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A version of this post appeared earlier this year in the blog of the Drucker Society of Europe:
To students of management Pope Francis is a fascinating study in leadership and organizational change. From his surprise election as an outsider, the first non-European Pope in 1300 years and the first Jesuit in history, to his well-publicized efforts to shake up an aging institution by revisiting its mission and purpose, he exemplifies the behavior of a charismatic, transformational leader. His many actions to distance himself from the trappings of power that he believes separate him from the reality of the situation on the ground have been well documented. Now he has written a powerful, brilliantly-crafted papal letter (encyclical) on the environment, arguing that if the mission of the Catholic Church is “to serve the poor”, then degradation of the planet is the primary obstacle to this effort, because the poor suffer more than anyone else from the unintended consequences of headlong economic growth.
The encyclical is an astonishing document, written by a high-context, non-linear thinker, who takes a systemic, process view of organizations, institutions and the planet as a whole; “We are faced not with two separate crises, one environmental and the other social, but rather with one complex crisis which is both social and environmental. Strategies for a solution demand an integrated approach to combating poverty, restoring dignity to the excluded, and at the same time protecting nature.”
The theme of the 2015 Drucker Forum that ended in Vienna two weeks ago was “Claiming Our Humanity: Managing in a Digital Age”. Nearly 500 management academics, business people and management consultants from all over the world attended the two-day conference in Vienna.
The preliminary events began with a CEO Roundtable on the afternoon of Wednesday November 6. The opening ‘provocation’ was supplied by Tom Davenport and Julia Kirby’s June 2015 Harvard Business Review article “Beyond Automation”. In it they address the threat that artificial intelligence in the form of smart machines is encroaching on knowledge work to such an extent that it will lead to widespread unemployment. In the past machines took over work that was dangerous, dirty and dull. Now they seem to be taking over decision-making roles. Does it mean automation and the replacement of humans or is there scope for augmentation of human cognitive powers by machines? Should we be worried? The Davenport/Kirby shorthand answer, “Yes-No-Yes”, captured the both uncertainty of our questions about the future and the equivocality of the ‘answers’.
The VW Debacle: How Large Successful Organizations and Institutions Can Become “Bad Barrels” And What To Do About It
The outlines of Volkswagen’s comprehensive program to defeat national auto emissions laws are becoming clearer. According to the New York Times the company began installing software designed to cheat on emissions test in 2008, when they realized that their new E89 diesel engine could not meet the pollution standards in the US. Three (now four) top managers who were involved in the development of that engine have been suspended. The NYT article goes onto mention that that it was also in 2008 that the CEO of VW, Martin Winterkorn, had vowed to triple the company’s sales in the US within ten years. When he became CEO in 2007 he had a reputation for being a detail-oriented manager who hated getting bad news and dealt harshly with subordinates who failed to meet their targets. All this in a company known generally for its high-pressure management methods…
The debacle at VW is just another instance of the alarming propensity for large, apparently successful organizations to spawn unethical and even criminal activity for long periods of time and then to cover it up. When they are eventually revealed, these activities can result in existential threats to the organizations involved. The recent General Motors cover-up of its faulty ignition locks is an obvious parallel but Johnson & Johnson (J&J) is another example of a corporation that has encountered more and more ethical issues in recent times. Only a few weeks ago NYT columnist Nicholas Kristof reported on J&J’s aggressive attempts to promote off-label uses of its mega-hit drug Risperdal. The company eventually pleaded guilty to misbranding the drug and was fined over $2.2 Billion. No individual executives were charged with any wrongdoing. As Kristof points out, Alex Gorsky, the executive responsible for the marketing of the drug in these ways has now been elevated to the job of CEO! This suggests that the internal reward systems for pursuing results at all costs can be very real. This incident occurred shortly after J&J’s tardy recall of faulty hip joints as well as the discovery of multiple quality problems in J&J’s factories. J&J used to be known as the “Credo Company” that always put its patients first. How it has drifted!
For Peter Drucker history was an essential resource. Commentators have described the scope of his writings as “Braudelian” in honor of the work of historian, Fernand Braudel, the leader of the French Annales school of history, renowned for its broad, integrative approach. Drucker’s illustrations of organization and change included both the British Raj in India and the Meiji Restoration in Japan. A trio of little-known German thinkers, Willem von Humboldt (1767-1835), Joseph von Radowitz (1797-1853) and Friedrich Julius Stahl (1802-1861) informed his understanding of what it took to preserve the traditions of the past while facilitating rapid change.
Recently Adrian Wooldridge, the Schumpeter columnist for The Economist, reviewed the introduction by BetterWorks, a Silicon Valley startup, of “goal science” to the workplace. The New York Times reviewed the same company on Monday. The company “makes office software that blends aspects of social media, fitness tracking and video games into a system meant to keep employees more engaged with their work and one another. With the software, employees and their bosses set long- and short-term goals, and, over time, log their progress on a digital dashboard that everyone in their company can see and comment on.” The idea is to make the Management by Objectives (MBO) process more frequent and more “data-driven”. One wonders whether this is the real challenge with MBO. More often the problem is with the philosophy behind the technique, rather than with the technique itself.
MBO; an Elusive Philosophy
Management by Objectives (MBO) is a deceptively simple technique that is very difficult to employ effectively. The philosophical framework within which it is used is critical. Given Peter Drucker’s background, upbringing and his emphasis on self-discipline, it seems likely that his original intent was that MBO should be the civilian equivalent of the system of mission command or auftragstaktik, developed by the Prussian army in the 19th Century. The essence of this system was that no commander should issue an order that went beyond what he could know of the actual situation. Rather he should declare an intent that created a space within which his subordinates would have the freedom to act as they saw fit. They, in their turn, would declare their slightly narrower intents and so on, down the line. This cascading set of “action spaces” preserved autonomy and creativity at every level of the organization. Helmuth von Motlke the Elder (1800-1891), who perfected the system, made no distinction between strategy development and execution – strategy could emerge bottom-up through “directed opportunism”, just as readily as it could be formulated top-down. Mission command is still the gold standard for armed forces all over the world. But, outside of small Special Forces units, it has proved extremely difficult to implement – the words are easy, but behavior and the selection and training required to produce and sustain it are difficult.