Renewing corporate culture one soul at a time
Book review: What Matters Now: How to Win in a World of Relentless Change, Ferocious Competition, and Unstoppable Innovation by Gary Hamel.
What Matters Now by Gary Hamel is a critique by a renowned management thinker of the apparent collapse in moral values in big business that was revealed by the financial crisis. It’s a startling read because, while being a contribution to the airport news-stand canon of management literature, it uses language and imagery which is alien to the corporate world – precisely to question their absence. Hamel offers an impassioned call for a more compassionate and ethically-grounded capitalism which puts value rather than cost at the centre of its concerns.
No anti-capitalist, Hamel insists that “the worst economic downturn since the 1930s wasn’t a banking crisis, a credit crisis, or a mortgage crisis – it was a moral crisis, willful negligence in extremis.” He documents the “cataract of self-interest” – the greed, hubris, denial and obfuscating complexity – that normalised a collapse in standards through a long series of “small, nearly innocuous compromises.”
He demands a renewal of corporate cultures “one soul at a time.” No pretence here that a figleaf of corporate social responsibility is apt for this task. Hamel is interested in fostering “a bottom-up sense of moral responsibility that informs every decision.”
He presents evidence that the public are as disgusted as he is with the behaviour of large corporations: a Gallup survey from 2010 that showed only 19 per cent of Americans expressing “quite a lot” or a “great deal” of confidence in big business; or a McKinsey survey from 2007 showing that less than 40 per cent of “consumers in the developed world” believed that large corporations make much contribution to society.
Not only that. Whether it’s by reference to the concentrations of harmful fats in processed foods, the cavalier attitude to privacy displayed by large websites, or the execrable customer service provided by banks or airlines, he is clear that a good many businesses make a poor fist of even serving their customers well:
“Consumers and citizens have become increasingly disgruntled with the implicit contract that governs the rights and obligations of society’s most powerful economic actors – large corporations. To many, the bargain has seemed one-sided – it works really well for CEOs, pretty well for shareholders, and not so well for everyone else… If individuals around the world have lost faith in business, it’s because business has misused that faith.”
Hamel shows corporate leaders the path to a better way. It includes innovation in pursuit of delighting the customer. He’s good at contrasts. He explores Apple’s approach to product development, highlighting Apple’s aspiration to create magical experiences, and invites us to consider what might happen if your bank set the bar that high.
His better way also includes passion. By this he means staff engagement that seriously empowers employees and encourages their initiative rather than constraining them in over-specified processes. There’s a good story about how the Bank of New Zealand inadvertantly engineered a revolution in customer service by allowing branches anarchically to set their own opening hours according to their perception of local need. He’s also impressed by W.L.Gore and Associates, makers of Gore-Tex, and Morning Star, a Californian processor of tomatoes. Both have well-developed systems of bottom-up management and peer review.
If he provides the positive incentive of the value that can be achieved when businesses adopt what he calls a more conscientious capitalism, Hamel also points out that big businesses will likely find their licence to operate curtailed if they continue to ignore the wide and deep public discontent. But for the most part his is not an appeal to their self-interest. Hamel acknowledges that the canonical beliefs of CEOs constitute a significant obstacle to a change in the culture of corporations. Beliefs such as: that the main purpose of business is to make money rather than enhance human welfare; or that executives should be incentivised on the basis of short-term earnings rather than the long-term creation of value.
It is a weakness of the book that it fails to address what might conceivably encourage executives to shake off such beliefs. Hamel urges them to embrace transcendant values that are conspicuously absent from the culture of corporations – beauty, truth, justice, even love. But what grounds are there to hope that such exhortations might have an impact if the canonical beliefs of the past decades have withstood the near implosion of our economic system?
Gary Hamel is too polite to spell out the answer; he earns a good living, after all, consulting to the C-suites of big corporations. So let’s turn instead to someone with less of a stake in the corporate establishment, the novelist Margaret Atwood, writing recently in the FT. You might protest that a novelist is no guide to matters of corporate strategy. But pay attention to her sense of history:
“When distrust in a system becomes widespread among small players, it throws up something like Occupy Wall Street, or like the Tea Party. Or like, for instance, the French revolution. Before that game-changing event, a privileged class that made the rules – rules favouring itself – overspent on a foreign war and then tried to stabilise the nation by overtaxing the already ruinously taxed populace. Confronted with protest, the aristocrats responded with inflexibility and prevarication, and dedicated themselves to preserving their own advantages at the expense of everyone else. If this sounds in any way familiar, it may be bracing to recall that before long, heads were being sliced from necks, blood was running in the streets, and France, riddled with internal dissension, lost its position as the most powerful country in Europe”.
One doesn’t have to believe in the imminence of chief executives’ blood flowing in the gutters to grasp that, when a system is broken, not only does something have to give but it will. As the economics commentator, Larry Elliot, put it this week, we are experiencing a crisis of capitalism of the sort that Marx envisaged:
“This is a tough, even brutal environment, where only the lean and mean organisations will survive. We can no longer expect to borrow our way to prosperity, either privately or publicly and we are not as rich as we thought we were. Low growth, bankrupt states, precarious banks and falling living standards: that’s now the new normal.”
Corporations can be part of the recalibration that will help us navigate this state of affairs or they can carry on provoking public ire and thereby contribute to the growing risk of a social breakdown which would undermine the basis of their prosperity anyway. The inspiration that Hamel offers is that we needn’t wait for the CEO class to grasp the agenda. Renewal can happen “one soul at a time”. We each have a part to play in recalibrating the values that guide our organisations.
Image courtesy Simiant.