Empty corporations

As business develops in Africa, many of us are reconsidering the ways in which organisations should be structured and run. As a rule, enterprises that achieve growth beyond the SME level look to copy historical models from overseas. These models originated in the British Industrial Revolution of the 1700s and became codified during the boom in large scale manufacture in 20th century America. They are about controlling physical labour and utilise the contract as the principal way of formalising human cooperation.

Managers and employees are seen as a group of individuals, who find it convenient to do business with each other, and indeed with customers and suppliers.  There is no collective interest, only a coincidence of individual interests. The organisation is managed through command and control, framed by targets and incentives. This ‘nexus of contracts’ approach treats the corporation as an empty shell. 

In 2008 the global financial crisis provided a shocking revelation of the weakness of empty corporations. The financial institutions that had done most to promote ‘shareholder value’ actually had little cohesion as organisations. Low levels of trust and cooperation within these institutions were low; individual gain was the real motivator. Businesses that made nothing but money were torn apart by the greed of their own employees.  

A different view of corporate culture was proposed in Edith Penrose’s Theory of the Growth of the Firm published in 1959.  ‘All the evidence we have indicates that the growth of a firm is connected with attempts of a particular group of human beings to do something together’. 

Anyone who has worked in an organisation knows that human motivations are complicated. We see colleagues for whom money is the overwhelmingly dominant motivation, who are primarily self-interested and opportunistic. But we all know that they are somehow defective as human beings, and that should make them unsuitable for leadership or senior management positions in complex organisations.  The financial sector decided not only to accommodate but to attract such people. And, over time, they have been markedly unsuccessful in creating value within the organisations themselves.

It’s a truism worth repeating that most people benefit from social interactions with colleagues and want to take pride in the company they work for and the jobs they do. There’s plenty of evidence to show that job satisfaction plays a major part in what makes human beings happy. 

The cultural context of Africa, with its strong sense of community, coupled with the future need to encourage more intellectual than physical labour, suggests that a more social approach to the organisation might soon be needed here.

Chris Harrison leads The Brand Inside


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