Guild Companies

Harvard Business Review is not an inexpensive magazine. But what it lacks in economy it makes up for in surety. The same class of folks who populated the halls of Enron, and gave us energy derivatives, charge $16.95 to share their latest theories on business and management practices. They range from the self evident to the monumentally impractical, but all are presented with ivy-league gravity, backed by studies, confirmed by statistics, and garnished with colorful charts.

Two articles in particular attracted my attention because they present views of corporate governance and management behavior that are as surprising as they are unworldly. The theorists, it seems, are much more utopian than the hard-nosed, bottom line realists they are seeking to influence. Or perhaps they are simply blind to the realities of human nature.

The first article, which belongs squarely in the self evident camp, was written by David C. McClelland and David H. Burnham. It was originally published in 1976, but was apparently thought to be of such penetrating insight that the editors chose to include it in their January 2003, Special Motivational Issue. Not surprisingly, the subject of the article is management motivation and its authors have imposing and relevant credentials. The former was a professor of psychology at Harvard, and the latter was president and CEO of a behavior science consulting firm.

During a series of workshops, they carefully studied management behavior by questioning over 500 executives about the minutia of their managerial styles. They probed the delicate executive psyche, plodded through the tangled thicket of management motivation and concluded...are you ready...that the most successful managers are motivated by power!

Not just any kind of power, though. Not the ruthless, self-absorbed variety that recently surfaced like a predatory shark. In McClelland and Burnham's model, power means "a desire to have an impact, to be strong and influential." Not for any petty, self-serving motives, but for the good of the institution.

In fact they call these management types "institutional managers," as contrasted with two less successful varieties, the "affiliative managers" and "personal-power managers." Affiliative managers are the ones who have a strong need to be liked and therefore tend to make exceptions to every rule in order to accommodate the likes, dislikes, and needs of their staff. Instead of earning their staff's affection, however, they only create confusion and chaos and are the least effective of the three. Personal-power managers, like institutional managers, are motivated by power but with one notable caveat: they lack inhibition. And having low inhibition, they tend to do things for their own aggrandizement and are likely to exercise their power more "impulsively," which is a polite way of saying, ruthlessly.

Institutional managers, on the other hand, are miracles of self restraint. They wear "the socialized face of power," which means they exercise power for the benefit of the institution and its employees; not an inconceivable mutation in the evolution of the corporate executive, but somewhat unlikely given the corrupting influence of power. What McClelland and Burnham fail to consider is that for a manager to subordinate his personal ambitions to a larger institutional good, he would have to have a profound sense of loyalty and an unshakable belief in the rectitude of that institution.

They probably chose the term "institutional manager" because at least one of them worked for an actual institution that inspires such loyalty: Harvard. But institutions are not the same as corporations, and executives are not tenured. Managers are as disposable as leisure suits and it's hard to imagine a savvy survivor of the downsizing wars working up a midlife passion for Coca Cola or Buick.

The lesson we have clearly learned in the ensuing quarter century is not to depend on individuals to inhibit their darker impulses, but to set up a structure of checks and balances that delimits individual power and forces accountability. Where gluttonous amounts of money are concerned, we can be guided by the economic acumen of 17th century English dramatist Thomas Otway, who said: "Honest men are the soft easy cushions on which knaves repose and fatten." That goes for honest investors, too.

Setting up the proper structure is precisely the topic of the second article. In "Beyond Empowerment: Building a Company of Citizens," Brook Manville and Josiah Ober argue that although we're riding the swells of a knowledge economy (and IT professionals are the ultimate knowledge workers), "corporate ownership structures, governance systems, and incentive programs...are still firmly planted in the industrial age." If, from that statement, you deduce that being mired in the past is the problem, then you will be surprised by Manville and Ober's solution.

The authors argue that we should move forward by looking even further backwards; 2,500 years to be exact. They would like to model the modern corporation after the ancient city-state of Athens. Athens, the authors assert, was "democratic...open, experimental and entrepreneurial." Indeed it was if you didn't happen to be a woman, a slave, or a foreigner. But assuming you qualified for citizenship, Manville and Ober maintain that you had "a direct voice and an active role in civic governance," which was based on "personal freedom, [and] collective action."

There was, in Athens, a sense of shared journey and therefore shared responsibility. Membership in the city's leadership assembly was rotated among all its citizens. All voices were welcome, all opinions heard. The citizens and their community lived by a code that Manville and Ober describe as "moral reciprocity" which "provided the all-important link between 'What's in it for me?' and 'What's in it for us?'" Eliminating the conflict between self interest and community interest, the authors contend, was a key factor that enabled a ragtag naval force of 30,000 Athenians to defeat a much greater invading force from Persia.

Manville and Ober contrast the open, inclusive environment of ancient Athens with the "closed doors of executive offices and conference rooms," where decisions are made by a small group of "insular elites." Indeed, "the entire shape of the modern company reflects a fundamental distrust of its members," the authors argue.

Unfortunately, their article offers precious little guidance for how to transform modern Enron into ancient Athens. It merely places the onus on the shoulders of the knowledge workers it seeks to liberate. "One thing...is certain," the authors contend, "the practice of citizenship cannot be imposed from above. It must grow out of the actions and beliefs of the citizens themselves."

Again, there are several things the authors ignore. First and foremost, power is almost never voluntarily shared. Those who have it, want to hold on to it. So, short of a bloody coup, not much is likely to change. The stock boy is simply not going to be asked to join the management team any time soon.

Further, Athenians were willing to participate and sacrifice because they were inspired by the culture and the shared values of their city. No such shared values exist in the modern corporation, and there is nothing intrinsically inspiring about soft drinks or this year's SUV. And mutual loyalty, the glue that binds the Athenian model, is also sadly lacking in today's workplace.

Finally, Athenians were motivated by their long-range survival, which is somewhat more compelling than quarterly profitability. For Athens to reemerge in pinstripes, it is not only the company but the system that will have to change. Since both sets of authors judiciously ignore systemic issues, it's hard to determine whether they are truly agents of change or just strutting their rhetorical stuff.

Perhaps one day McClelland and Burnham's "institutional manager" will don a toga and go to work in Manville and Ober's corporate city-state. It's fun to think so. Yet I couldn't help but chuckle at a century-old quote I came across from John Galsworthy. The English novelist noted that "idealism increases in direct proportion to one's distance from the problem."