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Arie de Geus: Living Company

James Dean or Kirk Douglas? Jimi Hendrix or Vera Lynn? Why do some people die young and other live long and productive lives? Arie de Geus, who himself is living a long and productive life, asked the same question of companies. And the answer he got was, like the long-lived companies,  unexciting, cautious, yet robust.

Arie de Geus
Arie de Geus

Short Biography

Arie de Geus was born in 1930, in Rotterdam in the Netherlands. While studying for his doctorate in Business Administration at the Nederlandse Economische Hoogeschool (now, Erasmus University) in Rotterdam, he started working at Royal Dutch Shell to support himself through his studies.

His career at Shell was long and successful. Over 38 years he took a number of regional and corporate roles. They culminated with leadership of Shell’s Group Planning Department, famous for its innovations in Scenario Planning. There, he focused his attention on Portfolio Analysis and Organisational Decision-making. He concluded that organisational learning was a key to successful decisions and corporate longevity.

He developed this theme in a Harvard Business Review article in 1988, ‘Planning as Learning’. When de Geus retired from Shell in 1989, he rapidly got involved with the newly founded Center for Organizational Learning, at MIT, joining Chris Argyris, and Edgar Schein among its advisors, and Peter Senge, as its first Director. In 1997, he wrote the book that has brought him most prominence: ‘The Living Company’.

The Living Company

In his research, de Geus found that the average life expectancy of European and Japanese companies is 12.5 years. For large multi-nationals, it is between 40 and 50 years. Why then, are some able to last hundreds of years? De Geus argues that all have a potential life of 200 to 300 years, and he set out to learn the secrets of those who have achieved it.

His principal conclusion is simple. The problem is profits. Or, more accurately, it is a short-term focus on building profits, at the cost of a longer-term focus on all aspects of the business. Chief among the long-term aspect, de Geus highlights the need to nurture people. How a long life, a business needs to prioritise human capital over financial capital.

The title of his book arises from two hypotheses de Geus sets out:

  1. A company is (in some ways) a living being
  2. The decisions made by the company are a result of a learning process

Therefore, for the living being to thrive, it must continually learn, and build on what it has, rather than constantly seek to throw out the old, and with it, the organism’s accumulated wisdom.

Other factors he found, which characterise the long-lived companies he studied, are:

  • sensitivity to their environment
  • cohesive, with a strong sense of identity
  • tolerant of experimentation
  • frugal financing decisions

He uses these to carry forward his metaphor of companies being like living organisms, in suggesting that these characteristics also represent successful survival strategies for real living creatures.

Context

Without a doubt, de Geus sets out a corporate, rather than entrepreneurial growth agenda. And his approach to human capital aligns him with other proponents of the human side of the enterprise, starting with people like Follett, Owen, Mayo, and McGregor.

His analysis is also more nuanced and less of a ready-recipe, than the book that followed it a few years later and also looked at long-lived companies: ‘Built To Last’ by Jim Collins and Jerry Porras. Perhaps the biggest difference is that, while de Geus saw average companies as lasting up to fifty years, and targeted longevity on 200-300 years. Collins was interested, in Built to Last, on those that make it past the 50 year mark. Maybe de Geus would see these as merely promising adolescents.

 

 

 

 

 

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Amy Edmondson: Teaming

Amy Edmondson is an Engineer turned Management and Leadership Professor, who has made a special study of how to create effective collaboration among small, disparate groups in informal circumstances. This, she believes, is the key to organisational success in a world where innovation is critical.

Amy Edmondson
Amy Edmondson

Very Short Biography

Amy Edmondson grew up in New York, and studied Visual and Environmental Studies and Engineering at Harvard University, graduating in 1981. For a short while, she was Chief Engineer at the Buckminster Fuller Institute. After she left, she published a book, ‘A Fuller Explanation: The Synergetic Geometry of R. Buckminster Fuller’ about Fuller’s ideas.

She then moved to the Pecos River Learning Centers, where she became Director of Research, until starting a PhD in Organisational Behaviour at Harvard in 1991. When she completed it, she joined the staff of Harvard Business School, where she is currently the Novartis Professor of Leadership and Management.

Failure

For many people, Amy Edmondson came to notice with her 2011 Harvard Business Review article ‘Strategies for Learning from Failure‘. In this, she argues the case for ‘intelligent failures’ setting out a neat model of how failure spans a spectrum from blameworthy to praiseworthy.

Reasons for Failure - Amy Edmondson
Reasons for Failure – Amy Edmondson

The abilities to face up to failure, discuss it candidly, and be curious about it lead nicely into the work for which Edmondson is best known…

Teaming

Edmondson distinguishes the concept of ‘Teaming’ from the more familiar idea of teamwork. Teaming is about bringing together a diverse group and rapidly creating the conditions for close collaboration. It bears a close relationship with the idea of Swift Trust, which we discussed in an earlier Pocketblog.

However, whilst swift trust focuses on creating a solid basis for long-term collaboration quickly, Edmondson is more interested in short-term, informal collaboration. For this to happen, she identifies ‘three pillars’.

  1. Curiosity – to learn from the people around you
  2. Passion – so that you care enough to work your hardest
  3. Empathy – so you can see things from other people’s points of view

The role of leadership becomes one of role modelling these three behaviours. You must be driven to achieve the goal, enquire deeply into the situation, and tune into the needs and emotions of the people around you.

Edmondson’s book, Teaming: How Organizations Learn, Innovate, and Compete in the Knowledge Economy is very highly regarded and features a foreword by Edgar Schein.

An important concept that Edmondson introduces in her work on teaming is…

Psychological Safety

Teaming works – and teams work – when participants collectively feel that members can take risks together safely. They can share feelings and disclose actions without fear of recrimination. This creates a climate of openness, which Edmondson calls ‘Psychological Safety’. Again, the leader needs to model appropriate behaviours, acknowledging your own fallibility, and being curious and empathic.

Crucially, when you achieve psychological safety for your team, work becomes a problem of learning, rather than of executing actions. In this, Edmondson’s work complements Schein’s exceptionally well.

Edmondson in her own Words

There are a number of excellent videos available. In this 12 minute TEDx video, Edmondson is talking about Psychological Safety.

And you can see Edmondson talking about Teaming here.

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Charles Handy: Management Philosopher (Part 1)

In my research for this article, I found an unreferenced remark, suggesting that it was The Economist magazine that coined the term ‘management guru’, and that they first used it as a description of Charles Handy. Handy rejects the label – and so he should. It almost belittles the breadth of his thinking. From organisational theory, to management trends, to social polemic; Handy’s thinking goes well beyond easy categorisation.

Charles Handy

Short Biography of Charles Handy

Charles Handy was born in a small town a few miles outside of Dublin, in Ireland, in 1932. He was educated in an English public school, and at Oxford University, where he gained his MA in ‘Greats’ – classical history and philosophy. He went from there to work for Shell, taking a number of operational roles around the world, where he had great autonomy as a young manager. Returning to London, he found headquarters life didn’t suit him. What did, however, was a transfer to the staff college, where he found teaching much more to his liking than corporate administration.

MIT Sloan School

Having taught himself the basics of economics earlier on, so he could take up a role at Shell, he moved briefly to Anglo American as an economist, before travelling to MIT to study at the Sloan School of Management. here he met and studied among some of the greats of US management theory: Warren Bennis, Chris Argyris, and Edgar Schein, who supervised his studies. He was greatly influenced by them all, and also by the work of Douglas McGregor, who had also worked there and died a little before Handy arrived in 1965.

He returned to London to set up the Sloan Program at the newly founded London Business School, where he became a professor in 1972. It was there that he wrote his first book, Understanding Organizations, which has remained in print pretty much ever since 1976, with new editions updating it for modern readers. It is still a first rate introductory text, of which Handy says that he wrote it to get to grips with the ideas in it. He also (famously) recommends that once you have read it, you should re-write your own version and burn the original. In part, Pocketblog is my attempt at re-writing his book, though I never plan to dispose of my trusty 1993 fourth edition!

Handy finds his Voice

Whilst Understanding Organizations is very much a compendium and synthesis, Handy’s next book introduced his own ideas. 1978 saw the publication of The Gods of Management. We’ll take a look at the ideas in this book in part 2 of this blog.

In 1977, Handy left academia, in search of a somewhat more spiritually rewarding role. He found it in an organization set up by Prince Philip the Duke of Edinburgh, and the Church of England. St George’s House is an institution that encourages business and political leaders to come together, along with faith leaders, to consider contemporary and societal issues. His post as Warden allowed Handy to marry his philosophical and commercial instincts.

Portfolio Career

However, in 1981, Handy left, to pursue a new direction in his working life. This was a direction signposted in one of his most important books, 1984’s The Future of Work. In it, he signposted the development of portfolio careers, and the downshift from high-powered corporate jobs (the rack he had been on at Shell) to lesser-paid, but more congenial lifestyle careers. He embraced this downshift through the 1980s and started his own portfolio career that has served him to this day.

Handy further developed the ideas from The Future of Work in 1989’s The Age of Unreason. This book is full of ideas that we will explore further in part 2 of this blog. At its heart is Handy’s rejection of people as human ‘resources’. In modern organizations, we will want to assert our individuality.

A Stream of Ideas

The late 1980s and early 1990s were a particularly prolific time for Handy. He contributed to Making Managers, which sparked a new focus on management as a professional discipline, rather than a simple set of tasks, and led to the growth in the UK of management qualifications, and wrote Understanding Voluntary Organizations. In 1991, he presented a BBC TV series called Inside Organisations, and published a book by the same name, which set out 21 management concepts or ideas. Handy chaired the RSA from 1988-89.

His more philosophical leanings emerged from 1994, when he wrote one of his biggest selling books, The Empty Raincoat, about the emptiness at the heart of global economic growth. In the US, it was called The Age of Paradox. This book may be the most prescient among many of his works that seem that way.

Handy has barely let up with a stream of new books with new and interesting ideas:

A Summing Up

Without a doubt, Handy is a prodigious thinker. He has done and written so much, that we have to consider him one of the few of our Management Thinkers and Doers for whom a single article is not possible. Like another great, Peter Drucker, Handy is one of our foremost commentators on the nature of organisations. And like Drucker, his ideas have ranged well beyond that field. In Part 2 of this article, we will focus entirely on some of Handy’s biggest and most important management ideas.

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Edgar Schein: Organizational Culture

Edgar Schein is a social psychologist who has introduced a raft of ideas around organizational culture, and placed his thinking at the heart of the subject. He was brought to The Sloane School of Management by Douglas McGregor, where he was a contemporary of Warren Bennis. Though less widely known, he seems to me to be every bit their equal.

Edgar Schein

Short Biography

Edgar Schein was born in 1928 in Zurich and moved to the United States. There he became a citizen and studied Social Psychology, gaining a BPhil from the University of Chicago, and MA from Stanford, and his PhD in Social Psychology from Harvard, in 1952.

Following this, he spent four years in the US army, studying both leadership and, importantly for his later thinking, the rehabilitation of prisoners of war (POWs) returning from Korea under the influence of brainwashing.

In 1956, Douglas McGregor invited him to join the faculty of the Sloan School of Management at MIT, where he became a professor in 1964 and chaired the Organizational Studies Group from 1972 to 1982. He remains an emeritus professor there.

Edgar Schein’s Work

Edgar Schein’s work is deeply concerned with organizational culture and its relationship to behaviours, motivation, learning, management and leadership, and careers. Let’s survey six big themes in his work.

Organizational Culture

Schein sees culture as the dominant force within an organization, and he defines it as a pattern of shared assumptions, about how we relate to one another, how we perceive truth and reality, the balance of task focus with growth and fulfilment, and others. These affect how people behave and the values and social norms that evolve.

His primary thinking was captured in his best known book, Organizational Culture and Leadership, originally published in 1985, but now in its fourth edition. In a later article, ‘Organizational Socialization and the Profession of Management‘ he argued that integrating with an organizational culture requires undoing, ‘unfreezing‘ prior cultural norms, and establishing new ones. He related this to what he learned during the Korean War, about brainwashing, and suggested there are three responses to these pressures.

  1. Rejection of the organization’s imposed norms and culture: ‘rebellion
  2. Selective adoption of certain values and norms: ‘creative individualism
  3. Full acceptance of the new culture: ‘conformity

Psychological Contract

In another of Schein’s important text books, Organizational Psychology, (1980), he focused on the idea of a ‘psychological contract’ between an employer and its employees. He credits the original idea to Chris Argyris, but develops it considerably. The psychological contract is a set of undocumented expectations between the organization and its employees. Where expectations match, there will be harmony: where they mismatch, problems arise, such as disloyalty, under-performance, and industrial disputes.

Management Cultures

Within an organization, Schein identified three management cultures that co-exist and, to a degree, compete unhelpfully with one another. Organizational Learning will come as people evolve their organizational culture to properly integrate these three cultures.

  1. Operator Culture: local cultures within operating units
  2. Engineering Culture: technicians and experts seeking optimal technical solutions, mistrustful of the soft roles of people in driving the right answers
  3. Executive Culture: managers focused on financially-driven metrics

Organizational Learning

Under the pressures of constant change, organizations can only thrive when they learn quickly. The problem is that it is frustrated by employees’ and managers’ fear of change. He calls this fear ‘Anxiety 1’ and argues that for learning to occur, it must be overwhelmed by ‘Anxiety 2’ – the fear of the consequences of not learning, and therefore of not transforming to meet the new realities. He therefore advocates the need for creating a culture where people can feel safe to learn and experiment, as a way of overcoming Anxiety 1 without the need to induce greater levels of fear.

Motivational Theories

Not surprisingly for someone who came to the Sloan School at the behest of Douglas McGregor, Schein’s fertile mind also paid attention to motivation. He created two contributions. The first was to group models of workplace motivation into three categories, and the second was to add a fourth category.

  1. The Rational-Economic Model
    McGregor’s Theory X, building on Taylor’s approaches to Scientific management suggest we act out of compliance with incentives of coercion.
  2. The Social Model
    Mayo’s Hawthorne experiments suggested we respond to social cures, which was in part captured in McGregor’s Theory Y.
  3. The Self-Actualizing Model
    Maslow’s Hierarchy of Needs and, to some extent, McGregor’s Theory Y focused on our need for something more than social or economic benefit.
  4. Schein’s fourth category really seems obvious from any distance…
    The Complex Model
    We are all subject to a whole array of needs, expectations, desires, and motivations, and a wise manager will engage with all the subtlety and complexity of each individual. For me, Self Determination Theory is a good introduction to that necessity.

Career Anchors

We all have perceptions about ourselves. Carol Dweck has shown that we are most successful when we feel free to enlarge these as we learn, rather than see ourselves in a fixed way.

In his 1985 book, Career Anchors: The Changing Nature of Careers, (now in a new edition), Schein documented, first five, then three more, perceptions that act as anchors in the career choices we make. The original five were:

  1. Their technical-functional competence
  2. Their general managerial competence
  3. Their need for autonomy and independence
  4. Their need for security and stability
  5. Their entrepreneurial spirit and sense of creativity

The three later components are:

  1. Their desire to give service or their dedication to a cause
  2. Their need for challenge for its own sake
  3. Their desired lifestyle.

What is Culture?

Excerpts from an Interview with Edgar Schein

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