Blog: Imagine

Effective organizations like healthy families

15 January 2018

Tolstoy began his novel Anna Karenina with the immortal words “Happy families are all alike; each unhappy family is unhappy in its own particular way.” And so it may be with organizations: they have an unlimited variety of ways to fail, but perhaps only few by which to succeed. In the spirit of Tolstoy, I will not try to list all these ways to fail—blogs have their limits—but present a framework by which many seem to get it right.

Tolstoy began his novel Anna Karenina with the immortal words “Happy families are all alike; each unhappy family is unhappy in its own particular way.” And so it may be with organizations: they have an unlimited variety of ways to fail, but perhaps only few by which to succeed. In the spirit of Tolstoy, I will not try to list all these ways to fail—blogs have their limits—but present a framework by which many seem to get it right.

Lewis et al., in the introduction to their book No Single Thread: Psychological Health in Family Systems¹, comment that: “There is considerable literature on the pathological family types, but a ‘scarcity of data’ on the healthy family” (1976: xvii). When I read the book, I was struck by the parallels with a framework that I had already sketched out in my book Managing. I subsequently borrowed the word “thread”, and was able to find one or more quotes from their book that matched each of the characteristics that I had identified in effective organizations. 

So here comes, not a formula, not a theory, not a set of propositions, so much as a tapestry to appreciate effectiveness in organizations.  As shown in the figure, at the center are five threads, what we call managerial mindsets in our International Masters Program for Managers.²  They range from the more personal to the more social, and are labelled reflective, analytic, worldly, collaborative, and proactive. Two additional threads are shown: at the beginning that of being personally energetic, and at the end that of being socially integrative. Each thread is discussed in turn.

The Energetic Thread

“Although [effective] families differ in the degree of energy displayed, they all demonstrated more constructive reaching out than did patently dysfunctional families” (p. 208–209). Effective organizations may likewise differ in the energy they display, but perhaps not in their inclinations for constructive “reaching out.”

The Reflective Thread

“In approaching problems within the family, [the healthy ones] explored numerous options; if one approach did not work, they backed off and tried another. This was in contrast to many dysfunctional families in which a dogged perseverance with a single approach was noted” (p. 208). In my own experience, a remarkable number of effective organizations, and their managers, are reflective: they know how to learn from their own experience; they explore numerous options; and they back off when one doesn’t work, to try another. They are inclined to know what they know while appreciating what they don’t know.

As I noted in my book Managers not MBAs,  reflecting means “wondering, probing, analyzing, synthesizing, connecting—‘to ponder carefully and persistently [the] meaning [of an experience] to the self’.”³  This goes beyond sheer intelligence, to a deeper wisdom that enables people to be insightful—to see inside issues, beyond their obvious perceptions. Many of the people in effective organizations think and see for themselves.

The Analytic Thread

Too much attention to analysis can be dysfunctional in organizations, but so too can too little, leading to disorganization. Looking for the key to effectiveness in the light of analysis may be misguided, but expecting to find it in the obscurity of intuition is no more sensible. People have to know formally and explicitly as well as informally and tacitly. Lewis et al. describe the most dysfunctional families as presenting “chaotic structures” and what they call the midrange families as presenting “rigid structures,” while the “most competent families presented flexible structures” (p. 209).

The Worldly Thread

“There is another complex family variable that involves respect for one’s own world view as well as that of others” (p. 207). We hear a great deal these days about globalization, but not much about worldliness. To be global implies a certain conformity. Is this what we want from our managers?

Thinking for ourselves requires that we be worldly, which is defined in my dictionary as “experienced in life, sophisticated, practical.” An interesting mixture of words—and perhaps as close as a set of words can get to what many of us want from our organizations. (See my earlier blog on this.)

To be worldly means to get into the worlds of other people—other cultures, other organizations, even other functions within our own organization. To paraphrase a line by T. S. Eliot that has been overused for good reason, people should be exploring ceaselessly in order to return to where they started and know the place for the first time. This is the worldly mindset.

To appreciate other people’s worlds does not mean to invade their privacy, or “mind-read” them. Lewis et al. found these to be “destructive characteristics”, seen only in “the most severely dysfunctional families” (p. 213). In the midrange families, they found pressures for conformity. But in the healthy families, these researchers found what they called “respectful negotiation…. There was no tidal pull toward a family oneness that obliterates individual distinctions” (p. 211).

The Collaborative Thread

As we move along our tapestry, the social aspects of organizing become more prominent. Collaboration is not about motivating or empowering people, but about helping them to function together. “The trend toward an egalitarian marriage was in striking contrast to both the more distant (and disappointing) marriages of the adequate families and the marital pattern of dominance and submission that so often was seen in dysfunctional families” (p. 210).

Healthy organizations exhibit a sense of respecting, trusting, caring, and inspiring, not to mention listening. To draw more from the Lewis et al. book, “Healthy families were open in the expression of affect. The prevailing mood was one of warmth, and caring. There was a well-developed capacity for empathy” (p. 214).

These days, we hear a good deal about teams and task forces, networking and learning organizations, joint ventures and alliances. Many “subordinates” have become colleagues and many suppliers have become partners. All this requires a shift in managerial styles from controlling to collaborating, leading to linking, empowering to engaging.

The Proactive Thread

“There was little that was passive about healthy families. The family as a unit demonstrated high levels of initiative in responding to input” (Lewis et al., p. 208–209).

All managerial activity is sandwiched between reflection in the abstract and action on the ground—“refl’action” is a word coined by one of our IMPM participants. Nothing gets done when there is too much reflection, while things get done thoughtlessly when there is too much action.

I have saved this for last among the five mindsets because, while reflection can be largely personal, action in organizations is fundamentally social: it cannot happen without the involvement of various people. Managers who try to go it alone typically end up over-controlling—issuing orders and deeming performance in the hope that authority will ensure compliance. Effective managing is essentially a social process.

I use the term proactive rather than active to indicate that this thread is about seizing the initiative—launching action instead of just responding to what happens. Doers grab whatever degrees of freedom they can get and run vigorously with them. To quote Isaac Bashevis Singer in what could be the motto for the effective organization: “We have to believe in free will; we’ve got no choice.”

The Integrative Thread

Lewis et al.’s most important conclusion may be: “…health at the level of family was not a single thread… competence must be considered as a tapestry” (p. 206). Effective organizing is a tapestry woven of the threads of reflection, analysis, worldliness, collaboration, and proactiveness, all of it infused with personal energy and bonded by social integration. Effective organizations harness the “collective mind.”

© Henry Mintzberg 2018. Derived from passages in my books Managing and Simply Managing.

--------------------------

¹Lewis, J.M., Beavers, W.R., Gossett, J.T., & Phillips, V.A. (1976). No Single Thread: Psychological Health in Family Systems. New York: Brunner/Mazel
²Gosling, J., & Mintzberg, H. (2003). Five Minds of a Manager. Harvard Business Review, 81(11), 54-63
³Mintzberg, H. (2004). Managers, Not MBAs: A Hard Look at the Soft Practice of Managing and Management Development. San Francisco: Berrett-Koehler.  Citing Daudelin, M.W. (1996). Learning from Experience Through Reflection. Organizational Dynamics, 24(3), 41.

Enough of MORE: Better is better

9 November 2017

Mostly I blog about managing organizations and rebalancing societies. This time I connect the two, to appreciate how both are brought down by MORE, or else lifted up by better. 

Enough of MORE: of all our excessive production and consumption, with its destructive waste and warming. MORE is ravaging our enterprises, our societies, our planet, and ourselves. We can do better.

Creating an Enterprise

You have a compelling idea and lots of energy, so you create an enterprise. You may not have much money, but with the help of an understanding banker, alongside your own sweat capital—those 15 hour days—you succeed! Your customers are delighted, your employees are engaged, you feel great, and the economy benefits. Everybody wins.

Mostly I blog about managing organizations and rebalancing societies. This time I connect the two, to appreciate how both are brought down by MORE, or else lifted up by better. 

Enough of MORE: of all our excessive production and consumption, with its destructive waste and warming. MORE is ravaging our enterprises, our societies, our planet, and ourselves. We can do better.

Creating an Enterprise

You have a compelling idea and lots of energy, so you create an enterprise. You may not have much money, but with the help of an understanding banker, alongside your own sweat capital—those 15 hour days—you succeed! Your customers are delighted, your employees are engaged, you feel great, and the economy benefits. Everybody wins.

OK, maybe you did this this to make a lot of money, or become celebrated, or avoid having a boss. But if you are a real entrepreneur, your incentive went further, to building something special: an engaging enterprise with its own sense of communityship, beyond your leadership.

As the enterprise grows, however, you become concerned.  What if you get hit by a truck?  Or you wish to retire in the manner to which you have become accustomed. Or you want to grow faster than your existing resources will allow. Your financial friends tell you to do an IPO, an Initial Public Offering: cash out, or get the cash in. Let new shareholders fund faster growth. It sounds good, so you agree. This becomes the turning point. 

Grabbing MORE 

The first sign of trouble is the realization that, while you wanted more, the stock market is intent on grabbing MORE. It doesn’t care about your ideas or your customers or your workers, except as a means to relentless, one-dimensional growth, for the sake of “Shareholder Value”. You discover that this has nothing to do with decent values, your own included. You are running a publicly-traded company now, so you must keep feeding the beast. ¹

As a consequence, a different feeling is enveloping your enterprise, replacing its sense of communityship. The market analysts are analyzing, the day traders are trading, the financial sharks are circling, the stock market is demanding—a performance report every three months. Every three months! How can anybody manage a company this way? Was that IPO really worth it?

But it’s too late. Anyway, you are getting greater growth, albeit accompanied by greater pressure. Eventually you find yourself running out of the usual customers, and it’s tough to get new ones with the old ideas, or new ideas with this new Value. And so comes the key question: How to get MORE when there is no more to be had, at least not in the way that you built the enterprise?

Ravaging the Enterprise

The answers are all too easy: just look at other IPOs. (1) Exploit the existing customers. Bamboozle pricing is a good idea—customers can’t figure it out. Or how about reducing quality, to get MORE by giving less? You can also charge excessively for servicing the products that your customers are stuck with. (2) There is one old idea you can use to bring in new customers: Trash the brand. Sell to those who were not willing to pay for the high-end products of which you used to be so proud. In other words, cash in your legacy, quick! (3) If you can’t increase the revenues, then you can certainly cut the costs: cut maintenance, cut research, cut everything out of sight, except the executive perks. (4) And don’t forget to squeeze the workers, by putting them on short-term contracts at lower pay, without benefits. Better still, fire the whole lot of them and produce off-shore. (5) And when all else fails: Diversify. Get into all kinds of new businesses you don’t understand. So what: you’re big now, with lots of money to throw at them.

Ravaging Society and Self

Your enterprise has now become a global corporation, with obligation to no country, least of all your own, where it no longer pays taxes anyway. So why not go whole hog, so to speak? Do well by doing bad. (6) Collude with your competitors to create a cartel, or better still, buy them out altogether—in the name of competition. (7) And—in the name of free enterprise—lobby governments all over the globe to grant subsidies for your industry, and to rid it of those annoying regulations. If you do eventually go bankrupt, which can actually happen to companies that exploit, fear not: you have become “too big to fail.” Thanks to your political donations, the government you betrayed will bail you out, shifting the costs of your failure to society at large. (The economists, right in step with such shenanigans, call this an “externality”!)

But one day you wake up to the realization that you have been ravaging yourself. “Could I have been responsible for all this, by doing that IPO? I used to love my business. We had a great time serving the customers I worked so hard to keep. I had pride in our place, our products, our people. Now the customers write me nasty emails and the workers glare at me when I see them (which is rarely). For what reason have I cashed in my legacy: to amass all that money I can’t spend?”

Imagine a country full of such corporations, let alone a whole planet of them. We’re getting there. By hogging resources that could be recycled to build vibrant new enterprises, these kinds of companies are distorting our economies and debilitating our societies. (Why can’t they just die of sudden strokes, instead of these prolonged corporate cancers?) By playing countries off against each other, they are undermining our democracies. And by their relentless fostering of production and consumption, they are damaging our planet. Not all corporations do this, just too many. How much MORE can we take?

One-dimensional companies, like one-dimensional people, are pathological: they are an invasive species that has no business in a healthy society. Edward Abbey said it best in 1975: “Growth for the sake of growth is the ideology of the cancer cell.” Why build engaging enterprises only to jettison their engagement?

Getting Better

Let’s go back to that fateful decision about the IPO. You were a real leader when you built your enterprise. Why become a follower now, with yet another IPO? Are you really beholden to the stock market? There are better ways to finance enterprise. (a) Find some patient, decent capital, that will allow you to grow responsibly and sustainably. (b) Or do an IPO that keeps the analysts at bay by issuing two kinds of stock, as did Tata in India and Novo Nordisk in Denmark, with family trusts that control a majority of the voting shares. (c) How about converting to B or Benefit Corporation status, with a commitment—legal in one case, voluntary in the other—to respect social and environmental needs? My own publisher, Berrett-Koehler, profitable in a difficult industry, took the legal, B Corp route. It also offered its stock directly to its own authors and other stakeholders. (Disclosure: I am an owner of my publisher!) (d) This suggests another option—crowdfunding, where many people each buy a little bit of the ownership.

As for start-ups: (e) Consider relying on funding by loans and retained earnings, at least if you don’t need heavy investment. This is supplemented by sweat capital, the real investment in truly entrepreneurial enterprises. (f) How about creating the business as a cooperative, with one share each owned by the customers (as in a credit union bank), or the suppliers (as in a farmers’ cooperative), or the workers (as in the Mondragon Federation, started in the Basque region of Spain in 1955, now with 74,000 workers, in 268 businesses, and sales of €12 billion). By the way, there are more cooperative memberships in the United States than people. (g) Here’s an idea that may sound crazy: give your existing company away to its employees—you know, those people who actually care about the place, unlike the day traders who own it. Is it really crazy to carry this kind of legacy to your grave instead of destroying the one you built up so carefully? The John Lewis Partnership in the U.K. did this in 1950. Since then, while so many chains of department stores and supermarkets have come and gone, this one continues, acclaimed and profitable, with its 84,000 “partners”. Would the name “John Lewis” mean anything to Brits today if the family did an IPO? (h) One step farther is to dispense with ownership altogether and create a social enterprise— a business set up as a trust that is owned by no-one. Look around—they are proliferating. Think about the YMCAs. In fact, many NGOs have business activities alongside their more prominent social ones, to help support the latter. The Red Cross, for example, sells swimming lessons.

Better is better

Economists insist that MORE is the way forward. Nonsense. It is the way backward, economically as well as socially. We don’t have to destroy our progeny and our planet for the sake of this senseless dogma. Sure we need development and employment, but responsible development, with robust employment. A healthy society is sustained by a diverse, responsible economy, not one driven by the mercenary force of one-dimensional growth. Stock markets have done enough damage.

There are many impoverished people all over the world who need more: more food, more employment, more housing, more security. What they don’t need is the MORE that is depreciating the so-called developed world. When do all of us, in both these worlds, get to live honorably, fully? What is development for anyway?

We would do well by shifting our economies from MORE toward better. While MORE is about quantities, better is about qualities. They lift us up instead of dragging us down. We can invest our efforts and our resources in durable products, healthier foods, personalized services, properly-funded education. Rather than reducing employment, a shift to better can enhance it, with higher paying jobs in healthier enterprises. When we work better, we feel better, and so we do better and live better. Our societies become better…and sustainably democratic.

Imagine a world of getting better, instead of grabbing MORE.

© Henry Mintzberg 2017

Administered by Tanya Sardana

Follow this TWOG on Twitter @mintzberg141, or receive the blogs directly in your inbox by subscribing here. To help disseminate these blogs, we also have a Facebook page and a LinkedIn page.

--- 

ᶦIn March of 2015, a deranged pilot flew a Germanwings airplane into the face of a mountain, murdering 150 people. Just over a month later, a New York Times article reported from a shareholders’ meeting that “at a time when Lufthansa faces urgent commercial challenges…many shareholders expressed concern...that the Germanwings tragedy risks detracting management from its turnaround efforts.” One portfolio manager claimed that Lufthansa management “will have to come back to reality.” The murder of 150 people was apparently a distraction; reality is getting back to managing Value for the shareholders.

A CEO letter to the Board...long overdue

29 July 2017

Dear Members of the Board

I am writing to you with a proposal that may seem radical, but is in fact conservative. That is because my primary concern as Chief Executive Officer is to conserve this company as a healthy enterprise. You are now paying me so much that I can no longer manage this company as I should. I hereby request that you cut my salary in half and eliminate my bonuses.

We have talked a great deal about teamwork in our enterprise, that our people are all in this together. So why am I singled out by virtue of my compensation? Bonuses are the worst part of it. Like everyone else in this company, I am being paid to do my job. Why should I be paid extra to do a good job? If I believe in this company, I buy the stock. If I don’t, I quit. The misguided assumption behind these bonuses is that I, as CEO, do it all.

Dear Members of the Board

I am writing to you with a proposal that may seem radical, but is in fact conservative. That is because my primary concern as Chief Executive Officer is to conserve this company as a healthy enterprise. You are now paying me so much that I can no longer manage this company as I should. I hereby request that you cut my salary in half and eliminate my bonuses.

We have talked a great deal about teamwork in our enterprise, that our people are all in this together. So why am I singled out by virtue of my compensation? Bonuses are the worst part of it. Like everyone else in this company, I am being paid to do my job. Why should I be paid extra to do a good job? If I believe in this company, I buy the stock. If I don’t, I quit. The misguided assumption behind these bonuses is that I, as CEO, do it all.

Now I am getting hate mail from our employees about my pay. This is certainly disconcerting, but more troublesome is that I have no reasonable reply, short of claiming that I must be several hundred times more important than they are. Is this leadership? Is it any way to run a company?

We have had a good deal of discussion at our board meetings about the long-term health of this company. Why then am I being rewarded for short-term gains in the stock price? You all know perfectly well that I can use all kinds of tricks to drive up that price, and so reach my bonuses, while destroying real value—and helping to do a number on our economy too.

Ever since we started this Shareholder Value nonsense, our values have gone to hell. The frontline employees tell me that this gets in the way of serving customers: they are forced to see dollar signs out there, not people. Consequently, many of them don’t give a damn any more. As one put it to me recently: “With all this counting, we don’t count. So why should we care?”

I have always prided myself on being a risk taker; that is one reason you put me in this job. So how come I cash in big when the stock price goes up but pay nothing back when it goes down? Some risk taker! You know what: I’m tired of being a hypocrite.

I know the excuse we have been using all along: that I am just being compensated to keep up with CEOs in other companies. This makes me a follower, not a leader.  Enough of this complicity in behavior that we all know to be shameful. My salary should not be some kind of external trophy, but an internal signal about the culture we are trying to build.

So please, help me to concentrate on managing this company as it should be managed.

Sincerely,

Your CEO

© Henry Mintzberg 2017.

An early version of this commentary was published in the Financial Times, as “There's no compensation for hypocrisy" (29 October 1999), and it first appeared on this blog on 24 October 2014. I post it here now, with revisions, in the hope that some responsible CEO somewhere will finally listen.

Follow this TWOG on Twitter @mintzberg141, or receive the blogs directly in your inbox by subscribing here. To help disseminate these blogs, we also have a Facebook page and a LinkedIn page.