The Corporate Crisis As Opportunity: Restoring Balance of Power

Acknowledgements

I would like to acknowledge the help that I received from the following people while writing this book.

My gratitude goes to my wife Jean for her help, encouragement and skilful editing, to Alfonso Montuori for his constant encouragement and suggestions, to Jaqueline Vischer, Roger Brouillette, Pierre Lanoix and above all to my son John, who not only read and made valuable comments for improving the manuscript but also made this ebook possible.

There is a widespread, almost universal, under estimation of the impact of organization on how we go about our business… Creativity and innovation, like freedom and liberty, depend not upon the soft pedaling of organization, but upon the development of institutions with the kind of constraints and opportunities that can enable us to live and work together harmoniously.

Elliot Jaques, Requisite Management

(Arlington: Cason Hall, 19XX), p. 10.

Stockholder privilege rests on the notion that corporations are not human communities but pieces of property, which mean they can be owned and sold by the properties class.

Marjorie Kelly, The Divine Right of Capital

(San Francisco: Berrett-Koehler, 2003).

Introduction

The famous question: is man made for the Sabbath or is the Sabbath made for man? has its modern counterpart: is the corporate system made for human beings or are human beings made for the corporate system? During the past 25 years our confidence in the system has been badly shaken. The ravages of corporate greed have ripped through the fabric of society like a tornado, leaving gashes that perhaps cannot be mended. Trust is one of the most valuable of our non-renewable resources. When it becomes polluted and we can no longer trust, only tyranny and power can replace it as the means for sustaining the society in which we live. The financial meltdown in 2008 is simply the most recent and will surely, by no means, be the last earthquake that has undermined our trust.

In whose name is all this being done? The shareholders? But they now have to sue companies that have misused their investments. The customers? Not if prices are fixed and the customers manipulated in a multitude of ways by these corporations. The employees? "In the last decade and a half the proportion of employees making poverty-level wages has climbed substantially, and in mid 1990's it stood at an alarming 30 percent. (emphasis added)[1]

The myth is of course that a company is in business to make a profit for its shareholders, and the shareholders are the owners of the company. Yet, most investment dollars do not go to corporations but to other speculators. Among the Dow Jones Industrials only a handful have sold any common stock in thirty years. According to figures from the Federal Reserve in recent years only one in a hundred dollars trading on the public markets has been reaching corporations. Those who found the company do take a risk based on company activity. Those who buy sixth and seventh hand take a gamblers risk.[2]

Gambling, as we know, is an addiction and the addiction can become critical if the dice are loaded in favor of the gambler. Compound that addiction with the addiction to power and an unholy alliance is formed. According to Ken Auletta[3] writing in his book Greed and Glory on Wall Street: The fall of the house of Lehman, Human folly and foibles-not the bottom line of profits, not business acumen, not scientific management" or the perfect marketing plans or execution - often determine the success or failure of an organization.

To dub insatiable greed and lust for power 'follies' and 'foibles' hardly does them justice. As is now very well known, ninety percent of the financial wealth in the United States is owned by only 10 percent of the population, and the one percent wealthiest doubled their share of national household wealth during the last twenty years from 20 percent to close to 40 percent. Yet still, among the 10 percent are those who break the law and indulge in corrupt practices to increase their portion even further.

Social activists are drawing attention to the damage being done to the environment, to the exploitation of the poor in third world countries, to the waste of diminishing resources, to pollution, global warming and to many other concerns. They are pressing for government controls and regulations. Even some shareholders and shareholder groups are now actively trying to reduce the damage being done to society by the companies in which their money is supposedly invested. Furthermore, courses on ethics and corporate social responsibility are now given in universities and business schools. Yet much is based on a faulty assumption: that executives, within the present corporate system, can do things differently. Sam Gibara, Chairman and former CEO of Goodyear Tire said, Although the perception is that you have absolute power to do whatever you want, the reality is that you do not have that power. As a person you may want to act one way, but as a CEO you cannot do that.[4]

Foibles and follies do not drive the system, and greed is not the cause but the result of the system. Let me quote Marjorie Kelly once more: "The prime force [that drives the corporate system] is systemic pressure, pressure that comes from the design of the system itself.[5] The pressure to 'get the numbers' (generate profits for shareholders) is felt by CEOs or managers — and enforced by them — but it originates with the financial interests behind corporations" (my emphasis).[6] And those financial interests are succoured by a myth, the myth that a company functions simply in the interests of the stockholder. Thus the corporate system functions to promote and maintain the corporate system. Human beings simply serve it, and where possible, exploit it. Is the corporate system not the dreaded Frankenstein Monster that Mary Wollstonecraft Shelley warned us about?

We must return to the roots.

If we are to make real changes we must examine the system and we must ask once again what or who is it for. We must ask ourselves, What was the original prime force that gave rise to the corporate world? If we can start from there we may be able to see the corporate world from a different perspective. As long as we stay within the present assumptions we will simply have to turn around within the limits imposed by those assumptions. But how are we to break out and make this exploration? Where can we look to find an understanding or explanation of corporate behaviour and reason for being that is not already biased by those assumptions? We cannot go to business schools and universities. They are, for the most part, the purveyors of the myth. We will not find there a road map by which to steer our way back to the roots. We will not find there a securely founded understanding of the corporation.

I can well imagine that this statement could be met with protests and derision. Yet let me ask any university professor, You use the word 'company' quite often, you may well know people who work for a company, you possibly invest in a company, you also are a customer to a number of companies, what do you mean by the word 'company'? How would you answer? Would you say that it means a legal entity? But the articles of incorporation, the letters patent and so on are not really the company, are they? They make a company possible. Would you say that it means the buildings or land? Yet these are obviously not the company either. A company can change its premises and still be the 'same' company. Would you say that it means all the people who are investing in the company? All the employees? Somehow these do not seem appropriate either. So to what does this word company refer?

Joe Badaracco, Harvard Professor of Business Ethics, admitted that in his 25 years of teaching he had never been asked that question! His best guess was that it was a group of individuals working together for a common object.[7] But, let's face it, that was not a very good guess because it could refer to a bunch of boy scouts trying to light a fire, or a group of children playing hockey in the street. If we consult Webster's Dictionary we find that it says that a company is an association of persons for carrying on a commercial or industrial enterprise. That might give us a start, although it does not say what kind of association these persons have, nor does it account for the role of money in a company; nor does it mention work, which, after all is a vital requirement if the company is going to survive. If we search the Web we find a company is simply an institution created to conduct business.[8] If we try to find a definition of a corporation we will fare no better. The equivalent to these definitions in physics would be that an atom is a number of things brought together.

Work is the most essential ingredient in a company yet again it is another word that we use frequently, and take for granted that we all understand it in the same way. We go to work, we do work, we are paid for work, but what is work? What do we mean by the word 'work?' Something hard, activity we are paid to do, the expenditure of energy? Also what do we mean by 'profit?' Is the purpose of a company simply to make a profit? All of these questions are interconnected: we cannot answer one without in some way answering or implying an answer to all of them. A theory of a company will have to have defined these terms and shown their interconnection.

Eliot Jaques in his book Requisite Organization is one of the very few people who have seriously questioned the meaning of the words we use in the corporate world. He says, "There is not one single unequivocally defined concept in the whole field." He lists twelve of the most commonly used words in a manager's lexicon, including 'manager,' 'supervisor,' 'responsibility,' 'performance,' 'authority,' 'CEO', and 'organization'. Any rational discussion or worthwhile understanding must be based on univocally defined concepts. But, as he says, Lack of clarity is the ruling state of affairs in organizations and the field of management science.[9]

Creativity as the root

I am going to suggest that the key to understanding these terms and to grasping the prime motivating force at work in entrepreneurial, managerial and investment capitalism is 'creativity.' We must understand what it means to be a creative person, what the connection is between creativity and making decisions, and how this understanding will affect the way that we think about organization.

Human beings are naturally creative. Seizing hold of this as the root and source of human behaviour, we must then ensure that the way we organize a company enhances, and does not inhibit, creativity and correct decision making.

On isomorphisms in a company

One of the more important things that I shall show is that company organization is not simply a creation of the human mind; it is an extension of the human mind. To be more specific, the mind of a manager and a company organization are, to some extent isomorphic. Because I will be using the word 'isomorphic' frequently, let us be quite sure that we understand the word in the same way. Isomorphic means the same shape. Iso means the 'same' and morphic means 'shape.' A camera and an eye are to some extent isomorphic, so are the lens of a magnifying glass and the lens of an eye, or a backhoe and an arm and hand. Just as a telescope is an extension of a person's eye, so the organization of a company is an extension of a manager's mind.

If you think about this for a moment, to say that a company organization is an extension of the manager's mind is not a very profound statement. Of course it is an extension of the human mind. Intuitively it makes sense. A company can start as one man and grow to a huge multinational, and so all that is in the multinational was in an embryo fashion in the mind of the man when he began his company. If this man has a plan of action he can keep that plan in his head. He could also write it down. Writing it down now makes the written plan an extension of the mind. If the plan details the activity of three people, then the actions of these people, as they do what the plan calls for, are also an extension of his mind. If the plan calls for the people to make decisions, then, as long as these decisions further the plan, then these decisions too are an extension of his original decision.

Isomorphy and pattern

One of the most important ingredients in understanding is pattern. Identifying a pattern that is similar in a number of different systems is one basis of intelligent behaviour. It simplifies the way we think. Mathematics, on which we rely for so much of our understanding, has been called the science of pattern, and much of scientific research is the search for pattern. Isomorphisms are recurring shapes or patterns. If we can find recurring patterns within a company organization then our understanding of it will be that much greater. Moreover, if we can identify a number of systems that are isomorphic, we may well be able to transfer solutions that we arrive at in solving the problems of one system to problems that arise in other systems. The basic pattern that I shall identify is the pattern that underlies the creative process.

I will use the word role to talk about the work that an employee does. The meaning of the word role is more or less the same as the meaning of the word job. We might ask someone, What is your job? or What is your role? The word job, though, seems looser, less precise. I will show that a role and a company are isomorphic, and as a role is made up of a number of task cycles - and I will say later what precisely I mean by the expression task cycle - I will also show that these are isomorphic with the mind, a company and a role.

So, let me repeat. Companies, and company organizations, are human creations People are naturally creative. Creativity, as I will show, has an identifiable pattern. This pattern is repeated at different levels of an organization. This is possible because the company organization is an extension of the mind of the one who creates it. It is isomorphic with this mind.

The company as organism

A company is a pseudo-organism. One of the chief characteristics of an organism is that it can make copies of itself. A company grows by this process of self-replication. Let's go back to the one-man business again for the moment, and suppose that work increases to the point that he cannot do it all himself. So he employs and trains another to do the work. The role has copied itself. A company also has the potential for growth, expansion and self-regulation, which are also characteristics of an organism. An organism takes in food and impressions from the environment and transforms them into action. In the human organisms it also transforms it into ideas. A company does likewise: its food being raw materials and components, knowledge and information.

The company as a person

What I have said so far fits in with the legal understanding that a company is a person or is a corporate personhood. As a person a company can buy and sell property, borrow money, sue and be sued. I am now suggesting that as an organism it can think and create. It can also go mad. Although one can subject a mind to a certain amount of stress, nevertheless this amount is limited. In the same way an organization can only suffer so much abuse before it too begins to show signs of madness. As we now know, the mind suffers stress when one of its parts is at odds with other parts. I will show that an organization too will similarly suffer stress when parts are opposed to other parts. The film The Company went so far as to say that the modern company is psychopathic and used the psychiatric determinants of psychopathy to make its point.

One of the contributors to the film The Corporation, Ray Anderson, is the CEO of the world's largest carpet manufacturer. He is concerned that a company organization is not based on any real understanding. He used rather a dramatic way to make his point. The film showed the early attempts that men made to fly. The last attempt showed a plane being pushed off the edge of a cliff and going into free fall. Anderson said that the pilot might think that the plane was flying but, because it was not built according to the laws of aero-dynamics, the plane must inevitably crash. In a similar way he was saying that because the corporation has deviated so far from the basic needs of society it too is in free-fall and, unless we do something to bring it more in line with those basic needs, it too must crash. I agree with him.

The structure of the book

This book is divided into four parts.

Part One

Part one deals with what I mean by saying that human beings are naturally creative. In this part I will show why, when considering a company and its organization, I have chosen creativity to be the most important aspect of the mind. I will also show that perception is the earliest form of creativity. If we can understand perception we will understand creativity. I will go on to say that the creative aspect of the mind and work are isomorphic and that they are both dynamic systems. A company is an on-going process, it is something that is happening. Every situation is different. A company does not change; a company is change. There is no entity called a company that is subject to inner and outer influences. The inner and outer influences are the company. There are recurring patterns, but these too are patterns of processes.

Understanding creativity in turn will make it possible for me to show that the way we think about thinking is so often limited and disruptive to creativity. This disruptive kind of thinking is based on the belief that the only way to solve problems is to break a situation down into its parts and resolve each part. This way of thinking is called reductive, analytical or logical thinking. It is a legitimate way of thinking, but legitimate only if balanced and complemented by an intuitive thinking that is concerned with grasping the whole situation regardless of it parts.

What I am offering therefore is a new way of thinking, and this will include, but go beyond, a new way of thinking about an organization. I will not be telling you how to organize; I have no Six Easy Steps to Better Management. There are no such steps. It is said that to help someone who is in need you do not give him a fish; you give him a fishing rod. To give Six Easy Steps to Better Management or one of their tireless and tiresome repetitions is to give a fish. I am giving the fishing rod.

Part 2

Part 1 will lay the groundwork for showing in Part 2 that the structure of the simplest task cycle carried on in a company and the company structure as a whole are isomorphic and that between these two extremes lies a hierarchy of isomorphic structures. I will talk about work, define it and show to what extent work and creativity are inherently one and the same thing. I will show that a company that is organized in an optimum way will allow for creativity at all levels.

Part 3

In Part 3 I will be concerned with the structure of the company and the relation of this structure to all that I have said about creativity.

Part 4

In Part 4 I take a new look at corporate ethics and give criteria by which to assess the ethics level of a corporation.

This means that Part One of the book will be devoted to unraveling some of the mysteries of the human mind. The second will respond to such questions as what is work? What is an organization? If you wish you can go straight to Part Two and read the rest of the book from there, and then return to Part One after you have done this. I debated with myself whether I should give the explanation and the practice or whether I should give the practice and then the explanation.

Origins of this book

I have been engaged in Zen Buddhist study and practice since 1954 and met a teacher i n 1966. Since that time I have spent from two to three hours each day in meditation and have attended numerous weeklong retreats. For the first half of my adult life I was an executive in a corporation in South Africa and a corporation in Canada. At the age of 48 I gave up my work as an executive in order that, after three years intensive training, I could begin teaching Zen Buddhism. In 1979 I came to teach in Montreal. I was originally trained as a psychologist and, through many years of psychological and spiritual counseling and interviews, I have been able to gain a profound insight into the workings of the mind. It has been from this insight that I have come to see the role that creativity plays in the human mind and the problems that can come when this creativity is stifled. Creativity and Zen practice share a common source: whereas, broadly speaking, the East has gone the way of meditation, the West has gone the way of creativity.

I have not arrived my present understanding simply by logic and reading, but from my years of experience as a manager and also by direct observation of the mind at work: my own through years of intense meditation, and the mind of others through close work with hundreds, perhaps several thousands, of people both as a psychological counsellor, and as a teacher of Zen Buddhism.

Part One

The Dynamics of Human Nature

Chapter 1

The Themes

The importance of understanding ourselves.

If we want to understand why we do the things we do in life, such as why we work, or why we organize work in the way we do, what is creativity or why creativity is so important to us, we must understand ourselves. Quite obviously an organization cannot exist without people, and yet this is so often overlooked. Even though organizations must be designed with people in mind, yet all too often people who have to organize simply think about goals or objectives, or about specific kinds of work that must be done, about principles of organization, or, worse still, about different ways of drawing organization charts. As Joel Bakan says in his book, The