There are some clear advantages in having supranational bodies such as businesses. They redistribute their assets around the world, bringing resources and technology to new areas. Because they are answerable only to themselves they can take bolder and quicker decisions. They can gather together finances from around the world, and build partnerships on a scale and of a type that governments on their own would find difficult if not impossible. They can apply ethical standards to the people who make the products that they buy. These supranational bodies, in sum, make things happen which otherwise would not happen. We need them.
But it does not always follow that what is good for General Motors is good for the rest of the world. Organizations of this size, make governments uncomfortable. A form of governance will need to be created which represents the interests of other parties. If the organizations do not devise this form of governance for themselves they will find it imposed upon them by international pressure. Were the United Nations less obsessed with its own governance problems, this is an area to which it might usefully turn its attention. Before it does so, the big companies ought to come up with their own proposals. It may be that the concepts of citizenship and representative democracy may have more to offer than those of property rights.
NINE
THE CITIZEN COMPANY
BUSINESSES, THEN, AND indeed all institutions, are communities not properties, and their inhabitants are to be more properly thought of as citizens rather than employees or human resources. What will this mean in practice?
Citizens in all democracies have the rights of residence, justice, free speech, a share of the wealth of society in some way, and a say, usually a vote, in the governance of their society. Most importantly, however, a citizen is entitled to life, liberty and the pursuit of happiness, as the Americans have it, in other words the right to make your own life, subject to the laws of the land. The essential freedom of the individual has been the driving force behind democracy down the ages. It is this force that organizations must now come to terms with as their individuals begin to expect from their work communities the same collection of freedoms, rights and responsibilities that they have in the wider society. People are property no more.
Translated into corporate terms, a citizen’s right to residence means some guarantee of employment; not for life, because that would be unrealistic, but for a fixed period of years – a decade, for example. It is reasonable to substitute predictability for permanence in a more uncertain world, and few, anyway, of the citizen-calibre workers would want to sign a commitment for life. What is needed to restore commitment in the workplace is a rebalancing of power, so that those in control make commitments in order to win commitment. We will increasingly, I suggest, live our lives in five- to ten-year chunks, so that a ten-year commitment will be seen as a fair definition of guaranteed residence. Justice, free speech and a share of the wealth are all easy to translate into the corporate world, but not always delivered. A say in governance translates into a right to be consulted about major decisions affecting the future of the corporation.
This has all the feel of a trade union manifesto, and some unions are moving this way, wanting to make their members citizens of the employing organization. In 1997 two large British industrial groups agreed to a guarantee of four years’ employment for their core workforce in return for a promise of flexible working. But citizenship is not just the outcome of negotiation or arbitration. It is more subtle than that, something that grows from a shared commitment, bits of which can be defined in writing, such as the length of residence and the share of the wealth, but much of which is more intangible. As long as trade unions have an adversarial relationship with the organization they will have little role in a citizen company, and the citizens will not want them.
Oddly, perhaps, the British are not citizens (except, by international convention, on their passports) but subjects, subjects of Her Majesty the Queen. Although this is an historical accident, the different words may have made a subconscious difference. There is no Bill of Rights in Britain and no written constitution. Citizens tend to expect these things, which are to be found in most other democracies. The only time that the language of citizenship has been used in Britain has been in the form of the Conservative Government’s idea of a Citizens’ Charter for the users of the public services. An unexceptionable idea in itself, calling it a Citizens’ Charter made Citizen sound like Customer, thereby degrading the whole concept of citizenship. This is a pity, because it will make it less likely that British companies will see the point of adopting the idea of corporate citizenship, except in a very loose and informal way. This may not be enough to satisfy the people whose loyalty and commitment they need to win. Citizen Companies will need written constitutions.
Partnership or associate are terms that fall more comfortably on British ears. They are also terms that are easier to apply to two other stakeholders – the suppliers and the customers. It is important for any company to win the trust and cooperation of the largest and most important of these groups, along with the most significant of their investors. Were citizenship to be formalized in any way, it would be appropriate to see these other stakeholders as associate citizens, with at least the right to be kept informed, to be consulted whenever appropriate. This form of associate citizenship should help to bond these crucial players into the long-term aims of the organization and to build a degree of mutual trust by the sharing of information. To win trust you have first to give trust.
One way to give formal expression to the right of citizenship would be to resurrect the old idea of A shares and B shares – voting and non-voting shares. The A shares, with their votes, would be confined to the personal citizens of the business – the core employees, or a Trust representing their interests. To these could be added significant holders of the equity, being investors who could be presumed to have a long-term interest in the business. Citizen rights could also be extended to the larger suppliers if they held an equity stake (as suppliers tend to do in Japan). To involve the community it might be possible to create the equivalent of the ‘golden share’ which the British Government awarded themselves in some of the companies created by privatization. This would give the community a voice, and conceivably a veto, in specific areas to do with the environment.
The idea of non-voting shares has always been hotly contested by the investment community – for obvious reasons. The investors would lose much of their power. But it is this power that will have to be reduced if the real members of these wealth-creating communities, the people who work there, are to have more say over their destiny and if the business is going to be more than the property of its financiers. The change will not, however, be soon or sudden. It will happen as the newer businesses explore ways to enfranchise their important constituents. It is only when these new businesses become large in their turn that the stock markets of the world will notice that they have, in their turn, lost their power.
The emergence of completely new forms of organizations may, of course, make all the talk of ownership irrelevant. The Internet, probably the fastest growing organization of all time, is owned by no one. Visa, the credit card service, carries over 7 billion transactions a year, worth over $650 billion, but is ‘owned’, if that is the right word, by the financial institutions, well over 20,000 of them, who use its services. Organizations like the Internet and Visa are facilitating mechanisms rather than collections of assets. Few in number at the moment, they may set a pattern for the future as more and more independent operators look for Geoff Mulgan’s mechanisms of connexity.
Federalism is an old idea for the combination of independents but one which, rethought for the information age, offers some clues to possible futures. The point of federalism is that too much power should never be in one place or in one function. The centre is the servant of the parts, a facilitating mechanism with powers delegated to it by those parts. In practical terms, ownership then resides with the parts even if the outside investors think that they own the w
hole. To equate federalism with a super-state ruled by a powerful centre is a uniquely British distortion, one that may come to haunt us in years to come if we turn our backs on what may well be the form of the future.
We recently installed a new kitchen in our home. The firm we went to implied that they would design, build and install the kitchen. In practice they did none of these things themselves. It was a hollow firm. All the functions were subcontracted. None of them worked as they should. There was little the original firm could do about it other than harass and cajole their subcontractors who held the real power. It would have worked better the other way round; if the subcontractors had owned the firm who first sold us the promise of the kitchen, because it was the subcontractors who had the real power, but needed help to deliver it.
It will happen that way, eventually. Effective ownership will gradually revert to those who hold the resources, who will employ those who previously employed them. Those on the outside who provide only one of the resources – finance – will inevitably see their effective power recede. It is called ‘subsidiarity’, the old idea that power should morally and rightly lie at the bottom not the top of things. Put more simply – stealing people’s responsibilities is morally wrong and doesn’t work in the end. It is a pleasing thought that, ultimately, the pressures of modern business will compel us to be moral.
Sometimes one has to wonder why we need the concept of ownership at all. Oxfam, that large non-governmental organization, was described to me as a community which belonged to no one and which was fuelled by belief. As business realizes that its best people are really volunteers, there because they want to be, not because thay have to, the model of the voluntary agencies may become increasingly relevant.
THE HERDING OF CATS
Citizenship is about autonomy, the freedom to run your own life. In return for this freedom, the corporate state can demand little, but hope for much. Citizens in a democracy are free to emigrate. You cannot stop anyone leaving. Nor can you demand commitment, only hope for it. Combining this freedom and these rights with the aims of the organization is the real challenge of the citizen company. Many managers would prefer not to accept the challenge, because organizing talented people is akin to the proverbial herding of cats – difficult by definition. We have to manage people whom we can’t totally control. Instead we have to trust them, and they have to trust us. The principle is simple. The practicalities mean that it seldom happens.
For a start, organizations as well as individuals have to earn the right to be trusted. But in an atmosphere of downlayering and outsourcing, loyalty to the organization is today a rare commodity. Which is odd, because loyalty is worth money. Frederick Reichfield has put numbers on the Loyalty Effect, suggesting that disloyalty from employees, investors and customers can stunt performance and productivity by up to 50%.
Once established, however, an organization with mutual trust at its core can be both creative and efficient. People obviously work better if they are not looking over their shoulders for the next job. They work more creatively if they respect the people around them and believe in what they are doing. Where they trust the organization, where they are committed to its goals and share in some way in the results of the business, they are more likely to accept relocation, reassignments, even temporary across-the-board pay cuts.
Who are these citizens? States, nowadays, require proof of talent and good behaviour from those who would apply to be their citizens. Some states would like to apply similar tests to those born into their citizenship, were there only some place else that they could dump them. Organizations are privileged in this respect. They can choose all their citizens, and would be wise to do so very carefully. Citizenship will certainly not be granted to all. In changing times no organization can make even ten-year commitments to too many people, but will keep their citizenship core as small as possible.
There will also be the necessary mercenaries, who could always turn into citizens, and there will be probationer citizens, who have to prove their worth and earn trust. The citizen core will be the proven ‘trusties’. For an example of how such an organization works we only have to look at professional partnerships, in law, accountancy, consulting or architecture. The partners in a professional partnership are the full citizens of that organization, so much so that all the outcomes belong to them, bad as well as good. A public company with limited liability does not have to ask so much of its citizens, but, proportionately, the rewards and the commitment are probably lower.
Businesses could also look at universities, who have long struggled with the dilemma of tenure, or life citizenship. This dilemma is nicely put in the jibe that those who need tenure don’t deserve it and those who deserve it don’t need it. Tenure, which was once the guarantee that you could speak your mind without fear of dismissal, is now a guarantee of a job for life, a protection that the best should not need. Unfortunately, the best are not guaranteed to remain that way. The universities fear that they may get lumbered with unworthy citizens who cannot be expelled. Indefinite tenure than becomes expensive and demoralizing to the rest.
To prevent this deterioration the stakes have been raised in the initial tenure decision. It is now much harder to be accepted as a full citizen after the necessary probationary period. Tenure is also becoming more conditional, subject to periodic review or, even, to termination after due process and proper notice. Citizenship, in other words, is now more clearly seen to have responsibilities as well as rights. In business it was often the other way round – citizens, if one could call them such, had more responsibilities than rights. The worlds of academia and commerce are meeting each other halfway.
The payoff for a citizen company should be a shared commitment and mutual trust. But the trust has to be in the bloodstream, no matter how well the bone structure or the nervous system have been designed. In a world where work is where you are – in the car or plane, at the office or at home, on the client’s premises or in a hotel – you will increasingly have to work with people whom you do not see. Organizations are drowning in communications, in e-mail, voice mail, faxes and telephones, but you can tell lies on e-mail and not be noticed, and who knows whether your fax or your e-mail has actually been read, not crumpled, lost or deleted. More than ever before we have to trust those with whom we work. Trust sounds like a nice motherhood term, something no one could be against, all warm and woolly. In practice, however, it is difficult and tough. Management by trust depends upon some clear rules and principles, which will have to become the guidebook for a citizen company.
There are seven cardinal principles of trust:
1. Trust is not blind. It is unwise to trust people whom you do not know well, whom you have not observed in action over time, and who are not committed to the same goals. How many people do any of us know that well? Perhaps more pertinently, how many people know us that well? In ordinary life there seems to be a rule of twelve. When asked how many people’s deaths would affect them personally, or how many telephone numbers they can remember it is seldom more than twelve. Work demands less stringent conditions. In practice, we can probably know a maximum of fifty people well enough to rely on them in ordinary circumstances. Those fifty can, in their turn, know another fifty, and so on.
Large organizations are not, therefore, incompatible with the principle of trust, but they have to be made up of relatively constant and smaller groupings. Impossible? Asea Brown Boveri (ABB) has 225,000 employees working in 5,000 business units which operate in 142 different countries. Each unit has an average of 45 people working in its citizen core. The larger factories manage with 300, which is stretching it. The units combine with each other in an infinitely flexible way to create a powerful and fast-growing complex corporation, but the building blocks conform to the rule of fifty.
Make the groups larger, or change them too frequently, and the organization starts to replace trust with systems of control, because the people do not know each other well enough to develop trust. My title, in one la
rge organization, was MKR/32. In this capacity I wrote memos to FIN/41 or PRO/23. I often knew no names and met no people behind those titles. I had no reason to trust them, and, frankly, no desire to. I was a ‘temporary role occupant’ in the jargon of the time, a role occupant in an organization of command and control, based on the premise that no one could really be trusted, only the system. I left after a year, for such places can truly be a prison for the human soul, and in those prisons people seldom grow because there is no space to explore the truth about yourself. Worse, these prisons, boring though they may be, suck up energy, leaving little over for exploration outside. Role underload, studies show, can be more crippling than role overload.
2. Trust needs boundaries. Unlimited trust is, in practice, unrealistic. We trust our friends in some areas of life, but not necessarily in all. A neighbour may be a great help in emergencies, but hopelessly unreliable when it comes to money. ‘I would trust him with everything – except my wife’ one man wrote in a reference for an applicant to the Programme I was running. We manage our young on a loose rein, but the rein is always there, getting longer and looser as we trust them more. It is no different in organizations.
By trust, organizations really mean confidence, a confidence in someone’s competence, and in their commitment to a goal. Define that goal, and the trusted individual or team can be left to get on with it. Control is then exercised after the event, by assessing the results, rather than before the event, by granting permission. This freedom within boundaries works best, of course, when the work unit is self-contained, with the capability to solve its own problems.
Trust-based organizations are redesigning their work, pulling back from the old reductionist models of organization, whereby everything was divided into component parts or functions, where everyone only did bits of things and seldom saw the whole. The new, holistic designs for the units of the organization look, at first, to be more expensive than the old functional types, because they often duplicate functions, maintaining separate accounting sections, for instance. The hope is that the energy and effectiveness released by the new freedom within boundaries more than compensates. Where we are trusted to find our own means to some agreed results we have the room to explore, to put our own signature on the work.
The Hungry Spirit: New Thinking for a New World Page 16
