Instructions for Self-Organization E-Book

Fredmund Malik

• Herausgeber: Campus Verlag
• Kategorie: Fachliteratur
• Serie: Die Malik ManagementSysteme
• Sprache: Deutsch
• Veröffentlichungsjahr: 2012

Seitenzahl: 164

Beschreibung

Management is no matter of ideology, nor is it a question of fashion. Management is a craft - the universal and most important discipline of the 21st century. Fredmund Malik, the leading expert in the field of general management, provides you with the knowledge it takes to be a successful executive and manager, in any position, within any organisation. This part introduces Fredmund Malik's toolbox for consistent General Management, featuring the modules of Master Control for the management of complex systems. These modules cover the entire development of a systematic policy with regard to issues both internal and external, with a focus on the core questions faced by all businesses. Fredmund Malik's theory is system-oriented and can thus be applied regardless of time or place. It is designed to work in all areas and industries of any society, irrespective of changing trends or national and cultural differences. Taking as his point of departure the consistent traits displayed by complex systems - phenomena that executives and managers are likely to address on a daily basis - Malik sets the standard for sound management in a knowledge-based economy. Read more about the Malik Management Systems: Management Is a Craft The Principles of Effective Management Tasks of Effective Management Tools of Effective Management The Malik Management System and Its Users Managing People - Managing a Business The General Management Functions Management For a New Era Sovereignty and Leadership through Master Control Cybernetics: Background of the Malik Management Systems

Leseprobe

Fredmund Malik

Instructions for Self-Organization

Outline

Management is no matter of ideology, nor is it a question of fashion. Management is a craft – the universal and most important discipline of the 21st century. Fredmund Malik, the leading expert in the field of general management, provides you with the knowledge it takes to be a successful executive and manager, in any position, within any organisation. 

This part introduces Fredmund Malik’s toolbox for consistent General Management, featuring the modules of Master Control for the management of complex systems. These modules cover the entire development of a systematic policy with regard to issues both internal and external, with a focus on the core questions faced by all businesses.

Fredmund Malik’s theory is system-oriented and can thus be applied regardless of time or place. It is designed to work in all areas and industries of any society, irrespective of changing trends or national and cultural differences. Taking as his point of departure the consistent traits displayed by complex systems – phenomena that executives and managers are likely to address on a daily basis – Malik sets the standard for sound management in a knowledge-based economy.

Read more about the Malik Management Systems:

Management Is a Craft

The Principles of Effective Management

Tasks of Effective Management

Tools of Effective Management

The Malik Management System and Its Users

Managing People – Managing a Business

The General Management Functions

Management For a New Era

Sovereignty and Leadership through Master Control

Cybernetics: Background of the Malik Management Systems

Information about the author

Prof. Dr. Fredmund Malik is an orderly professor for corporate management with a teaching license from the University of St. Gallen, an internationally renowned management expert, the founder and chairman of Malik Management, and the creator of the Malik Management Systems® framework. He is also a bestselling and award-winning author of over ten books, including classics like “Managing Performing Living” and “Strategy of the Management of Complex Systems” (in German language), as well as a columnist for opinion-forming media and one of the most distinguished thought leaders in the area of management. As a board member and chairman of several governance bodies at renowned world market leaders, Malik also has broad first-hand knowledge of international corporate governance practice. In the 1990s, Malik was the first macroeconomic thinker – and for a long time the only one – to point out the damaging effects of neoliberalism to society as a whole. He was also the first to criticize the Anglo-Saxon business administration theory with its one-dimensional fixation on shareholder value, which Malik identified as one of the main causes of the global financial crisis. Thanks to his cybernetic methodology and toolset, Malik was one of the first to realize the imminent danger. As his tools enabled him to read the warning signs early on, Malik and his team developed innovative solutions to manage the complexity of today’s major challenges. With his cybernetic-based management theory, Malik has been setting standards for Right and Good Management.

His numerous distinctions and awards include the Cross of Honor for Science of Art from the Republic of Austria, 2009, and the Heinz von Foerster Award for Organizational Cybernetics from the German Cybernetic Society, 2010.

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Two CEOs at a business dinner

(A’s mobile is ringing non-stop, B’s mobile is dead)

A: Say, is your mobile off?

B: No, it’s on. I can be reached 24/7.

A: Then why does it never ring?

B: ’Cause we’ve got our company organized so that my people don’t need to keep checking back with me.

What the Organization Should Do: The Business Concept

The business of business is business.

Milton Friedman, liberal economist and Nobel laureate

We will now start to look at how an environmental or systems policy using Master Control is developed and formulated in practice. The focus will be on the concept of corporation, and therefore on that part of overall policy that concerns the institution directly. The issues relating to the company will, however, continue to be reflected in the context of the total system, as the illustration shows. The total system is always the same. However, in this step, attention will be focused like a searchlight entirely on the institution.

From the corporate policy point of view, there are three key questions that are equally important to every institution and – in my opinion – can be answered in a universally valid way. The specifics of the individual case have to be considered by further questions.

The key questions common to every institution are:

What should the purpose of the institution be?

What should the mission of the institution be?

Where should the institution carry out its mission?

The answers to these three questions have the greatest directing influence on an institution’s activities. They are the most powerful and complexity-rich Master Controls when they are “set” rightly. Conversely, when the “switches” are in the wrong position, they have the most negative impact. This is the core of the big, comprehensive, alldetermining feedback regulators – the laws of nature acting within the system, so to speak.

The widely discussed ethical problems of the last few years originate in these three questions, and they can only be solved there. This is also where the errors of corporate governance have arisen, the cases of mismanagement through shareholder value, the excesses of executive pay, the false compromises of the stakeholder approach with the resurrection of management’s potential escape routes from responsibility, the re-opening of social gaps. Also, should any turbulence occur in the financial system and a crisis arise in the economic system – a possible and highly probable development due to years of mismanagement – this is where the causes lie.

The Purpose of the Organization

The purpose of the institution determines every aspect of how the organization as a system should be designed and operated. We are thinking entirely on the system level here, in terms of management and content. The central cybernetic importance of the corporate purpose can most clearly be illustrated on the basis of errors that are made in defining purpose.

What people now call corporate governance took the wrong turning at the crossroads of “purpose” when it went in the direction of the shareholder instead of the customer. As a result, both sails and rudder were set wrongly. The wind of the zeitgeist created the illusion of being on the right course. Once the error was noticed, another false signpost was followed: the stakeholder approach.

It was obvious to eight out of ten top managers from the start. Instead of spending their time concentrating on the business, they would now have to get ready for a balancing act. As one of the most outstanding CEOs told me in a discussion: “In the morning I have to tell the financial community and the media what they want to hear – and inside the company, in the afternoon, I have to make sure that the opposite is done, without the financial world noticing …”

The Best Ones Remain Concealed

The shareholder eyeglasses blinded people to the overwhelming number of companies that had always worked well and did not abandon their principles even in the era of the Wall Street scandals. The corporate governance debate only saw and considered the large, listed corporate groups – a relatively small number of companies. However, more than 90 percent of all firms worldwide are not listed on stock exchanges. Today’s corporate governance and the governance codes that have now grown up are simply irrelevant to them.

Essentially, people have allowed themselves to be led astray fora whole decade by a few Wall Street scandals and a tiny minority of greedy egocentrics and white-collar criminals. In addition, a problem that is solved with total ease in every country every day is grossly overestimated by one particular economic theory: the principal agent problem – that is, the question of how owners can control and monitor persons acting on their behalf in such a way that they will not be able to systematically cheat them. That may be a problem in the ivory tower of economic theory-spinning. We can draw on several thousands of years of experience for the practice of right corporate management.1 Assuming professional management and subject knowledge, corporate governance functions in a way that does not require any sophisticated financial constructs, which invariably prove to be fair-weather models.

The true gems of the corporate landscape remain virtually undiscovered and disregarded2 – which is fine by them, since they want no truck with financial publicity. They want their products to be well known, but in their view, the internal details of their companies, ownership structures, finance etc. are no one else’s concern. Presenting their strategy to competitors in road shows is the last thing on their minds.

The one-eyed shareholder viewpoint failed to notice real performers that were not in the stock exchange spotlight, and in the media noise of the corporate governance discussion the gentle tones of the true goldmines went unheard. The truly functioning economy finds no place in MBA programs.

I am not talking about small to mid-sized companies, which are often cited reflexive – and frequently with mocking condescension – as the supposed opposite pole to the listed corporations. I am talking about a quite different category of extremely successful businesses, including many global market leaders. To make my meaning clear, I have coined a new term for these companies: entrepreneurially managed enterprises – which can be abbreviated as EMEs, to separate them from the category of SME, the small and medium-sized enterprises. With this type of company, the key feature is not the size but the type of management.

Examples speak louder than words. In the German-speaking region, which is the second- or third-largest economic region in the world, depending on the method of calculation – and in fact the strongest – examples include Boehringer Ingelheim, Würth, Dr. Oetker, Stihl, the Claas Group, Otto Hamburg, Bertelsmann, Braun Melsungen, Ina Kugelfischer, ZF, Aldi, Lidl, REWE, Bosch, Porsche, BMW, Springer, Hilti, Patek Philippe, Migros, Coop, Logitech, Liebherr, Maxon, EmsChemie, Kaba, Swarovski, Red Bull, Plansee, Spar, Doppelmayr, Miba, Blum, Raiffeisen, Zumtobel and many others, which I unfortunately cannot mention here for lack of space.

It is evident that entrepreneurial management is possible and successful regardless of industry, size, form of finance or ownership structure, and also regardless of whether a company is listed on a stock exchange or not. With regard to the last point in particular, it is frequently said that listed companies have no option but to operate in accordance with shareholder-oriented principles. That is not true, as can be seen.

This type of companies exists in other countries and economic areas as well, and almost everywhere they are the most successful in their fields. They contribute the major part of the gross national product and provide the biggest share of jobs. Corporate governance should learn from them, not the other way round.

Only One Right Purpose: Customer Value

The purpose of the institution must be clear, and it must be right. Conventional corporate governance sometimes set an unclear purpose, but mainly the wrong one. The purpose defines the relevance of events inside and outside the enterprise. Only a clear corporate purpose enables a correct environmental analysis, otherwise you do not know what you are supposed to be looking for and what you should take into account. The purpose determines what will be managed and how. If you have the wrong purpose, you have loaded the wrong program and will inevitably arrive at the wrong results. In contrast, the right, clear purpose makes everything easy, even with a high level of complexity. The corporate purpose defines the relevant feedbacks for the Master Controls at all levels. This is essential for decisions on what should be considered information or misinformation, data and data clutter, and what parts of the institution can and should organize themselves in which direction. The corporate purpose defines what comprises right results and what does not.

Creating clarity about the purpose of the institution, communicating, giving reasons and explaining it internally and externally, is a top priority task for top managers, perhaps the most important one of all. One of their most difficult tasks in this context will be to convince shareholders that they are harming themselves if they hold management to the purpose of shareholder value. What is supposed to be good for the shareholders according to their own intentions will actually lead to the opposite, their disadvantage. The really competent top managers know that. However, they also know how difficult it is in the present climate to communicate that fact. Managers have a hugely important task of enlightenment here3, which I will expand on further in Part IV.

The better the company’s profitability is to be, the less emphasis there should be on financial ratios such as shareholder value. Particularly when a company wants to maximize its financial performance, it has to target a fundamentally different purpose and objective. Companies obviously need profits, and liquidity even more. However, it does not follow that the purpose of the company is to make a profit.

The right purpose – the purpose that is relevant to decisions for steering the institution – is diametrically opposed to this and places corporate governance on a different basis. The shareholder value approach has shown more dramatically and convincingly than ever that businesses are not just economic, but also human, political and moral institutions. However, regardless of whether social and other reasons also argue against shareholder value, it is possible to stay entirely within the logic of business management and economic thinking and still set the right objective. This is important to the weight of the arguments in my view, because too many people are too quick to argue on non-economic grounds, which, of course, cannot make any impression on economic and financial convictions.

My solution is not aimed at either the supporters or the opponents of neoliberalism. It falls into a different category. There is a third way which has been overlooked in the corporate governance debate.

And yet this is the clearest and most obvious purpose if you detach yourself from interest groups – of any kind whatsoever – and think the problem through from the point of view of the management function, in other words: including the perspective of navigation and control, from the point of view of the institution,and how to steer it. To the best of my knowledge, neither the champions nor the opponents of neoliberal thinking have so far found arguments to successfully refute my proposal.

The purpose can be formulated simply and clearly:

The purpose of the business is to transform resources into value.

Whose value? As a first possibility, the value of individual or all interest groups may be postulated. Any of the solutions conceivable on this basis will damage the institution in the longer term in some way or another and undermine its ability to function, systematically and inevitably. In addition, such purposes will ultimately not be achievable at all, with intrinsic inevitability. A purpose oriented towards interest groups, whether shareholders or stakeholders, will render itself obsolete; it will make its own fulfillment impossible because the decisionmaking and actions of management will be programmed and incentivized in the wrong direction.

Particularly when the interests of these groups are to be borne in mind, the purpose has to be viewed from a completely different angle: that of value to the customer.

The corporate purpose can thus be formulated clearly and simply in practice, and is:

The purpose of a business is to create satisfied customers.

Figure 1 shows the clear and simple relationship. No one is forced to accept this proposal, since we are right at the heart of normative management here, in the realm of true value decisions. However, as explained in Part I, values of this nature should not preempt the decision, but should result from the consequences of the decision. The decision in favor of value to the customer is the only one to deliver the consequence of right corporate management, because only the customer pays bills. This, in turn, has the consequence that all interests are served as well as possible. No other purpose can achieve that. It is logically impossible to find a right strategy if it is not explicitly focused on solving customer problems and generating value to the customer. There is not a single strategically relevant question that can be answered rationally without an orientation towards customer value.

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Figure 1: The corporate purpose as the transformation of resources into customer value

If this purpose is accepted, it has to be adapted to the individual case in developing the corporate policy. From this point of view, the question has to be asked:

What is our purpose?

What resources do we transform into what value?

Who are our customers? Who should they be, who can they be?

Resources are all types of goods and services that are needed to create value for customers. The key resource in the 21st century will be knowledge, as is already the case today in many areas. Added to this is the (meta-)knowledge that is needed in order to transform knowledge into value, in other words, knowledge about management of and in complex systems.

Value, in turn, is all kinds of goods, services, information and knowledge that solve a problem for the customer for which he is prepared to pay a bill. I therefore propose customer value as the corporate purpose.

If we extend corporate policy into a policy for all types of social institutions, or in other words, into a general systems policy as discussed in the introduction, the purpose for non-profit organizations would in principle be:

The purpose of social institutions is to bring

about desired change in people and society.

Thus, the contribution of both business enterprises and non-profit organizations is defined in social terms. This is where their ethic lies. It lies in their impact for society, in line with CybernEthics by the great cybernetician Heinz von Foerster4 and his associated observation: It’s not ”what should other people do?” but “what should I do”? The ethics and decency of the person and the institution are founded in this, and not in regulations and codes.

The Function of Profit

The form of organization that has proven most effective to date for the transformation of resources into value is the free-market enterprise. However, the output of the transformation process is not profit, which is the way it is normally seen and which the economic disciplines postulate in particular - over-hastily, as a premise that has not been thought through or tested. The output is the economic object.

Naturally, this does not mean that a business can or even should survive without profit. The economic function of profit as a return on capital and risk premium is still valid. However, as mentioned before, the undisputed fact that companies need profits and, still more importantly, liquidity by no means implies that profit is the purpose of the company. Likewise, the fact that people have to eat does not imply that the purpose of humanity or indeed the meaning of life is food. However, every individual is free to make his or her own decisions in this regard. Therefore, the question is not so much what the purpose is, but which purpose involves the greatest probability of right decisions.

From the point of view of the company’s navigation and control, profit has a different function: that of control information. My proposal is to understand profit as a test of the rightness of the corporate mission, which I will discuss below, and as a gauge of the quality of fulfillment of that corporate mission.

Profit thus provides two key pieces of information for managerial navigation, that is, whether the business is doing the right thing – which encompasses the effectiveness