Broad Themes


What are these first principles? Three linked, overlapping themes dominated the analysis and dialogue of the convocation. Many of the contributions to this volume reflect more than one of these themes.

Managers must build and maintain the trust of a broad set of stakeholders through openness, transparency, and accountability

As Alex d'Arbeloff makes clear in the foreword to this book, business runs on trust. No system of laws and contracts, no system of corporate governance can cover all contingencies or detect all wrongdoing. For any firm to function effectively, its management must be trusted by shareholders, customers, employees, communities, regulators, and other stakeholders to behave in an ethical fashion—to live up to the spirit of regulations and agreements, not just the letter, to conform to social norms, and to do all this even when it costs money and nobody is watching. U.N. Secretary General Kofi Annan's opening remarks remind us forcefully of the breadth of business responsibilities and stakeholder relations in our global economy. And Carly Fiorina's talk demonstrates that building trust on the many relevant dimensions is not just another top management task; trust depends on how management at all levels performs all its tasks—on the DNA of the organization, as she puts it. We believe these two important statements, which we present together in chapter 2, deserve careful consideration by all in the business community.

In most of the convocation sessions, trust emerged as an issue of great, often over-riding, bottom-line importance. We saw, in many contexts, how trust depends on openness, transparency, and accountability. The examination of the Nike case in chapter 3 illustrates the value of being trusted by customers and others not to exploit workers and the difficulty of rebuilding that trust once it is lost. Both the importance of trust along this dimension and the difficulty of rebuilding it have increased markedly in recent years. And the discussion of the organization of the future in chapter 4 shows that, particularly in knowledgebased firms, employee loyalty and creative engagement are essential. Both these, of course, must rest on trust.

The theme of building trust beyond the organization is central to the discussion of the changing role and power of consumers in chapter 5. It has always been recognized that in a free market economy the needs and preferences of consumers should drive the goods and services supplied. But for the past 50 years, marketing science and practice have led a sort of schizophrenic life. On the one hand, the tools of marketing have helped companies to increase profits by better understanding and in some case better shaping consumer behavior to fit the products and services offered. This is what Glen Urban and his students describe as "push marketing." Thanks to an important extent to the power of the Internet, however, these same tools can now be used to empower consumers to increase their satisfaction by shaping the products and services offered by businesses. For this to happen, consumers need to trust information supplied by firms and react honestly to it, and this will require marketing practice to focus on supporting as well as influencing consumers and to build longer lasting and more trusting relationships between consumers and producers. Urban labels this "trust-based marketing," an exciting new paradigm for the next 50 years of marketing science.

Trust-based marketing is another example of the shift in management perspective called for by conference speakers and participants. In his speech to the convocation, GM CEO Richard Wagoner reinforced the importance of listening to and meeting the needs expressed by customers by recounting the story of Buck Weaver, GM's director of consumer research back in the 1930s. Weaver was a voice for the customer inside the corporation then, and he serves as a model for the shift in marketing called for today. In recognition of the importance of this shift, Wagoner announced that GM is creating a Buck Weaver Prize to be awarded by MIT Sloan to individuals who advance theory and research in marketing science over the course of their careers.

In chapter 6 we turn to the issue of corporate governance and its role in rebuilding investors' trust. Citizenship, accountability, and performance must rest on sound and effective principles and practices of corporate governance. Recent corporate scandals in the United States have both given visibility to debates over corporate governance and opened these debates to a broader array of voices than those that dominated this topic in the past decade or so. This is a healthy development that, if taken seriously, could usher in an era of experimentation and change in who participates in corporate governance and how organizations are held accountable to their different stakeholders.

Are there some fundamental theoretical principles that should underlie all governance models, regardless of the specific institutional forms they take? Is there value in institutional variation, both for the sake of learning and experimentation, and to reflect differences in cultural norms, economic conditions, and societal expectations? Chapter 6 reports our discussion and analysis of these important questions. In his introduction to this topic, Stewart Myers outlines what he sees as the fundamental tasks of an efficient governance system. It must allocate capital and human resources to their optimal uses. There is little debate about these fundamental requirements. The debate comes in how to structure governance arrangements to meet them.

This debate is not limited to the United States. The same debates are alive and well in Asia and Europe, fueled by their own financial crises, the emergence of new market economies, and historical differences in institutional development. We therefore bring an explicit international lens to these issues. This is done in part out of a new sense of modesty and recognition that in the past some have too aggressively promoted the American model of corporate governance as the ideal the rest of the world should emulate. It is clear now that, in order to improve the American model, we must both examine that model and work to better understand and learn from the experiences of governance models found in Asia and Europe. The two papers prepared by Myers and his student teams do just this. The front-line views from Europe presented by Dr. Rolf Breuer, and from Asia presented by Dr. Victor Fung, then show how these issues look from vantage points outside the United States. These views give a sense of some of the relevant institutional issues and complexities.

Managers must be prepared to deal with increasingly complex problems involving broadening sets of stakeholders

It is much easier to talk about trust-based marketing than to solve the complex problem of being both credible and effective. And it is much easier to talk about improving corporate governance than to figure out exactly how to do it—much less how to ensure by laws and regulations that it is done. More generally, as the global economy becomes more tightly linked, as business performance depends more on creativity and less on easily measured effort, as new technologies present an increasing flow of challenges and opportunities, and as customers and shareholders become better informed and more demanding, the problems faced by management involve new stakeholders and levels of complexity undreamt of a few decades ago. There was no suggestion at the convocation that any of these drivers of complexity will slow in the foreseeable future.

U.N. Secretary General Kofi Annan's opening remarks both described an important dimension of this complexity and set the tone for a broader vision in his call for corporations to join together in a Global Compact to "embrace nine universal principles in the areas of human rights, labor standards, and the environment, and to enact these principles within their spheres of influence." Hewlett Packard CEO Carly Fiorina agreed and announced that her company is joining the Global Compact. She went on to state even more clearly the responsibilities of CEOs and other executives: "Management serves at the pleasure and for the benefit of our shareowners, our customers, and our employees—and not the other way around."

These are not calls for business leaders to sacrifice enduring shareholder returns in pursuit of social objectives. Rather, they call on business leaders to recognize that the long-term health of their organizations requires them to be broadly accountable and to address issues heretofore generally viewed as not business concerns.

The complex challenges that businesses face as they attempt to be good corporate citizens in our global economy are brought to life in chapter 3 through examination of a concrete case study prepared by Richard Locke. The case asks: What, if any, labor standards should the Nike Corporation require of its global contractors, and to whom should the corporation be held accountable? As the comments that follow the case illustrate, the case stirred considerable debate among participating alumni. The answers to these questions offered by different alumni turned on how broadly they defined the term "corporate citizenship." The minimalist answer that dominated much of public discourse and business school teaching in recent years is that corporations should be accountable for enhancing today's shareholder value. And, of course, managers are responsible to the individuals and institutions that put at risk the financial capital needed to build and sustain a firm. Yet most of the alumni who discussed this case view an exclusive focus on shareholder value as leading to decisions that are both myopic and socially unacceptable. They too want to hold corporations to a higher standard of corporate citizenship. But, as the Nike case makes clear, it is far from simple to translate these aspirations into effective policies.

In chapter 4, the legacy of Douglas McGregor serves as a launching pad for a rich discussion of the features of the complex and evolving organization of the future and its implications for management practice and education. The paper prepared with Sloan students and alumni by Thomas Kochan, Wanda Orlikowski, and Joel Cutcher-Gershenfeld suggests that realizing McGregor's vision will require questioning and challenging some of the very basic assumptions regarding the role of people, work, technology, leadership, and organizational goals that dominated twentieth century organizations. The sustainable organization of the twenty-first century, according to this view, will be one that leverages the full potential of its human capital to add value to the firm and returns fair value to its workforce and their families. Because modern organizations depend so much on intangible assets—like intellectual property, loyalty, trust, and firm-specific knowledge—traditional financial measures may provide misleading indicators of performance and viability.

The panel discussion that accompanies this paper reinforced the points that Carly Fiorina made about the need for openness and transparency, not just to investors but to employees as well. Panelist Meg O'Leary, a senior manager at PriceWaterhouseCoopers, noted that the culture of openness, trust, and flexibility present in her organization made it possible for her to work at home and to integrate her work and family life. James Goodnight, CEO of SAS Institute, stated succinctly the importance of the workforce in the twenty-first-century organization and the personal responsibility of the modern CEO to gain and maintain its trust and commitment: "95 percent of a company's assets drive out the front gate every night; the CEO must see to it that they return the following day."

Peter Senge, a founder and president of the Society of Organizational Learning, reinforced a point made in the earlier discussions of globalization, namely, that transparency, openness, and engagement no longer stop at an organization's boundary. He argued that a truly sustainable networked organization of the future will need to engage and address the interests and needs of a broader set of groups and organizations in civil society, whether this be NGOs, unions, or governmental entities. He put it bluntly: "15 percent of the people having 85 percent of the ‘goodies’ is not sustainable." Fifty years ago, only a few would have thought of this complex issue as a concern of business.

Managers must be prepared to harness advances in science and technology that will transform organizations and markets

Perhaps the most visible reason why managers' roles have become more complex in recent decades is that the pace of technological change has accelerated across a broad front. Organizations that do not harness the potential of new technologies and solve the problems they pose do not survive long in most markets. Successful companies with able CEOs are regularly pushed aside by technologies that were unknown when those CEOs were in school.

The paper presented in chapter 7 by Rebecca Henderson and her students, and the panel discussion that follows it with leading MIT scientists and engineers, provide a glimpse of some of the powerful new technologies that will shape the business world of the near future. As our colleagues from the Schools of Science and Engineering pointed out, these technologies have the potential to do enormous good as well as harm; every innovation is both an opportunity and a challenge. Professor Susan Linquist, for example, described work underway on how adding vitamin A to rice production could reduce the number of malnourished children who go blind by the time they enter school. She also described an innovative but simple technology developed at MIT for purifying drinking water that if made widely available to families in developing countries would have major payoffs to world health. On the other hand, convocation participants were amused and at the same time appalled at the demonstration of a prototype "person finder" that might join us in our homes, keep track of our whereabouts so presumably others (like our bosses?) can locate us and reach us anytime, anywhere, and under any circumstance. And while we delighted in the sight of a personal robot that we might have doing household chores, preparing our meals, and helping us to monitor our children from work or other remote locations, we were less enamored with the idea that others might likewise tune in and observe all aspects of our family and personal lives.

In his remarks summarized in chapter 7, MIT provost Robert Brown notes that most of the really big scientific innovations come not from established disciplines or departments at MIT but out of the laboratories and research centers that bring together scholars from two or more disciplines. This is equally true in management organizations and processes today. Translating scientific discoveries and technical breakthroughs into actual products and services requires building, leading, and coordinating multi-disciplinary and multi-functional teams. This is the heart of the innovation process in organizations.

In remarks summarized in chapter 4, Boeing's CEO Phillip Condit captured the changes in management and organizational designs that are needed to manage the innovation process efficiently and seamlessly. He, like others, sees the organization of the future as a network more than a hierarchy. To be successful, the networked organization needs to draw on and return fair value to its workforce, suppliers, customers, and communities. Condit's remarks provide a good introduction to the discussion of the broader range of features needed in twenty-first-century organizations presented in chapter 4.

It is important to note that many of the organizational changes discussed in chapter 4 are driven by changes in information technology, just as the emergence of trust-based marketing rests importantly on the power of the Internet. Technology, particularly information technology, has had—and will continue to have—profound implications for how businesses are managed, as well as changing the goods and services they produce.




Management[c] Inventing and Delivering Its Future
Management[c] Inventing and Delivering Its Future
ISBN: 7504550191
EAN: N/A
Year: 2005
Pages: 55

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