The Modern Corporation: It’s About People, People

As turmoil continues to roil economies both large and small, as politicians struggle to figure out how to deal with the conditions of the 21st century, and as the United States and the West heads into what Paul Krugman describes as no less than “The Third Depression”, a new way of thinking about management and innovation is making the rounds.

It’s about people, people. Instead of thinking about the corporation as an amorphous entity, executives need to remember the individuals at the heart of every organization. Ok, so it’s not exactly an earth-shattering insight, but it’s a sign of how far we’ve drifted that people’s health, hopes, insights, and talents have come to be seen as mere grist for the grinding wheels of capitalism.

Three moments emphasized this shift for me recently:

1. John Hagel, co-author of the recent, highly recommended book The Power of Pull: How Small Moves, Smartly Made Can Set Big Things in Motion, talks about the “red queen effect”, where executives are running faster and faster to stay in the same place. The problem is, they’ve essentially already lost this particular race, and trying the same old techniques only means they’ll fall further behind.

Now, says Hagel, is precisely the time for executives to figure out what, precisely, their firm is really about. And while Ronald Coase may have won the Nobel Prize in 1991 for his theories of efficiency within the industrial organization, executive focus in 2010 has to be on talent development. Not, says Hagel, simply a cursory nod toward human resources but a concerted effort toward making a focus on talent integral to every part of an organization.

2. At the recent New York Forum, I sat in on a breakout session about how large corporations should handle the challenge of disruptive innovation. Truthfully, there wasn’t much consensus; it mainly seemed like an opportunity for panelists to trumpet their fervent support for and dedication to the discipline of innovation, the definition of which was unclear. But Glenn Kelman, CEO of online real estate company (and would-be industry disruptor) Redfin, had some insights that have stuck with me. “The number one thought I have every day is how do I make Redfin the best place to work for engineers,” he said. “One great engineer is worth 10 mediocre engineers. And a great engineer won’t work somewhere that engineering isn’t valued.” For Kelman, the future, intuitively, lies with people. Make them happy; watch your company thrive.

3. I’ve recently been reading The Power of Positive Deviance: How Unlikely Innovators Solve the World’s Toughest Problems. I’ve written about PD before; it’s a curious philosophy of examining the behavior of outliers to see how they’ve intuited a better way of doing something than ‘most everyone else in their same society. The most frequently cited example of PD in action comes from two of this book’s co-authors, Jerry and Monique Sternin, who documented it in action while working for Save the Children in Vietnam. By looking at what a few individual parents did with the same resources in the same situation as an entire community (in this instance resulting in healthier children), positive steps for all could be identified—and rolled out for the wider benefit of the inhabitants.

But PD isn’t limited to developing markets, and the authors include some potent examples from business, too, including from within giants such as Merck and, believe it or not, Goldman Sachs. The former company tried PD as a last resort in Mexico, where it brought about the resurrection of sales of the drug Fosamax, a miracle osteoporosis drug that reps had nonetheless struggled to sell. Manager Andres Bruzual called his district managers for a meeting, outlined the principles of PD and told them to have at it. As the book’s other co-author, Richard Pascale, outlined to me on the phone: the managers were initially both skeptical and horrified. But once they realized that the onus really was on them to figure out the next, best steps, they rose to the challenge. By allowing individuals to feel like they had some say in how they should best do their job, Merck Mexico pulled off a seemingly impossible success story.

In an age where people can work anywhere, on anything, and for a generation that hasn’t grown up with the promise of a job for life (and is probably horrified at the very idea of it), the real challenge is for the corporate supertankers of our time to prove they can turn away from the very real threat of being out-maneuvered on all sides. Thoughts on which companies might prove the Titanics of the age? Or which behemoths have the chops and the wherewithal to adapt in time?

This post was originally published on the NEXT blog at Bloomberg Businessweek.


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