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What of the Future

Written by: Douglas Long

Article Overview: As we recover from the Global Financial Crisis, have we really learned anything? What is to stop the excesses of the 80's and the more recent factors leading up to the GFC from happening again? In this article Doug Long takes a brief look at history to show that perhaps we haven't learned very much at all - and the question is posed as to what we are going to do about it.

What of the Future

In theory, the world in which we bring up our children today is vastly better than the one that our forefathers knew. And, again in theory, our children's children will live in an even better world than that of today.

I suggest, however, that reality shows our world is not as different from the past as we might hope.

Yes, we have a greater life expectancy today than ever before - at least for non-indigenous people in the western world. Yes, we have the technological ability to feed, house and clothe every person in the world at a very satisfactory level - yet most of our technology is used to increase power and wealth for a minority of the world's people. Yes, we have medicine and drugs that could alleviate or cure much of the suffering people experience - yet we price these in such a way that the poorest countries and people cannot access them.

We are caught in a dilemma that is as old as humanity itself. On one side is the drive for fulfilling one's potential and achieving both economic success and happiness. On the other side is the drive to care for those people less fortunate than we are and to provide a better world for them as well as for us. Our rhetoric says that, if we improve things for ourselves, this will then have a flow-on effect of improving things for them. Our practice shows that, in reality, as many of us gain personal and economic success we tend to forget the rhetoric.

A simple recapping of the history of management thought over the 20^th century illustrates this.

At the turn of the 20^th Century there were little or no generally accepted "management" practices. The worst evils of child exploitation and slavery had been abolished in Europe, the USA, and most other countries. But working conditions were still reasonably poor. There was little or no legislation on occupational health and safety. Workers had little or no protection from exploitive employers. The drive was to produce and sell goods and services at the lowest cost while selling them at the highest price. Care for the environment was largely ignored. The wealthy and the powerful saw a world that was theirs for the exploiting - and they took advantage of every opportunity to do just that.

Then, for 20 or so years the emphasis of management was on efficiency. The challenge was to produce things in the most cost-effective way and, to help in this, "time and motion" studies were used for the removal of inefficient practices. The invention of the assembly line was a logical extension of these studies and often engendered a situation in which the assembly line was of greater importance than the people who worked on it.

The "Great Depression" which preceded the Second World War brought an end to some of the excesses that had developed and, around this time, there was a move to recognise the importance of people. By the 1950's the study of "management" as a discipline in its own right was well established and the literature was arguing for a humanistic approach. There was recognition that the people who worked in organisations had rights and that, in the quest for production and sale of goods and services, these rights could not be ignored. From here it was but a small step to the establishment of "personnel" services as a sub set of management and, eventually, as a key department in most organisational structures.

By the 1970's, at least in the western industrialised countries, there was a creative tension between concern for people and concern for production. Organisations sought to produce their goods and services with people who were well trained and, in the main, reasonably recompensed for their services. The gap between remuneration at the top and bottom of organisations certainly existed but, overall, most people at all levels considered it to be reasonable. Quality of working life was a key theme and this was seen as an extension of the overall push for improved quality of life for everyone in society.

In the 1980's things changed. Many of us hadn't noticed the change emerging. Suddenly we were in the midst of a push for "quality" and "international best practice" - and a direct implication of this was that profits could be improved and people could make more money. "Greed is good" had hit and many of the established practices were swept away. The gulf between the "haves" and the "have-nots" suddenly widened and social inequality was more obvious than had been the case for many years. For many, the good times had arrived and would continue forever. It took the "stock market adjustment" of 1987 to shake our confidence but even that did not really register for many until the early 1990's.

We spent the 1990's arguing that the excesses of the 80's were over. But the genie was out of the bottle. Globalisation became the catchword and international investors became the drivers of management philosophy and practice. Then came 2008 and the Global Financial Crisis.

Which begs two questions:

• 1. Has the last 100 years brought about any real change? Indeed, has anything much changed since 2008?
• 2. Does it matter?

First, does it matter whether or not any real change has occurred?

Yes.

Today we have the best educated and most technologically capable macro society in history. We have the ability to do things that were beyond the imagination even of science fiction writers 100 years ago. The rate of acquisition of knowledge is constantly increasing. In just my lifetime the things I have seen include the movement from small propeller driven aircraft to space exploration, the completion of the first stage of the genome project, and the advancement of medical science to the point where we are able to deal with most major diseases facing mankind. It is beyond my comprehension to envisage what learnings will occur in the future. It would be a tragedy of major proportions if such technological advancements were not matched by a development in the way we interact with other people.

Second, has the last 100 years brought about any real change?

I believe the answer to this is "yes .... but"

The "yes" part is easy.

There is a significant body of knowledge that demonstrates both the need to treat people with dignity and respect and that demonstrates the benefits available to organisations and society when this is done. Virtually every management course in the world teaches this. Probably every organisation - be it for-profit, not-for-profit, private or public sector - would have little difficulty with the adage that "our people are our greatest asset". Those organisations that produce "values statements" invariably have something about "caring for people". In other words, the last 100 years has brought about "real change" in terms of knowing that people are not really expendable objects that can be bought, sold, used and discarded at the whim of management and owners.

"But" ... and here is the crunch ...

Some years ago I raised the issue of "education" and "learning" (Learner Managed Learning: the key to lifelong learning and development 1990, Kogan Page, London & St Martins Press, New York, p.18). I suggested that "learning" has not occurred unless the knowledge imparted by education manifests itself in behaviour. We can measure changes in knowledge by some form of assessment such as a test or examination. And we do just that. In my own university teaching in the USA and Australia I, like every other teacher, have set examinations that assess the extent to which a student has acquired knowledge from the course taught. The difficulty lies in knowing how much of the knowledge exhibited in such assessments will actually be transformed into learning. Will it have a behavioural impact on the student?

I suggest that, all too often, we confuse "education" or "knowledge" with "learning". We assume that, because a person knows something they will then demonstrate this knowledge in their behaviour. And the assumption is patently false.

From our studies of the last 100 years we "know" that organisations staffed by highly competent and committed people will out perform those with less competent and committed people. We also "know" that people who have a reasonable balance between work and personal life perform better, in the long term, than those whose lives are less well balanced. We "know" that we need sufficient stress for us to perform but not so much stress that we are rendered inefficient or incapable. We "know" that people are social creatures who need interaction with other people. We "know" that customers respond well to service and that those organisations whose staffing levels and training are such that customers feel they receive service will outperform those in which "customer service" is seen as an oxymoron.

We "know" all these things and much more. The difficulty is that, in the main, we have not "learned" them.

Over my years of consulting and teaching I have had many discussions with managers, executives, and Directors about this. Time and again these people say to me words like "I am caught in a dilemma. My education has made it clear that we need to have staffing levels that allow people to have balance in their lives and so that we can provide customer service close to the level customers want. But we are driven by the stock price. If we don't return profits that are comparable with or better than those of our competitors and of the market generally, the institutional investors will dump our stock. It is absolutely critical that in the quarterly reports we are able to show that our costs are minimal - and we can only do this by keeping staff levels down to the lowest possible level. I'm sorry, Doug, I can follow the arguments for a different approach regarding people - I just cannot implement it."

From my observations, it seems that some 85-90% of managers, executives, and Directors are caught up in this dilemma. Daily they face a conflict between what their studies have told them will bring long term results for their organisations and the demands placed upon them by market forces. When their reputations and remuneration are integrally linked with the market performance of their stocks, which way will they jump? There is an old adage that says "what gets rewarded is what gets done". If rewards are given for reducing staff levels, making existing staff work harder and longer for little or no extra pay, cutting back on customer service, and the like, they are the things that will get done. The penalties for failing to do these things are too severe. If you doubt this, simply ask any Company Chairperson, Chief Executive Officer, or other senior executive (whether public or private sector) what has happened to their colleagues or themselves when they failed to deliver what the market or their bosses demanded.

Back in the days before "international best practice" and/or "globalisation" it was a different scenario. These were the days (probably up until the 1980's) in which organisations were, in the main, controlled by local Boards and generally the investors were from the local country. Under such a situation the main comparison was with other local organisations. The flow of money from one country to another was, very often, more difficult than today and, with a lower cost of living, people were prepared to accept lower returns on money invested. Remuneration of executives was generally lower and more tied to national standards. In many countries, a social obligation was felt and acted upon by organisations that saw themselves as having a dual responsibility - one to their shareholders and another to their community.

But those days are gone. Today there is widespread interchange of executives from one country to another. Today international investors will move their money from one place to another based on less than a percentage point difference on money invested. Today a product may be produced in one country from components made in a myriad other countries - and, on a daily basis, investors watch the reported and predicted results of the companies involved. Based on this data they will buy and sell without regard for national sensitivities and/or cultures.

So are "best practice" and "globalisation" bogies we should fear and seek to avoid? No. There are many benefits that accrue to nations, organisations and individuals from these. In most places, best practice and globalisation have resulted in lower prices for many goods and services. Most countries have benefited from many of the overseas executives who have come to them while many of their people have been able to make significant contributions overseas.

But along with these we need to recognise that the bottom line on a profit and loss account is not the sine qua non of business. We need to recognise, also, that short term profits and results may give us long term business failure with consequent the loss of thousands of jobs and negative impacts on the overall economy.

Ultimately we need to realise that the research and theory from the past 100 years contains truth that needs to be heeded and implemented. Central to this is management education that is then applied in the workplace. And central to this management education is the truth that people are the most important asset for any country or organisation. Without highly competent and highly committed people both organisations and nations fail.

The task facing governments, Boards, and executives is to recognise this truth in practice as well as in theory and to create environments in which it both can and will be applied. In the short term it might mean lower profits and dividends. In the long term it will mean stronger organisations and a better national economy.

Now that's a leadership issue!

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Article Tags: excesses, gfc, global financial crisis, management education



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