A Real Crisis

The precepts of neoclassical economic theory (a.k.a. capitalism) have permeated almost every aspect of life in American society leading us to create both a materialistic and individualistic focused society.  This has a tremendous influence upon how people understand society and organizations, the problems in society and organizations, and correspondingly the solutions people offer.

 

Its About Me There’s No Place for We

In American society rugged individualism is the means to, and material gain the measure of, success—what’s in it for ME is the question asked most often.  It is a society that is self-absorbed about its individualism; it is so much into itself that any suggestion that the collective is a contributor to the success of an individual earns being judged and labeled an anti-individualist (synonyms for this include anti-business and anti-American).

 

Consequently, the interplay of individualism and collectivism is imperceptible and deemed impossible. Absent of a systems view of reality, most can’t understand how these can co-exist. Accordingly, people see it as individualism versus collectivism, when in fact these are intimately connected—and actually complimentary—as a result of the ‘I-WE’ nature of the human condition.

 

Yet this either/or way of thinking is so deeply seated in peoples way-of-being that they don’t even know they have the power to think about and see reality differently.  So people dis-empower themselves as they persist in asserting their individualistic nature to the exclusion of their connectedness to all other beings.  Metaphorically people are so focused on the rungs of the ladder—those they aspire to be on—that they don’t even realize that if not for the support of the sides (the collective power of the interdependencies that comprise the system) there would be no rungs.

 

Assigning Credit & Placing Blame

It is because of this tendency toward bifurcation and reductionism—looking to dichotomy of choice and the individual elements/components—as the way of thinking and analyzing that causes people to misplace both blame and credit for what has happened.  Deming, in his (always relevant) book Out of the Crisis, explained and illustrated with numerous examples that the problem with business rested predominantly with the system.  Deming claimed more than 85% of the problems that challenge us are systemic, yet more than 85% of the time people place blame on the individual. Unfortunately the likelihood of being struck by lightening is greater than the probability that the business-minded would seek guidance from Deming’s management philosophy. It is no wonder people are so adamant about accountability?

 

Consequently we are unsuccessful with thinking our way out of a crisis because of our very way of thinking is most often the reason we find ourselves in the crisis, over and over again. As Einstein is often cited as saying you can’t solve a problem with the same level of thinking that was used in creating it.

 

A Case In Point

An essay in Knowledge@Wharton (August 1, 2012) titled “What’s in a Title? Overcoming a ‘Crisis’ of CEO Credibility” places focus on the CEO failures leading to corporate scandals at JP Morgan and Barclays Bank as well as recalling and relating these to the debacles from within the executive suites at Enron and WorldCom.  However, in the context of the current system, these aren’t failures since the CEOs did succeed in realizing the gain they sought, it is just that in doing so they also realized unintended consequences.

 

In this essay Thomas Donaldson, professor of Legal Studies and Business Ethics at the Wharton School, is quoted as saying, “right now, we have a crisis of trust and credibility, and CEO’s need to overcome that.”  No doubt those occupying the CEO position—as well as other executive management positions—have an obligation and responsibility to be trustworthy.  However, while they are complicit in these scandals it does not mean that they are the cause.

 

When individuals in authority within different organizations and at different times are seen as making very similar decisions then perhaps the very system of business—the business of business—is a root cause. After all what is common in each case is the measure of success, the goal of the organization.  These CEOs were simply doing—though rather aggressively—what the system expects of them, and what Wall Street will judge them against.

 

So what is expected, what is the business of business?  It is not just generating profit or shareholder value but it is maximizing the realization of these sooner rather than later! With increased shareholder scrutiny of corporate SEC filings, Wharton’s management professor Peter Cappelli noted, “somewhere along the way, shareholders and management became acutely focused on improving efficiencies and short-term financial performance.”  With the system requiring profit maximization, of course the focus will be on being more efficient toward making more and more profit—getting more and more out of less and less!  Clearly CEOs are doing what good self-interest profit seeking business professionals are expected to do!

 

Short-term profit maximization has always been the raison d’être of business but in these times of scarcity accomplishing ever increasing profit objectives becomes much more difficult, and near impossible if one stays within ethical and legal boundaries—hence the CEO’s dilemma.  So we ought not place blame on the individual when the system not only encourages but expects bold action that returns the desired results—results are all that matter.

 

Yet because of our materialistic and individualistic focus, it seems we can’t help but to frame the issue as a CEO crisis, rather than as a crisis caused by the system.  So to help “CEOs avoid ending up in the same type of situation” the solutions offered in the essay involve calling on CEOs to change their style of leadership. In short the cause is the individual and his/her style of leadership—if it was only that simple.  The recommendations are that they should have a more “vigilant style” be more hands on toward being in touch with the “day-to-day operations” and be open to “challenges from the vantage point of the customer and seek out diverse opinions.”

 

Donaldson added having a “culture of candor” is critical toward staying in touch with people at all levels of the organization and “another way to win over people at all levels is through symbolic significance—instituting programs that do not hurt the bottom line of the company too much, but are very important to employees of customers.”  The sentiment here is clearly keeping within the context of the existing system.  It highlights keeping the focus on realizing shareholder value and increasing profits, yes the root of the problem!  In other words, do whatever you can to avoid causing another crisis but by all means do not venture too far from what the system expects.  So the system remains untouched, ignored and its role in such crises denied.  What’s the chance of things changing?  Zero!

 

The Aim Matters

Of course being vigilant and being hands on and being in touch with the work of the organization would add positively to being a better manager, a better CEO! But these tactics are focused on the individual as if it the individual is the root of the problem.  As if the crisis would be resolved by a change in leadership style.

 

We mustn’t forget style is more about the way one does the thing they are seeking to do, not about the things they are seeking to do.  To quote Russell Ackoff, “doing the right thing is more important than doing the thing right, especially if that thing is the wrong thing.”   Moreover, in effect these calls for different CEO leadership styles are nothing but exhortations.  Urging people to do ‘A’ is futile when the system encourages and requires them to do ‘B’.

 

We shape the leaders we get.  That is to say our societal culture embraces the notion that people are at base driven to maximize their material self-interest—what’s in it for me is not just cliché it reflects a general attitude, the American zeitgeist.  Just ask business school graduates what the purpose of business is.

 

Without giving it a second critical thought most just assume that we are each at base independent selfish beings.  In fact if one is not so into his/her individualism then he/she is called out as being anti-business—you don’t get to the c-suite by being anti-business.  Most business schools educate and train our business leaders accordingly, to not only accept but to embrace the raison d’être of business as defined by the individualistic and egoistic economic system. This is the real crisis!

 

It is time we stop publically espousing for ‘A’ while doing everything to maintain and even defend a system that encourages and requires ‘B’.  Until we change the focus of our attention and until we educate accordingly nothing can and will change.  Unless the aim changes the system will remain as is, ensuring more unintended negative consequences for society.  But at least we’ll have someone to blame!

 

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