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It's management, stupid

Mon, 15th Aug 2011

The outspoken Henry Mintzberg, Cleghorn Professor of Management Studies at Montreal's McGill University, is a long-time critic of the direction management, both pracrical and academic, has been taking. Now he believes that democracy itself is in danger.

Simon Caulkin: Are you optimistic about the future of capitalism?

Henry Mintzberg: No.

It’s not about business or free enterprise, it’s about capitalism being so far off the rails in at least two respects that relate to each other.

First of all, the predominant form of financing large business, the stock exchange, has turned out to be completely dysfunctional, in the sense that it breeds a mentality that doesn’t sustain enterprise. It breeds a kind of ‘cash in and get out’ mentality … The phrase I use is ‘the unholy alliance’ of economic dogma with corporate entitlement which refers to the same thing: it creates a very short-term mentality and a very anti-community and anti-social mentaility within organisations, so that everything is economic, everything is short term. A CEO fires people at will if the company doesn’t meet the numbers on Wall Street, suddenly 5,000 'human resources' become magically redundant because he didn’t make his numbers, and it destroys the whole fabric of the enterprise.

SC: So the crisis we’re seeing...

HM: I don’t see the current cris as an economic crisis, I see it as a management crisis - so many companies in the US have been so badly mismanaged that the whole economy is faltering. And it’s not going to be fixed by Obama’s economists because they don’t understand, they don’t have a clue about the functioning of enterprise. They’re trying to fix it economically – but the problem is managerial, it’s not economic. There are too many enterprises that have been trashed, and no one seems to get that message. Either I’ve got it wrong, or nobody wants to hear it. The message doesn’t get through.

There’s another point, which I don’t think anyone else has made. Entrepreneurs today are much more interested in cashing out their companies through a profitable IPO than in building a sustainable enterprise. This is new. Entrepreneurs never built companies before that they could sell real quick, they built enterprises for a legacy. The heart and soul of the economy is small and growing enterprises, and even those are being managed for the short term.

SC: You said you had two major concerns about what’s happening.

HM: Yes. The first part is short-termism and the second is the wholesale destruction of the sense of community, which is what sustains an enterprise and builds it for the future. If you do everything for the short term you end up with very superficial companies that everyone hates working for. And that’s undermining whole social fabric of the society.

Picking up on something Jim March used to write about, the distinction between ‘exploiters’ and ‘explorers’, there are so many exploiters now who are trying to manipulate their market position, largely through lobbying, that they’re destroying democracy. US democracy is under huge threat right now from the role of money, the US Supreme Court ruling that corporations have the right to donate [to election campaigns], and the sense of corporate entitlement. I say that free enterprises are replacing free people in the US democratic system.

So it’s not capitalism itself that’s the issue, it’s the fact that it’s running rampant. For me a balanced society balances the three sectors, it balances the private sector, the public sector and the plural or social sector. What’s happening is that in 1989 people misinterpreted the reason for the fall of communism and assumed that capitalism triumphed: it was balance that triumphed. The Eastern European countries were utterly out of balance, and we were much more in balance then than we are now. They were then out of balance on the side of the public sector, and now we’re going out of balance on the side of the private sector. And so it’s not capitalism that’s the problem: it’s the assumption that capitalism is the be-all and end-all of human existence instead of a way to create and fund enterprises.

SC: Do you think it’s the shareholder-value mantra that’s to blame?

HM: Yes, absolutely. It’s this simple-minded idea that the enterprise exists only for the owners. Greed is good, markets are supreme, and governments are suspect – the whole mantra – and therefore corporations exist only for shareholders. Who by the way contribute least. The workers contribute their daily lives. There’s interesting evidence from a few years ago, and supported since then, that the amount of additional money that shareholders actually put in the company, as opposed to just trading back and forth, is trivial, very small indeed. So are they really entitled to all those economic rents and the workers none of them? Not only that, but the salaries of those who do the work have been stagnating for years. It’s amazing how docile the Americans have been, having been kicked around so much.

SC: Do you see any positive signs? Social enterprise, for example? Any indications that we are coming back into balance?

HM: No, not coming back into balance. Of course I think that social enterprise is wonderful, but I wish there was much, much more. One  of the things I wrote lately was that a green Walmart won’t make up for a greedy Exxon. If you think of the impact on the environment of the greening of Walmart compared with Exxon’s impact on the environment, it’s so weighted towards the negative. It’s the same thing with social enterprise. I think what there is of it is wonderful – we need it and we need much more of it. But it’s a pittance compared with what’s going on in the private sector.

Not that the private sector is bad. The private sector is great. I don’t want to go to a state-run restaurant or buy my car from an NGO. When a businessman says to me, ‘I want to be socially responsible’, my response is: ‘Good, now get out of my government’.

To clarify, it’s not him or her – they have as much right to make their views known as anyone else – it’s getting the company out of government. Individuals have as much right as anyone else to express themselves – but not more.

SC: What about the business schools? What do you think of their role, in both creating the monster and putting things right?

HM: They have certainly played a role in creating this monster. But anyone who thinks that taking an oath to be good is going to get anywhere or running more courses on ethics is going to get anywhere – I’m sure Jeff Skilling would have signed that oath in flash when he was at Harvard Business School – is silly. Well, not silly because that’s fine as far as it goes, but it’s not very far. I’m in a business school, but I’m not sure many other people in business schools are saying these things – well, you tell me.

I think we’re facing a dreadful crisis, and it’s accelerating by the hour. I think the ante is getting upped all the time as to what corporate entitlement expects, and the latest thing I’ve been reading about is corporations suing people to shut them up because they can’t afford the legal fees. These are cases which are frivolous and have no basis in law, but you can’t afford to fight it [‘A strategic lawsuit against public participation (SLAPP) is a lawsuit that is intended to censor, intimidate and silence critics by burdening them with the cost of a legal defense until they abandon their criticism or opposition’ – Wikipedia]. And it’s getting more common.

SC: Is there anything you can be positive about?

HM: There are always companies that we admire. Apple has done amazing things. There are the explorers rather than exploiters, and they’re the companies we admire. You mentioned social entrepreneurship, social movements like what happened in Egypt, where people are beginning to get together and kind of see things in their own light. All this is good, but it’s just being overwhelmed at the moment.

Read more by Henry at The Economist and Huffington Post

 


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