Slide 1
Most people will recognise that the primary purpose of a
commercial organisation is to make a profit. Some commercial ventures such as
charities may not seek to make a profit in the most traditional sense, but
still, the funds through which they do their work are generated by the same
means as those organisations that are seeking profit.
Profit is a contentious thing in the world today, largely
because of the disparity between large multinational corporations and the
little guy. I think it’s worth spending some time exploring this argument.
A description of profit taken from Reinventing Organisations is this, “profit is like air; we need air to live, but we don’t live to breathe.”
My own personal definition of profit is this: profit is not merely the mark of
a robber baron, but an acknowledgement by the end consumer of the value added
by each person prior to the consumer’s purchase.
I would suggest the issue most people have with profiteering
organisations today is that faceless multinational corporations, non-describe
shareholders and the pursuit of profit maximisation do not show any
appreciation for the human endeavour behind that profit. Whose value am I
acknowledging when I purchase a product off Amazon? Whose value is a homeowner
acknowledging when they pay off interest on their mortgage? It’s not that there
isn’t value to be rewarded, just that there’s no obvious person to reward. Profit has become
disconnected from its purpose, in this regard.
Or consider it another way. If profit is like air, what does
profit maximisation make you think? To me, I conjure a picture of many smartly
dressed people desperately clawing at clouds until there is only one left, and
the others have suffocated. Then I ask the question; can one person breathe
more than another?
Profit as air is the business perspective, whilst not living
to breathe is the social perspective. Profit as recognition of value is the
economic – or at least political economy – perspective. All three of these
perspectives are important but none should be considered in isolation. This
will be a theme of this presentation.
Slide 2
Of the ideas Reinventing
Organisations tackles, competition is one of the subtler. What’s
interesting to me is the idea of competition within an organisation. When I
read the book, I drew a picture, and wrote some annotations. This is basically
what I drew.
Firstly, I said there’s a limited quantity of stuff. This
assumption is obvious. In a competitive environment, only one person can win a
race. Next I said if our organisation’s aim is to build as many towers as
possible, out of the limited stuff we have – stuff is a technical term by the
way – then competition works. But if our organisation’s aim is to build the
highest tower, then competition drains resources, and in fact co-operating is
better.
But if you think about this model, there is a glaring flaw
in it – namely, if we want to build the most
towers, isn’t it still better if we co-operate? Together, we can plan the most
efficient pattern of construction, the best way to split resources and so on.
Together we can make big decisions that in isolation we can’t even start to
ponder.
Ultimately, it’s what we strive
to do that should influence how we do
it. And there’s almost no organisation on the planet – except maybe some banks
(don’t get me started) – that actively work against their own self-interests. Of
course, it’s important to understand what an organisation’s ‘self-interest’ is,
because I think that’s an innately vindictive term.
Slide 3
My proposition is this: a company’s ‘self-interest’ is
essentially its ‘purpose’, and succeeding in fulfilling its purpose requires
profitability, for profit is air, and co-operation, for what we strive to do
should inform how we do it.
My go to way of thinking about these things is via a
constructed model. I think of these three things, purpose, profit and
co-operation (I couldn’t think of a third ‘P’ word) as being cyclical. But this
model still feels reductionist and removed from the real organisations
discussed in Reinventing Organisations.
My solution is to use profit and competition.
Specifically, I want to think about what organisations in
the book do for their employees. This idea is touched on in The Puritan Gift by Hopper; the idea
that managers should know what their employees want to achieve to allow them to
better manage the employee. In Reinventing
Organisations, we are asked to go beyond understanding and to actively
encourage our staff to pursue their goals, with company interests not directly
in mind.
When an employee does this, whether they are encouraged to
or not, I call it self-profiteering. Primarily we work to earn money. When we
change the way we work, without a change in our compensation structure, we are
earning something else. This is self-profit, and it can be destructive. In
fact, I’d suggest in some industries – banking, cough cough – this is why we
see so much intra-company competition. Your standard company’s battle over
departmental budgets is another prime example, often with department heads
jostling for efficiency savings, and the benefits that come with that…
This competition, as shown prior, degrades the company’s
purpose, and ultimately its profit. So why is it a good idea to encourage it?
Because when an organisation takes an employee and treats them merely as a cog
in a system they become atomised, and disconnected from the purpose of the
organisation. This is the result of oppressing staff ambitions. When we engage
in our staff in their future ambitions, their additional skills and, to an
extent, just as people, we can bring people from all different areas of the
organisation to the table – perhaps metaphorically – so they not only know what
they’re doing and how they contribute, but importantly why they do it. How is their role helping the company, and how is
the company helping them?
This is how profit becomes a way of acknowledging the value
added by all people involved. It might not be an explicit social contract, nor
a negotiated financial agreement, but it’s a meaningful, human reward.
Not only does adding in the idea of encouraged self-profit
make the model feel so much more human, it also allows us to look at
organisational hierarchies not as vast pyramids but as close, human networks.
We can pick any individual and trace how they inform the company’s purpose, how
they help others, and they contribute to profit and importantly what they get
out of the whole arrangement.
Slide 4
I want to conclude with asking a question that I think is
important: where next? The ideas I’ve spoken about have, in my opinion, sounded
obvious on one level and very utopian, pie-in-the-sky on another. I refer you
to Reinventing Organisations for
answers to both these points: firstly, much of the book is obvious, and the
perversion comes when we ask how the technocracy of modern large business has
emerged, and secondly, the book demonstrates organisations that have these
ideas already exist, and can be successful. If my ideas are pie-in-the-sky,
well, that’ll make for a weird view.
The reason I ask where next is because two of the
organisations referred in the book are Buurtzorg, a Dutch healthcare provider,
and ESBZ, a German school. Not only are these both examples of sectors of
extreme public relevance embracing these ideas (and so I would suggest worthy
of inquiry for public benefit, even if no result is found), but they are sectors
that we, as a country, are struggling to operate at this present time, and in
the future.
Please do not for a moment think that I am proposing a
resolution to the crisis in the NHS by distributing copies of Reinventing Organisations to every
senior manager in the NHS; but the success of Buurtzorg in the Netherlands
should not be underestimated. Equally, ESBZ seeks to encourage their students
to become independent thinkers, to be creative and to engage in the outside
world. In a future of increasing automation, increasing online presence and
increasing mental health challenges amongst younger people, it is perhaps wise
to ask why this school works so well, and what benefits can it provide for
tomorrow’s, if not today’s children?
I don’t have the answer to these questions, but a good
presentation should leave the listener questioning something. I question how
the ideas in Reinventing Organisations
can be applied to the world of finance to make a more stable and more suitable
banking system. You will have your own interests. But let the book inspire
questions. It’s not a manual. If the key to business success could be written
down, business schools would be libraries. It’s an idea, one that places people
– us – at the heart of it.
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