1. Introduction
The last annual meeting of the Strategic Management Society (SMS) which
took place in Phoenix, Arizona, in November 1996, opened with four high-level
presentations, which outlined four different but not contradictory strategic
visions for today's companies. The first session was conducted by C. K.
Prahalad and Gary Hamel; the second by Don Tapscott; the third by Ernest
S. Micek, Chairman of Cargill, Inc.; and the fourth by Donald J.
Schneider, President of Schneider National, Inc.
These four strategic visions the "four pillars of Phoenix"
emphasised different aspects of the management task. That was to be expected:
the importance of a strategic vision lies not only in formulating it properly
but also in its successful implementation. And that is of course one of
the most crucial and demanding tasks of top management.
2. The four pillars of Phoenix
Prahalad and Hamel's position was that in times of rapid and turbulent change,
a manager must be capable of designing not only the best strategy, but also
the next strategy. The most important qualities of a manager are creativity
and innovation, since it is these that enable the company to achieve the
necessary differentiation in a turbulent and globally competitive world.
Managers have to rely on the core capacities of the organisation and to
focus on differentiating themselves from their competitors. This often means
breaking traditional moulds and giving talented managers their head.
The second concept, Tapscott's(1),
emphasises the dominant importance of technical knowledge, and especially
of the new information technologies. These technologies, which are the driving
force of the economy, are developing so fast and are disseminated so widely,
that unless top company managements understand them thoroughly, they will
miss many excellent business opportunities. They will also miss opportunities
to update the services they offer and the way they offer them, and to restructure
their organisations in line with the new kinds of management skills that
are needed.
The third contributor the President of Cargill Inc., one of
the world's biggest foodstuffs multinationals saw his company as a
perfectly co-ordinated and "oiled" organisation whose over-riding
goal is to maximise profits from the products it offers to the market. Achieving
this depends on high levels of efficiency in the production processes in
particular and in management generally. Managerial talent must respond to
the demands of a well adjusted organisation. Managers must be flexible and
prepared to change roles in the interests of general productivity.
The company must place a high priority on developing managers with these
qualities so that they can be deployed in any of its subsidiaries throughout
the world. Its future depends on this to a significant degree. Above all,
the manager is seen as a part that fits into the big, organisational machine.
There must be no faulty parts.
Schneider's presentation, the fourth, was a surprise. He mentioned that
the company of which he is president, one of the most important road transport
companies in the West of the United States, has 16,000 "associates".
He went on to explain that this is the term used at Schneider's for
the people whom other organisations refer to as their employees. Everyone
in the company is an "associate", and they are all equally important.
All of them have ideas and initiatives that can contribute something towards
improving the organisation. It is of the highest importance that work and
the working environment should represent the best possible arena for the
professional and personal development of everyone in the company. Everyone
could then be expected to help achieve and even surpass the service and
financial targets set for all. Mr. Schneider gave several examples of how
these plans (which many may consider ideal or idealistic) are real and realistic
in the context of his companies. An Asian member of the audience asked Schneider
where he had got his ideas and how he had managed to put them into practice.
He replied that from the outset he had based his organisation on the Christian
values he had learned as a child, in which ideas about the human being had
figured strongly.
The four pillars of Phoenix can be seen as emphasising four critical
factors for every modern company: creativity (Prahalad and Hamel), knowledge
and techniques (Tapscott), efficiency (Micek) and human and individual values
(Schneider). These four strategies presented in Phoenix are not the only
possible ones: there are other ways of designing organisations and their
management. However, they represent significant approaches and powerful
ideas that can and ideally should complement one another, to the
considerable benefit of both organisations and their managers. The company
manager of today and tomorrow cannot conduct a true professional career
without incorporating the right proportions of these four ingredients.
3. The cultural foundations of
Western organisations
These four factors creativity, knowledge, efficiency and human values
play an integral role in Western culture. They are rooted in and supported
by some of its basic assumptions.
Many attempts have been made to delineate those basic assumptions, a recent
example being that of Samuel P. Huntington(2).
Underlying them, and linking them to the ideas put forward in Phoenix, are
five general principles which have been central to all aspects of Western
culture.
The first principle is the equality of people as regards their dignity.
All people have the same fundamental dignity, even though their capacities,
interests and objectives may be different. Therefore, they have the same
basic rights, which can be expressed in various ways, one of which is the
UN's Universal Declaration of Human Rights (1948).
The second principle is freedom. All of us, as part of our dignity, should
be free to choose our own destiny and behaviour. Others society and
its various organisations must respect and facilitate the exercise
of that freedom, within the framework laid down by law, accepted standards
of conduct, and the legitimate freedoms of those with whom we work and live.
As de Tocqueville so masterfully pointed out(3),
equality and liberty are the basis of democracy, which is the characteristic
system of government of Western civilisation.
The third principle is participation. From the two preceding principles,
it can be deduced that everyone can and must play an active part in the
design, organisation and realisation of the activities with which they are
involved, and in the entities which issue the rules and standards affecting
them. It is logical and legitimate that they should also participate in
the outcomes of their work.
The fourth principle is expressed in a word which is once more becoming
fashionable today: solidarity. No social organisation (government, company,
university, trade union) can operate effectively and efficiently, or even
justly, unless the people within them consider that the problems and aspirations
of others are partly their own, and unless they are prepared to help resolve
them and achieve them. Here we should note the contribution to the theory
of organizations made by Professor Juan Antonio Pérez López(4), which has greatly influenced Spain and the
Spanish-American countries, and whose impact is progressively extending
to the English-speaking world.
The fifth and last basic principle in the Western social heritage can be
deduced from the first four: higher-level social structures should not interfere
in the internal life of lower-level social groups, depriving them of their
prerogatives. Rather, they should support them in case of need and help
them co-ordinate their actions with those of the other components of society,
in the interests of all. This is the principle of subsidiarity. Together
with the principle of solidarity, it has been the subject of special attention
within Christian social thought(5).
These ideas have a practical relevance. What might befall a company which
ignores or contravenes any of the principles that are keys to the creation
of successful human organisations? History has demonstrated what it meant
to ignore dignity, freedom and the principle of subsidiarity in totalitarian
countries, and particularly in the former communist countries.
The consequences for their organisational, social and human development
are clear. By contrast there are equally clear examples of the consequences
of ignoring or deprioritising solidarity, even where other principles are
respected. Regardless of how much wealth may be created, social inequalities
and wretchedness will persist(6).
It is also salutory to consider those companies and organisations in which
long-term effectiveness and efficiency (measured as profit) are not the
exclusive, or even the most important aims. To what extent have these organisations
succeeded? What are the outcomes when an organisation fully respects people,
their dignity, their intellectual freedom, their participation and initiative,
and where solidarity is exercised at all levels?
The identification of dignity, freedom, participation, solidarity and subsidiarity
as the characteristic heritage of Western culture may be open to criticism,
but it is a fact that for over twenty centuries those five principles have
been the subject of continuous, profound and full debate in the West. Nowhere
else are they so clearly defined and so fully accepted.
An important question now arises: if the five principles are so widely accepted
in the West, why was it precisely in the West that most of the antithetical
notions which have traumatised the world arose, including Marxism and Nazism?
The answer must lie in the fact that the five principles have not always
been respected, and that the resulting abuses have provoked contrary reactions.
These have included both a collectivism which denied the principle of subsidiarity
and cut out freedom and participation, and an individualism which both in
theory and in practice has relegated solidarity to assistance and charity,
thus infringing the dignity of the person.
All the extreme situations individualisms, collectivisms and others
have one thing in common: dehumanisation. Companies, organisations of all
kinds, and even states, stop being really human when they deny people's
dignity, intellectual freedom and capacity for initiative; when they prevent
their active participation in the design and organisation of action; and
when they disregard solidarity (which includes justice) and subsidiarity.
In losing their human dimension, they definitively lose their most important
values. There are innumerable examples to show that, in the long run, those
organisations cease to be efficient and competitive.
It follows that Western company leaders must not permit organisations and
their managements to behave in ways that contradict their long-held cultural
heritage, in favour of allegedly more useful and necessary assumptions such
as efficiency and competitiveness. It is true that companies must be efficient
and competitive if they want to survive. But to survive (and prosper) they
must also, above all, be essentially human, and not only respect but strengthen
the principles on which their culture is based. They must become forums
within which people can resolve their present and prepare their future with
dignity and in freedom.
4. Strategic visions and cultural
foundations
The four pillars of Phoenix are necessary ingredients for successful business
practices. They in turn are underpinned by the five principles which are
central to Western culture.
The cultural foundations of creativity
Creativity and innovation are rooted in respect for people's intellectual
freedom. Where freedom is not respected, the arts and sciences do not develop,
or only develop precariously and narrowly. Open markets and free competition
call for free and open minds innovators who look for the best
ways of offering new products and services.
A company in which initiative is not stimulated will become stunted or will
wither for lack of new sap experiences which arise from inside
and fresh, clean air ideas which enter from the outside. Likewise,
managers who do not feel at ease with their work, or who feel intellectually
limited will find it difficult to give of their best. They will not be productive
in their posts and their future careers will be at risk(7).
This situation occurs all too frequently. Companies that do not stimulate
internal innovation then have to resort to using outside talents which are
offered and requested to operate with a greater degree of freedom. But,
before using outside talent, top managers must ask themselves whether they
have created the incentives and climate needed to facilitate innovation
and creativity in their company. If they have failed to do so, are they
compromising the future capacities of their company? Will they be able to
solve their problems by resorting to outside talent?
It is clear that creativity is more often found in young, small and dynamic
organisations than in large and bureaucratic entities that have a strong
resistance to change. As Hammer and Champy have demonstrated(8), such companies will find it difficult
to cope with change if they do not first change themselves.
The cultural foundations of knowledge
Knowledge and new technologies can be acquired both inside and outside the
company. We are living in the knowledge era. An explosion has taken place
in every sphere of knowledge and information relevant to the company. It
is simply not possible to acquire and use it all, and indeed it would be
counter-productive to try to do so. Ideally, the acquisition of knowledge
would be restricted to what is necessary for the present and for the future
of the company; unfortunately, it is difficult to evaluate what the extent
of this knowledge might need to be. The answer is for an organisation's
people never to lose the habit of learning, as Ikujiro Nonaka and Hirotaka
Takeuchi brilliantly explain(9).
After all, the members of an organisation are, in most cases, the ones who
know best what they need to learn and what knowledge they can apply. Even
if they do not know, at least they must be the parties most interested in
finding out.
When an organisation in the knowledge era loses this capacity for learning,
it is as if it were already dead, because it lacks the will to live. Managers
who lack the capacity for learning are in professional danger. They will
be replaced very soon. And then, either they will find a less demanding
company or job, where their qualities and knowledge are still useful, or
they will be out of the labour market. This raises the problem of current
European unemployment, which for the first time in modern history is affecting
not only manual and white-collar employees, but also, to a significant degree,
managers.
In Europe, unemployment could be substantially alleviated in most countries
and in most companies, provided that the appropriate capacities are in place.
An analysis of the people who are now having difficulty in finding work
or in finding work that will progress their professional careers
will often reveal that the fundamental cause of their difficulties is not
labour market inflexibilities, sectoral restructuring, or their age. Typically
they are due to the fact that the people concerned lack the specific knowledge
and capacities demanded by companies today, whatever other great qualities
they may possess.
It is an organisation's responsibility to create the right conditions and
incentives to keep alive their people's interest and capacity to learn.
It is known that routine and low expectations reduce such capacity and are
one of the fundamental causes of premature and accelerated ageing of organisations
and their managers.
What has been said about the five basic principles that underpin Western
culture, implies that companies' goals must not be restricted to competitiveness
alone. There is a higher responsibility in making the company a place of
professional and personal progress. Responsible top managers know that they
will retain their best people when they provide them with greater opportunities
for development. Good managers appreciate that it is better to be bound
to an organisation which provides these opportunities than to another which
merely provides a better paid or more prestigious post. So, as Edgar Schein(10) has shown, the career path
of a manager is based on the real development opportunities which an organisation
is capable of offering.
When an organisation creates the right conditions for its people to acquire
necessary knowledge and familiarise themselves with new technologies, it
is giving an implicit acknowledgement (and it is better still if it is explicit)
of its employees' right to professional and personal development, and is
allowing them their right to choose; their freedom. And then it can encourage
participation and subsidiarity with greater vigour. On the other hand, when
an organisation infringes those basic principles, the pool of knowledge
within will tend to shrink. It is easy to conclude that such an organisation
would cease to be efficient.
The cultural foundations of efficiency
Efficiency is not just about achieving results, but about doing so through
the best possible use of the resources that are there to be used. What efficiency
adds to effectiveness is the understanding that it is not enough to achieve
results at any cost, whether that cost is economic or ethical. Ultimately
that cost will be have to be paid, and this may endanger the survival of
the organisation.
Efficiency in the use of resources indicates that the organisation has
a well-established commitment to doing things well from the outset, because
doing them well is cheaper. As Michael Porter(11)
among others has explained, economy in the use of resources is a differentiating
factor in many companies. In the free market, companies which cannot differentiate
themselves through their products (because those products are standard items
or hard to improve), will find that they obtain long-term benefits from
savings on their production, administration, sales or service processes.
The culture of efficiency is very worthwhile at times of extravagance and
consumerism like the present. Its principal value is in the way it obliges
organisations to draw the maximum possible benefit from the capacities of
their people. The culture of efficiency is closely bound up with the principle
of subsidiarity, in that this principle encourages a reduction in the number
of transactions between the levels involved in decision making.
Efficiency means reducing the economic cost and the ethical cost. A culture
of economising resources cannot be maintained if it is not accompanied by
a truly ethical culture. A company that has a culture of economic cost reduction
can still incur ethical costs, as Carlos Llano has warned(12), if it engages in certain unethical
practices inside and outside the company. Sometimes companies employ practices
which are in principle unethical, in order to avoid incurring certain economic
costs. Such practices range from by-passing the proper channels in order
to shorten management decision-making processes, to deploying unacceptable
tactics in purchasing and sales so as to speed up these processes or to
improve results more quickly.
Managers who employ these practices could acquire bad habits that could
damage their professional careers. They may tend to resort to unethical
practices more frequently, because they can sometimes produce results more
quickly and with less effort. However, they thereby lose the genuine capacity
to manage. Secondly, they would frequently place themselves in a false position
in relation to colleagues, superiors, suppliers and customers, thus placing
their integrity in question. Both companies and the professional careers
of managers should be based on integrity, reality and truth, rather than
on falsehoods.
Thus where efficiency is pursued as the ultimate value this can endanger
any of the five basic principles or, in the worst cases, all of them.
The cultural foundations of human values in the company
In principle, companies should be based on shared values. Without these
it is difficult to maintain the company's vision and mission, and thus guarantee
its survival. But the existence of values that are shared adds a sense of
belonging which all organisations need. Increasingly often, organisations
depend on teamwork and understanding between people for achieving their
results. Some disagreements may persist, which may be useful for encouraging
creativity and innovation, for finding better ways of doing things, and
for coming closer to customers. But there must be cohesion in fundamental
matters: what unites must be stronger than what separates.
Shared values must fulfil two conditions. Firstly, they must be real
and constructed from within, not imposed from above. Many companies have
published their "creeds" at one time or another. This is fine
if they reflect real experience, and if they embody goals which everyone
in the company can understand. It is counter-productive if they consist
of meaningless platitudes, or if they represent theoretical ideals that
are unattainable in practice, or if they bear no relation to what actually
happens in the company for example where management practices are commonly
"unethical".
Secondly, these values must not contradict one another, such that pursuing
one of them would put the others at risk. This often happens in organisations
whose exclusive goal is profit. As long as that aim is compatible with honourable
and fair service to the customer, it is possible that no contradictions
will arise. But when to achieve the increases in added value demanded by
shareholders or top management the company resorts to what might be described
as deceiving customers in small ways (through ambiguity in advertising or
in relation to product specifications, or service) then the contradiction
can destroy trust in the system of values, and finally may destroy the values
themselves.
The great advantage of a system of shared, real values that are constructed
from within is that it demands discipline and coherence, and therefore forms
a framework of positive limits on action which cannot and must not be overstepped.
But above all, shared values, if they are deeply human, that is, if they
are compatible with dignity, freedom, participation, solidarity and subsidiarity,
help to make the company an increasingly human reality and hence also more
of a company in the true sense of the word.
5. In conclusion
Last year's meeting in Phoenix cast much light on the author's reflections
about the connections between culture and economic progress. This led to
the formulation of the argument laid out here.
Five fundamental cultural principles that characterise our social structure
the dignity of the human being, freedom, participation, solidarity
and subsidiarity also form the foundations for excellence in business
practices. These principles and the practices that they imply
are necessarily complementary. Mutatis mutandis, they should be applied
as fully as possible in every organisation. Without them, the strategic
pillars of Phoenix could not stand up and would be unable to support a human
and social structure, an organisation.
The challenge that confronts us with the new millennium is that of strengthening
the foundations of the Western culture, on which companies and the rest
of the institutions in the social fabric are supported.
Yet there is a darker side to these reflections, and to the experience of
the West. The century now coming to a close has witnessed great horrors
resulting from ideologies that ignored the foundations on which our civilisation
is based. Human freedom manifests itself in paradoxical and surprising ways.
As the psychiatrist Viktor Frankl wrote: "Man is that being who has
invented the gas chambers of Auschwitz. However, he is also that being who
has entered those gas chambers upright, with the Lord's prayer or the Shema
Yisrael on his lips"(13).
How can such ideologies arise in a culture that prides itself on respecting
and promoting human dignity? The West must continue to reflect on the mystery
of the human race, its ways of being and its capacity to act.
In this context, Western culture must recognise of the heterogeneous world
in which it is moving, aware of the contributions it has made to the rest
of mankind, but not ignoring its undoubted limitations. The company and
business practices which have prevailed in the West are apparently being
proved satisfactory in other cultures. Will those other cultures also choose
to adopt the cultural values which underpin Western social structure, and
appear necessary for the proper functioning of social life? Huntington,
in the book referred to earlier, answered that question in the negative,
accepting that, for those cultures, the process of modernisation does not
imply a process of cultural Westernisation.
Here is a serious debate which perhaps we must take up. It revolves around
a number of important and far-reaching questions.
- Can excellent company and business practices be rooted in principles other
than those that define Western culture?
- Have Western practices and those of other cultures influenced one another?
- Have company practices been changed to adapt them to cultural environments
other than the West?
- Have some of the basic principles of those cultures been modified by
the presence of Western company practices?
- If company practices have been modified by the influence of other cultures,
can those modifications help to improve company efficiency in the West?
- What can the West learn from the other cultures with which it cohabits?
It is certain that it was in the West that modern technical, business
and social systems first developed, and in this sense the West may perhaps
claim some superiority. It is even more certain, that we all have much to
learn from one another. The world's different cultures and their successful
business practices, instead of turning in on themselves and seeking only
to maintain their internal coherence, must be prepared for an open, calm
and constructive dialogue.
This will be a key theme at the SMS's Barcelona meeting, where the light
of the Mediterranean is expected to cast its clarity and brilliance on the
questions initiated in the Arizona desert. |
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The company
manager of today and tomorrow cannot conduct a true professional career
without incorporating the right proportions of these four pillars: creativity,
knowledge and techniques, efficiency and human values
The identification
of dignity, freedom, participation, solidarity and subsidiarity as the characteristic
heritage of Western culture may be open to criticism, but it is a fact that
for over twenty centuries those five principles have been the subject of
continuous, profound and full debate in the West
It is
clear that creativity is more often found in young, small and dynamic organisations
than in large and bureaucratic entities that have a strong resistance to
change
It is
an organisation's responsibility to create the right conditions and incentives
to keep alive their people's interest and capacity to learn
What efficiency
adds to effectiveness is the understanding that it is not enough to achieve
results at any cost, whether that cost is economic or ethical
In principle, companies
should be based on shared values. Without these it is difficult to maintain
the company's vision and mission, and thus guarantee its survival
The challenge
that confronts us with the new millennium is that of strengthening the foundations
of the Western culture, on which the companies are supported
|
