of behaviors and attitudes that all share. For the character of this kind of leadership to take root, it requires changing the structure.
The Structural Turn is towards an organizational culture where people are free to create and contribute, to communicate, to initiate and to pitch in where they see a need. Instead of being doers of assigned responsibilities, they are facilitators and problem solvers.
In many companies, this kind of structure is developing. However, it must happen at the senior level for the turn to be successful.
How would the company in The Company Men function differently if they operated under a network structure?
1. More people would be engaged in meaningful reflection about the challenges facing the company because they knew that had an actual stake in its success.
2. Innovation would be more prevalent as employees practiced a higher level of leadership initiative and problem solving.
3. New business applications through employee ingenuity would expand the number and range of revenue streams the company has.
4. The company would be unified behind its shared values and mission.
5. The company would be a more attractive place for the top talent to work.
6. The company could more easily adapt to financial downturns.
7. Communities would be vying for the opportunity for the company to create a local operation.
The central message of the Three Turns is for your mission to drive change in the company, centered around values that unite people to create a shared company culture of trust, personal initiative, and a desire to contribute to the company's success. When this happens, the turn from hierarchical structure to a network one can take place as a natural evolution of the company.