The hard lesson we are learning is that ethics is no longer a luxury–itis a staple in the success of any enterprise.
IN TIMES OF GLOBAL LIMITS and global competition, we can no longer rely on growth, and plentiful cheap resources to solve our problems. We face dilemmas that are projected in the post-Soviet economy: do we need more control or more freedom? More soft humanism and equality or more hard discipline and sacrifice? More individual risk and initiative, or more collective collaboration?
It can be tempting to hunker down in the midst of extensive lay-offs and business failures, foolish though we know it to be. We wish for predictability, hope for wise control from the center, and feel coerced to manage things for the short term bottom line. And yet we know the bureaucratic solution no longer works–designed for defense, to resist change and concentrate intelligence and control in the head. More open self-organizing systems, modeled on nature and free enterprise systems of multiple small entrepreneur ships, have a capacity for self-renewal that is more than self-preservation.
These lessons are not lost on giants such as IBM and Xerox, who are risking reorganizational perturbations to flatten and speed their organizations, and open themselves to more continuous innovation.
Hard times also call into question more self-indulgent goals such as quality of work life and minimizing environmental degradation. What good are business ethics in a business that may be forced to close its doors and send all its people out on the street?
The hard lesson we are facing is that ethics is not a luxury. The ethics we need to save us, to make us competitive in the world market, is a very deep kind of ethical wisdom. Free enterprise is about to encounter the age of limits and in doing so will discipline itself. As the decade progresses, the advantage to the ethical will grow.
To flourish in the modern marketplace, we need extraordinary commitment from all employees, often to do the impossible: to achieve unprecedented quality and responsiveness in products and services along with heroic frugality, to create incredible levels of integration and collaboration within and without the organizations, and especially to pull off continuous, brilliant, and cheap innovation. How can we begin to function at these levels?
This is where the old-fashioned values are having renewed following. First, it is people who make a difference, all the people. We have relearned over the last decade simple truths without hubris: there is no way we can “manage” highlevel human output, but only set the conditions for everyone doing their best: including support of the core competencies of people, their ability to self-organize, their ability to change and grow.
We are discovering that we only bring our best selves to the party when each individual is valued and has sufficient freedom to act. Freedom only works when it is exercised with a state of mind well beyond the limits of individualism. Human self-organizing systems depend on the units within the system to behave even when they are not watched, even when there are no penalties for misbehavior. For higher levels of interconnection to manifest there must be trust, and that trust must be based on an assurance of the goodness of others in the system.
We must build organizational cultures in which freedom and personal initiative can cohabit with cooperation, caring and a highly integrated harmony.
Seven Basic Principles
Effective societies and effective companies alike have their grounding in ethical basics that rest on freedom and democracy: the value of diversity; distributed power; continuous reality testing; distributed leadership; global ethics; acting for the long run; and the Golden Rule.
1. The Value of Diversity. A collective freedom must encompass and nourish diversity. This is what collectivism forgot-the freedom to be diverse, and the conception of each diverse individual being inherently of equal value and having open-ended potential for contribution.
The challenge of valuing diversity only begins with equal opportunity as defined by law. Within each ethnic and cultural group there is enormous diversity that individuals bring to the workplace–diverse organizational styles, talents and competencies. The freedom to be diverse without being devalued is at the yeast of democracy’s effectiveness. It is diversity that is driving the successes of flexible cross-functional teams, and further appropriate diversity is gained when teams form anew for each new project. The U.S. is still the world’s melting pot, a leader in human diversity among the industrialized nations. Assigning equal value to each of us brings out our uniqueness – and this in the long run can be our greatest competitive advantage.
2. Distributed Power. To have a flexible and responsive organization, the intelligence must be distributed throughout–every person using his or her brain, and interacting in such a way as to create continuous and current knowledge that is rapidly disseminated and used.
The achieve this, the power to decide and act must be distributed. The forces for ignoring this fact in practice are so great that effective organizations are raising the distribution of power to an ethical principle, backed up with some level of control or ownership of assets.
In practice, the best organizations are promoting the emergence of their informal organizations, encouraging new cross-functional working alliances to serve customers-and assisting the dismantling and re-emergence of new groupings, processes and structures as new needs emerge. These new alliances are developing across all traditional boundaries within the organization, and, between people within the organization and without, substituting for hierarchical simplicity an amorphous and fluctuating complexity of relationships.
In these circumstances of increasingly empowered and self-organized employees, simple rules and rigid policies are not enough to guide employees. There must be a shared sense of where the organization is trying to go, and then, because ends never justify means, a deep respect for ethics. The power of leadership is in providing ethical and effective power to the people.
3. Continuous Reality Testing. To give people freedom and power we need continuous and principled reality testing, fully distributed throughout the organization. To do this, we need what Max De Pree calls “lavish communications,” which only occur in organizational cultures that promote truth and never suppress or limit the distribution of information. Organizations energized with self-organizing groups and projects, that are flexible and responsive, gain needed coordination not from the power of people over people, but from continuous self-testing against broad principles and shared vision.
4. Distributed Leadership. Leadership, as countless people are teaching us, must be as distributed as intelligence-free people cannot collaborate without sharing the big picture, cannot move forward effectively without a common mission, cannot self-test and self-renew without accurate feedback, cannot count on each other without trust in a common and widespread moral wisdom.
Distributed leadership integrates the paradoxes inherent in human association. The new organizational designs will encourage equal measures of freedom and cooperation, equal doses of market discipline and community collaboration. Anyone ignoring one side of this paradox will in the end be burned by it, and so we must develop in ourselves both the analytic and the heartfelt, the canny trader and the caring compatriot, the entrepreneur and the communitarian, the individualist and the egalitarian, the competitor and the partner.
5. Global Ethics. Freedom extended to people embedded in a deep sense of community is the basic lesson the Japanese are teaching the world, and to hold our own we must attain the next stage of ethics beyond them-beyond a parochial definition of what the individual is part of. If the Japanese are learning to be ethical to the boundaries of Japan, we must learn to be ethical not only to the level of company and beyond to the level of our national communities, but to extend our ethical boundaries to include the world. When we do that we will achieve a kind of aliveness that is very difficult to defeat.
6. Acting for the Long Run. The most difficult and important technological challenge of our times is to find ways to bring the whole population of the world up to an advanced standard of living without destroying our environment. This cannot be done with existing technology; nor will the world wait for economic progress. Good industrial ecology is already yielding savings for companies. “Pollution prevention” programs are preparing firms for the inevitable regulations and taxes to come.
7. Golden Rule. “Do unto others as you would have others do unto you” is the basic rule for community survival. Those groups which survive well will treat each other and even their customers as equals, with consideration and respect. Internally, the “Golden Rule” is needed to prevent our worst – destructive-in-fighting, stifling authoritarianism, diverting status-seeking. This principle is the basis of pulling together and getting done anything of value. Reality is harsh, and seems to be getting harsher. We function best when we can count on others, and others on us, and when we are willing to collaborate with our colleagues and customers on mutual goals. Every workplace that has long-term success rests on community values: mutual support, caring for each other, our customers, and the worlds we share, and being responsible to learn and change so as to produce unquestionable positive value–or jeopardize everyone’s survival.
In some sense, everyone knows that more ethical and far sighted behavior is necessary to solve our nation’s problems. Many of our problems today are the result of the moral lapses and selfish excesses of the 80s, but now that a firm is in trouble, many business leaders feel forced to temporarily apply even more short-sightedness and selfishness as the remedy.
In the rapids ahead, no inner guidance system will be strong and aware enough to guide the empowered employees save an unshakable desire to discover what is truly ethical and do it. This does not mean that we do not have controls or systems for encouraging the good and limiting the bad. It does mean we need to recover the old-fashioned wisdom which taught that one of the primary jobs of leadership is to develop the ethical awareness of one’s followers while bringing out their creativity and competency. It does require each of us to begin cultivating our ethical competence with the same enthusiasm we devote to cultivating our technical marketing and finance skills.
Business organizations have contributed to the problems of the world – we can point to pollution, materialism, and alienation as consequences of the modern corporation. Yet modern corporations have within them the powers of change. Interconnected and interdependent, our international corporations have wider interests and wider spans of influence than any government bureaucracy. They are driven by their competitive position to be responsive and adaptive on a global scale. Those companies that seize the ethical initiative will define the future and be around to enjoy it.