“Of People and Enterprises, Leadership and Values, Shareholders and Stakeholders”

Here is the raw manuscript of my presentation in Nuremberg on January, 17th, 2011, at the VWA Nuremberg (Academy of Administration and Business). It was part of the lecture series “Organization and Leadership III” by Prof. Dr. Alfons Madeja.

This presentation links terms that should be meaningful to all entrepreneurs and leaders. Let me start with the word ENTERPRISE. Can you just draw a mental concept of what (as a language game in economical studies) you associate with the term “enterprise”?

Well, you get totally different concepts. You might think of a huge concern like Siemens, but also of a government agency like the BA (Federal Employment Agency) or the Max-Planck-Institute. On the other hand, you might easily think of a mom-and-pop grocery store, the local painter or an architect’s office. And how about Google or Facebook?

How else could it be? Even if you draw a mental concept of the term “table”, which, incidentally, is a lot more palpable than “enterprise”, everyone thinks of his or her own table: one of us thinks of a table with three or maybe four legs, another one thinks of a round, oval or rectangular table, made of wood or metal, with a table top made of glass, a high one for the kitchen or a low one for sitting behind on the sofa, etc.

COMMUNICATION is nowhere near as easy as it looks. Even when it comes to trivial terms, we have totally different mental concepts.

My next question is:

What could an enterprise best be compared with?

Is it like a machine that gets input and generates output in a very determined way? A machine which is optimized by managers towards rendering as much turnover and/or profit as possible? A machine you only have to turn the right buttons of at the right time?

or

Is it more like a biological creature that must be nurtured and coddled? Like a swarm of fish or a tree? A creature that comes and goes?

I remember the church person and entrepreneur Augustinus Heinrich Graf Henckel von Donnersmarck – whose untimely death I greatly lament. Along with Rupert Lay, he is said to have been the Nestor for “Business Ethics”. Augustinus was a Premonstratensian Monk with a seat of honour in the Dome of Cologne. Besides his work as pastor, he was director of the Catholic Labour Institute and also founded and directed a counselling agency for enterprises. I often saw him. In one presentation, he introduced himself as a lobbyist of the world’s oldest enterprise. He meant the Catholic Church, which was founded a little more than 2,000 years ago and he called it the most successful enterprise of the world.

I also know another very old enterprise. It is the Hamburg “Berenbergbank”. In its enterprise brochure, they proudly present the portraits of all their managing directors in an uninterrupted sequence, starting in the 16th century. But firms of such an age are absolute exceptions to the rule.

So you can see:

There is a starting point to every enterprise. Most of them also have an end. That means that, as a rule, enterprises have a limited life span, just like biological creatures.

In Fürth, Quelle comes to mind. We in Germany of the 1950ies and 1960ies grew up with it. In 1927, Schickedanz founded the catalogue company Quelle, taking his clue from the American idea of mail order business. That was 83 years ago. Now, Quelle disappeared, regardless of the fact that it was really important to many people for a long time.

At least as far as the name is concerned, Schickedanz showed more fantasy than Neckermann. Neckermann – the founder just took his own name for the enterprise – is also one of the companies that no longer exist.

Many enterprises have only a very short life span. Three out of ten probably survive the first year. Many companions of InterFace AG gave up during the last 30 years. And the process continues.  At the moment, the last of the enterprises founded in the 1980ies are either given up or sold out.  As the saying goes: they cash up.

Enterprises have annual rings. It is also true for the InterFace AG. Often, your history is quite heterogeneous, with plenty of change and modifications. The way how you give yourself a certain profile on the market is also very diverse. Especially for service enterprises such as the InterFace AG, this is very important. After all, it is not easy to shine among the competition with just technological competence today. It goes without saying that a modern programmer has to know all the ins and outs of his programming language. Consequently, you have to build your own profile in another way.

InterFace started out as a typical founders’ firm. We were characterized by the founders and supported by their network of relationships and their ideas. If you are a founders’ firm, you initially have a rather easy time profiling yourself against other enterprises. This bonus, however, will not last very long. More people became part of the firm, the image of the company on the market changed. From having been a founders’ enterprise, we grew into an enterprise with special technological competence (document storage on UNIX). This was also a good way to find your own profile on the market.

But that, too, did not last. A few years later, InterFace underwent its next change and became an enterprise showing itself on the market with a special image (label and logo – the UNIX and CLOU/HIT Company with the face on the logo). Yet even this kind of thing will only last so long. During the last few years, we turned into an established service enterprise. If you have come this far, the only possible way of differentiation against the competition is through your enterprise culture. And unless something special will happen, this is how it will continue to be.

The development of InterFace is typical for a service enterprise. The enterprise culture gets more and more important. CULTURE has something to do with KNOWLEDGE and VALUES.  These are both words that are strongly connected with “being human”.

So what makes us humans?

I do not know. Well, if there is something you do not know, then you might benefit from asking: where does it come from. So let us ask:

Where does homo sapiens come from?

In my considerations, I would exclude simple creationism (Kreationismus) for explaining the existence of humans. Consequently, all that remains for explaining how humans developed is the evolutionary theory. It is the current state of the art in science. The evolutionary theory is based on Darwin. He would have celebrated his 200th birthday in 2009, which is why the year 2009 was called the Darwinian year. Darwin wrote his first essays on the evolutionary theory when he was 40 years old. That means that the evolutionary concept of the world is only 150 years old. Well, it explains why we still sometimes believe in an antiquated concept of human nature.

At this stage, I gave a very concise history of the development of humans from the species anthropomorphic (Menschenartigen): we started walking upright about 10 million years ago. It was the beginning. There are two theories why humans started walking upright.

The anthropomorphic needed a lot of protein. Since, due to an environmental catastrophe, the jungle disappeared in Africa, the anthropomorphic creatures had a problem finding enough food. Today, scientists assume that the upright posture either developed in the Savannah (seeking vultures in the high grass) or in flat waters, where they hoped to find proteins in the water. Well, if you see it under this aspect, there can be a positive side to environmental catastrophes (?). If the environmental catastrophe had not happened, home sapiens would probably never have emerged.

Walking upright, the apish creatures had freedom of their hands, because they no longer needed them for walking or climbing. And what do you do with your hands if you do not really need them? Well, you get “silly ideas”, for instance you start building things, like tools. In this way, intelligence might have developed step by step:

Figure (

> 20,000 years ago?),

Language (developed while hunting in a team – only possible because of the incidental larynx flap) and

Stories (> 10,000 to 20.000 years ago?) and

finally letters (

> 5,000 years ago?). They were first used to help with trade and exchange, later to make it possible to write down stories for coming generations to read.

It is an interesting fact that, especially through recent discoveries in the field of molecular biology, the knowledge about the evolution of homo sapiens has enormously increased. Incidentally, the same is true for other disciplines, as well, for instance astrophysics.  In this area, satellites listening into the cosmos create totally new data quantities and qualities, such as could never have been acquired from the earth. And modern findings show that the development of humans went a lot faster than we would still have imagined a short time ago. And with an extremely short time, I mean relative to the existence of the universe.

In some way or other, the concept of humans being noble and quasi God-like seems, after all, not to prove true: well, all we are is – to say it bluntly – descendants of the humanoid – apes that got intelligent.

But how are complicated, intelligent apes supposed to live together in a socially acceptable way?

Well, we have to live together. Both neurology and psychology have shown that humans are social creatures. They need a “personal other”; they feel safe in herds and groups.  Rule mechanisms controlled by the brain reward social behaviour and good deeds.

For instance, humans permanently build up social systems (matrimony, family, clubs, communes …). ENTERPRISES, too, are social systems. Their major purpose is an economical one: providing for people inside and outside the enterprise by producing commodities and services. Even Adam Smith, “father” and “creator” of the economic theory, pointed out that the baker does not bake bread because he is such a philanthropist. He does so in order to provide for himself and his family, that is: for the profit.

But there is a very implicit MEANING to a bakery. And consequently, I think enterprises that want to exist in a sustainable way also have to prove the meaning of their existence at all times. They constantly have to re-fill their meaningfulness, re-fill their “container of meaning”. And it must and can never be the entire meaning of an enterprise to work exclusively for the SHAREHOLDER value.

As far as this is concerned, Alfred Rappaport, the inventor of the shareholder value who postulated “an enterprise must exclusively work towards the shareholder value” was not a good pupil of Adam Smith. And if you look at the Bavarian constitution (Verfassung), you will also find something totally different on free business and banks.

But let us get back to enterprises.

Who are the STAKEHOLDERS of an enterprise?

Well, there are many: customers, providers, partners, employees, families, leaders, managers, managing directors, local institutions, and the local community where the enterprise has its office building. And, of course, also the shareholders. Yet I would not say they have an exceptional position such as Rappaport attributes to them.

At an aside, I would like to point out that some enterprises would benefit from drawing up a balance sheet of influence on the external factors. Simply because you could test the effect an enterprise has on its environment (with which I do not only mean the environmental resources).  And maybe it would do no harm to keep a social balance sheet – as we used to in the 1970ies.

Back to LEADERSHIP
.

🙂  
We all saw that humans are apes … that means all “leaders” and all those who are “led” are apes. Even talking about the “led” ones shows you how problematic “leadership” is.

What is LEADERSHIP all about?

Enterprises live by the SELF-RESPONSIBILITY and SELF ORGANIZATION of its employees. It is the task of the leaders to make this possible and to realize it.

Problems and conflicts between humans are a thing of everyday life. This is also true for the eco-social system: enterprise. It is an important task of leaders to solve those conflicts. In saying this, I probably already gave you the most important responsibility of leadership.

Well, but who is qualified for leadership?

Let me give you a list of qualities required from leaders (and others):

Being a good listener, being capable of thinking altero-centered, empathy, being rather eloquent. Technological and other competence, authority, charisma and being able to delegate in the sense of letting go. These are all very useful things. Let me call them virtues of the B-Class.

But there is something even more important: 

CIVIL COURAGE and constructive disobedience. Those are the A-Class virtues.

Incidentally, life is far from easy for ENTREPRENEURS and TOP MANAGERS, such as CEO’s. According to research done by the  HYPERLINK “http://www.rise.ch/wiki/index.php/Main_Page” o “Website von RISE” t “_blank” RISE (at St. Gallen), they spend most of their time talking and telling stories. That is good news, because, above all, the entrepreneur always has to keep up his and other’s belief in his enterprise. And the best way to do that is by telling stories. But it is rather steep to demand of someone who likes talking a lot that he also be a good listener.

There is still one more important quality a leader should have:

They must be capable of making good DECISIONS.

A decision only deserves its name if it answers to the following criteria:

The person who decides must be free to choose (if there is no alternative, you cannot make a decision).

The decision must have important consequences for the future.

There must be an element of uncertainty underlying the decision.

It is not easy. Many people who have to make decisions want to make things easier by selecting a good basis for their decisions. Formerly, we used to say: “collect information, evaluate and decide”. And then you collect or let others collect so many “facts” that, basically, there is only one way left to decide. Well, that is no longer a decision, is it? Except that “facts” are not really “facts”. All they are is evaluations made with a high degree of uncertainty. In other words: basically, others made the decision for you by creating a list of facts through many small decisions.

One requirement for good decisions is ETHICAL competence. Unfortunately, there is far too much talk of ethics today. Ethics commissions have become the latest fashion. Wait a little longer and there will be the job description of “company ethics manager” (what an atrocious idea…).

To me, culture and values seem more important. Yet: ethics are important for decisions.

Because decisions made with a factor of uncertainty require a responsible balancing of interests. In order to do that, a leader must have ethically responsible values. They do not appear from nowhere. Instead, they must be acquired during your life – through work, experience, self-scrutiny and reflection.

And eventually, these personally responsible values must match the consensus of mankind. For example, they must answer to the UNO Charta and meet the one principle basically agreed to by all religions:

Never treat anybody in a way you would not wish to be treated yourself!

The main requirement for this kind of personal development is the acquisition and preservation of FREEDOM. There are many definitions of freedom. I collected them in an article. In my personal opinion, the best one is still:

A person is free if he is willing and capable of leading and being responsible for his own life.

A few decades ago, some students at the Wolfgang-Goethe-University at Frankfurt opted for this definition.

Let me conclude this presentation with WISHING for all of us to become and remain free persons to the best of our ability.

RMD

P.S.
On the whole, it was a beautiful trip to Nuremberg. Prof. Dr. Madeja gave me a great welcome – and after my presentation, he did an excellent summary of same. Many thanks!