Executing the Change the World Needs

It seems clear, given the clearly dysfunctional nature of the global economy, that a serious discussion concerning the nature and purpose of the economy is overdue. The requirement for this discussion is made more acute by the central place the economy occupies in all of our lives. Central to this discussion is a return to the question of how we are to understand businesses and organisations. What is a business?

For me, I think there are two things to consider that impact this debate:

1.       The question of what the primary purpose of a business or organisation is.

2.       The question of what the primary purpose of business leadership is.

More specifically, I think the above two points are important because of the extent to which the answer to each either inhibits, or cultivates the potential conditions for change. Our understanding of the purpose of an organisation and its leadership is indispensable to our understanding what an organisation is and without a radical change in this understanding change of the sort required to remedy the ills of the current system is impossible and disaster is inevitable.

1. What is the Purpose of an Organisation?

In terms of the first issue, it’s an obvious statement that the prevailing view of the purpose of a business or organisation is to make money, and more specifically, to ensure profits for shareholders.  There is little arguing that most theoretical and practical constructs that make up organisational theory have this premise at their core, and that this propagates a set of pre-defined roles and positions for role-players in business consistent with this position.

Whether we look at it from the point of view of the business owner/shareholder or from the point of view of the trade unionist it is the same.  The trade unionist sets up his role in business on the basis that the owner is out to make as much money as possible while paying employees as little as possible, and therefore the trade unionists role is defined as being in conflict with business insofar as his job is try and ensure employees are paid as much as possible.  The reverse is true for the owner – his job is setup as being to make as much money as possible, for the least cost – which means as little labour cost as possible.

These roles (and an inability to break out of these roles) are at least in part maintained because the people in each of these roles are mostly concerned with acting out of personal self-interest or at the very least only out of concern for the interests of the group they represent.  Nobody is really thinking about the interests of the business system in totality (which is inclusive of its owners, employees, customers, suppliers, surrounding community, surrounding environment, competitors, regulators and critics!).

Consider whether these relationships between business roles would be different if our view of the primary purpose of business was for example, social justice. Consider how the economy would operate if everyone within the economy viewed the organisation they were part of as primarily an instrument for making a contribution to the society they live in. This is a difficult thing to imagine because the current understanding of the purpose of an organisation is deeply entrenched, once again lending credence to the point that discussion is overdue.

The problem of rectifying the divisive understanding of the purpose of organisations is made more difficult by the dominant theories of what organisations are. That the purpose fails to be viewed in the correct light is clearly unsurprising given observations about organisational theory like those made by Jerry Schuitema. We see that the predominant theories tend to describe organisations as inanimate constructs devoid of human presence. This view of organisations perpetuates the problem because it makes it easy for us to forget that an organisation/business is really only a function of the people involved in it and their relationships with one-another.  It is convenient to de-humanise the organisation as a construct because it makes it far easier for us to make tough decisions if we don’t have to think too much about the human consequences of our action. Viewing organisations in this light makes it easy to view them as existing solely for profit and ignoring the human cost.

We see then that a new understanding of the purpose of organisations is sorely required but bringing about this enlightenment requires an overhaul of our current understanding of organisations.

2. What is the Purpose of Leadership?

The second issue I mentioned is important because change of the sort required is only possible if someone (or a group of people) are able and prepared to challenge the current view and do things differently. Change is a matter of practice and will be executed when the individuals active in the economy make the change. Further, I believe that it is business leadership that is consistently in the best position to impact/not impact this change. So if change is to be executed it must start with business leadership, those making the decisions and defining the fabric of the economy.

If business leadership sees its role as primarily ensuring that the business makes a profit (true in most cases), then any issue that arises in the course of doing business will be evaluated based on the extent to which it supports the making of profits.  Treating employees well or having a good relationship with suppliers will only be worthwhile if they are instrumentally useful in supporting the making of profits.  There is no fundamental value system attached to this other than “profits are good!”

This raises the question of what is “good” leadership?  It regretfully appears as though the current view is that “good” leadership is leadership that gets the result (in business’s case – profits).  If the required result is the extermination of 6 million Jews then we have to say Hitler was a “good” leader!  We are uncomfortable with saying these because we know that leadership should have a sound ethical basis.

The pursuit of profits does not give us this.  I’m really in agreement with the view that the fundamental purpose of leadership, or that which describes “good” leadership is actually effective ethical agency – that it pursues a sense of social or community justice for any community or organisation that it leads.  The question business leaders ask has to shift from “what is in the best interests of more profits” to “what is in the best interests of our total business community?”.  These questions sometimes will produce the same answer, but in the case of the second one it needs to be accepted that the answer could sometimes be “right now, not more profits!”.

We see that a shift in our understanding of the purpose of organisations is best executed by getting business leaders to start functioning differently. A step towards this would involve making the issue of ethics, and not results, the variable business leaders are chiefly measured on. I agree with the view that the Care and Growth contribution to this problem starts with the contribution to senior business leadership, and how we can enable them to view their role differently.