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Chapter 3 Zen & Creative Management

Page 21

On the contrary, “so far from being controlled by the market, the firm to the best of its ability has made the market subordinate to the goals of its planning.”  Galbraith is equally categorical when he says that profit maximization is no longer necessary.

The second difference in management theory is exemplified in the writings of Drucker and Galbraith.  Drucker says, “Organizations do not exist for their own sake, they are a means; each is society’s organ for the discharge of one social task.  Survival is not an adequate goal for an organization as it is for a biological species.  The organization’s goal is a specific contribution to individuals and to society.  The test of its performance, unlike that of a biological organism, therefore always lies outside of it.”  For Galbraith the primary purpose of an organization is to survive: “For any organization, as for any organism, the goal objective that has a natural assumption of pre-eminence is the organization’s own survival.”  We may well ask who is right.

Within the framework of the theory being proposed, both are right: Galbraith is viewing the organization as structure, Drucker is viewing the organization as process.  Galbraith, in fact, coined the word “technostructure” and it is significant to note that he did not coin the word “technoprocess.”  Drucker, on the other hand, developed management by objectives, which is essentially a process-oriented type of management.  We have seen that the company must be viewed as a holon and that there are two tendencies at work: an integrative or survival tendency and an assertive or mission tendency.  The conflict between Drucker and Galbraith can be shown to be simply one of point of view.

March 18th, 2020 ~ Process & Structure–we will be reading discussing these two in great detail.

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Chapter 3 Zen & Creative Management

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Ernest Dale says that presidents, faced with the need to balance alternatives who act in a way to optimize the return for the different forces making up the field, find that they are unable to act at all.  He is right in saying this since he is talking about the president-as-person, not the president-as-role.  Dale is also right when he says that it is not surprising to see that many presidents find the only way out is to act irrationally, and this irrationality eventually pervades the entire organization.

The point of view we have developed so far assists in reconciling the various conflicting points of view of management theories.  First, there is a divergence of opinion about which of the three primary elements is pre-eminent.  Professor Dale’s view, which is the one held, or at least expressed, by most businessmen and business theorists, is that the primary task of a company is to make a profit for the shareholders.  Peter Drucker’s viewpoint is different:For him the primary task of a company is to produce a product and fulfill a particular role in society.  Just as Dale feels that the objective of providing a return on investment is an ethical obligation, Drucker feels that the objective of serving society through the market is also an ethical obligation.  Drucker also tends to dismiss or play down the importance of the employees’ needs and wants.  “The large business organization does not exist for the sake of the employees.  Its results lie outside and are only tangentially affected by employee approval, consent and attitude.”

For Galbraith, on the contrary, the company exists for the employees; that is, the technostructure: “. . . the association of men of diverse technical knowledge, experience, or other talent which modern industrial technology and planning require.  It extends from the leadership of the modern enterprise down to just short of the labor force.”  No doubt there would be a sufficient number of union leaders who would want to know why Galbraith stops “just short of the labor force.”  Galbraith does not believe the company is ethically obliged to serve the market or the shareholder.

March 17th, 2020 ~  These observations are just as poignant today.  Who has the power and leverage?  It depends on the market, product, location and so on.  Getting an idea of how past economists viewed things is important.  One of the areas sorely lacking in capitalism today is how big companies are.  The idea that monopolies are taking place in the current market are very much overdue.  Income inequality is ridiculously off the charts high.  It makes people jealous and bitter.  It reminds me of what the Dalai Lama says about cars.  When someone is your area gets a fancy car compared to what everyone else has, it makes people jealous.  We are so beyond that.  It is multiple cars and huge fortunes.  They say CEO’s of these large corporations are sociopaths.  How can they tolerate making so much more money than the employees that often do the hard labor; much of this labor is oversees where they don’t “see” it. 

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Chapter 3 Zen & Creative Management

Page 19

A manager is an employee.  However, strictly speaking, the president is not an employee: it is he who employs.  The role of the president is to put to use the commitment of employees, shareholders, and customers.

To understand fully the implications of what is being said, a distinction must be drawn between the role of the president and the person filling that role.  The role of the president is independent of the board of directors; it is not something that is created, but arises out of the total field.  This role is necessary in order that the three forces, one of which is represented by the board, may stay in equilibrium and so allow the whole field to grow.  These three forces have equal status within the total field.  Growth will be accomplished provided that the appropriate action is taken to meet the situations that arise.  However, a distortion in the field is created because the role is filled by someone appointed by the board of directors–by one of the forces within the field.  As well as being appointed by the board, he is also conditioned to respond to the needs of the board by bonuses, stock options, and other profit-oriented rewards.  This means that the primary allegiance of the president-as-person will be to the board of directors, while the present-as-role requires equal allegiance to all three forces. 

Because the president is appointed and can be dismissed by the board of directors, and because his attention is conditioned to the needs of the stockholder, a fundamental distortion is introduced into the field.  Instead of being completely free within the options and as a consequence being able to adapt action perfectly to the requirements of the situation, most presidents are fixed, their strategy inflexible, their responses preconditioned.  From the viewpoint of good organization–that is, the viewpoint on which company survival, effectiveness, and growth is based–different alternatives must be balanced and traded off, and these alternatives include, but are not equivalent to, profit maximization.  But from the point of view of the president-as-person, only one strategy is acceptable: that which will maximize profit.

 

March 16th, 2020 ~The role of the president is a fascinating one.  As the author mentions, most appointed presidents are conditioned.  Most everyone is conditioned–the president is a very important role in the company, however.  The author mentions separating the role of the president and the person filling that role.  It really takes an exceptional individual to be appointed by one group but to focus on the three distinct entities as a whole.  Th author talks about roles in a company a few times in this book.  He mentions how companies hire not based on role, often times, but on individuals.  But it is the role that is more important.  Individuals in roles can be replaced because the focus is on the role.  You are not focusing on an individual which is often unique.  You see this often with companies.  Apple couldn’t exist without Steve Jobs.  The company was wildly successful after his return to the company.  The new CEO has done a tremendous job keeping the momentum going, but have they created any new technology?  Have they made the move of focusing on the role of the CEO?  Time will tell. 

One place in sports where you see a franchise hire based on role–the Pittsburgh Steelers.  Since 1968, they have had only 3 coaches: Chuck Noll, Bill Cowher and Mike Tomlin.  Prior to that, there were 13 coaches. 

More will come about roles in a company.

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A shareholder can control certain aspects of the financial dealings within a company, but the extent of the control is limited, as is the responsibility or liability he has for failure on the part of the company.

Although the meaning of ownership has changed in that it has become a much more complex notion than “this is mine and that is yours,” the attitudes and beliefs that it once bred remain unchanged.  To change these attitudes would need a prodigious exercise of thought and will, and it is easier and more comfortable–at least on the surface–to leave well enough alone.  But, paradoxically, to leave well enough alone in this case means considerable rationalization, frustration, and even chaos.  It would not be so bad if those who performed the magic of turning Cinderella shareholders into Queens for a Day were not taken in by their own magic; but they are. 

One of the most pervasive dichotomies affecting our thinking and arising out of the univalent view is the management/employee dichotomy.  A great deal of confusion has been created by this dichotomy because it naturally implies that managers are not employees.  This implication is reinforced when managers discuss employees: “All that employees really want is as much money for as little work as they can get.”  “A company is not there for the good of its employees.”  And so on.  When a manager says this, he is talking about them–the employees–not himself.

But the question naturally arises that if the manager is not an employee, what is he?  This is where the shareholder-owner illusion becomes useful.  Given the polarity “owner/employees” managers gravitate toward the belief in the univalent view of organization.  Power, it is said, is vested at the top and percolates unidimensionally through the organization.  This gives rise to the great emphasis that is put on the “organization chart” with the board of directors, and frequently even the shareholders, at the top.

 

March 15th, 2020 ~Stay tuned. . . .

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Chapter 3 Zen & Creative Management

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The decline of power, moreover, is not confined simply to the shareholder but, according to Business Week, has extended to the board of directors.  Even the board, which once sat at the right hand of the source of all economic power, must change its role.  Its control is now becoming control in theory rather than in practice.  “One of the totems of business is the board of directors.  That august body, once synonymous with power, prestige, and probity, is now under attack.  Its critics call it an ornamental anachronism and charge that board members no longer protect the interests of stockholders.”  It seems that boards merely rubber stamp what managers have already decided, and can protect the interests of shareholders only when those interests coincide with those of the managers.  “One company president, irritated that his directors did not give him total control, said: “I didn’t get to be president by soliciting a lot of opinions, then getting a consensus of everybody around, and going along with the majority–and that’s one of the reasons our board has never really shaped up.'”  A company director is reported to have said: “The reason I don’t get involved as an outside board member is that I don’t have time to get the facts, and I prefer not to look stupid.  Silence is a marvelous cover.”  It would further seem that “in most large and medium-sized companies where the president and board members own only a few shares of stock, the president determines what boards will do.  In most cases this means that the board is relegated to performing functions that are substantially diluted from the classical roles of policymakers and guardians of the stockholders’ interests.”

With a business run by an entrepreneur there is an owner, employees, and customers, with the entrepreneur being the owner.  But with the professionalization of these three, the situation is different.  it is no longer true to say that the shareholders own the company.  Shareholders simply own shares.  To “own” means to be able to control, as well as to have responsibility for, and although shareholders generally have a fair degree of ritual control, the real control of a company resides in the role of the president.

March 14th, 2020 ~ Learning about the role of president is an important element in this book.  We will learn more on this soon.  Also, keeping in mind the equal importance of each of members of the triad: employees, shareholders and market.

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Chapter 3 Uncategorized Zen & Creative Management

A Question of Ownership

Page 16 ~ The standard view of a company could be called a “univalent” one: a linear descent from the board of directors through the managers and employees to the customer.  This univalent view has as its corollary the belief that a company is “simply in business to  make a profit.”   This belief is one of the most fundamental in the credo underlying the free enterprise system and needs to be examined carefully.

In general, there is a misunderstanding about who owns the company.  Most people believe that shareholders own the company.  But do they in fact do so?  Or do they own shares in a company?  This is a very important question because on the way it is answered rests the understanding to control and to be responsible for.  “Ownership-responsiblity-control” are interdependent.  Do shareholders control a company, are they responsible for what it does?  It might be said in so far as the shareholders elect the board of directors and the board of directors selects the president that the shareholder indeed is in control.  But is this the best way to account for the facts? For example, J. K. Galbraith says that the annual meeting of the large business corporation is perhaps a most elaborate exercise in popular illusion because with great unction and little plausibility, corporate ceremony seeks to give the stockholder an impression of power.  When the entrepreneur owned the company he shared this ownership with a few powerful shareholders, who ran the company with him.  There was comparatively little pomp and ceremony.  But as the stockholder gets less, more ceremony is required. 

March 13th, 2020 ~