The Age Of Unreason

by Charles Handy

  The Role Of The Centre

  A report for Britain’s National Economic Development Office in 1988 was severely critical of some of the country’s largest electronic businesses. They had, said the report, been growing depressingly slowly compared with their competitors in Japan, Germany and the USA. The report suggested that a major cause of this slow growth lay in the corporate structure adopted by these companies. They had broken themselves down into individual businesses and had then left those businesses to determine their own strategies. The result, too often, was short-term and parochial thinking. The implication was that it needs big organizations to think big and long-term.

  If these companies had indeed devolved strategic thinking to their individual businesses then they had misunderstood corporate federalism. It would be akin to the USA letting the States decide on their individual policies for defence – no one would, in the end, be defending the USA. To see the centre only as a banker, pulling in surplus profits and dispensing funds for worthwhile projects, is to throw away most of the advantages of federalism which is a concept devised to make things big whilst keeping them small.

  The centre has to be more than a banker. Only the centre can think beyond the next annual report or indeed, to quote one family business, can look beyond the grave. Only the centre can think in terms of global strategies which may link one or more of the autonomous parts. To leave these big decisions to the discretion of the parts can be a way to mortgage the future.

  The centre, however, is not in full control in a federal organization. It is easy, in logic, to think of the centre taking the long-term decisions and leaving the implementation to the parts. That logic, however, reeks of the old engineering language of management, of decentralization and of delegated tasks and controls. It is not the new language of political theory, of people and communities. The federal concept requires the centre to act on behalf of the parts, if the resulting decisions are going to be self-enforcing – and they have to be because the centre does not have the manpower to control the detail.

  It all requires a new image of the corporation, one in which the centre genuinely is at the middle of things and is not a polite word for the top, or even for Head Office (a term gradually disappearing from the corporate vocabulary). The centre must cling to its key functions of new people and new money, but its decisions have to be in consultation with, and on behalf of, the chiefs of the parts. In political terms this makes sense – the centre becomes an assembly of chiefs, acting in that place and time on behalf of the total federation, then returning to their own tribes to do their own bit for the whole.

  Running the federal centre is not therefore the job for a monarch, someone with an overarching authority and a liking for autocratic government. It has to be a place of persuasion, of argument leading to consensus. Leadership is required but it is the leadership of ideas not of personality. It is observable how the bigger multinationals, pushed earlier than most into federalism because they have to deal with autonomous nation states, have begun to create triumvirates, even committees, to run the centre.

  I asked someone who had just become Chairman of a great multinational what it felt like to be head of one of the world’s biggest businesses, to be, in one sense, one of our biggest businessmen. ‘It isn’t like that,’ he replied. ‘I have just moved round the table and I’m temporarily chairing the team because someone has to.’

  In 1984 Noburo Goto, the charismatic head of the Tokyo group in Japan, with 300 companies ranging from railways to property, resigned and in his place the company is run by a group. From monarchy to federalism in one move.

  The centre will have its own staff in these organizations, a staff whose concerns will largely be with the future, with plans and possibilities, scenarios and options. They will be there to advise their political seniors, many of whom will be in the part not the centre, and will have to rely increasingly on influence rather than on any formal authority or absolute power. In many organizations the centre is already becoming a training place for future chiefs, a necessary exposure to the whole before a commitment to one of the parts.

  Because organizations evolve there are, as yet, few federal corporations in a pure form. The Japanese have always come close to it and, more recently, Isamu Yamashita of Mitsui was quoted (in John Naisbitt’s Reinventing the Corporation) as saying, ‘The best corporate structure today comprises a small strategic centre supported by many front-line outfits.’ New words, however, are, once again, heralding new behaviours. One chief executive recently described his corporate centre as variously a ‘Good Food Guide’ (indicating which subsidiaries were best for what), traffic policeman, orchestra conductor, interpreter, critic or cheerleader. Asked about his own role, he replied, ‘For most of my life I’m a missionary’. ‘We need’, he said ‘to compete outside but collaborate within’, a succinct description of the federal principle of interdependence, the principle that each part needs the help of the other parts, as well as the centre, in order to survive. Too much independence, after all, can lead to breakaway or to a random collection of disparate bits, a conglomerate not a federation.

  Unfortunately, federalism misunderstood can be worse than no federalism. Federalism misunderstood becomes inefficient decentralization, leading to talk of the headless corporation or the hollow company and the kinds of criticisms cited in the NEDO Report of Britain’s electronic businesses. A clear understanding of the role of the centre is crucial to a proper federalism, but so is an appreciation of concepts like ‘subsidiarity’ and ‘the inverted do’nut’ because structure on its own will not produce a federalist organization. The words are deliberately strange to signal that new ways of thinking are required in these organizations. More of the same will no longer work. Discontinuity demands upside-down thinking.

  Subsidiarity

  The federal organization is not only different in its form and shape, it is culturally different, it requires a different set of attitudes from those who seek to run it and from those who seek to manage it and from those who are managed. This is the discontinuity which matters – not the change in structure but the change in philosophy.

  That philosophy is characterized by the word ‘subsidiarity’. It is a word unfamiliar to most, but not to the adherents of the Roman Catholic Church where it has long been an established part of traditional doctrine. First enunciated by Pope Leo XIII, but later recalled in the papal encyclical ‘Quadragesimo Anno’ in 1941 at the time of Mussolini, the principal of subsidiarity holds that ‘it is an injustice, a grave evil and a disturbance of right order for a large and higher organization to arrogate to itself functions which can be performed efficiently by smaller and lower bodies’. To steal people’s decisions is wrong.

  The choice of word is deliberate because the sense of morality implied by it is crucial to its working. Subsidiarity means giving away power. No one does that willingly in organizations, yet the federal organization will not work unless those in the centre not only have to let go of some of their power but actually want to do so, because only then will they trust the new decision-makers to take the right decisions and only then will they enable them to make them work. They have, therefore, to believe that it is an essentially good thing to do; they have to feel good in themselves about it because they have done the good thing.

  It is only too easy in organizations to create negative self-fulfilling prophecies and to delegate with the secret knowledge that it won’t work because the individual to whom you have delegated does not have the right information, or access to it, cannot mobilize the resources to implement any decisions and is inadequately trained for the new responsibilities. It would, of course, be an irresponsible manager who delegated under these circumstances but we can all act irresponsibly when we act reluctantly. To be effective, delegation requires a positive will to trust and to enable and a willingness to be trusted and enabled, a positive self-fulfilling prophecy, a moral act, subsidiarity.

  Interestingly, virtue in this instance does not go unre
warded. It is the way out of one of the many Catch 22 situations in organizations. This Catch 22 starts from the observable fact that it is hard to give responsibility to someone if they are not capable of it, but how do you have any evidence of their capability if they have never been given the responsibility? Trust has to be earned, but in order to be earned it has first to be given. I must first trust my children to find their own way to school if I am to find out whether they can be trusted to get there on their own. I will do that because I am their parent, because I want them to grow and because I believe that they are capable, give or take one or two initial mistakes.

  Those organizations which are forced, often because of the nature of their work, to give large responsibilities to young and junior people have a very good record of attracting a high calibre of young people, which makes it easier for those above to take the risks implied by subsidiarity. Television and journalism are both arenas which the talented young queue up to join. It cannot be the money, nor is it usually the fame; it is the chance to take responsibility publicly at an early age. It has to work this way because no one in the centre of a television company or a newspaper can specify in any detail what has to go into every programme or every page; those in power have to rely on control after the event, which can at times be embarrassing and even expensive. These are the mistakes which are an inevitable part of trust. In good organizations the mistakes are rare because the people are good, they are good because they know that they will be entrusted with big responsibilities, including the chance to make mistakes.

  Practice subsidiarity, in other words, and in due course you will draw unto yourself the kinds of people whom you will need if the subsidiarity is to work. Increasingly we see subsidiarity infecting other areas of work, in the new finance houses, for example, in advertising agencies, in the more traditional fields of medicine and now of law; in places, in other words, where decisions have to move so fast that those on the spot have to be trusted. Where the young perceive it happening is where the best of them want to be. Ultimately subsidiarity is a self-justifying philosophy.

  The Inverted Do’nut

  An alternative analogy is that of the inverted do’nut. The do’nut is an American doughnut. It is round with a hole in the middle rather than the jam in its British equivalent. Call it a bagel if you live in New York. This, however, is an inverted American do’nut, in that it has the hole in the middle filled in and the space on the outside; like the diagram below:

  The point of the analogy begins to emerge if you think of your job, of any job. There will be a part of that job which will be clearly defined, and which, if you do not do, you will clearly be seen to have failed. That is the heart, the core, the centre of the do’nut. The tasks may be written down in a job description, or, if it’s a classy organization, in a statement of objectives; the snag is that when you have done all that you have not finished, for there is more. In any job of any significance the person holding the job is expected not only to do all that is required but in some way to improve on that, to make a difference, to show responsible and appropriate initiative, to move into the empty space of the do’nut and begin to fill it up. Unfortunately, no one can tell you what you should do there because if they could they would make it part of the core. It is another organizational Catch 22. All they can tell you is the boundary of your discretion, the outer rim of the do’nut.

  Some do’nuts are all core and no space. We do not want the bus driver using his initiative to leave early, take a quicker route or go for scenic detours. Some people, particularly perhaps those in the flexible labour force, want jobs which are all core; at least one knows what has to be done and when it is done. Other jobs have no rims, that of the independent entrepreneur, for instance, and some have huge areas of space as with people in the caring professions, teaching or the priesthood, where there always seems to be more that could be done were there only the time. Most people seem to like a balanced do’nut with about equal spaces of core and space.

  The point is that federal organizations require large do’nuts, be they group do’nuts or individual do’nuts. That is not as it used to be. Organizational fashion used to imply that the work of most of the organization could be precisely described and defined, and therefore carefully monitored and controlled. Most jobs were all core. The changing complexity, variety and spread of reaction which is now a feature of so many organizations makes the well-cored do’nut an impossible dream today, if dream it ever was. These organizations have to be managed by specifying the essential cores of do’nuts, by being clear about boundaries or areas of discretion, and by specifying the kinds of results which are required from each do’nut, the criteria for successful initiative.

  Obvious though it may sound when set down on paper, this philosophy of management marks a major discontinuity. We are not, most of us, used to running organizations by results, with large and empty do’nuts. Most managers feel more comfortable when the cores are large as well as closely defined, when they can control the methods and therefore the results, the means and not the ends. To let go, to specify success criteria, to trust people to use their own methods to achieve your ends – this can be uncomfortable. It is particularly uncomfortable when we realize that after-the-event controls, or management-by-results, means that mistakes can and will be made. It may be true that we learn more from our mistakes than from our successes but organizations have in the past been reluctant to put this theory into practice. Now they will have to, and they will have to learn to forgive mistakes. Not all mistakes, of course, can be forgiven but most are less critical than they seem at the time and can be the crux of important lessons.

  Organizations are not by nature forgiving places. Mistakes are magnified by myth and engraved in reports and appraisals, to be neither forgotten nor forgiven. Organizational halos are for sinners as well as for saints and last for a long time. The new manager must be a different manager. He, and increasingly she, must use what, in psychological jargon, is called re-inforcement theory, applauding success and forgiving failure; he or she must use mistakes as an opportunity for learning, something only possible if the mistake is truly forgiven because otherwise the lesson is heard as a reprimand not an offer of help. The new manager must learn to specify the measures of success as well as the signs of failure and must then allow his or her people the space to get on with it in their own way. The new manager has to be teacher, counsellor and friend, as much as or more than he or she is commander, inspector and judge. It is a major change in our ways of managing. If we cannot do it then federalism becomes anarchy, control reverts to the centre, the centre becomes too big and too expensive, the organization is crippled, withers and can die.

  The Language Of Leadership

  The new organizations need to be run in new ways. As we have seen, these new ways need a new language to describe them, a language of federations and networks, of alliances and influences, as well as of shamrocks and do’nuts. The language, and the philosophy which it describes, requires us to learn new ways and new habits, to live with more uncertainty but more trust, less control but more creativity. To those of us reared in another tradition it can be a strange and a frightening language but I think that we have to recognize that it is the right language. No one, after all, has ever liked being managed, even if they didn’t mind being the manager, for anyone who has tried to run an organization has always known that it was more like running a small country than a machine. It was only the theorists who tried to apply the hard rules of number and logic and mechanics to an essentially soft system. Maybe we were instinctively right to pay little heed to them until people like Peters and Waterman first started talking the new language in their In Search of Excellence, a book which obviously touched some chord.

  As a result, leadership is now fashionable and the language of leadership increasingly important but, as Warren Bennis says in his book on Leaders, it remains the most studied and least understood topic in all the social sciences. Like beauty, or love, we know it when we
see it but cannot easily define or produce it on demand. Again, like beauty and love, the writings on it are fun, sexy even, with their pictures of heroes and stories that can be our private fantasies. To read MacGregor Burns, Maccoby, Alistair Mant, Warren Bennis, Cary Cooper or Peters and Waterman themselves is to escape into a private world of might-have-beens.

  They may even do a disservice, these fun books, with their tales of heroes and their myths of the mighty, by suggesting that leadership is only for the new and the special. The significance of the new language is, I believe, that leadership has to be endemic in organizations, the fashion not the exception. Everyone with pretensions to be anyone must begin to think and act like a leader. Some will find it comes naturally and will blossom, some will not enjoy it at all, but unless you try, and are allowed to try, no one will ever know, for leadership is hard if not impossible to detect in embryo – it has to be seen in action to be recognized by oneself as much as by others.

  So what is this mysterious thing and how does one acquire it? The studies agree on very little but what they do agree on is probably at the heart of things. It is this: ‘A leader shapes and shares a vision which gives point to the work of others.’ Would that it were as easy to do as to say! Think on these aspects of that short sentence:

  — The vision must be different. A plan or a strategy which is a projection of the present or a replica of what everyone else is doing is not a vision. A vision has to ‘re-frame’ the known scene, to re-conceptualize the obvious, connect the previously unconnected dream. Alistair Mant talks of the leader as ‘builder’ working with others towards a ‘third corner’, a goal. Those who are interested only in power or achievement for its own sake he calls ‘raiders’ or mere ‘binary’ people. MacGregor Burns talks of the ‘transforming’ leader as opposed to the mere ‘transactional’ one, the busy fixer.