REDISCOVERING THE "HAPPY COINCIDENCE"
We have lost our bearings in the world of work. A return to fundamental values is needed.
The last 50 years have seen a lot of changes in the industrial/ financial landscape
We have witnessed a flood of disgraceful behaviour from finance and industry. In Britain, the Murdoch press has been exposed as behaving with gross illegality and even grosser morals. The investment banking industry has recently been accused of lacking any form of ethical code by a Morgan Grenfell manager, but we should have known this a long time ago. Huge corporations in industries as diverse as food, tobacco, drinks, pharmaceuticals, oil and energy have been exposed as wanting in their treatment of staff and customers alike. Politicians have been "recruited" by industrial and financial corporations to such a degree that it is almost impossible for a candidate to stand for office in America without strong corporate support. Political lobbying by industry is huge in Washington and London.
Has this always been the case?
1960 - A personal experience
One morning in October 1960, twelve young men dressed in their best suits (only suit, in the case of one of them) gathered round a conference table in Unilever House in London. One of the young men was Don Young, then a third year undergraduate at the London School of Economics. The others were all undergraduates at the universities of Oxford and Cambridge. All were applicants for Unilever's corporate management trainee scheme. Looking around, Young wondered if the other eleven applicants felt as nervous as he did.
An imposing, well-dressed man entered the room. He began to brief the applicants. He gave a thorough history of the company, its products and international spread and a description of the three-day selection board.
He emphasised the values of William Lever, its founder. He made a special point of the philanthropic values upon which the company was founded and the fact that Lever placed huge emphasis on enhancing the lives of customers through the value created by his products; but especially that he went to great lengths to give his employees respect and decent lives through their work
Then he said: "Should you be successful and join Unilever, we would expect you to have a full career with us. Entrants through the Unilever Companies Management Development Scheme can reasonably look forward to reaching senior management after ten to fifteen years, and some of you will reach the very top of the company before you retire".
This message was intended to motivate, and indeed it did. In 1960 young men considering a management career knew that a life inside an international blue chip company, together with the opportunity to rise through the organisation to senior management, was as good as it could get.
Managers were groomed to value the culture, organisation and products of their company. They had pride in the organisation and pride that they were part of something important.
The fortunate few who joined Unilever in the 1960's were dispatched to the front lines of the many Unilever companies. There they learned the basics of manufacturing, marketing, selling and leadership from the ground up. This was leavened with education in all aspects of management and finance for non-financial managers. This they felt, together with the hard experience of getting on with all kinds of people at all kinds of levels in all kinds of places, was the grist of real leadership.
Great Companies, Great Pioneers, Profound Values
The might of British and American industry was created in the main in the Nineteenth and early Twentieth Centuries by men with clear moral codes.. These pioneers held strong beliefs about how to lead their lives. Their beliefs were based on non-Conformist protestant religions that were essentially non-hierarchical in nature; that held that all men were equally and directly accountable to their Deity - and particularly that all men were worthy of being treated with dignity and respect. This belief system stretched deeply into the moral code that guided the way they conducted business and the ways in which they deployed their massive wealth to philanthropic causes. They believed in the sanctity of work as a giver of positive Meaning to peoples' lives, and in providing education and dignity to workers. Later came great pioneers from Japan and India, who demonstrated very similar values with the same results.
50 years on......
Cut to 2012: What of the Brave New World?
But since those far-off days, there have been huge changes in the practice of management:
- Business education has been revolutionised through the burgeoning growth of Business Schools, especially in the "Anglo-Saxon" countries. Management has been taken apart, analysed and put together again in a massively more sophisticated form
- The idea of a full career with one company has become much scarcer. It is relatively rare for general managers to make their ways from the front line to the top. Career routes are now narrower and specialist - often through the finance function
- Huge international management consultancies have grown all over the world. These have soaked up a large portion of the Business School output.
- With the growth of business education and consultancy has come the phenomenon of the management Guru - a being who can see beyond the horizon and reveal the future
- The practice of finance has become a science. Techniques for analysing risk and modelling the future have now reached such complexity that only a few particularly talented people can understand them. With this has grown the power of massive investment banks that now dominate the industrial landscape
- A relatively small number of very large corporations now dominate the global industrial and financial landscape
Seen from a wider perspective there have been seismic ideological changes. Free Market dogma has become dominant in global business. A strong conviction that only the market, enabling unfettered competition, can deliver lasting prosperity has seized the minds of many politicians, industrialists and academics. In the Anglo-Saxon world this has supplanted belief in collaboration between the state and other stakeholders in the economy.
And the results?
- Unilever joined the UK top 100 company list, the FTSE 100 when it was formed in 1983. Now it is one of the very few survivors of that august band. Over 90% of the original companies have gone, taken over, broken up, or failed. The attrition has been particularly marked amongst manufacturing and technology companies.
- The pay and benefits of directors of top companies have soared from about 15 times those of the average employee in the 1970's to over 100 times today.
- In fact, the real earnings of the average employee have shown little increase over the last 20 years. In the United States, real earnings of the average employee have been static since the 1970's.
- It might be thought that the largest companies with the highest rewarded bosses must have performed exceptionally. In fact this is not the case. Sales and profit growth of these mighty companies have hardly exceeded GDP growth. What has soared is dividends paid to investors and top managers' pay. Consequently long term investment has decreased, especially in Britain. Organisations that are not dominated by the investment markets have tended to perform better. These days, one has to look to smaller enterprises, partnerships, co-operative ventures and some family companies for the good news
- There has been a steady increase in the power and influence of investors over the rest of industry. One effect of this has been an increase in the proportion of wealth created going to the providers of capital and a consequent decrease in that enjoyed by employees other than directors
- The nature of employment in all categories has changed. Some trends have been a reduction in job security, considerable increases In temporary and part-time employment and massive decreases in skilled and semi-skilled work in manufacturing and technology, balanced by increases in work in service industries. More subtly, much of the skill and discretion to make judgments in work has been replaced by computer systems and "box-ticking". There is strong evidence that trust and mutual confidence has dramatically decreased over the period - many employees have little confidence or trust in their top managers.
- The whole environment surrounding the economy and work has become unstable. The dominance of the global finance industries has resulted in increasingly violent swings from boom to bust. The bust of 2007 - ? is only the latest of a similar sequence.
- It is now clear that huge finance and industrial corporations dictate the economic and political scenes. It can be argued that the power of corporations is in the process of converting democratic capitalist countries into plutocracies. The biggest corporations now dominate politicians and exploit customers and employees. In the US and to a lesser extent Britain, it is impossible to be elected to government against the wishes of big business and finance
The fruits of "progress" have been wasted.
Of course financial performance has improved since the 1960's. But the fruits of improved productivity have mainly been soaked up in ruinous deal-making, exceptional rewards for the few, "creative destruction" of enterprises and the costs of "financialisation" of the economy. The biggest waste, however, is the loss of experience and wisdom. Leadership is not a science. We knew enough of how to manage successful enterprises in the 19th century. There have been no seismic changes in the nature of people and markets that could not have been managed by incremental exploration and progressive improvement. There are no "secrets" - the plain wisdom of how to manage has been in the public domain for more than a century.
Is there a better way?
We cannot return to the Nineteenth Century, which was no picnic for the majority of people anyway. But we must rediscover a moral dimension to public life - and especially to finance and industry. In this regard, the Market has little to offer - Markets are amoral; competing and winning is all that matters.
The special band of pioneers who created much of our economic infrastructure have much to teach us that we have forgotten in the heat of the chase for quick profit.
Profound Values that led to successful enterprise.
The "Happy Coincidence"
Unilever was one of a large number of companies that had been founded by religious Non-Conformists, especially Quakers. William Lever, the founder of Lever Brothers, later to become Unilever, shared very important convictions with Cadbury, Rowntree and a host of other industrial pioneers in engineering, railways, banking, finance and industry. On the other side of the Atlantic, Protestant Non-Conformists were building what became the most powerful industrial machine the world has so far seen.
These pioneers held strong beliefs about how to lead their lives. Their beliefs were based on religions that were essentially non-hierarchical in nature; that held that all men were equally and directly accountable to their Deity - and particularly that all men were worthy of being treated with dignity and respect. This belief system stretched deeply into the way they conducted business and the ways in which they deployed their massive wealth to philanthropic causes. They believed in the sanctity of work as a giver of positive Meaning to peoples' lives, and in providing education and dignity to workers.
One does not need to be a practising Christian to appreciate such ethical beliefs.
In other parts of the world, great men with similar values, such as Jamsetji Tata in India, founded mighty corporations that flourish to this day. Others from different cultures, in particular Japanese entrepreneurs, have built mighty companies that are world leaders in their industries.
The essence of their belief systems has been described as the Happy Coincidence - if they treated employees with respect and decency, provided customers with good value and behaved ethically in the community - business success was likely to follow. But it goes further than that - the values imbued by these great enterprises have great implications for re-invigorating contemporary Society.
This then, was the environment in which I grew up, and although I left Unilever after ten years to explore a wider world of industry, the values imbued by that experience stayed with me through a full career.
Important ideas to guide us
At the beating heart of successful enterprises - two essential relationships.
There is no "secret" behind sustainably successful enterprises. The reasons for success are quite simple and lie in two quite vital relationships.
The First Relationship is between owners, directors, managers and all the people who make up the heart of the enterprise.
The Second Relationship is between all these people and the enterprise's customers.
Unless there is a close affinity of interests and values between owners and staff - and between these people and customers, the enterprise will falter and fail.
This is delightfully simple, borne out by research and wide experience, yet it is completely ignored by too many people in the finance industries, business schools and political circles. External investors and directors who worship the contemporary religion of "shareholder value" are frequently pure poison to enterprises' success and sustainability because their primary allegiance is to each other, not staff and customers. That is one of the reasons why so many big companies fail to perform to their potential - and why for one hundred years the John Lewis Partnership has been a highly successful retailer. And it is probably no coincidence that Morgan Grenfell ceased to be a partnership and became subject to pressure from the investment markets. The result was that top managers and investors were only interested in profit, not customers.
Behind the Happy Coincidence lies another profound idea - the best results can only be reached by oblique means. This principle has been described by economist John Kay as Obliquity. If you want sustainable profit, it can only be attained by doing positive things that will eventually produce profit. If you want to build a great enterprise, it can only be done by scrupulous attention to the well-being and skills of employees and dedication to providing customers with value.
The "Happy Coincidence" is quite simply that treating people well and a mutual dedication to customers by all staff will bring lasting success and financial value.
The ideal of The Happy Coincidence resonated strongly with my experience. I came to strongly believe that the only durable foundations for any enterprise are the quality of staff and their relations with customers.
The Quakers knew that the quality of the work environment and Meaning derived from honest endeavour is the strongest value creator. Enterprises with the narrow purpose of maximising financial returns will lack the vital spark and an ethical compass - and almost inevitably underperform over time. In the process they will debase the lives of all those connected with them. Today there are arguably far too many of those.
We badly need to rediscover our contemporary "Happy Coincidences".