Blog: Imagine

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

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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.

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Imagine getting it…beyond Donald Trump

9 March 2017

Imagine Donald Trump getting it. Imagine him coming to realize what he must do to serve, not the interests of business, but of the people who elected him to put a stop to their exclusion.

After all, Ariel Sharon was a tough guy who overcame his smugness to change course, for the sake of his country. Donald Trump has certainly shown the proclivity to change course—sometimes daily! And who can doubt his penchant to challenge his “enemies”, whoever they might happen to be? Barack Obama had trouble dealing with real opponents, and too many people doubted Hillary Clinton’s propensity to confront the establishment.

Imagine Donald Trump getting it. Imagine him coming to realize what he must do to serve, not the interests of business, but of the people who elected him to put a stop to their exclusion.

After all, Ariel Sharon was a tough guy who overcame his smugness to change course, for the sake of his country. Donald Trump has certainly shown the proclivity to change course—sometimes daily! And who can doubt his penchant to challenge his “enemies”, whoever they might happen to be? Barack Obama had trouble dealing with real opponents, and too many people doubted Hillary Clinton’s propensity to confront the establishment.

At his recent congressional address, Donald Trump did show a hint of a shift: he stayed on script, and read it with some feeling. Millions of Americans breathed a collective sigh of relief: finally something, anything. Next day, though, it was back to the old shtick.

So let’s try this instead. Imagine if those “enemies of the people”, the liberal press, get it instead, to help all the friends of a free press—doubtless a majority of the people—get it too. I subscribe to one of these newspapers up here in Canada, the New York Times, which should be called The Relentless Rant: article after article, comment after comment, day after day, on the foibles of Donald Trump. It’s become entertainment more than news: look at what this guy did to us yesterday.

OK, I get that. But does this newspaper get it? The New York Times will no more hound Donald Trump out of office than Donald Trump will hound The New York Times out of business. The problem goes far deeper than him.

I look for commentaries in the paper that get into this depth—go beyond those foibles, to the root of what is distressing so many Americans. Instead, here is what I got in the opinion piece on page 1 of the Times the day after that congressional address. Roger Cohen imagined a dinner of Nigel Farage with Donald Trump: “I suppose they disparage Muslims over well-done burgers and Coke. Multilateralism gets a guffaw with ice cream. God help us.” God help Roger Cohen. Here we have a bit of that fake news, its effete snobbery as base as Donald Trump’s ignorant rants. Indeed, this points the way to the problem: the callous exclusion of people who eat hamburgers and drink Coke.

OK, so if it’s not yet time for the Times to get it, how about the people themselves—the well-intentioned, good folks of America who are fed up with what’s been going on, including some who trustingly voted for this man. Imagine them as the silver lining in the dark cloud of Donald Trump.

To appreciate this, think of Donald Trump as one hell of a community organizer, superior even to Barack Obama (at least after his first election). The president has already been doing his country a great service by bringing all those people on to the streets, and thus bringing to a head the fundamental issue. He’s just the extreme manifestation of the problem that has been festering in the country for years. Yet it is surprising how many of even the most thoughtful people don’t get it. The dogma runs deep.

What the Donald Trump presidency makes clear is that the United States of America is not suffering from too much government so much as from too much business, all over government. The country is seriously out of balance.

I intend to elaborate on this in a forthcoming blog of its own. So please stay tuned. Meanwhile, you can get it by reading my little book Rebalancing Society…radical renewal beyond let, right, and center.

© Henry Mintzberg 2017. 

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