Every now and then I read an article that startles me. It is usually not for the deep insights (though there are many sometimes) but for the brutal honesty and humility. Here's a perfect example. Reading the excerpt below in the latest Businessweek is somewhat shocking. Coming from a 15 year Professor at the Harvard Business School gives it all the more gravitas -
I have come to believe that much of what my colleagues and I taught has caused real suffering, suppressed wealth creation, destabilized the world economy, and accelerated the demise of the 20th century capitalism in which the U.S. played the leading role.
We weren't stupid and we weren't evil. Nevertheless we managed to produce a generation of managers and business professionals that is deeply mistrusted and despised by a majority of people in our society and around the world. This is a terrible failure. - Shoshana Zuboff
The articles goes on to explain that by focusing too tightly on economic value and encouraging students to think about shareholder value above all else, HBS did a disservice to its students and to society. She's probably right and the problem extends beyond HBS too. Interestingly, some people probably feel that we do not have a strong enough alternative model in place. One that can rebuild the trust of Americans (only 10% of Americans trust big business today) in the corporate world.
I believe that trust has been weakened forever. It will never be the same again. That's not bad as instead we're going to trust each other - peer influence is going to rise in importance everyday especially as we're able to organize collectively, tap into each other's intelligence and harness collective wisdom for individual action.
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this is very thinky. it is always a shocker when someone points out something that, after they point it, out it seems quite obvious. i will be interested to see the reaction this gets.
you mention "we do not have a strong enough alternative model". i thought to myself -- model for what?. likely 'making the most money' or 'winning' is a large part of it. i wonder if we will ever be able to accept an alternative 'end-game' complete with whole new models. will we ever accept taking a step back in order to move forward? it is a lot to ask for a society to shift its values in order to progress, but i kinda think it may be coming to that. this strengthened that idea for me. thanks shiv for sharing.
Shiv - Thanks for sharing this article with your thoughts, it is indeed startling. Perhaps the alternative to directly focusing on shareholder value is to begin focusing on end-user value? After all, when products and services maximize value for the end user, shareholder value tends to take cafe of itself (think Google and Apple for instance). Thanks again for the thought provoking article, I'm going to mention it on my blog to bring it to the attention of a few others.
Cheers
Chris
Thanks for the tweet on this, Shiv, and the post.
When I read the quote from the HBS professor, I was immediately taken back to a memory from my b'school days at Wharton.
I remember challenging a professor in class regarding his statement that maximizing shareholder value was the chief objective of any business. The professor was befuddled by my comments, as if the very notion that other paradigms could exist were outside his consideration set.
Needles to say, I applaud the HBS professor's "awakening" and am heartened by his words.
The truth is that with all of the massive challenges facing our world, narrow business paradigms like "maximizing shareholder value" will only accelerate our problems. Socially- & environmentally-based factors have become imperative inputs into the "modern business case".
B'schools such as HBS have a great deal of influence in these areas - I only hope they have the courage to make the necessary changes to their curricula & cultures.
Thanks for sharing, Shiv,
~Doug
http://www.mindofmarketing.net/
Thank you for your comments. By saying we do not have a strong enough alternative model, I imply that there's no easy equivalent to "maximize shareholder value" for managers. There needs to be something stronger, simpler and one that balances the competing tensions. I like the notion of putting user interests first though that too doesn't account for every factor at play.
It is commendable what the professor said and probably serves as much of a wake up call for past students as it does for current ones. Pity it took such a huge crisis for this to surface.
This brings back a memory from 1992. I was wondering what became of all the folks from communes and coops in the 70's who WERE trying to evolve alternative models. In particular, I was struck by what the co-authors of "Co-ops, Communes and Collectives" were up to:
* Paul Starr, in the white house
* Rosabeth Moss Kanter, Editor of HBR
* John Case, writing in Inc. magazine
The Federation of Intentional Communities is still alive-- I took a course in consensus from one of the leaders of it last year.
Many older folks might do well to ponder whether the foolishness of their youth is exceeded only by the foolishness of their "productive" years.
Reading The Economist (July 18th issue, www.economist.com), it seems that the last crisis has put many of the subjects that were supposed to guide our economy into shame.
The focus was on making simple models with simplified constraints that would enable financial institutions to evaluate risk. This failed miserably.
If Economists got it wrong and managers got it wrong and so it is no wonder they do not have the answers on how to get it right again.
I think that the search for a unified model if good for physics where the science is based on a limited number of particles and forces.
Humans, built out of millions of atoms and having such unpredictable emotional forces are probably impossible to formulate into a mathematical formula.
Managing companies comprising of hundreds or thousands of such agents and they are constantly interacting with other such large unpredictable organizations. This makes a simplified formula of "Maximizing shareholder profits" look fairly foolish.
In fact if one thing was predictable it was that the predictions would fail.
Alternatives to looking for a formula were mentioned in your post and some of the comments, mainly, trying to understand the end user and their needs, looking at the environment and how we affect it.
If I had to sum up what management should be I would probably use the word "responsibility". This includes the responsibility to the shareholders but in also includes responsibility to your users, your work force and your environment.
If managers were more responsible (as opposed to greedy), we would probably not be in the mess we are in today.