Monday, December 5, 2011

The human factor

Last week I was invited to a networking meeting of top-management to present our book to leaders of different industries. The focus of the event was the success factors of strategic management, in the time after the financial crisis and in Europe’s critical economic situation. The participants agreed on one dominant factor for success: human beings. After a long period of narrowing down corporate value creation to a purely financial dimension, which can be measured and negotiated in impersonal markets, the longing for a human dimension has become dramatically noticeable.

The success stories the participants presented are examples of actively motivated individuals, who are inspired to contribute in a meaningful way to value creation. The successful management strategy in these examples depends on the way human beings are willing to contribute. And they emphasize that human beings are motivated, when they are respected and appreciated in their engagement. Confronted with challenging times, and the growing lack of trust in leadership, the relief is seen to be in the hands of human beings.

The participants of the meeting then asked how this crisis of confidence could be overcome. One leader emphasized that successful mangers are also courageous individuals. Leaders have to stand up and advocate sustainable value creation that contributes to the quality of human life, and not to quick short-term profits. They have to support their own people, and respect the experience and knowledge of the people with whom they do business. These kinds of human narratives contrast greatly with the greedy behavior that brought us to the deep crisis of trust in which we find ourselves. Or to quote one manager: “Every company has the employees it deserves. If a company is interested in short-term profitability and it sets the corresponding incentives, it will automatically have selfish and extrinsically motivated people. Companies are what they do (not what they say!).”

Successful business is moving away from the idea of the controlled and defensive management of relations toward a constructive and partnership exchange between leaders of firms and stakeholders. In the late seventies, Chandler was already calling for the visible hands of the leaders (Chandler, A. D. (1977). The Visible Hand: The Managerial Revolution in American Business. Cambridge, MA: The Belknap Press of Harvard University Press). We recall Chandler’s notion of the "visible hand," because value today is not being primarily created by the invisible hand of the market, but by the active shaping of leaders (see chapter 9 of our book). Not the invisible hand of the market leads to an overall increase in the welfare of society, but the visible hands of the leaders of the firm and its stakeholders. The human factor, not the inhuman factory, matters in rebuilding trust and achieving sustainable value creation.

Sybille Sachs

No comments:

Post a Comment