The Conflict between Learning and Results in Talent Management Strategy

Two clients of mine have posed the question to me about how HR can operate successfully in the emerging environment of complexity and Gen Y employees challenging companies today. The question is surprisingly difficult to answer, as a scan of the web turned up no approaches which I could in good conscience recommend, but much which represents the ordered systems paradigm of old style management.

My first client is responsible for HR in a family company operating world-wide, with a decentralized organization coordinating performance in largely independent country organizations, which are very successful and fiercely autonomous. His first attempt to professionalize HR by implementing bureaucratic processes failed, for the simple reason that the countries scented the danger to their autonomy and performance and blocked the initiatives.

When we had our first meeting, the client wanted to talk about organizing a world-wide high-potential group to bring the regions of the organization into better contact with one another, and about how to embed the meetings of the group in an HR selection, development and retention strategy which would support the company’s independent culture and avoid a second rebellion.

I suggested they skip the bureaucratic middle step and go directly for a participatory approach based on the insights of complexity strategies–an approach we will be developing together over the coming months in preparation for the next global meeting.

Here are the first outlines of what we are thinking about, starting with some context in the current norm, before we go to more complexity-based approaches.

The modern HR model saw its most prominent initial large-scale implementation at GE under Jack Welch, who focussed talent development not only on what people in the company deliver, but on how they deliver it based in a competence model which describes behavioural success factors for leadership and performance.

A good representation of this approach is given by Gary Steele, the Head of HR and Sustainability at ABB in Zurich in an interview, where he describes people and talent management as the “spine” or “thread” that determines everything ABB does. The purpose of the programme is to drive the culture of performance and delivery across the organisation. Part of the programme is top-down, through leadership assessment based on a competence model to look at how performance is delivered, and the other part is bottom-up through performance reviews that include the competence model criteria for assessment. At its heart is the attempt to develop core values, which describe the way the company as a whole does business, and to which a large part of the work of coordinating activities company-wide can be devolved.

As Steele explains, the competence approach seeks to create an advantage in the “war for talents” by dealing with the problem that leaders with bad behaviour drive away valuable talent, so that even if they bring in good performance short-term, their cost in terms of people involves unacceptable risk to success. Given the good intention behind the competence model approach to widening performance management to include good behaviour in leaders, it is tragic, then, to see the results in how people experience the process, especially in large corporations that have done their homework in thoroughly implementing a talent management strategy.

Through the ever tighter requirements of corporate governance, combined with a focus on short-term results, talent management largely backfires. Among the hires who come to my clients’ companies, there are a large number of corporate refugees who want out of the bureaucratic straightjacket of competence-based perfomance reviews, and into an environment in which they can work productively and focus on results–and remain the individuals that they are. As employees vote with their feet, it is apparent that talent management is making a major contribution to exactly the problem it was designed to prevent.

To understand the failure of the classical approach to talent management, it is helpful to look at the dilemma it finds itself in for most corporate systems:

Performance is social, in the sense that no one is successful alone. Companies create value through the work of people in groups, whether these are organized through the machine paradigm or, more modernly, in teams or networks. Although companies are social organizations, they exist not for their own sake, but for the external purpose of creating value for others in a market. There are, therefore, two coordinating principles for social organization in companies (see below).


The source of the failure lies in the complete difference in nature of coordination based on judgment of results, and coordination based in social relations. The first system is transactional: we sign a contract in which we are paid for measurable performance based on explicit indicators. We fulfil a function or a role in a structure of power, and we can be replaced anytime. We follow rules, and perform functions. If we overperform relative to benchmark, we get bonuses and promotions; underperformance means stagnation or firing. Having a place in the company social group depends on what we do and how well we do it, without regard to our history, reputation, or who we are as people. Our positon is fragile, subject as it is to the vagaries of power and control and to the incalculabilities of the market and company politics.

The second kind of coordination is rooted in social dynamics: in a complex reality whose vagaries cannot be known ahead of time or planned for, we look to each other as people for orientation. Through give and take, we learn to rely each other, and the history of our behaviours forms our reputation and instills trust or mistrust towards us in others. In the absence of full knowledge, we orient to values to inform our decisions, and how reliably we do so contributes to our standing in the group. Our influence is based more on our experience in dealing with uncertainty, on our tacit knowledge and who we are as people, than on our position in the organisation, and so is resilient to the changes in the power structure.

When in the talent management process behaviours are evaluated, we effectively collapse the second world of social coordination into the first of performance and results–with catastrophic results:


Picture for a moment the dynamics of the goal-setting meeting between a manager and an employee in sales. The manager’s incentive is to set a high goal for the sales represenative, both to maximize performance and to minimize the bonus. The incentive of the sales representative is to agree to a minimal goal, both to reduce effort and increase his certainty of achieving results, and to maximize the bonus. The boss says 20%, the sales rep. 0%. Then it is 15-5, and agreement might come at 10%. There are always good arguments for both sides. However it is achieved, the result is not an objective response to market realities and a reflection of personal abilities, but a negotiated settlement which has to do much more with the illusion of planning and with tactics. In the worst case, top-down planning is simply imposed through the agreement, and the employee is told to perform accordingly.

When behaviour is treated on the basis of the same logic, the result goes beyond the pseudo-objectivity of the planning process to effect cynicism and distrust in the social fabric of the organisation, as an employee report on the Stack-Rank performance review system at Microsoft under Steve Balmer devastatingly shows. In the video above, the interviewer mentions to Gary Steele that talent is an emotional issue, and asks him (without any apparent sense of irony), how to mandate the emotions aimed at by the talent management process. Steele doesn’t lose his stride.

Picture the same sales representative negotiating about the evaluation of his behaviour as a communicator and team player. His manager may criticise his behaviour, and the sales rep. will explain or justify himself. The manager will find examples, the sales rep. counter-examples. In the end, the evaluation is just as arbitrary as the planning number, with the employee trying to show himself from his best side, while the manager tries to reduce him to his failures to satisfy the bell-curve of possible evaluation distributions. The best managers, who genuinely try to support their people’s development, learn how to game the system, giving their team a leg-up relative to others in the rating game, against which HR must find counter-measures, and so the irrationality potentiates itself up the system.

The simple answer to the question of how you mandate emotions is, “you can’t.” Values, beliefs and emotions cannot be mandated, and attempts to do so bring with them all of the nasty consequences of social engineering. To enable people to develop their potential, what my client and I are working on is how to ensure that performance appraisal on the one hand, and potential for development and growth on the other, are treated differently, each according to its own logic and mechanisms of success, and the one is not collapsed into the other.


This is simple to do, but difficult to manage within a short-term performance measurement environment. The key lies in the concept of “obliquity,” and in the ability of the company culture to tolerate the disconnect between supporting the development of employees on the one hand, and planning for and getting results on the other. Very much according to the maxim of giving unto Caeser what is Caeser’s, key performance indicators need to be aimed at, and results measured. But since only a tiny part of what takes place in companies operates on the transactional level of planable ordered systems, the rest is beyond direct control. For system two, managers need only to foster human potential and… to trust! And that is what makes system two management so intolerably uncertain for classical management. The highest performing groups are the ones whose skills we support, but whose behaviour we do not measure. The whole point of transactional goal-setting is that it does not matter how we get there–only the results count.

How then do we deal with the legitimate concern about abusive or destructively instrumental behaviour in our leaders? Healthy social groups take care of that on their own. Thieves, liars, the abusive and the sociopathic are quickly disposed of by a team with a purpose, that knows where it wants to go, and has a healthy values culture among the team members. Those who want a place in their group will gladly be honest and reliable and get results to best of their abilities. (The same principle counts when we look outside the company to customers and markets, who are more than able to regulate what is socially acceptable and what not in their relations to a company when empowerd to do so through, for example, the internet.)

What organisations can do to support the process of social self-regulation is to provide their people with the resources and opportunities to do so, not to sabotage their efforts through bureaucratic, pseudo-objective planning and control systems, to listen, and to take the opinions of their people seriously when it comes time to make decisions about talent. For the rest, “talent manages itself,” as Kevin Wheeler and Murry Christensen of Jet Blue say in an interview snippet from the Future of Talent Retreat 2009. That is of course a simplification, as talent flourishes best in a rich environment full of experienced people, interesting challenges, trustworthy leaders, and immediate reality-based feedback– things which do not happen by accident. That will also be the point of the Talent Management strategy, to focus on creating the environment and resources talent needs to succeed.

My second client is at a different point in his trajectory, having come to the insight that the traditional and informally highly networked family corporation lacked even the most rudimentary global processes in many areas, including HR, and the new General Managers have embarked upon a thorough and consequent strategy of making the organisation compliant through stricter process-orientation. While getting their ordered systems processes created and under control will be a boost to solving many of their challenges, it will be interesting to see where the system type boundary is seen and what influence it will have on Talent Management.

Post Scriptum: By the way, the talent development challenge in business is logically identical to the problem of learning and performance measurement in the education of our children, as the more we measure learning performance in schools, the less education our children receive, leading to poorer–not better–performance in the jobs market, as a lucid RSAnimate video of a talk by Sir Ken Robinson explains for the curious, and from which I am tempted to see an analogy between the “epidemic” of ADHD in children and the alarming rates of burnout among managers who are caught between competing imperatives of the two systems they work in, and which companies do not help them to resolve.

A Short Meditation on Politics and Creative Destruction

Watching the blockade in the US Congress over raising the budget deficit gave me pause to reflect on the nature of the progress of humanity. 

The dishonesty of the debates and their careless use of US solvency to give power to ideological positions made me wonder–briefly–whether it makes sense to believe in human progress at all. As a child of the 70’s, I hoped that the US had left such fundamentalism behind it for good–or at least been able to relegate it to the darker corners of its civilization.

Yet the politicians who put on the show are but the representatives of their constituencies. Taking sides (beyond having one’s own opinion and values on the issue) gets us nowhere. Both sides of the debate are bankrupt, empty of any ability to reach meaningful consensus on the big issues like finance on which our collective well-being depends. They mirror the emptiness of vision and ideas of the people, and of the monied interests who have power because the people lack the vitality to stop their self-serving actions and integrate them back into a healthy economy and body politic as useful citizens.

This is how paradigms shift, and empires fall.

Yet the conservatives have a special role in the drama, having committed themselves, for want of alternatives for action which could be consistent with their beliefs, to something which smells of a Mephistophelean nihilism:

I am the Spirit that denies!
And justly so: for all things, from the Void
Called forth, deserve to be destroyed:
‘Twere better, then, were naught created.
Thus, all which you as Sin have rated,–
Destruction,–aught with Evil blent,–
That is my proper element
(Gutenberg Edition of Faust, p. 153)

Ich bin der Geist, der stets verneint!
Und das mit Recht, denn alles, was entsteht,
Ist wert, daß es zugrunde geht;
Drum besser wär’s, daß nichts entstünde.
So ist denn alles, was ihr Sünde,
Zerstörung, kurz, das Böse nennt
Mein eigentliches Element. (Faust)

Just say no!

Obama’s adult reflectiveness has about as much of chance against a believer’s “no” as a snowflake in hell. Rationality is not the level on which the debates are being played out.

Where is the silver lining? How can a belief in progress be maintained? Here, I am beginning to believe, Schumpeterian destruction may be afoot on a cultural level. The structures of the mind–both on the left and on the right–which currently determine our responses to the various crises that are upon us are outdated, and have become more of a risk to our endeavors than part of the solution. They must go. But, as Keynes has already noted, “Our difficulty lies not so much in developing good ideas as in escaping from the old ones.”

In this sense, the American Republicans may be at the forefront of institutional innovation–just not in the way they think they are. Their ideas and collective will are hastening the downfall of the old order, even as they claim that they are trying to save it. Their stated goal of resurrecting a mythological 18th Century frontier version of minimal government has no hope of realization in the complex world of the 21st Century. But what they will achieve is to bring the edifice of their own beliefs crashing down along with the general destruction they help to bring about.

Though the experience will be painful, mostly in the US, but also far beyond its borders, it may yet be useful. Ideologies whose time has come must collapse from within, by exposing their true nature to the public in the stagelights of their own performance. Perhaps we must accept the inevitability of  the wreckage before the creative space is freed up sufficiently to start rebuilding with sane, sustainable ideas and solutions, made vital by the hard won knowledge of what does not work.

Report on SenseMaking Accreditation at Cognitive Edge

Amsterdam was beautiful last week, a fitting backdrop to the accreditation course provided by Cognitive Edge that I attended.

Given my last post on the methodology, let me say that my take away was that consulting in the world of complex challenges and strategies is not dead, only different. Dave Snowden’s love of both hard science and philosophy was evident in the programme, as the Cognitive Edge colleagues took us through basic principles of complexity theory, narrative and sensemaking, demonstrating the content in facilitation formats which the group worked through at four tables over two days. 

For the analytically inclined, the focus of the methodology on stories and meaning takes some getting used to. Some of the most valuable formats were “anecdote circles” and “ritual dissent,” the first of which is used to collect stories, and the second serving to test and enhance proposals, stories or ideas. We had a strong group, so there we lots of stories to go around, even in the artificial training environment where the focus was not on the content, but on methodology.

On a first level of subjective experience, the process was fun. Stories are alive, and the story focus is creative and motivating. The second level I experienced faced me with the challenge of letting go of analytic (pseudo)certainties and allowing myself to rely on the meaning the stories expressed to provide a basis for action. 

Here, the philosophical DNA injected by Dave and his business partner Steve Bealing into the methodology of the programme becomes apparent. I’ll give it a shot at a summary: CE gives phenomenology (experience) priority over ontology (categories of being), through an epistemology (theory of knowledge) which relies not on analysis, but on hermeneutics (interpretation). Narratives (fragmented stories) are signified (given meaning) by the storytellers to create an attractor landscape (map of important issues) which decision makers can use to intervene (act).

This strategy is used as an alternative to analysis, which is subject to expert entrainment (first fit pattern recognition based on abstract or outdated solution models). But rather than make analysis superfluous, as I had initially thought, narrative strategy raises the bar on the abilities of decision makers to interpret the sense of the story landscape they are given.

To navigate narrative landscapes successfully—especially when they grow beyond local spaces to take on continental dimensions through the scalability provided by the SenseMaker software—decision makers will need to develop abilities in interpretation we haven’t seen represented in our leaders in generations (if ever on this scale). Neither the facilitation process we learned on the first two days of the course, nor the software we got to know on the third day, do the work for us. On the contrary, they provide us with large quantities of signified raw material on a finely granular level to work with, and leaders will have to learn how to make sense of what they are given access to.

Because of this, as consultants we are going to have more, not less to do. Leaders will want to turn to someone to teach them hermeneutical skills (something definitely not taught in business schools), and training will take a new direction. Facilitators skilled in managing the pure process of communication will be given phenomenological material to ground their work in (helping to avoid the nebulousness facilitation processes can fall prey to when they become theoretical or purely psychological). But they will also need the experience to know how to keep discussions about stories from mirroring the fragmentation of the stories themselves, and to boil them down to safe-fail experiments for solutions. Even more importantly, consultants will have to prepare their clients to understand complex strategies approaches in advance of any particular project, as otherwise there will be no basis in a common understanding of the options to get a project off the ground.

A colleague with many years of experience in strategy consulting, who accompanied me to the seminar, reflected over coffee in the evening that interpretation and coaching is what (his kind of) strategy consulting has always been about. Benchmarking, four-field matrices and the myriad of other analytic tools have been but trojan horses used to enter the gates in the walls of scientific management that have been erected around business over the past years, behind which the actual job of decision making and consulting gets done. Especially in the large consultancies, this entry tactic has been confused with the strategic work it is meant to lead to. Billing kpi’s destroy not only innovation, but also the good judgement that develops over many years of practice in interpreting complex realities and experimenting with solutions.

The Cognitive Edge approach puts the living, messy reality of human doing at the centre of the management and consulting stage again—and gives us some good approaches to hand to get back to the business of learning good judgment and experimental process in dealing with business, government and social challenges.

The Emergence of Complexity Theory in Consulting

During a change project at a car parts supplier a few years ago, a process consulting colleague of mine went off on a rant when he heard that the company had just paid a six figure sum for the months long analysis and report of a strategy consultancy on operational issues in the plant. “Give me full access to talk to managers and employees, and I’ll give you 90% of the information in that report and all of the important decision points in four days!” I believed him, having experienced his pragmatic competence and his uncanny ability to intuit when and where to find the key issues in the improvement process as he worked with the people in the company.

Complicated systems analyses are not only expensive, they often miss the point, as the reality they are applied to is complex and unpredictable and not reducible to the results of linear analysis. Most executives I know are aware of the gulf which exists between what analysts say and the way reality behaves. That is why reports are sometimes commissioned to provide secondary rationalization for decisions executives already want to make, based either on their own experience or motivated by political considerations, and as long as shareholders and supervisory boards share a belief in analytic results, they serve their purpose.

Applying systems analysis to complex environments, however, can also lead to catastrophic failure, as we have seen in financial markets when even honest bankers fall prey to the limits of the assumptions on which their system models are based, or in Japan, in which an unexpectedly strong earthquake turned reactor risk management into a disaster which in hindsight seems to have been waiting to happen, or with the Western military response to terrorism, whose violent interventions have served not to diminish radicalization but to foster it.

But despite awareness of the limits of systems analysis, until recently there doesn’t seem to have been much of an alternative. One that I have just found, and hope will be very fruitful is the work of Dave Snowden at Cognitive Edge. Dave and his colleagues have been working on using complexity theory to translate narrative from any given context through software into objective facts that can be used as a basis for decision making—an approach that promises to close the gap between decision making and reality which our increasingly painful failures in risk management are making obvious.

Some colleagues and I invited Dave for dinner in Frankfurt last week to learn more about his thinking and his software. Dave is taking an open source approach to his services, but in contrast to the prevalent models, the software is proprietary as SaaS, while it is the methodology of complexity theory it is based on which is open source. Dave wants to do for consulting what open source did for software, i.e. to democratize decision making (and make proprietary consulting methodologies and expert approaches within complex environments essentially obsolete!). 

There is no better sensor for understanding the complex human systems we make and live in than our own lived experience. That is why an experienced process consultant like my colleague can sense the neuralgic points in the system by listening to the stories people living in the system tell him. Our brains are pattern recognition organisms, not trivial machines. We perceive elements of the systems we experience, and we connect the dots based on patterns we have learned through our evolutionary development and lived experience better than any purportedly objective model we could invent.

At the same time, however, we are limited in our capacity to know what is important through the way in which we connect the dots: Our brains, David explains, do not connect the dots of our perception through a best fit strategy, but rather latch onto the first pattern they come up with. This is where the Cognitive Edge methodology comes into play. Analysis of a system is done by collecting stories about a particular context one wants to understand. Narrative fragments are then indexed to signifiers designed to frame the questions one wants to put to the system. The storytellers themselves index the key words to the signifiers, cutting out the middle men who would normally do the interviews and analysis as consultants, thereby eliminating the first fit distortions introduced by the consultants’ analytic models. Executives who need information on which to base decisions simply click on the signifiers in the user interface in the ongoing report to access the narratives behind the patterns. The software makes vast quantities of information available through the visualization of the valuations of the key words in signifier pairs or triads. The access to experience within the system which the software provides is in real-time. Without the distortions introduced by the experts, executives listen directly to the experience of their people, close the reality gap, and can use their judgement to the greatest possible effect.

Even strong decision makers are doomed to fail when their decisions are based on unrealistic information. What I hope is that the narrative-signifier strategy Cognitive Edge has derived from complexity theory can dramatically improve information quality for my clients. This will not save executives with poor judgement or a political agenda from running us off further cliffs. But a potential side-effect of a narrative information strategy is that bad judgement and its effects will themselves be reflected in the ongoing collection of narratives in real time, so that poor executives will have less places to hide from the consequences of their actions.

For consultants, this means a radical departure from past business models, if we are to have a productive role in future projects. The expert systems approach to consulting looks like it will be coming to an end. For enablers of complexity strategies, on the other hand, there is a world of challenges ahead of us. I’ll be attending the next European workshop offered by Cognitive Edge in Amsterdam from May 31st-June2nd, and will report on my insights.

The Psychology of Transformation

“Alas, two souls beat within my breast!” groans Faust, as he struggles to reconcile competing interests in himself—and so Goethe describes the existential condition of us all: we are not one with ourselves! Personal identity is not monolithic, but is the negotiated result—minute for minute—of a complex relationship of often competing psychological parts within our own self. Skill in managing our internal dialogues and arriving at viable conclusions is the precondition for managing conflicts in our environment. But self-awareness training is not part of our schooling, with the consequence that we live out our unresolved issues unconsciously and mostly destructively with each other in the world.

To the extent that we remain unconscious of the self-divided nature of our human condition, we project internal conflicts onto others and the world, to fight them there as if they had nothing to do with ourselves. That is why so many “wars” are doomed from the start to failure, for the problem to be solved lies not “out there,” but rather in the lack of awareness of its causes in ourselves, so that the war is an expression of the problem, not part of the solution. The war on drugs, for example, blinds us to the problems of a society so devoid of meaning that large parts of its population would seek criminal profit or hallucinatory escape from it (witness the destruction of young lives through imprisonment for drug offenses which would be non-issues in other countries). The war on crime lets us act as the just avengers, as if we had no part in creating the criminal environment we feel we need to protect ourselves against (as, for example, the walled-in white enclaves in apartheid South Africa, or gated communities in the US). The war on fundamentalism reverses cause and effect in dealing with the blowback (e.g. Blowback, Chalmers Johnson) we reap from earlier Realpolitik policies of supporting “useful bastards” in the interests of power, about which many people in the world are understandably hostile. The potential list is as endless as the issues facing humanity. We are ourselves the hell we face. Salvation lies not in “winning” whatever war one is in, or in escape to a literal heaven, but in transforming the thoughts and feelings through which we create the world we live in.

The origin of humankind’s self-division lies in brain evolution, in which, according to Antonio Damasio, “self” has come to “mind” through the development of consciousness of our body processes. For Damasio, consciousness is a physical event, which would be both inconceivable and meaningless without the body as its basis. Mind strives, like all of unconscious life, to maintain a viable balance in the body in the face of a changing environment–a process which biologists call homeostasis. Our body, for example, maintains an internal temperature of 36.8 °C regardless of external temperatures, adjusting as needed up to temperature limits it can no longer cope with. The “self” Damasio describes takes this life process as a blueprint to the next level of complexity in creating society and culture. Likely, self came to mind as an evolutionary advantage, allowing human beings to engage in farther reaching social relationships which improved our collective chances of survival. As mind strives to maintain physical homeostasis, so the “self” is focussed on maintaining what Damasio calls sociocultural homeostasis.

Where physical homeostasis happens automatically, sociocultural homeostasis requires active intervention. To maintain our collective balance, we must bring what we think, feel, and do, both individually and as a society, into consciousness. Consciousness expresses itself through syntactical language, in which a subject describes its awareness of an objective world separate from itself, and a complex orientation in time, through which we orient our present in a context of our awareness of a past and future. Both syntactical thinking and awareness of time show the ability of consciousness to reflect upon itself as something added on to immediate experience. Even more significantly, consciousness brings with it the ability to intervene in its experience, and so to become an active force in its own evolutionary development.
The moment we become conscious of space and time, we can change what takes place in them. For example, human beings are the only animals that live in two worlds: the world of facts, and the world of meaning. Meaning is generated by the “frame” in which we view facts. As George Lakoff describes, by “reframing” the debate about facts, we change the way we experience them. What happens in time, also, is subject to conscious influence. Not only can we imagine the “future” in a way which will influence the way it becomes, but we can view past experience through “frames” which change our memory of what took place (“it is never too late to have a good childhood”).

The world our “self” has created is full of wonders. However, the limits of our practical imagination are also becoming brutally apparent. The world of meaning can become a war zone itself, as conflicting cultural values fight it out over which meanings guide consciousness. Conscious influence over our experience of space and time requires that we take responsibility for creating the sociocultural homeostasis that enables our collective survival and development. Looking at the results we generate, we are but infants in our playing with the frames that determine the way we live (the influence of political action committees, talk radio and television, paid scientific research results, and the marketing of brand illusions are just a few of our failures).

The problems we are now experiencing globally are a wake-up call to an unconscious society and culture. A path to greater competence lies in learning techniques to constructively change the way in which “self” maintains its balance, and to make them central to our educational programs, leadership training, political processes and social dialogues.

Umair Haque and Saving Capitalism

In an article in Vanity Fair by Michael Lewis on the Irish experience of the financial crisis, one biting comment particularly caught my attention: “Even in an era when capitalists went out of their way to destroy capitalism, the Irish bankers set some kind of record for destruction.” What struck me about Ireland in Lewis’ analysis is that it expressed in starker terms what has been happening throughout the West. The capitalist system is apparently going the way of its communist nemesis, collapsing under the consequences of its own incompetence and bad will.

This is a time of disillusionment—a good thing if you believe in the healing effects of reality. Those of us who grew up with Milton Friedman were taught to believe that greed did good through the mechanism of the market, which would perform the alchemical wonder of transforming baser human strivings into collective benefit through the vitality of self-regulating economic life. The destructive behaviors of business leaders were punished by the markets, but the system itself was never seen to be at risk. Capitalism was too big to be destroyed—and for a while that belief seemed to hold true. But what has been unthinkable since the 50’s is taking on a disturbing reality. The bankers continue unheeded, and the consequences of the socialization of costs of a bankrupt business ideology continue to unfold in the sovereign debt crisis.

One of the most eloquent and passionate critics of the assumptions upon which business is based that I have found these days is Umair Haque. 

Haque’s style has much in common with that of a prophet, and his mission is not to bury capitalism, but to save it. The problem, he argues in his book, The New Capitalist Manifesto, lies not in the functioning of markets, but in the “addiction” of business and politics to what he calls “thin value,” which is based on maximizing profits by outsourcing costs to people, society and the environment. According to his guiding metaphor, 20th century capitalism lived the life of the explorer in the wilderness, taking from nature’s bounty to satisfy its needs, and leaving it to the planet to clean up the mess it had made in the process. Life in the 21st century is fundamentally different. The planet now resembles less an endless wilderness than an ark, where resources are finite, interdependencies between those inhabiting the ark absolute, and the consequences of bad behavior an immediate threat to the survival of all on board. What capitalism needs, Haque argues, is an update of its strivings to the constraints of the modern context. His solution lies in business creating what he calls “thick value,” or profits that result from giving back to the collective more than one takes away. The implementation of his recommendations requires nothing less than a complete rethinking of what capitalism is about and how it needs to work if we are to survive its continued operation. Businesses that get it, like those he features in his analysis, will thrive. Those that don’t will be eliminated by the demands of the changing market.

Haque’s writing is brilliant and charismatic, and what gives his arguments their extraordinary vitality is their focus on “purpose” in a way which until recently has been conspicuously absent in any business thinking that was taken seriously by the mainstream. At the heart of capitalism’s failure, Haque argues, is a gaping void of purposelessness, a strategic striving empty of content other than money and power, whose defining characteristic is the very absence of any philosophical commitments which could create sustainable meaning. Salvation, it would seem, lies in a change of mindset about what it is that capitalism is about. Ultimately, it lies in putting business in the service of humanity and the environment, and Haque provides us with a serious model of what the success factors of the new business paradigm should be. 

What is striking about the movement of which Haque is a strong representative is that the malaise he describes is nothing new. Dilbert has been around for decades as a bitter mirror to the suffering masses of cubicle workers. The three things people hate most in their lives in a classical capitalist system are going to work, being at work, and traveling back from work. Managerial success has been guided by incentives which maximize thin value at the expense of employees, society and nature. Where capitalism once lifted masses out of starvation, today it has for a growing majority of people become a living hell, destroying the basis of our collective existence, fulfillment and happiness for the sake of the wealth of a privileged few.

What is new is that people in positions of influence in the old system are beginning to take arguments like Haque’s seriously. Perhaps most importantly, I suspect that his lucid style and argument from a standpoint of purpose might strike a chord in the conservative heartland of the old order, whose conversion from a frontier mentality to one of a sustainable common and collective purpose will be key to mastering the challenges we face in the new century.

What I miss in his writings is a discussion of how to deal with the interests of power. Capitalism works today the way it does not through any self-regulating dynamics inherent in its nature, but through its systematic and purposeful distortion to serve the intentions of a small group at the top. Where the rule of law once helped to level the playing field so that excellence and commitment could be rewarded in a meritocratic competition of competence, today influence on the law serves to strengthen forces that diminish competition, support businesses that drain the health and wealth of society, and threaten the biological foundations of our existence.

In the past, as long as things remained fair enough for a broad middle class to live hopeful lives, the power games at the top were tolerable to the majority. But on an ark which faces the hunters at the top with diminishing returns, the middle class has turned to prey. Hunters have traditionally not been very open to changing job descriptions, and, for example, to feel motivated to take up a life of farming. As in Egypt, we may find it increasingly necessary to force destructive actors (which often suffer from master of the universe delusions) to walk the plank. For that we will need more than the markets. This is what Haque sees us experiencing as the “age of dilemma,” in which we only have the option of making bad choices within the context of the institiutions which sustain the old system. The biggest challenge we will have to master before 21st century businesses can take off will take an act of collective purpose and political will. We need to create some losers among established business interests so that all of us can win on a larger scale. Creative destruction is not just an economic process, but one we must also confront politically.

A Note on Excellence and the Pursuit of Happiness

An American client working at a German company reflected with me last week on an insight she had come to about working and living in Germany.  What surprised her was how many quietly competent people she encountered around her.  The surprise was less about the competence, than about how excellence happened quietly, as a matter of course.

There is a cultural characteristic that I too experience in German business of preferring substance to stardom. In this largely decentralized country, one travels to small towns spread out through the countryside to discover one world-class small and medium sized enterprise after the next, snuggled away in the hillsides of the Black Forest, along the banks of the Rhein, or at the foothills of the Alps around Munich (to name just a few). These companies have grown and thrived through a passion for quality and excellence in what they do, often over generations of family entrepreneurs.  It is a joke among the Swabians, where Daimler has its roots, that success is not worth mentioning (it is just the result)—it is the practical problems that require our attention! They also have a reputation for being critical and impatient with fluff. It is not about the show, but about long-term development of the company through excellence in products. Respect is gained by being a reliable partner by being good at what you do.

I wonder whether the pursuit of happiness in the US and in many cultures which have followed its example, is not an adolescent fantasy. The go-getter attitude of the frontier was a liberation for emigrants from the dead weight of feudal and religious Europe and Asia, in which the lack of a meritocracy and fair rules made climbing the social ladder through work and creativity most unlikely. The American image as the land of opportunity was a beacon unto the oppressed masses of the world.

But times have changed and values need to shift again. Americans grow up with the Horatio Alger stories of unlimited social mobility for everyone, which, tragically, no longer work. Much more, it strikes me that the myth of stardom and grand success which the stories engender today undermine the striving for mastery, and with it a deeper, more sustainable satisfaction that characterize cultures of excellence.

The crash of the financial system has in part exposed the consequences of the striving for business stardom, with its focus on short-term success through the search for “thin” value. Perhaps it is time to focus more strongly in our businesses again on mastery in the production of genuine, “thick” value (many Germans, too, got caught up in the hype and are paying the price).  What we need is a culture of learning for long-term satisfaction. In the process we will hardly lose our freedom to celebrate and enjoy the happiness of the moment. The deeper flow of being good at what you do, and of living in a society where that is valued—and it pays off!–makes the pursuit of happiness seem like an unnecessarily stressful and futile operation. Cultural maturity, I can report, brings with it its own deeper and sustainable joy.

Rushkoff’s Demythologizing of the Marketing of Power

How does “power” sustain itself?  Force is not enough, as the power of its “subjects” to topple power through rebellion is always greater than that of the ruling elite to exercise control, as the Tunesians are currently demonstrating to their escaped and arrested rulers. Power needs the buy-in of its subjects, and one of its strategies to maintain itself is to create myths supporting its brand of centralized control that its subjects believe and buy into. 

In a talk at the Pivot 2010 Conference, Douglas Rushkoff gives us fascinating insight into the struggle between democratic strivings and the interests of power from a marketing perspective. Branding, he explains, has no place in the social conversation.  It is nothing but an instrument of power to intervene in the social process of value creation, and an aid to taking wealth from the real economy and concentrating it in the hands of the dominant class.  

Rushkoff sees the bazaar as an early iteration of social value creation. Real people came together in a marketplace in which conversations about useful ideas (memes) were had in the process of exchanging goods and services directly with each other for the purpose of increasing their common well-being. In Rushkoff’s historical analysis, feudal power elites began to experience their superfluity (as a class that created no value in itself), in a world in which the emerging peer-to-peer economy functioned adequately without them.  Social networks were a threat to power already in medieval times, so power interests looked for ways to reassert centralized control through intervention in the social dialogue.  The two instruments through which they were successful were a centralized currency, and the creation of the chartered corporation to subsume productive work, making hierarchy the defining form of the last few hundred years of human society.

Power today is facing a new challenge from social conversations and democratic interaction. The productive, content-based social conversations happening on new bazaar platforms like E-Bay, Craigslist and Twitter are exposing brands as the myths of power they are, and threaten to cut out the intermediating functions in which power interests have created their base.

In the service of their corporate employers, marketing departments are making valiant efforts to redirect conversations in the network from topics of real interest that are taking place between people, to customers paying attention to brands by putting the brands between people in social conversations. 

But Rushkoff says that these attempts are futile and ultimately harmful to the products of the company (to the extent the company has retained any focus on useful products at all). The whole purpose of human conversations, he says, is to enable us to move to a next level of human awareness (in the social mind). We need and look for helpful products and services as we explore, and are happy when we find them.  

Part of our search for useful facts involves undermining and toppling the myths which stand in the way of our progress. I would conclude that companies to succeed need to put themselves in the service of our development. Those that fail to provide us with genuine value on our path, or that even get in the way of our process by using brands to try to reanimate myths of power, will soon not have much reason for being.