Sunday, January 02, 2005

Stuart Berman, a fairly new addition to the blogroll had an interesting post where he managed to work in creativity theorist Mihaly Csikszentmihalyi, The Lord of the Rings, The Pentagon's New Map and economic theory. Not a bad combination I'd say. In this excerpt, Berman asked:

"2) If free and democratic governments are more viable than socialist (or other top down authoritarian regimes) does it also make sense that corporations should also become 'free and democratic'?

My impression of many large corporations today is that they are run like benevolent dictatorships or other centralized planning regimes. If a corporation can be structured like a democracy where there is limited government (management which has a core function, specific responsibilities, term limits, transparency) we might see the corporation of the future. I believe this may be viable for the same reason that socialist societies are far less effective and enjoyable than free market societies - our society functions remarkably well despite it complexity and lack of centralized planning, the market knows better than any individual or committee. Mihaly says take the hand off the worker and let them (workers as the market) decide what is best. I am not advocating anarchism or a lack of governance but rather a rebalance - management needs to be very disciplined about where it should tread and where it should not. [Barnett's rule sets again - and as he notes that in a democracy or horizontal organization you are given free reign unless you cross certain defined lines of action - whereas in a vertical organization (autocracy) there is an attempt to constrain what you think or are exposed to. Corporations are not that extreme but somewhere in the middle - I think there is more room to move toward Mihaly's democracy.]"

A good question. I'm of two minds in terms of the answer which could be divided into matters of principle and matters of practice.

In principle there is a fundamental difference between a corporation and its employees and a State and its citizens. Namely that while in the case of the State the citizenry forms the only interested party in the case of the corporation it exists as property held by shareholders in addition to being a legal entity and an employer of labor.

To make corporations truly" free and democratic " would be to effectively take all the rights of ownership of property away from the shareholders and bestow it, unearned, upon the employees, leaving the shareholders voiceless and powerless. Of course, in the case of employee owned corporations, this is a moot point. I realize in the case of the small investor this is not unlike the current situation where most do not bother to exercise their current stockholder voting rights anyway and are holding the shares purely as a speculative venture; but there is a not insubstantial number of venture capitalists who really do make significant investments to build and grow corporations whose contribution, vision and risk-acceptance is the vital part of the free-market.

That being said, in terms of management practice Mr. Berman is correct, in my opinion. Hierarchical and bureaucratic forms - vertical organizations - are rigid, uncreative, power-centralizing organizations that by preferring autocracy, sacrifice huge creativity gains by not allowing and trusting to a flexible, autonomous, collaborative and horizontally organized work environment. Much employee utility remains untapped as workers are merely cogs in a machine. It was a good model for the second-wave, mass-production, industrial societies circa 1800 -1950 once decried by Ortega y Gasset but today it is an anachronism headed for the graveyard of history.

Excellent post by Mr. Berman, I encourage you to make his blog a regular stop.
Great post on this topic.

Mihaly's work offers a way to optimize organizations (I was referring specifically to his more recent book, 'Good Business') effectiveness by creating better leadership. You bring up a good point about ownership which needs more thought. I am a strong advocate of the capitalist system and meant in no way to transfer rights away from the owners. (The Invisible Heart by Russell Roberts is quite thought provoking.) As a stockholder (even as a large institutional stockholder) I would prefer to have 'my' company well run and profitable in the long run. (I do admit that it is fine by me if the speculative investor that wants short term returns at the expense of the long term health of the company gets burned. It's your coin - flip it.) Mihaly makes a compelling case with his research. I extend his ideas (albeit without any research) to include the ideas of Barnett such as term limits for the CXO's. As such I would attempt to persuade existing owners to consider adopting a more horizontal approach to management. Both authors have what appear to be deep truths which ought to synthesize quite well. They both in essence offer the promise of building a 'future worth creating' - in Mihaly's case for employees and in Barnett's for nations. Of course the devil is always in the details.
A very interesting post. Especially the part about LOTR, I was unaware of that. I think that while you may be able to tap certain employees in certain positions and allow them increased autonomy, I do not think that the top-down structures of corporations are outdated, yet. In my view our education system needs to catch up with corporate reality before this kind of de-centralization can occur. Currently, you have a system where (presumably) the best and the brightest are at the top running corporations and making the decisions that Mihaly wants to push down the heirarchy. You need dramatic educational reform, begginning with primary education, that focuses on developing critical thinking skills and other facultys of reasoning that would allow workers to become more adaptable and creative. You need employees who may not neccesarily be trained in a particular field but instead have highly developed abilities that promote innovation and ingenuity. Robert Reich talked about this in his book the Work of Nations, and for many reasons I think this is where we are heading. As of now though, I think a only few small companies with highly competent work forces can achieve this sort of model.

Sorry to get off-topic here but I just googled your futurist and read a few things by him, here's one that impressed me - Andrew, you should read this one too:


A clear thinker with good advice. In fact, much of what he wrote there for IT leaders would apply equally well to the Bush administration. Or any public player in the marketplace of ideas or the marketplace of goods.
A very astute analysis of "Info War". I think the Bush administration is quite good at this in some ways and quite poor in others. Domestically, they are excellent at managing the media and disseminating the information they want to get out (despite the inevitable leaks). With talk radio and Fox News they have excellent forums to promote their agenda. You can almost go through the list one by one and find examples of how they manage info at home.

When you talk about foreign policy though the Bush administration has been a failure on many fronts, although I will grant that it is a much more difficult endeavor to manage info aborad thanit is at home. The list that May puts forth is great, but when you try to take that strategy aborad you run into many difficulties. For instance, on example that readily sprung to my mind is the al Hurrah television channel that wa srecently established. Clearly an attempt to create an "official source of truth" (as per #4), but it has been very difficult to establish any credibility. And you can probably go through the entire list and pick out how we cannot do some of these things or how we can be doing some of them better.
al-Hurrah was an embarrassment. Radio Sawa is not any better though it is more popular because it sticks with fluff. Some Clinton appointee apparently trashed the Arabic language USIA programs back in the 90's - a cost-cutting measure or some unexplained personal intrigue
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