The economic theory we follow has as its dominant precept the maximization of material wealth. Accordingly, economic enterprises are expected to not only have material gain as a goal, but they are to pursue unlimited growth. As a measure of effectiveness, business executives are expected to demonstrate that today’s gain is more than yesterday’s. Accordingly, those in authority monetize all aspects of the company; even the very people of the organization are objectified and treated quite impersonally.
Although W. Edwards Deming emphatically spoke of the need for a new economics, rarely did anyone truly listen to—and even fewer understood—his message. Many saw it as mere statistical technique. Further most of those who tried to apply his philosophy colonized it so that it fit the framework of their paradigm—keeping any chance of it succeeding near zero. Accordingly, in the hopes of enhancing their material gain, many managers adopted and misused a method or two—waste reduction and six-sigma are the most popular. In so doing they committed the crime of hackwork that Deming often warned against. [Hackwork is when one fails to acknowledge his or her limitations and attempts to become creative with something he/she doesn’t understand.]
Although an organization may become larger in size and/or realize more profit, it does not mean that it has improved. The focus of improvement is not growth—it is not about becoming larger—but rather it is about meaningful work and a new focus of business practice. Improvement (in quality) comes when we learn more about our customers, suppliers, processes, and ourselves in support of our effort to enhance the value provided to people through the conduct of business. While growth may result from improvement, improvement cannot be implied from growth.
Growth is a by-product or consequence of doing something else. When we set growth as the objective, we turn away from the very things we need in order to maintain our health. We become so consumed by the outcome that we forget about the process of business. Toyota’s recent difficulties provide an excellent example of confusing means and ends.
As those in authority continually strive to maximize growth—month-to-month and quarter-to-quarter—they become consumed by the quantitative measures of business. Correspondingly, they foolishly convince themselves and others that they are in control, when all they are doing is keeping score. Meeting quarterly profit goals does not guarantee long run viability.
When the concern is for maximal growth the focus unavoidably turns toward the magnitude of things of outer value in relation to the past—profit, market share, shareholder value, etc. This causes leaders to manage by looking backward, and to disregard how the choices they make impact the organization’s prospects in the future. A narrow focus of attention could very likely bring about a considerable amount of disorder and self-destruction. The recent economic collapse caused by the narrow focus of Wall Street banks perfectly illustrates this point. Those seemingly in control were blinded by the thought of their anticipated immediate gain. Their demise would surely have been the outcome had the U.S. government not thrown a lifesaver to those drowning in the turbulence of their own wake—a turbulence caused by their unfettered self-serving pursuit of material gain. How many organizations have realized tremendous growth only to come tumbling down?
What is central to progress is an organization sustaining its viability, not its growth. Viability is basic to the idea of progress, for it includes not only learning in support of improvement, but it also encompasses the enhancement of the likelihood of (having) a future.
Moreover, because organizations are reciprocally interdependent with society and the environment, viability necessarily requires ethical, social and environmental responsibility—the focus of leaders cannot be narrowly fixated. It seems clear that the quarterly race results by which business leaders are measured (i.e. is this quarter better than last and better than someone’s arbitrary expectation) supports this destructive fixation.
In short progress requires having a belief in the future; believing that there can be a future that is not merely prefigured by the past. When the future is not merely the next quarter, but extends well beyond the next reporting period, a concern for viability becomes essential. Accordingly one cannot truly embrace the ideas of viability and progress without having the insight to understand the power of the human spirit. It requires making a commitment to cultivating and developing the capabilities of people throughout the organization—seeing this as an investment not an expense.
But to fully appreciate why such a commitment is essential requires understanding how conducting business in a manner consistent with a material self-interest based system of economics cannot support—that it is even counter to—our development as people. We must critically thinking about the underlying precepts of our current system to reveal how detrimental it is to our collective wellbeing and the viability of a business enterprise.
How would such a change in understanding impact leadership?
I really enjoyed reading your article, a couple of times I felt my eyes lit up. The key word I picked out of your article was viability and your associated related points.
Perhaps in the following I drift off point
Recently here in Malaysia I have joined, the Rotary Club. Many of the club members are local business men and women who have a deep concern for the wider society and wish to contribute their knowledge and expereince. Yes they acknowledge it is a good way of networking but the time and effort they put into various projects that help the community as whole is eye watering and very humbling.
The Rotary Club has its famous 4 way test, as below these are not the exact words.
1) Are we telling the truth
2) Will the resulting action be beneficial to all concerned
3) Is the proposed action be fair to all concerned
4) Will the proposed action promote good will.
The Rotarians I have met are all very successful but they seem to have a very different mindset to the typical business owners or senior executives I meet. This is very difficult to articulate in a few short sentences but I perceive the Rotarians in general I have met have embraced in theri work and businesses many of the ideas you promote in this and previous posts.
In going back to your article which I believe relates to a business being viable and and susstainable. I looked in some amusement this week of how Apple shares had shot up in value following a recent product launch and came to conclusion the share valuation could only be true if every man, woman and child on the planet bought one of their products.These products have a very short shelf life, they are very often rapidly over taken by products of competitors. Further more they are near the extreme end of discretional purchases. They are not needs or necessities. I believe Apple will make a massive short term gain, but question if any Apple will be remembered in 10 years time. Will they still exist.
Best wishes, all please excuse me if I drift of point.
I like very much the 4 way test you shared–thank you. If only more would follow it we’d have far less problems in business and society.
So I am led to ask the question, “What information, force, or feedback is provided in an ecological setting that allows progress to be experienced as much as growth?” If it is a jungle out there, why does the natural economy appear to function in a more unified and balanced manner? What traits does the man-made economy need to adopt to be as civil as the natural economy? What policies or rules does the natural economy follow that allows species to fail, but not the ecological system? Or maybe it has and can fail, but since the natural economic system has been functioning eons prior to ours, it has sorted out the big messes before we has a chance to start our quaint economic system.
Tim you raise many interesting questions–I only wish I had definitive answers to all. Perhaps others will chime in. The issue of experiencing progress as much as growth presupposes that this is desired–it may not be. If we consider climbing a mountain metaphorically there will be times that we will have to traverse below where we are in order to provide us the opportunity to continue along on our mission. If I understand our reference to the natural economy correctly, I believe it is because the rate of consumption does not exceed the rate of renewal–reciprocal interdependence and optimums (not maximums) are operative.
progressus – I believe that is correct. The rate of consumption not exceeding the rate of renewal. This creates an efficient use that leads to progress yet not necessarily growth. Because the man-made economic system is so dependent upon the ecological economy, our economy must find the means to value the renewable aspect so that we do not value growth over progress. I do believe our hope, ironically lies in the wasteful scenario that we have created. Excess is apparent yet not valued properly.
Tim yes because we are so dependent upon the environment unlimited growth will diminish our viability.
Gregory, I hung on your every word. What you said about Deming and some of the unintended consequences of his teachings rang especially true. I remember how in the early nineties–as the fad, TQM hit and then fell from its apogee–some executives thought that they could get the same results as the Japanese manufacturers by having their workers do calisthenics together in the morning before starting the day. It was a good example of how just imitating others without the spirit behind what they do not only fails, but does so in sometimes comical ways. . .
When they gave up on this, they kept the control charts and the rest of the problem-solving apparatus (the lean manufacturing disciplines), as if by magic these would produce the kind of inner commitment to work and its products that contributed so greatly to the hegemony that Japanese manufacturing had attained.
Then, in the service of the shareholders–not to mention their own shares/options–they harvested the human capital assets of a whole generation, spinning off money the whole way, leaving us expanses of hollowed-out, depleted industrial wasteland. They accomplished these great things by managing to quarterly results, not the long run. I continue to believe, though, that once some of the more decent companies break from the pack, take the longer view, and begin to reinvest in human/organizational capital, they will win an economic advantage. The things you advocate, Gregory, aren’t just “nice-to-haves,” though I fully agree with you that they would be nice to have. When implemented with sincerity and a focus on business viability, they are also more profitable than the slash-and-burn style of management that has–flowery mission statements notwithstanding–become the spirit of the last decade and a half.
Rick, I too had similar experiences back then (even as far back as the mid-late 80’s). It really is sad that so many were/are unwilling to let go of their superstitious knowledge as they merely colonized Deming’s philosophy–understanding was/is never realized.
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