Whenever I go into serious thinking mode I tousle my hair, scratch my beard, adjust my glasses because I hope I get better focus — it’s actually true, my eye doctor explained it to me — it’s physics, look it up. Then I turn to my blackboard and start to scribble like a mad scientist. Eleven posts in and the list keeps growing — create institutional decision-making frameworks, solve systemic and structural issues in organizations, enable cultural change through organizational learning, work on ideals not on pretty pictures, design workplaces that give identity not just employment, experiment and find enabling ways of working not cheap prisons, ensure healthy and safe workplaces, understand that motivation comes from meaningful work and not money, invest in the managerial profession, design processes that include customers, build companies that fulfill their economic and social role simultaneously.

White chalk, smeared a bit here and there. But it looks right, reasonable, no utopia. This comes from practical observation and some intelligent books. I can nod at this. I bet a lot of you can, too. So why is this not happening at scale? Because — at least in my experience — things like this often land on the cutting floor of the corpo movie. Or you run into some invisible wall when trying to implement it. The movie, the wall have a name. And a date. And of course since it is a movie also an author.

The Board Room Version: In 1970 an economist wrote a 3,500-word editorial. It had no legal foundation, no empirical support, and failed on its own terms. It restructured global capitalism anyway. Friedman claimed that managers’ sole responsibility is to maximize profits for shareholders. Six years later Jensen and Meckling argued that managers may pursue their own interests at investors’ expense, so they should be aligned with shareholders through ownership and incentives. In 1999 this was all institutionalized by the OECD and made into a global corporate governance principle. The whole thing was wrong from the beginning. A corporation cannot be reduced to contracts serving shareholders. The facts were wrong: managers did not systematically destroy shareholder returns, and stock-based incentives did not improve long-term operating performance. It is legally wrong: shareholders own shares, not corporations. And the outcome was wrong: exuberant executive pay, short-termism and inequality rose while shareholders received no promised golden age. Between 1933 and 1976 the S&P 500 returned 7.5 percent annually. After shareholder primacy became doctrine, it returned 6.5 percent. The alternative was always there: stakeholder hierarchy with a decision rule. In good business, shareholder value is a consequence, not an objective. The doctrine that claimed to answer the question of corporate purpose was never legally required and produced worse outcomes than the system it replaced.

September 13, 1970. Milton Friedman. New York Times Magazine.

The movie is called Shareholder Primacy, just in case you were wondering. Friedman was not the big bad villain. He was part of what is called the Chicago School of economics. His ideas influenced heads of state like Ronald Reagan and Margaret Thatcher. And it’s all about the idea of shareholder value being the most important thing in business. Ah, I see some shoulders dropping in the room. Yeah, the reason your team was reduced by 10% last year. The reason your project had to be finished in six months instead of the planned nine.

In 1970 Friedman wrote an essay ‘The Social Responsibility of Business Is to Increase Its Profits.’ It basically said top management are agents of shareholders, sort of the employees of shareholders. Sounds right? We will see. Friedman explained that spending shareholder money on social goals is taxation without representation. So top management is not allowed to just spend company, sorry shareholder money in any way they see fit. The only social responsibility of business is to increase its profits. It’s a short editorial — 3,500 words — that tried to fight against unnecessary spending by top management. Problem is that at the time the corporate payout ratio to shareholders was in an absolutely stable era, had been for years. So, what was he on about? Be patient.

Six years later economists Michael Jensen and William Meckling published a paper ‘Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure’ in the Journal of Financial Economics and it was the foundation for what is called agency theory. First of all, companies are something that is basically made out of a nexus of contracts. That’s what they are. And shareholders are on the receiving end of these contracts. They are the head honchos. They hire directors as agents. And then there is something called agency costs. And that comes from managers not serving the shareholders’ interest. Wait, what? Yes, sometimes top management does other stuff than working for the profit of the shareholder like buying private jets or expensive offices or also when they just run a business sometimes. This costs money and that is a problem to the shareholder because it cuts into his profits. How to make all that bothersome spending of money go away? Stock-based compensation is the answer because this aligns management with shareholders’ interests. Jensen and Meckling’s paper gave Friedman’s initial idea the mathematical and academic legitimacy.

After that, the idea kind of exploded and the confetti of shareholder value landed everywhere and I mean everywhere — business, academia, media and politics. Even the voice of reason in international business, the OECD, made it clear in 1999: it had placed shareholder rights at the centre of its global governance principles, although it still explicitly recognised employees, creditors, suppliers and other stakeholders. The little idea out of a short op-ed in a Sunday newspaper had become the global governance consensus. Why? There must have been tons of studies done on the subject with a lot of evidence supporting the idea. Funnily enough, not. It just became the dominant idea. Academia said it made sense and we all know that scientists just have to say so, no proof needed. The media found a simple story to tell. You know, the poor shareholder gets robbed by overspending CEOs. Consultants could easily sell the idea and product: returns to shareholder maximization — cut costs, hype companies. And the major stock exchanges had a trading machine that needed to make stocks the center of the business world. It was the perfect combo of a simple idea and all the institutional actors that had something to gain from it. 

In 2001 two leading corporate-law scholars from Yale and Harvard announced “The End of History for Corporate Law”, beating the same drum. The debate was permanently settled. For eleven months. Then Enron happened.

Of course Friedman didn’t cause Enron directly, he didn’t tell Enron’s top management to commit the fraud that caused the bankruptcy. Friedman only supplied the moral argument: managers have to work for the shareholders. Jensen and Meckling supplied the machinery behind it. Managers are agents whose interests must be aligned with those of shareholders. So give managers shares to connect them to shareholders. Managers will then drive up the share price. 

Well, at least that’s good for shareholders — and managers. Even on its own promised outcome, the record was hardly impressive. Between 1933 and 1976 the annual return of the S&P 500 had been 7.5 percent; after 1976 until 2011 it was 6.5 percent. So shareholders got less. What we got was Enron, WorldCom, Xerox, HealthSouth, Lehman Brothers, Wirecard, Wells Fargo — financial fraud cases because managing the stock price became more important than running the real business. But it’s not all accounting stuff. Volkswagen engineered software to fake emissions tests to avoid the cost of genuine regulatory compliance. And one of the most tragic cases was Deepwater Horizon. When engineering and process safety were ignored to reduce schedule and cost — a pattern the National Commission on the BP Deepwater Horizon Oil Spill documented in detail, finding that the industry’s knowledge and experience in deep-water safety had been decreasing for years — causing a disaster that killed 11 workers and released 134 million gallons of oil into the Gulf of Mexico. These disasters had different immediate causes, but they shared a dangerous governing logic: measurable financial performance and stock price repeatedly outranked the health of the underlying system.

It all comes back to Deming: when you impose a numerical target, people will try to improve only that specific number, not the system behind it.

And it’s not as if any of these failures ended the doctrine. Laws passed did little to prevent the next crash. If anything, each crash produced more of the same over more than 25 years. That is not a theory being tested but an ideology being administered.

So if it turned out so catastrophically, at least the initial idea must have been brainy and great. Actually not. The discussion Friedman reopened had already been settled. In 1954 the leading corporate law scholar Adolf Berle had conceded the debate — in favor of the other side. It always amazes me that shareholder primacy is one of those theories where you see the cracks immediately. 

Friedman had that whole spiel about how managers, if not laser focused on shareholders and profit, were spending the company’s money on other stuff, like corporate social responsibility. That would be like a tax the company and shareholders would have to pay. And Friedman said that would be taxation without representation, without legitimization — like in some communist dictatorship. He did say that, but you know, 1970 and cold war. The thing is that in a company managers always had very direct legitimization. If you want to use Friedman’s metaphor for the company as a political system — which is odd because he was the deregulation guy — then the actual legitimization is there without any changes needed. The shareholders elect the board, the board hires or fires the managers. Perfect. What Friedman was asking for was already there.

But he goes on about all this social spending and says these are only things not demanded by law and things that do not make sense for the business. But what about everything companies already do because the law requires it — social security contributions, safety standards, labor protections — or because it simply makes business sense, like paying decent wages so people don’t quit on you? Eventually most things a manager could do would fall into either of these categories. So what is left? The 100 dollar donation to WWF?

So what was Friedman on about? Maybe it was the time — maybe managers during that time were ruining shareholders. We already saw that they were not. William Lazonick and Mary O’Sullivan’s empirical analysis of US corporate governance documents what Friedman chose not to examine. Real returns were stable. The payout ratio had been consistent for the last three decades: 40-45 percent. Lazonick and O’Sullivan’s 2000 paper ‘Maximizing Shareholder Value: A New Ideology for Corporate Governance’ is the empirical source for most of the numbers in this essay. Friedman described a solution to a problem that did not exist.

But then Jensen and Meckling had to be on to something. They came up with agency theory that is still recognized today. And it’s true — nothing to complain about here: when managers control resources they don’t fully own, costs occur. Well done. Actually, if anything, they didn’t go far enough. Because it’s not just costs that have to be paid by the shareholders. Managers or shareholders can also create costs for employees — reduce staffing, freeze wages —, customers — overselling —, suppliers — extending payment terms —, communities — tax concessions —, the state — bailout costs — or the environment — pollution. But their agency theory just named the shareholder as the only possible victim — sorry, principal. 

Even beside this little oversight, the whole idea doesn’t have a firm grounding. The principal-agent model rests on three factual claims that are all wrong. Firstly, it says that shareholders own corporations. But companies are in a legal sense a person. Nobody owns one like an asset — shareholders have rights and duties — but that is not the same as owning it. Jensen and Meckling described the corporation as a nexus of contracts. That is like saying a person is just a collection of organs and bones and muscle and whatever. The corporation is not what its contracts say it is. It is what the law says it is — a legal person with rights and duties that exist independently of any agreement between shareholders, managers, employees or anyone else. Those rights and duties were given by law, not negotiated. You cannot contract your way out of them. Jensen and Meckling looked through the legal person and saw only the contracts underneath. What disappeared from view was everything the law put there that no contract could replace.

Well, that is all legal talk — what about the real world? Good question. The answer is, it’s exactly the same. In the real world the company is still a legal person, since its only reason for existing is that a legal system has given it its founding status. It is in the real world a person. Funny? Yeah, but that was the whole idea of the corporation. What Jensen and Meckling describe is not a corporation but a simple ownership or partnership. And they should know better — they are the experts. In my first year of private law I learned that shareholders are not the only group that has obligation towards the corporation. Employees have deferred compensation claims, career-specific investments, pension promises. Suppliers have relationship-specific investments. Communities have infrastructure built around the company. All have a stake in the corporate game. That’s why we call them stakeholders. The workers who lost jobs and pensions in the 2008 financial crisis were residual risk-bearers. The shareholders who got bailed out were arguably less residual than them.

Plus, it is also not really true that shareholders hire the board. A board is elected through a governance process established and secured by law. The board is then supposed to exercise independent fiduciary judgment. They are the voice of reason in the game — the White Council, so to speak, although we know how that turned out. But they are not there to just execute shareholders’ instructions.

The next thing is just a practical thinking trap — the compensation problem. Stock options were supposed to align management with shareholders, to make real good-old business decisions. Problem is, stock prices became the metric and that is not about good business performance. It is what people are willing to pay for a stock on a market. Therefore what is considered is the expectation. Now, managing a company for real performance and for expectations are different things. Legendary economist Keynes called it almost a hundred years ago a beauty contest. And he saw that it is not only about expectations — it’s about what you think other people are expecting. And you have just taken one more step away from the real business. 

Researchers have never established that the enormous expansion of stock-based compensation reliably improves long-term operating performance. What it unquestionably improved was executive compensation. Their compensation doubled in the 80s and quadrupled in the 90s. In 1965 a CEO earned 44 times the average factory worker’s salary. By 1998 it was 419 times. Wait — but that means those agency costs were rising. Yes, they were. The agency problem was real. The implemented solution made it worse.

But the best is yet to come: the people the whole thing was designed for — the shareholders. They didn’t even exist. Friedman, Jensen and Meckling all assumed the shareholder was an opportunistic, selfish actor indifferent to others’ wellbeing — sort of the lowest human denominator elevated as the governance body of business. OK, so who is the typical shareholder then? He doesn’t exist. Approximately half of them are institutional investors, everything from hedge funds to pension funds. So there are people somewhere behind it, but they are so removed from the actual share ownership they are invisible and powerless. Like me — I am part of a pension fund but I have no idea nor any real control over what that fund owns. But there is a fund manager somewhere who has some control, but he doesn’t own it either. In addition there are some very wealthy people directly owning stocks. And it is not just the diverse nature of shareholders — it’s also the length of time shares are held. In 1960 average shareholders of companies at the NYSE stayed with an investment for more than 8 years calculated from trading activity. By 2010 the average shareholder was gone in four months. Meaning each quarter you are faced with a new set of shareholders. Different shareholders have completely incompatible interests — the hedge fund and the pension fund own the same shares and want opposite things. Maximizing shareholder value means privileging the most aggressive, most short-term, least diversified shareholders over the long-term interests of most real investors.

Managing shareholder value means playing the expectations game — not creating actual value. If you beat the analyst estimate the stock goes up; miss it and the stock goes down. In 1983 US companies met earnings expectations about 50 percent of the time — that is what you would expect from a random system. By 1997 they beat it 70 percent of the time. Management didn’t get better at running businesses in that time — they just got better at playing a game.

You may say that this all sounds like business black magic, but what did it mean in reality? You know it already. What happens when companies are streamlined and made to look pretty? People are fired, even when companies are doing well. 1983 to 1987 were boom years. 4.6 million US workers lost their jobs. 35 percent remained unemployed two years later, with permanent wage reductions for those who found work. And more and more profits were going out the door of companies in the form of dividends and share buybacks — 81 percent by 1989. That is money that used to be reinvested in the business. Now it disappeared. But wait — that was the rise of Silicon Valley. All that new technology must have come from R&D. Yes, from the investments that had been made decades before, not at the time. You know, minor stuff like the internet and GPS. The new doctrine just harvested. The only thing that was rising was management compensation — 419 times a worker’s salary. 

But still, accepting the shareholder as the top dog sounds right somehow, doesn’t it? This is how it is supposed to work. It’s the way the system was set up. If you mean the law by system, that is not true. Corporate law generally does not require managers to maximize today’s share price — not US, not UK, not EU, not CH. Even in Asia where corporate law is very different, you will not find it. If the different national laws state anything on the purpose of a firm it is a very diverse range of things: growing the company, creating quality products, protecting employees, serving the public interest. As long as the board and management do not abuse their power to enrich themselves they can take any direction.

Maximizing shareholder value is not an obligation for management. It is one of several options. Friedman made it a must. And it was further developed into a de facto law by people who benefited from it. The costs are paid by the people who could not write an op-ed in the New York Times.

Alternatives had already existed for decades. Drucker had it in 1942. Deming in the 1950s. Japan went another way. Their most important principles had always been company continuity and long-term relationships with employees, suppliers and customers. Continental Europe had the tradition of both shareholders and employees having participatory power. Both regions slowly shifted towards shareholder primacy through privatization, institutional investors, executive share incentives, financialization and pressure for higher returns. The voices and examples for alternatives have always been there. The problem was never a lack of knowledge.

Shareholders are of course very important to business. But they are not the only important group. The needs of all stakeholders have to be considered, because without their input the business cannot grow. Yeah, yeah, all are important. We have all of them in our strategy, they are on our posters, sometimes even in our slogans. But it’s not that simple. As long as you just list all of the groups, it will not tell anybody how to make decisions. Because superficially stakeholders have contradictory demands: I want more profit, I want more salary, I want more taxes. So how do you solve the issue? Well, the concept is easy — it’s called stakeholder hierarchy.  It gives managers a decision rule when stakeholder interests conflict. Customer first means when resources are scarce you know where they go. Employee second means you know what comes next. Shareholder last doesn’t mean shareholder unimportant — it means shareholder as consequence of doing the other things well. The hierarchy matters — without it you have organizational personality disorder, competing goals with no decision rule. With it you have a governing principle that produces better shareholder returns than shareholder primacy did.

A word of caution: stakeholder hierarchy has been misused before. Trickle-down economics claimed that enriching corporations and the wealthy would eventually benefit everyone. There is no convincing empirical evidence that it does. Stakeholder hierarchy has to be founded on real performance, not on promises.

The real market — actual business performance — should be the ultimate objective of corporations. The real market creates value through products, services and relationships. The stock market translates expectations about that value into prices. The danger begins when management starts producing expectations for the stock market instead of value for the real market. Seems like reality is the better game to play. Who would have thought?

But why does shareholder value remain the dominant idea? We have seen what harm it can do. There is a known and tested alternative. And it’s no secret. Even the big promoters of shareholder primacy have distanced themselves from their claims. Jensen retreated from short-term, share-price-driven shareholder primacy — co-authoring ‘Just Say No to Wall Street’ in 2002. More damning still — the poster child of shareholder primacy, GE’s Jack Welch, said in an interview with the Financial Times in 2009, after his retirement: ‘Shareholder value is a result, not a strategy. Your main constituencies are your employees, your customers and your products.’

I guess there is more to explore.

What should have the highest value in business? LinkedIn

Don’t just take it from me, here is some good stuff to read:

Friedman, Milton. “The Social Responsibility of Business Is to Increase Its Profits.” New York Times Magazine, September 13, 1970. 

Jensen, Michael C., and William H. Meckling. “Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure.” Journal of Financial Economics, vol. 3, no. 4, October 1976.

Lazonick, William, and Mary O’Sullivan. “Maximizing Shareholder Value: A New Ideology for Corporate Governance.” Economy and Society, vol. 29, no. 1, February 2000.

Stout, Lynn. The Shareholder Value Myth: How Putting Shareholders First Harms Investors, Corporations, and the Public. Berrett-Koehler Publishers, 2012.

Martin, Roger L. Fixing the Game: Bubbles, Crashes, and What Capitalism Can Do. Harvard Business Review Press, 2011.

Welch, Jack. Quoted in Guerrera, Francesco. “Welch Condemns Share Price Focus.” Financial Times, March 12, 2009.

Keynes, John Maynard. The General Theory of Employment, Interest and Money. 1936.

I always get a headache when I enter the temple and the chattering hits my senses. Like a party with too many people and not enough music. I know they saved the city from those wine drinking, cigarette smoking existentialists. They – the geese – woke up the city. The mean guard dogs slept through it all. But man, the headache I get each time I enter Juno’s temple. Anyway it’s a contract. I just have to feed them once a day and the senate pays me. A good deal. 

Yes, Mr Publicani, it was a good deal, probably one of Rome’s earliest documented public contracts. No, tax collection came later, probably. E. Badian has the details in his wonderful book “Publicans and Sinners” – mainly on that it is kind of hard to know exactly, different sources, not always the best, still he tries his best and does lots of ancient business case calculations.

The Board Room Version: The corporation began in Ancient Rome. The state contracting private capital to perform state functions it could not handle. The deal was good, generated wealth, produced fraud and required periodic correction. The pattern repeated across history: charter companies granted sovereign power to push ocean trade and national control outside of Europe. Then they overreached. Free incorporation in the 1850s democratized the institution while any public purpose was forgotten. Standard Oil showed what unrestrained incorporation produced. Roosevelt named the problem and tried to contain it. The pattern was always the same: necessity created the form, legitimacy is granted, overreach follows, the state needed to correct. Then Berle and Means in 1932 documented what the pattern had been producing: ownership and control separated as the founding condition of the modern corporation, not a corruption of it. Then Pistor showing why the renegotiation never happened: capital rules by law and is protected by it. The corporation remains collectively indispensable and individually unpredictable – and the question to whom it is accountable has never been resolved.

We know for certain that these contracts start to involve serious money once the Hannibalic Wars start – 218 BCE. And that’s also when the societates publicanorum become important. And this, ladies and gentlemen, is the birth of what will eventually become the modern company, the subject of this essay. OK, it’s called proto-corporate, so not quite it, but sort of the first alpha version. I know there are those who dispute any kind of connection between societates publicanorum and the modern corporation, well I happy to introduce you to my roman law professor from back in the days and you can discuss this with him. 

See, our geese feeder was a single person with a state contract – sometimes it was also several people but they didn’t pool resources to fulfill their contractual duties. Importantly, these were not state employees, it was more like an outsourced job. But feeding geese is a relatively simple thing to do. When Rome was faced with Hannibal marching over the Alps it had to send sixteen legions – something like 72’000 soldiers – into the field. To supply these proved too much for the administrators of Rome at the time. The complexity of the logistics and a strained Roman treasury led it to contract the private sector. And even then this could not be done by one wealthy person – or family – alone but several needed to pull resources together to be able to supply all the tunics and helmets and food and whatever nonsense is needed in war. So the state had to go into contract with a group, unified with the purpose of fulfilling state contracts, a public purpose. These societates did a lot of what modern companies would do. They pooled capital, even fronting the investment – and the state likely paid interest although, you know, sketchy sources. They had grouped together before the contract, so were not just one-hit bands. And by 200 BCE these contracts were also substantial, before that they appeared to be more of a side hustle for wealthy families. War supplying stayed one of the major activities, although tax collection, mining, construction and salt harvesting also became important.

But we talk corpo here and that means then as it does now there were some bad apples. During the Hannibalic Wars the ship lanes were guaranteed by the state. So there is the story of some fine gentlemen loading worthless goods onto unseaworthy ships. When they sank, the businessmen would collect the loss of the expensive contracted goods from the state. Especially immoral since the state was under attack at the time. Some sources turn this into a corpo-political thriller — the Senate bought off, hired mobs storming the courts, total impunity for the fine gentlemen. Badian, ever the careful historian, complicates the story. The fraud probably happened. But the Senate likely just delayed dealing with it — wartime was bad timing for prosecuting your own war suppliers — and the Senate wasn’t really a court in our sense anyway. The mob that tried to break things up was probably small, and got punished for it. Less Netflix, more bureaucratic mess. Which is somehow more believable, and more familiar. Eventually some accountability arrived, if messily and incompletely.

Another interesting point comes from the fact that there was no specialization in these proto-companies. The same groups would bid for contracts in mining and war supplying. If a contract went from one group to the other, equipment and infrastructure and people were often just sold to the new one. This shows that these groups had assets and an organizational setup that could be sold and transferred.  

By 150 BCE the elite class of Rome, members of the Senate, had linked together with the publicani, not in person but within the same network. There was no active lobbying for business interests because it was not needed, the important political and business people were all linked together. There were some control mechanisms on the state’s side but they were rarely used. The state and the proto-corporations seemed to have found a good collaboration, until the story with the Gracchi brothers.

Tiberius and Gaius Gracchus were Roman aristocrats in the second century BCE. Tiberius first attempted to enforce land reforms to benefit poorer citizens. This went against the Senate which had converted public land into effectively private wealth for the political class. Gaius Gracchus went further. He wanted to reform taxation and provincial administration. Both were aimed at breaking the Senate’s grip on power — not by attacking it directly, but by building alternative bases of support. Gaius gave the equestrian (commercial) class controlling power over the governors in the new Asian provinces. Basically giving the publicani power to check the very government that should have kept them in check. That created a strange reverse accountability situation. What sounds like your everyday stupid political move – just some politician giving his wealthy friends some more power – ended in both of them being killed in political violence. These were the first political murders in centuries. Later this would become a lot more common. Rome became an epicenter of power struggles. It took another 100 years but then (and after Caesar and all that) Augustus effectively killed the republic and turned it into a monarchy in disguise. That also closed a lot of the doors for private activities. Tax collection for example was folded back into direct state administration.

That was the end of the first big corporations. Afterwards there were brief glimpses of corpo. The guilds in medieval societies were a bit more than just professional associations but no real companies. Also the Hanseatic League, the Italian banking houses and city-states were all significant, but they never quite reached the importance of Roman publicani. They were smaller in scale, mostly local and not pooling dispersed capital into a continuing entrepreneurial effort. Now some of them – as the Italian banks – were quite complex in setup but nothing comparable in scale. The reason was quite simple. It wasn’t needed. Europe after Rome had broken up again into smaller regions, their significance far less than Rome’s had been. So this Roman invention went dormant for about 1400 years until states had regained enough grandeur. But not just states had gotten larger, also the world had.

In 1492 Columbus crossed the Atlantic and maybe even more importantly Vasco da Gama reached India in 1498 by sailing around Africa. The birth of ocean trade. The south of Europe had much experience with trade by sea. Mediterranean trade routes date back to before ancient Rome. But the ocean trade was a different animal. Voyages took years not weeks. Capital – for ships and trade goods – was locked up for that time. The first voyages were indeed financed by the southern European monarchies Spain and Portugal, but we know how that played out. It took another century and two northern powerhouses to build structures that were better suited for these endeavors. In 1600 the English East India Company and in 1602 the Dutch East India Company were founded. The first Charter Companies.

Both were extremely successful in their enterprise. The English East India Company had over 100’000 employees at its peak and that excludes the more than 200’000 soldiers in its service. Oh, and it basically occupied the whole Indian subcontinent. The Dutch East India Company was economically even more impressive. It sent almost 5’000 ships to Asia and brought back more than 2.5 million tonnes of goods.

And they were actual companies, they had a multitude of owners, legal personality and operated separately from the state they originated from. Although separated economically, their respective states granted them a monopoly and quasi-sovereign power – like waging wars and minting coins – in exchange for a public purpose written into their charters – expanding their nations’ trade and presence.

The English East India Company as mentioned was basically a privately founded occupying force. And the Dutch version was also not innocent. They violently enforced their trade monopoly on the different spice islands. And these were just the two most prominent examples of charter companies. There were many more and they were all just in the hands of shareholders. One was the South Sea Company which had received trading privileges with Spanish South America in return for taking on a part of Britain’s national debt. Now, these opportunities were quite limited since Britain did not control these territories. But despite starting with a huge negative in the books and a bad business plan, the market’s expectations were enormous. In 1720, shares started at £100 and rose to £1,000. But confidence quickly collapsed again and thousands of investors were ruined.

Whereas in Rome there had been bad apples exploiting a system, these newer companies were built to exploit, either through overreaching power granted or by the first forms of financial speculation. In the case of the latter the state realized the danger and reacted with prohibition. Britain passed the Bubble Act banning new joint-stock companies without royal charter for the next hundred years.

But a total ban couldn’t last, the need for private enterprises didn’t go away. On the contrary, the Industrial Revolution demanded it even more. The machinery, the mills, the infrastructure — the required capital at a scale made the partnership form genuinely inadequate. By the 1850s new legislation was needed. Enter the Limited Liability Acts in the UK and similar state laws in the US. The main twist was that everybody could become a corporation and more importantly for the first time there was no public purpose required – other than making money of course. Nobody voted to abandon public purpose — it just stopped being a precondition once anyone could incorporate by filing paperwork. The publicani only existed because of state contract. The charter company had to justify itself to the state. The free incorporation didn’t have to justify anything to anyone. And it caught on like a wildfire – in the UK alone nearly 5’000 limited-liability companies were established by 1866.

One big business of the time was railroads and large companies like the London and North Western Railway with around 20’000 employees. This was also the birth of a new kind of profession: the manager – moving freight without trains colliding required coordination, oversight and administration on a scale nothing before had been known. But where to get people who had some idea of command and control activities. Well, you take them from the army – retired officers. So by 1850 50 to 60 managers had been hired by railroad companies, hundreds more would follow. Just if you were wondering where what McGregor would later call Theory X management originated, here is your answer.

These new incorporations were largely free of governmental checks. They also had no public purpose. They just developed on their own and of course grew. Let’s take Standard Oil as an example in the US. In its first form incorporated in 1870 it grew in just ten years to control roughly 95% of US oil refining. It was then organized in a trust, coordinating 40 companies worth 70 million dollars. John D. Rockefeller – the principal owner of Standard Oil – had amassed a fortune of 900 million dollars by 1913, roughly 2.3% of US GDP held by one man. Free incorporation did not make Standard Oil dominant. But it allowed companies to grow without having to prove that they served a public purpose. Weak regulation and the economics of oil did the rest.

The government had to react and did so first with a law in 1890 – the Sherman Antitrust Act – and then with the so-called trust-busting under two US presidents – Roosevelt and Taft. In his first message to Congress in 1901 Roosevelt gave a clear description of the situation: “They are indispensable instruments of our modern civilization; but I believe that they should be so supervised and so regulated that they shall act for the interests of the community as a whole.” More and more people realized why these new companies posed a problem for societies and again Roosevelt put it into the right words in 1902: “We have a great, powerful, artificial creation which has no creator to which it is responsible.” The law had created an artificial, a legal persona, but it had no soul. Standard Oil was eventually split into 34 separate companies by 1911 by the courts.

Academia became more interested in corporate business at the turn of the century. Not just in establishing education for the new profession of the manager, but also as a study object. Adam Smith had been an early outlier in 1776, most literature came around in the early 1900s. But few got as much practical insight as the Austrian immigrant Peter Drucker. After writing his social analysis “The Future of Industrial Man” in 1942, he was invited by GM to study the company. Drucker was fascinated by the decentralized M-form of the company. The different car brands – like Chevrolet, Pontiac, Cadillac – were organized as largely autonomous operating divisions and GM had only a coordinating control function. This solved the issue that top management in large organizations cannot make operational decisions. Smaller divisions keep decision making at a lower level where it is still feasible. This was very much in line with what Drucker had propagated for companies and he further developed the idea in his book “Concept of the Corporation.” He also pleaded with GM to treat workers less as a resource or cost element and to take seriously their social role in creating function and status for them. GM implemented Drucker’s structural recommendation. But when it came to the human and social argument their response was to start an employee essay competition: “My Job and Why I Like It.” This shows the gap between one of the most sophisticated corporations of its era and the most important management thinker of the era. Social responsibility had become a gimmick, not a central aim of the corporation. 

After World War II companies changed mainly in how they were financed and owned. The original model of companies being mostly financed by outside sources started to shift to internal – two-thirds of capital raised by non-financial companies between 1945 and 1970 came from internal sources. At the same time numbers of shareholders grew in the US from 6 million in 1952 to 25 million by 1965. The old small club of owners started to be replaced by a large – mostly passive – population of owners. Top management was free to invest long-term without needing shareholder approval. This financial architecture is what made Drucker’s vision of the corporation as social institution briefly look real. And there were signs of it – P&G’s guaranteed employment, Heinz’s citizenship education. But there was also the risk of the old saying “Everybody’s business is nobody’s business.” Dispersed share ownership threatened to turn everybody’s company into nobody’s responsibility.

And by the 1970s something else happened, accelerating dramatically in the 1980s. The patient internal financing started to be replaced by external pressure from shareholders to see returns. We are entering the period of hostile takeovers and leveraged buyouts. The golden age of the big old companies was dismantled and with it also the stability and the – although always limited – social purpose corporations had given themselves. By 1993 Manpower – a temporary staffing agency – had replaced GM as the largest employer in the US.

Besides Drucker’s early social theory, there were other voices that looked at the corporation critically. In 1932 Adolf Berle and Gardiner Means wrote “The Modern Corporation and Private Property” to point out some systemic weak points. They saw that if you concentrate the wealth of many people, the control over this wealth needs to be surrendered to a unified direction. Somebody needs to take charge of the business. That somebody is not the owner of the wealth anymore. It’s what came to be known as top management. That creates two questions: what is the motivating force driving the person – or persons – in charge? It’s not their money that is on the line. The second is how is wealth, more specifically profit, distributed. The person in charge is doing the work, but it’s the wealth-owner’s money. That leads to a funny symmetry between owner – or better investor – and worker. Both become wage recipients. The worker for labor and the investor for capital. Both are just resources in the company’s process. Neither of them is really owning or controlling anything. The manager is somewhere in the middle – not middle management in this case, but between capital and labor – but who can actually name them as the person in charge? Their legitimacy is unclear. So does the old proverb really come true: everybody’s business truly is nobody’s. And the stakes – as already mentioned with GM – were very high in the 1930s. AT&T is another example. By 1930 its wealth was bigger than that of 20 US states, but it was “owned” by 10 million shareholders. 10 million people don’t own any one thing. That would be chaos. Have you ever tried to co-own a car with somebody?

Berle and Means tried to solve the problem from different angles. Traditional logic of property would mean that control stays with the owner/investor. But that would mean management has no control and is therefore impotent to act. Management cannot negate that logic either because they used it to get capital from investors in the first place. Give me money and then you own part of our great gummy bear company!

Traditional logic of profit isn’t doing much better. It says that profit should reward effort put into an endeavor. Meaning profit would have to follow control. If management is the controlling force it would get all the profit, not the passive owner. Obviously that is not satisfying either. 

That results in the traditional concepts not being of any use anymore. There was a split between active ownership – the actual enterprise – and passive ownership – the shares. And since motivation of management could not be profit it had to be newly defined as a combination of salary, prestige, power and empire-building. Making the new top executive more like an Alexander the Great figure. Well, that didn’t solve the problem of who was to be in control. 

According to Berle and Means there were three possible answers. One – give shareholders more control — but Berle and Means saw this only as an interim safeguard against management stealing from investors, not as a description of what the corporation is actually for. Two – give management unrestricted control over companies. Well, that could leave them to wreak havoc with other people’s money. The third option was to create corporate power as a community or public trust. Neither shareholder nor management can claim corporations exclusively. Companies have also grown beyond just two parties because they affect workers, consumers and communities. That power needs to be directed toward broader social interests as well as financial interests. So it becomes a complicated construct of balancing different interests. It actually becomes more like the state, juggling different stakeholders and accountabilities. Not an easy thing to accomplish and it never has been. Instead, by the mid-1970s one economist called Milton Friedman simply declared the first option – the interim safeguard – to be the right and only answer.

Why capital’s privilege was never really renegotiated needs an explanation and it was my introduction to this discussion — because it comes from a legal scholar. Katharina Pistor wrote in 2019 her analysis “The Code of Capital: How the Law Creates Wealth and Inequality” and for non-legal people this might be quite eye-opening. See, capital rules because of the law. We see effects of this in times of economic crises – the US banking rescue of 2008-09, when the state rescued banks whose legal architecture had privatized gains and socialized losses – or the Covid-19 crisis or the Great Depression and on and on. But we also see this further back in history when the state gave feudal status or colonial race hierarchy that had direct influence on ownership. Max Weber already saw at the beginning of the 1900s that feudal society had given different groups privileges. Modern capitalism replaced these with laws that were supposed to be equal. But businesses quickly learned to use increasingly complex laws to gain new advantages, all under the motto of efficiency and what benefits business is good for everyone. 

But Pistor found that asset holders did not want the rule of law, they just wanted legal protection for themselves. That leads to absurd situations. Take English landlords in the seventeenth and eighteenth centuries. They fought for land titles to be legally recognized, then they took out debts on them. But when the creditors enforced the mortgage they cried foul. They had lawyers build trusts to shield their wealth from the creditors. The courts defended the shield and the creditors lost their money and ownership rights. Big creditors later learned the same game and fought for bankruptcy law placing their claims ahead of those of employees and customers.

Yet the real funny bit – at least for legal people – is that all these capitalist games require the law to constitute ownership in the first place. See, having possession of something and owning it is not the same thing. Possession is more or less an actual thing. I have an apple in my hand, I possess it. Now, the apple might come from my apple tree or I might have bought it at the supermarket and then I also own it. But what if I picked it from somebody else’s apple tree. I still possess it but I don’t own it. Ownership is having the right to something. Now rights are given by law – at least in modern states. So without law there would be no ownership. But why then do we have all these funny business shenanigans. Why can’t law do a better job at regulating all of this. The problem is that law is necessarily a generalization – it tries to cover all activities, not a detailed few – and it always suffers from incompleteness – it cannot anticipate every future case. So there is always the possibility of it being exploited before the system can close the gap. What makes this stranger still: the legal protection capital enjoys is never called a subsidy, while welfare payments always are — “it is legal” ends the conversation before anyone asks whose interests the law is actually serving. The exploiting of law is even more absurd since it works against a system that is required to constitute wealth. Or as Pistor says: “law is the cloth from which capital is cut.”

Corporations are an interesting thing because they are artificial entities, but they contain so many useful activities without which modern society would not be possible. But as with all things that need definition, a lot of things are forgotten. The social scientist and systems thinker Gregory Bateson explained what the semanticist Alfred Korzybski meant when he said that the map is not the territory. The reality is not drawn onto paper. It is only the differences – the lake, the mountain, the path. If there was nothing special about a piece of land all you would see on a map would be the boundaries. Same with corporations, what was drawn were only the specificities: the ownership and liabilities and contractual relationships. That’s what got coded. Everything uniform – work, communities, effect on the ecosystem did not appear. So we have only a fragmented picture of what corporations are.

Drucker said it was the first autonomous institution, a power center within society yet independent of the national state. An indispensable instrument as Roosevelt described it. Or as the Economist writers Micklethwait and Wooldridge described it: “collectively indispensable, yet individually unpredictable.” There are many questions that have never been resolved. Yet that does not make the corporation something to abandon but something to be worked on.

I guess there is more to explore.

Is the corporation a flawed necessity or an alpha version of something truly great? LinkedIn

Don’t just take it from me, here is some good stuff to read:

Badian, E. Publicans and Sinners: Private Enterprise in the Service of the Roman Republic. Cornell University Press, 1972. (Available on Internet Archive.)

Micklethwait, John and Wooldridge, Adrian. The Company: A Short History of a Revolutionary Idea. Modern Library, 2003.

Berle, Adolf and Means, Gardiner. The Modern Corporation and Private Property. Macmillan, 1932 (revised edition 1967). Book I, Chapter 1 and Book IV, Chapters I and II only.

Bateson, Gregory. “Form, Substance and Difference.” 1970 Korzybski Memorial Lecture. In Steps to an Ecology of Mind. Chandler, 1972.

Drucker, Peter F. The Future of Industrial Man. John Day, 1942.

Drucker, Peter F. Concept of the Corporation. John Day, 1946.

Pistor, Katharina. The Code of Capital: How the Law Creates Wealth and Inequality. Princeton University Press, 2019. Last chapter.

Roosevelt, Theodore. First Annual Message to Congress, December 3, 1901.

15 years ago— we had just implemented a Net Promoter feedback system, I had to do my first follow up call to a Detractor, an apparently very angry lawyer who hadn’t received his shipment in time. I wasn’t really looking forward to that. But I was in charge of implementation and we hadn’t assigned responsibility for following up with unhappy customers yet. So I called him and listened to a five-minutes rant. Now I was really scared. But I stayed calm. I listened. And I understood his frustration. Once I could get a word in, I apologized and explained what had happened. Some information had been missing in the paperwork, contact details had been wrong. That’s why it couldn’t be cleared on time. Again I apologized, yes, we should have handled that better. I made a note to look at the process. Somehow we continued talking and got to the subject of football and discovered we were both FC Basel fans. That somehow clicked. Also we had some of the same profs at university. We established a good connection. We stayed in contact over the years. He still ships with the company — fifteen years later.

Since he is just someone I chat with every once in a while and I am not a sales coach I never analyzed what happened in that first conversation. But something had happened there. Something that made him like the company more. And for me, it was a good experience, a good work day. Was it a mutual love of a particular football team, something totally unrelated to the business? I could never quite tell.

The Board Room Version: Quality Management is an old hat — it just never quite fit. Everybody understands that customers define quality. Drucker 1954, Ishikawa 1961, Deming 1982, Normann 1984 — four traditions, four decades, one conclusion. Everybody accepts it superficially. Even the boardroom nods. The implementation is the problem and it is a choice, not a knowledge problem. Quality is really value creation because it shifts the view from internal to external reference. Normann explains that the customer is inside the value creation process, not at the end of it. Normann also introduces the moment of truth where employees interact with customers to create value. Here all the good and the bad a company produces affects the customer. Decision making, structure, culture, control, mental health, evaluation — the customer experiences all of it. Ishikawa develops that further with true – customer – quality characteristics vs the substitute, internal KPIs. Internal data artifacts are a poor replacement for genuine customer feedback. Deming warns of people that never become customers or switch because of quality issues. But the bigger issue is the silent customer, never complains, just disappears. This is the ultimate failure — a feedback loop that never closes.

It is so obvious for me to write about customers and quality that I put it off forever. Of course it’s important but it’s also very close to what I do day in and day out, it’s the reporting, the initiatives, the newsletter, the trainings. Is it without issues? Hell, no. Because quality management is not just daily work for me but also daily frustration. The never ending fight for place one on the company’s priority list— still a losing battle if you have shareholder value on the same list. It’s the endless discussions on definition for the last twenty years, although it should be obvious for everybody by now. Quality is defined by customers. Full stop. No discussion, nothing else makes sense. 

What else is not helping? All the dangerous quotes of the classics on LinkedIn and in pop literature. They are true sentences cut away from the system that made them true. “Quality is everyone’s responsibility” — it’s Deming paraphrased, not direct — gets misused by management to shift responsibility down. Deming made it very clear that quality is mainly the responsibility of top management. But everybody contributes. “Quality is free” — classic Crosby— should actually say that non-quality costs more. That’s what he really meant. “You cannot inspect quality into a product” — attributed to Deming but it is actually Dodge. It means you should not be dependent on controls but it does not mean to absolutely abandon them. “Quality means fitness for use” — that’s Juran— and it’s actually quite good. Fitness for whose use matters, of course, because an umbrella will always make a bad baseball bat. Generally, as we have seen before: The simple quote survives. The thinking dies. So this is worth diving into deeper.

Quality is actually not the best word for the discussion, that would be value. Quality is generally seen as matching a fixed set of requirements. That can be some standard or specification— the bad version— or what we think the customer is specifying. But in both cases it is an internal view, a comparison against what we have defined. Value on the other hand is a comparative word with an external reference. Something has a value compared to something the customer brings— what they have to pay, what they expected, what they actually needed. Only the customer can say if it has value. Drucker was among the first major management thinkers to state it with absolute clarity: “What the customer thinks he is buying, what he considers ‘value,’ is decisive.” Value is defined by the customer. Only they can tell because only they can compare it to their own reference point. Drucker wrote that in 1954. Since then we had a lot more of the heavy hitters in quality management saying similar things— Ishikawa 1961, Deming 1982, Normann 1984. So the idea is pretty much universally accepted. The boardroom would nod in unison. But the idea is not the issue, the implementation is.

And the wording matters in implementation too. Quality is something you check— against specifications. Value is something that gets created. Why the funny passive formulation? Instinctively we would say the company, or if we are more people oriented, the employees create the value. No, that is not entirely true. Richard Normann described it best in his book “Service Management” in the 1980s. The customer is not the recipient of value. They are part of the creation process. Only through them can value be realized. The customer brings time, cooperation, expectations, constraints and usage into the game. Only with all of those things— and our processes and effort— value can be created. Just think of a product that nobody ever gets to use. No fun. No benefit. No value. 

And with that go all the slogans like “All for the customer”, “Customer is king”, “Delivering Excellence”, “We serve our customer”. All treat the customer as a passive recipient of a service or product, when they should be viewed as part of the process.

It was also Normann who introduced the term Moment of Truth into service management. In these instances the customer and the employees interact and create the value together. All the plans, the system, the promises, processes and management intentions become real in this instance. Therefore it is very important to build the system around these interactions. Otherwise they cannot work. That is one of the key problems that quality management sees today. We are quick to nod at the idea that we all do it for the customer — quite frankly because we want their money and it is kind of polite to say so — but we are not building processes and systems that make value creation together with customers possible. That is why my lawyer friend was so pissed.

Instead we still have the same old production processes: input of resources, production, delivery of output. These can if we are lucky result in a positive customer experience but as often as not they do not. What certainly will happen is that the customer ends up being on the receiving end of all malfunctions in our system. And as we have seen, there are many possibilities for that. Decision making based on unverified assumptions. Unclear structure. Ignored changes in customer requirements. Inflexible processes due to too much control management. Stressed employees due to negative work conditions.

The issue of systems designed without customer participation also comes to the surface in how we measure. Kaoru Ishikawa— yes, the fishbone guy— already realized in the 1960s that there is a difference between true quality characteristics— what the customer actually needs— and substitute characteristics that we as a company measure instead. This gap used to be very wide when we just sort of guessed what was important in a product for a customer. Later with Total Quality Management and Six Sigma the translation from customer view to internal view became more refined— Voice of the Customer to Critical to Quality— but it is still based on the view of an average customer. 

The thing is that this average customer is a fiction. They do not literally exist. And we can create as many segments and personas as we want — they all remain a grouped average, a fictional customer. Why was this done? Partly because mass production and mass service delivery made it necessary or at least easier. It is kind of hard and very expensive to produce a car tailor made for each individual customer. Instead we tried to find the lowest common denominator. The problem is that this can very rapidly lead from a good product for many to an average product for nobody.

Newer approaches in gathering customer needs, for example via customer feedback methods like the Net Promoter approach, have brought some more realism and immediacy into the game. But by concentrating on customer satisfaction scores we end up again with a fictional average. Large language models have changed this — for the first time it is practical for far more organisations to analyze thousands of open customer comments in something closer to the customers’ own language, not stars or a number between zero and ten. But this does not automatically solve the issue. It is just a new and better tool. The work is still tricky. In my reality I see that while some issues are shared by the majority of customers, we also get voices that go in completely opposite directions. “I want more features” — “I want a simple product”. “I need more information” — “Don’t bother me with too much information”. “I want blue pills”— “I want red ones”.

There are many more of these problems within quality management. B2C — business to private customer — has always dominated the discussion in the practitioner literature and in the way practitioners view the situation. B2B — business to business — is looked at much less, although it reveals some interesting points for better and worse. For worse: in B2B price becomes a much more dominant factor in customers choosing a certain service or product. Companies feel the immediate cost pressure on their side and the value experience is not a personal one but a corporate one. It is not “I like this smartphone, the experience of using it is nice” but “The company has to have smartphones, they should not cost too much, security needs to be guaranteed, administration has to be easy and by the way employees should also not hate to use it.” I have learned that this is just a much harder value creation process. It works the same way as with private customers, same basic model. Value is created with the customer, it is a comparison to something the customer brings to the table — business customers just have more to bring. A bigger rucksack so to speak. 

The better side of B2B actually comes from an idea in Deming’s “Out of the Crisis” where he describes that businesses should build long-term relationships with their suppliers. Long-term collaboration leads to better quality through active exchange between the two sides. And although Deming does not reference Normann, this is exactly the inclusion of the customer into the value creation process, just from the other side.

So the key is that customers become part of the value creation process and that we have to be aware that they feel all the effects of our system, including the bad ones — even something as remote as how motivated and healthy our employees are.

But no matter how good or bad our system is, whether private or business, with all the customer satisfaction dashboards in multicolour and AI-driven feedback analysis, I still see one big problem that is not addressed. Deming warned of people who will never buy your products — the non-users — and of dissatisfied customers who switch due to quality issues. My biggest concern has always been somewhere in between. The customer who does not complain. They do not return the product, do not fill out the survey. They just disappear. They silently become non-users. They are the biggest failure of quality management, of any system and any company.

No fancy dashboard or smart survey will solve that. The best approach is not to deliver value to the customer but to create it with them. Normann was right forty years ago that our systems have to be designed with the customer inside them. Not as a recipient, not as a data point, but as a participant. Because that’s what he truly is. That’s not new, I know, it was just the idea that was never implemented.

But even then something is still missing. Participation requires interaction, direct, personal, one-to-one. We have come from ignoring customers to creating fictional customers to analyzing large numbers of individual customer voices. But how can we ensure that sometimes we just talk with customers — an actual customer, not to sell, not to get a gold star, but just to talk about football and what a moron that referee was.

I guess there is more to explore.

Is your company producing for the customer or with the customer? Discuss — LinkedIn

Don’t just take it from me, here is some good stuff to read:

Peter F. Drucker, The Practice of Management, Harper & Row, 1954.

Richard Normann, Service Management: Strategy and Leadership in Service Business, Wiley, 1984.

W. Edwards Deming, Out of the Crisis, MIT Press, 1982.

Kaoru Ishikawa, Guide to Quality Control, Asian Productivity Organization, 1968.

Kaoru Ishikawa, What Is Total Quality Control? The Japanese Way, Prentice-Hall, 1987.

An all-too-familiar wave of mouldy odour creeps into my nose when I open the book — second-hand management literature from the 70s. It immediately sends me back to that archive, my first job, at eleven, working for my father. Sorting through mountains of information on faded paper, some still written on my father’s pale green Hermes Baby typewriter. Documents in hanging files made useless by time, not yet by technology. They were replaced not by zeros and ones but by heavy Bundesordner that looked like they were made out of marble. For the young me it didn’t matter, I didn’t understand either. I just wanted to get some comic books out of it and maybe solve a mystery. My father was a manager, middle manager, not private industry but government, local education department. He had a secretary and some people working for him. They were always busy. My father did not seem to be, whenever I visited him — he read, or was on the phone, or had a guest in his office. They laughed. Yes, most of what he did was talking, and reading all those documents I did not understand. But even more, I did not understand what he was doing, what his job actually was. Sometimes I think even he did not fully understand it. Because when I asked him, his eyes got distant and sad. He was smiling and trying to explain. But it never made sense to me. He would go on about some of these documents, that they came from the minister, that they seemed really important — but those I understood least of all. And my father would call the ministry the castle, and say that he felt like K., the surveyor.

When I first became a manager, my kids would ask me the same. What does a manager do? I was in the middle of it and yet I could not explain it to them properly. I am in a lot of meetings. I have to read a lot. And I write documents. These were my usual answers. They kept insisting: “But what do you really do?” I could not say.

The Board Room Version: The manager is the invention of the post-industrial age. We can observe what managers do. We still cannot agree on what they should. Mintzberg spent half a century observing it and found fragmented, verbal, reactive and interrupted work under permanent overload. Drucker shows that the stakes are higher than we realize. The manager is not just a busy person in a difficult role. They are the constitutional organ of the central institution of industrial society. The corporation should give people work, status, function and a place in society. The manager is supposed to make that happen. Drucker gives the manager dignity. Mintzberg gives the manager reality. The gap between the two is a design flaw and Follett shows the mechanism precisely. Accountability without real capacity to act. Power-over masquerading as empowerment. The one-man-show where a coordinator should be. The role was never properly designed. It accumulated. Management is not a failed profession. It is an unfinished one. Medicine, law and engineering went through the same development. The tools existed — Follett described them a hundred years ago. What is still missing is the institutional development that would make them the professional standard. What does a manager really do? Still the right question. And we should start answering it now.

Another kid who did not understand his father’s profession was Henry Mintzberg. The quest to find out drove him to become one of the most important management scholars of the last century. Trained as a mechanical engineer he became one of the very few empirical observers in that field. He sat with managers, watched and recorded what they did. He did so over a timespan of almost half a century. Before Mintzberg, the classical management school had a very neat picture of the profession. Plan, organize, coordinate and control. Mintzberg discovered quickly that this sounded very rational and orderly but was also pure fiction. Most studies before his worked with self-assessments by managers, surveys which managers filled out, activity logs — not independent observation.

Mintzberg published his studies twice — in 1973 in “The Nature of Managerial Work” and in 2009 in “Managing”. Surprisingly the results were not that different. The introduction of digital tools had not changed anything. Fast, fragmented, verbal and reactive were some of the words that best described it. The picture of the manager at the controls of a big machine had to be buried. Instead, he was stuck in the wiring.

The manager’s tasks are short and numerous, Mintzberg’s studies found. Half of the activities of CEOs lasted less than nine minutes and only 10% lasted more than one hour. Most of the day an average manager spends in meetings. Scheduled and unscheduled, they make up more than two thirds of his work time. He can spend only about a quarter of his time at his desk. And even these periods were chopped up into pieces averaging 15 minutes. There goes the image of the strategic thinker, I guess.

Our manager also does not get the benefit of well documented information. While in the 1970s he received 60% to 90% of information verbally, this has somewhat changed in the 2000s with the introduction of email. But even so, information still gets to him mainly in informal ways. Hastily scribbled notes, not reports and analysis.

He also does not get to stay on one subject for long and is often interrupted. Most tasks that require concentration he does outside core working hours. Fragmentation and interruption are the norm, not the exception in his day.

All this apparent chaos does not mean it just happens. There are systemic reasons behind this. Information in classical organizations flows towards formal authority. I just heard something, the boss needs to know that. That report on everything needs to be read by the CEO. So the manager gets a lot of information — so what? The problem is that the more information the manager has already received, the more new information flows towards him. It gets more and more until there is an information overload. Our manager cannot process any information in significant depth anymore. This means fragmentation and superficiality — which is the opposite of what he actually should do. This is called the Nerve Centre Trap.

Another problem is also systemic: the One-Man-Show Problem. By design organizations are built so that our manager is a central processor for decisions, conflicts, the aforementioned information and disturbances. That automatically creates a bottleneck — numerous subordinates, superiors and colleagues are feeding one manager. That is obviously an issue — overload, open-endedness of the job, because there is no natural completion, because everything is just a fragmented decision.

In addition there is something called the Action Bias. Our manager is pushed towards doing. That is supposed to be management. What gets lost is the thinking — because when should he have time for that. 

On top of that comes the problem of Decomposition — synthesis in a chopped up organization — and Delegating in an organization of informal information. The manager also has to balance things carefully. How much do I organise work? How many controls should I implement? How confident should I be in my actions? How much change to implement? How close should I stay to day-to-day business? Too much of any will lead to micromanaging — he takes care of everything and therefore nothing. Too little leads to macroleading — he is up in a cloud and has lost connection to what the reality of business is all about. All of these issues are connected to each other, causing and reinforcing.

With all the different activities, responsibilities and issues Mintzberg observed, he tried to come up with the different roles a manager has to take on. He found ten — the Figurehead, the Leader, the Liaison, the Monitor, the Disseminator, the Spokesperson, the Entrepreneur, the Disturbance Handler, the Resource Allocator and the Negotiator. Just to make this absolutely clear, these are not alternative roles — versions of different managers. All of these have to be filled by our manager. One person.

Mintzberg also analysed what is expected from managers in management literature. Here is the list: courageous, committed, curious, confident, candid, reflective, insightful, open-minded, innovative, communicative, connected, perceptive, thoughtful, intelligent, wise, analytic, objective, pragmatic, decisive, proactive, charismatic, passionate, inspiring, visionary, energetic, enthusiastic, upbeat, optimistic, ambitious, tenacious, persistent, zealous, collaborative, participative, cooperative, engaging, supportive, sympathetic, empathetic, stable, dependable, fair, accountable, ethical, honest, consistent, flexible, balanced, integrative — and tall. Apparently tall people are supposed to have more energy. Well, that is quite a lot to ask of someone who hasn’t had nine continuous minutes to think since last Tuesday.

Mintzberg for all his wit still paints a dark and chaotic job description for the manager. Take into account — this is not based on theoretical assumptions. This comes from observational data.

Again I remember my father invoking the castle. Did he feel trapped like our manager? Worse still — Kafka’s K. constantly receives information — messages, letters, orders — from the castle that are absurdly unclear and out of date. He has to somehow interpret them on his own since he cannot access the place of authority. Kafka was writing about the Austro-Hungarian bureaucracy. He wasn’t.

If this should paint the picture of our modern companies, there would need to be more than one chaotic element in the system. Or is the manager that important? Well, we called him the nerve centre, the one-man-show. So he seems to be quite important. We also called him the gunslinger when it comes to decision making — the person making a cognitive error. Looking at his role, the systemic information restrictions and pressure to act, we see now where that error originates. It is programmed into his job profile. Our manager is also the middle manager who is unfairly trapped in between. See the connection — it’s in this flawed design. Or consider companies unable to change because of organizational inertia. That is not the stubbornness of some CEO villain, not even an inexplicable systemic process. It happens — at least partly — because roles are designed without the authority to change things or the access to do so. Badly thought out control mechanisms and reward systems are a result not just of a bad system but specifically of a badly designed role — that of the manager on all levels, from supervisor to CEO. A role so absurdly overloaded and systemically set up that everyone taking it runs a great risk of being burned out or going mad. A person who is not supposed to be just a minor operational part in the whole thing. The manager was created to be the central figure of industrial society. The person through whom the organization thinks, plans, decides and steers. And isn’t it funny that post-industrialization has designed only that one big profession and has done such a piss poor job of it.

Please, don’t think of me as a doomsayer, but this is very important. And I am not the only one saying this. Peter Drucker, who we know as a voice of reason in management theory, has written about this quite early in his career. His social theory books “The Future of Industrial Man” and “The Concept of the Corporation” were published during and just after World War II. They helped lay the moral and institutional groundwork for what later became reduced to the language of corporate governance. No, not the money-laundering E-Learning you are forced to endure every two years. That is just the image-fragment of the original ideal behind it. 

The idea behind Corporate Governance is that large companies are more than just a private economic arrangement. They are representative institutions in society — meaning they have an important role beyond economics. They shape work, communities and give a sense of belonging. So they should also be judged by more than just profit. As important is that they give people Status — who am I here — and Function — what do I do here that matters. Only if all three are fulfilled do companies reach their intended role. Drucker’s broader point was that every functioning society must give people status and function. Industrial society had to do this through its dominant institution: the corporation. In the pre-industrial society — called the mercantile society — ownership still made authority visible. The owner acted. The owner decided. Responsibility had a face. He did that with varying success. But at least the responsibility was clear. In the industrial society, with ever larger corporations, ownership became a dispersed and distant concept. It still existed but it was largely not something that could be acted upon. Shareholders don’t do things in companies. 

That’s when the manager enters the stage. He is the actor — sorry, the one who acts. Although he does not own, he is meant to control resources — because the owner cannot act directly — he directs people, influencing their lives, and makes decisions which have social consequences beyond the company. But where does he get his legitimacy from — why can he do all those things? Someone hired him — the owner, even if indirectly. But Drucker was very clear that this does not work. In the large corporation ownership is no longer a strong enough reason, it is no longer direct enough. Ownership, as mentioned, has become a diversified concept — there are many people and institutions owning a company. Power from ownership cannot simply be transferred from one person to another as with a representative. So it must be expertise. The manager is simply the best at whatever the company does. But that is exactly not the role of the manager — he is not a specialist but a generalist. A gummy bear company is not run by a food technologist most of the time. So there must be something else.

For Drucker, managerial authority is tied to the function of the company in society. Not so much a profit producer — he actually sees profit more as a condition for existence than the purpose — but someone running an institution that gives people work, status, function and a place in society. To be clear, both are very much part of the manager’s mandate — productivity of a company and its role in society. Urgh, yet another role for our manager? Didn’t Mintzberg show that he already has too much on his desk? Yes, he did. But Mintzberg showed the resulting mess of what managers have become. Drucker shows the ideal of what he actually should be doing. And it didn’t just flow out of his head like a wild utopian dream. Drucker studied GM while writing the two social theories — a company that had heavily decentralized and had given managers, especially those in the middle of the organization, a role as translators of policy. They were not yet trapped in today’s dense web of KPI dashboards, reporting layers and escalation rituals. They were the constitutional organs of the corporation — less restricted, more enabled to act intelligently. Just to make this clear, GM did not turn out to be a Drucker dream company. They rejected most of his ideas when it comes to the company as a responsible institution in society. But they had at least created the structure for it. Drucker was not naive. Adding a paternalistic manager figure in one simple move does not solve all legitimacy problems. That question would need to be solved at a much deeper level. Trust me, we’ll get to that. 

Drucker showed what the role of the manager could be. A vision of a more dignified profession than just a KPI pusher. But the reality of Mintzberg remains. So how did we end up with that managerial mess?

Interestingly enough, to answer this we best go way back — at least when speaking of the managerial timeline. When Mary Parker Follett graduated in 1898 it was not in business administration, which was only just emerging as a discipline anyway. Her degree was a Bachelor of Arts, having studied a wide range of subjects such as government, economics, law and philosophy. By the 1920s she had become an important scholar and consultant in the field of business. She died in 1933 and was then largely forgotten. Peter Drucker called her the prophet of management and was heavily influenced by her. And rightfully so. Her analysis of management activities and their issues remains to this day very relevant. She described the mechanism that put our manager in such a maddening role — not by pointing fingers or screaming incompetence, but by showing the fundamental design failures in mainly two areas.

The first is the mismatch of accountability and responsibility. Accountability is what the company, the system, demands from you. Responsibility is what you can actually do in your job. They are not the same — close but not the same — and especially in business often confused. Which is part of the problem. See, if your job is cooking, having accountability for cooking means you are to be blamed if there is no food or bad food on the table at dinner time. Responsibility is the ability to decide on the dish, buy the ingredients, cook it and serve it. I am using responsibility here in Follett’s stronger sense — not blame, but the real capacity to respond. You see the difference? Accountability asks something of you. Responsibility enables you to deliver it. Like Josef K. in The Trial you can have accountability but no means of exercising responsibility. Similarly our manager is summoned by the board regarding KPIs he cannot fully influence, questioned on processes he has not designed and cannot change, and judged on outcomes he cannot control.

Follett explains the requirements for responsibility in even more detail. Enablement doesn’t just mean somebody tells you “You can do this.” That would again just be accountability dressed up as enablement. Responsibility means being part of the actual situation, understanding it, and most importantly being able to influence the different levers that shape the outcome. In other words our manager needs knowledge, resources, direct contact and recognised authority to decide. Is this too nuanced? What about the quality manager who has no direct influence over operational decisions? Or the middle manager who receives all his orders from top management, serves only as a translation layer, but is measured on the KPIs of his department?

The second important analysis Follett made is on how power is understood and distributed in organizations. The classical view of power is power-over. The CEO tells our manager what should be done. This can produce compliance. What it cannot produce is engagement. Engagement must come from the affected person — it cannot be produced or extracted externally. There are other drawbacks of power-over that were discussed when we looked at control measures and reward systems. Mainly it also produces resentment. Our manager doesn’t like to be pushed around. As a side note: democratic societies abolished power-over between individuals at least half a century ago. In the business world it is still the normal mode.

Follett also saw power-over as a misconception of power. For her real power cannot just be given by a title or an org chart. Power — she calls it power-with — is only real if it grows out of the situation. What she means is something very simple. In an organization people create capacity together to make things happen. For that capacity you need resources, knowledge, and other people — everything that is practically needed to produce an outcome. Remember, that is responsibility. Plus you will need the authority to act. Combine those two and you have power-with.

Reading Follett is truly interesting because she has the uncanny ability to develop one brilliant idea out of the last. Everything is connected. She looks at conflict resolution and develops the win-win method, then connects that to how orders should or should not be given, then develops organizational setup and power-with out of this. She eventually also touches on another important point — the illusion of final authority. We usually think that the person at the top of an organization has the final authority. All decisions come from the top. The thing is decisions are based on information. And the information giver is actually in control of that. Before a CEO decides, many other things happen first. A consultant defines the problem, an analyst selects the data, a manager frames the options. So the final decision is really at the end of a long selection and filtering process. It is not useless or stupid in any way. Somebody has to say either A or B — but only after C, D and E have all been eliminated first.

Follett puts much more weight on the different contributions people make in organizations. So she designs her manager differently from how we understand him. He is by design a coordinator, not a resource allocator or decision maker. He is responsible for creating the conditions in which the organization’s distributed knowledge can be put to work. See the difference from Mintzberg’s manager? Information does not need to flow towards one person — the manager enables information sharing when and where it is needed. Not a one-man-show who takes all the decisions but a coordinator who enables decision making where the knowledge already sits.

To Follett it was clear that this was not to be achieved simply by creating techniques, titles and training programs. A real profession has an accumulated body of knowledge, social function, standards of practice and professional ethical responsibility. Medicine, law and engineering are useful comparisons here. All of these professions went through that exact development. The first surgeons had limited ethical boundaries — they were at the same time barbers who cut, amputated and bled whatever they saw fit. Engineering could build bridges, boilers and machines before public safety became the profession’s explicit ethical centre. What happened is that mistakes were made and the profession had to respond, understand, establish rules and standards but most importantly create a system of values. Management is roughly a hundred years old as a named discipline. The tools existed already then — Follett described them. The discussion on the value system had also been started by Drucker. What is still missing is the institutional development. Companies are still like children that haven’t yet learned that you need to take responsibility if you want to sit at the grown-up table. Children with a lot of money and influence, but still children. And the manager is something like an untrained nanny, totally overloaded, trying to keep it all together somehow. 

Management is not a failed profession. It is just unfinished. It is a development. X marks today. Medicine passed that point gradually between 200 and 50 years ago. And medicine has had practitioners for millennia.

Still I find myself thinking of that kid again, and of my children. The generation of my father who was burned out in the madness of the castle. My generation seems to be on trial by the next generation because their questions rightly sound sharper, although the words are the same: What does a manager really do?

I guess there is more to explore — and we should do it now.

Have your kids ever asked you this? LinkedIn

Don’t just take it from me, here is some good stuff to read:

Mintzberg, Henry. The Nature of Managerial Work. Harper & Row, 1973.

Mintzberg, Henry. Managing. Berrett-Koehler, 2009.

Mintzberg, Henry. The Manager’s Job: Folklore and Fact. Harvard Business Review, March-April 1990. 

Drucker, Peter F. The Future of Industrial Man. John Day, 1942.

Drucker, Peter F. Concept of the Corporation. John Day, 1946.

Follett, Mary Parker. Dynamic Administration: The Collected Papers of Mary Parker Follett. Edited by Henry C. Metcalf and L. Urwick. Harper & Brothers, 1941.

Follett, Mary Parker. “The Illusion of Final Authority.” In Freedom and Coordination. Edited by L. Urwick. Management Publications Trust, 1949.

Wrapp, H. Edward. “Good Managers Don’t Make Policy Decisions.” Harvard Business Review, September–October 1967.

Kafka, Franz. The Castle. 1926.

Kafka, Franz. The Trial. 1925.

I feel so good, I just got my bonus. It’s nice of the man, the company to give me something for doing a good job. Plus, I got an awesome performance review — I can see it there on the whiteboard. I am the data point at the very right end of the bell curve, just like when mom gave me something for being a good boy. I scored especially high in the hearts category. I mean after all I achieved all my goals. Performance looks really good this year. Oh, there we go, another treat. My name is Max and I’m a black labrador.

The Board Room Version: Bonuses, KPIs and performance reviews are based on behaviorism — a school of thought within psychology which has been overtaken by research. It only works for simple, repetitive tasks — not for knowledge work. It uses rewards which Kohn says easily become punishment, destroy teamwork, ignore root causes and discourage risk taking. Most importantly rewards destroy intrinsic motivation for work. Herzberg shows that hygiene factors like salary, bonuses and free coffee can only demotivate if they are missing. Work itself is the only real source for motivation. Deci & Ryan and Csikszentmihalyi explain that Autonomy, Competence, Connectedness and Flow are the factors that drive us. True motivation comes from well designed jobs, not from treats. Passive employees are not personal failure but the result of absurd jobs.

Yeah, yeah we are all dogs or rats, very funny. We are all animals in a corporate lab. The thing is, it’s really not funny at all. Some of it comes down to misunderstood science, some to people not keeping up, and some to plain ethics. 

We usually don’t do recurring cameos in this show, but I have to bring back the gunslinging smoking corner manager for this one. You know the one making decisions out of intuition which is not intuition at all. Now, he needs to find out how to manage his people. But he has learned something since we last saw him. This time he turns to data, he goes all science on us. And he has discovered something called behaviorism. He likes it. It is something he can observe, something measurable. Like the minus 10% he gets in his team’s engagement score. 

And, no kidding, it all started with animals. Edward Thorndike became famous for putting cats into puzzle boxes. The cats had to perform some kind of action — pull a loop, press a lever, operate a latch — to escape and get food. Initially they would just do random things like scratching and pushing until they accidentally did the right thing. When the cat had to do it again, it became faster with each repeated trial. Thorndike then called that the Law of Effect. Behavior followed by good stuff happens increasingly often. Behavior followed by bad stuff happens less. 

John B. Watson, the father of what came to be known as behaviorism, put it into an even more generalized formula: Humans and animals — there is rarely a clear distinction between them in behaviorism — are highly moldable through environmental conditioning. Watson’s formula was simple: Man and animal only differ in the kind of behaviors they show, not in the principles. 

Taylor was not a behaviourist psychologist, but scientific management shared the same dream: You just need to standardize work and design the environment to a point where the worker can do only the right thing, as fast and as efficient as possible. 

Law of Effect, Scientific Management — if this makes you think of physics applied to people, you are absolutely right. Although this is only classical physics. Quantum physics was conveniently forgotten, but we’ll get to that.

But first we have to introduce the pigeons and Mr. behaviorism himself, B. F. Skinner. He did not use cats, but pigeons and sometimes rats — I always thought these were alike. Well the setup was similar to Thorndike, but Skinner looked a bit closer. He developed operant conditioning, finding out more about reinforcement schedules, timing, rates of response and the influence of different kinds of consequences. Based on his studies he started to predict the animals’ behavior then finds ways to control the behavior. 

And all of a sudden we don’t just have escape behavior, we have a learning concept. Thorndike’s cats learned how to escape. Skinner’s pigeons and rats learned to repeat behaviours under controlled reinforcement schedules. 

For Skinner it was irrelevant if his subjects were animals or humans. He applied the same rules for both and studied both and to be fair, his results confirmed his view. Skinner then had his vision where he could control all living organisms. This is of course a fully deterministic world view. If all beings are determined by external influence there is no free will. And even the objection that usually stops determinists — that this would also mean that the scientists themselves were fully determined by external influence — did not bother Skinner. Even when writing his own autobiography he admitted to that. “I did not direct my life. I didn’t design it. I never made decisions. Things always came up and made them for me. That’s what life is.”

What a strange thing, this behaviorism, you might think now. Actually it’s not, strange I mean. It is one of the most common assumptions about how psychology works. Nowadays it is even referred to as Pop Behaviorism by psychology researchers. Modern scientists have actually long moved on. The old absolute version of behaviourism no longer dominates psychology. Only in cognitive behavioural therapy as part of clinical psychology is a refined version of behaviourism still living on. What didn’t survive is the assumption that external rewards shape complex human behaviour.

 But its simplified popular version still runs most people management. Never named, never questioned, just practiced as common sense. The vision of total control never quite worked in the lab, but it found a much more comfortable home in the work place. 

There were always problems with behaviorism, but these problems were just pushed aside and forgotten. See it isn’t even clear who trained whom in these experiments. Was it the scientist or the rat? Psychologist and Skinner critic Alfie Kohn once wrote a lab report from the point of view of the rat, describing how the rat had successfully trained the scientist to deliver treats whenever the rat pressed a button.

This is more serious than you think and we see it to this day in management. Because behaviorism is the basis of reward based performance management. You deliver on a KPI and you get a bonus. You have just been trained to do the right thing through an external condition. You are the rat. Well, ok, as long as you get your bonus. But the picture isn’t that clear. 

Since Deming we know that what we measure and therefore manage in performance management is not overall performance. We can only manage that one number we are looking at. And not even that very accurately because rules get bent, definitions shifted, exceptions made. Eventually the manager can only measure the compliance to the measurement system. You will not improve the performance of the team or company you will only improve that KPI’s appearance. And that will then result in you getting the treat, oh sorry, the bonus. 

Now, who is training whom? The one asking for KPIs to look good or the one making the KPIs look good so he can get something. And that’s the moment when quantum physics makes its entrance. At quantum scales, measurement is not a passive observation; it is a physical interaction that can change the system being measured. Ha, I always knew management is nothing but quantum physics. Oh wait, does that mean I have to read Planck, Einstein, Bohr, Heisenberg and Schrödinger. Well at least one of them also had a cat.

Kidding aside, see the dogs and cats and rats and pigeons, wonderful beings that they are, could not object. People can. And did. And were ignored. The most fundamental problem of behaviorism is its uncontrolled application to humans and human activity. Mainly to management practices. And it comes in all forms: Bonuses, performance reviews, merit ratings, stack ranking, competency frameworks, gold stars and KPIs. Let’s first look at the question how bad a job behaviorism really does.

The problem starts with bonuses and what their intention is versus how they are perceived. The intention of a bonus is as a potential reward to make you want to perform better. But beyond the measuring problem already discussed, there is a deeper issue: it is a category error. Bonuses are perceived as payment for work. They appear in your contract right after your wage. That makes them system requirements. That means they are compensation for the time and effort put into the company’s value-adding process. Motivation operates on another level, not the systemic one but the psychological one. 

This category error undermines the bonus from the start. Furthermore the bonus gets absorbed into the expected compensation and loses its value as a reward completely. You see this very clearly when discussing salary with employees. Wages and bonuses are treated the same way. It’s a payment for your effort, not as a pat on the back. For the company this creates a trap: you built something as a motivator that never functioned as one, but now you cannot remove it because it is expected as compensation. The company has to pay but doesn’t achieve anything with it. 

Kohn, in his book “Punished by Rewards” pointed out five further problems with the whole reward system. Should you ever read him be aware that he is a bit of an enfant terrible in the psychology scene, but hey, you read me, so you should be used to that. His points are on the other hand excellent analysis. 

First he points out that rewards become punishment immediately, because withholding a promised reward is nothing but a punishment. The carrot becomes the stick. Have you ever not received an expected bonus. That feeling is not motivating. That is punishment. Then there is the problem of rewards leading to competition, it can often become that and this is worsening relationships within organizations. Now this can be avoided but it is a danger none the less. The next one is always true: Rewards ignore reason and it reflects back on Deming’s points. We are managing the appearance of a performance, we will not look for the real issues. Because the issues are not the relevant thing anymore, only the number that we are judged upon is important. Similar to that is that reward systems do discourage risk taking. We are less likely to try out stuff, experiment and therefore innovate because there is the fear of not getting that reward. 

Now there are authors that say that all of these problems can somehow be fixed with a very elaborate bonus system. One that does not punish in any way, nor encourage competition, always makes you look for the real issues and encourage experimentation. Well, tough but ok. 

The last problem that Kohn sees is however not even fixable by the most miraculous reward system ever created. It is the fact that rewarding an activity takes away one’s desire to do the activity. What? Yes, and this has been empirically studied by many researchers and is known to be true. See, what happens is that the initial motivation why you did the activity gets replaced by the reward. Rewards always lose their attraction over time — and when they do, or when they disappear entirely, the activity loses its reason. This one cannot be engineered away. It is built into the reward itself. 

One study that demonstrated this was the Kefir experiment done by Leann Birch and colleagues. Young children were divided into three groups and offered the yoghurt drink kefir. One group was just handed it, the second group received praise when drinking it and the third group were offered free movie tickets if they drank it. Who do you think drank more of the liquid yoghurt. As Skinner would have predicted it was the group who got the reward. Wait no surprising twist here? Be patient the experiment is not finished. Birch was not interested in the initial effect of rewards, she was interested in what rewarding did to long term behavior. Because a week afterwards which group do you think still liked the stuff? Exactly the one that did not receive any praise or reward. Those who had been rewarded were far less likely to drink it once the rewards stopped. The initial reward and praise had ruined the wonderful sweet gulpy stuff. 

This finding has been reconfirmed in many other studies. There are even jokes about this effect — there was an old man … no I’m going to spare you this one. How long a reward works depends on what it is, but most fade within days, not months. What is the timeframe of your bonus? Even then rewards only work well for people who are in a dependent population. Meaning there already has to be a situation where the rewarded person is controlled by the reward giver. As in employee and manager, student and teacher, child and parents. Well that doesn’t sound like management technique more like a hostage situation.

These studies also showed that reward systems only work well for simple, easily repeatable tasks — drinking kefir for example. Reward systems can enhance quantity but not quality of work. So rewards can make employees work more but not better. We will get to the why later. Rewards, however flawed, would only be useful for simple frontline tasks. But who gets the big bonuses in your company? The guy on the shop floor? 

All studies point towards the same thing, reward systems don’t work for their intended purpose. Are there things that do work? As a side note, some of these same studies tested other organizational measures like training or goal setting without reward attached. These always outperform the reward systems. It is quite clear and Deming put it plainly: bonuses do not work for psychological reasons — they undermine the value of work. For economic reasons — they are perceived as compensation, not motivation. For systemic reasons — they destroy cooperation, create fear, corrupt numbers. Even Alan Blinder, a Princeton economist who edited a major productivity research anthology, found that how employees are treated outperforms how they are paid.

But Deming didn’t stop with bonuses. In his view evaluations and grading are just as bad. They try to do the same thing but on even shakier ground. Same source, same problem. Simply put, it’s the ‘you are a good boy’ I do with my dog, and while it works for Max because he truly is a good boy, in most cases these things are numerical nonsense because they force distribution. 

Most evaluation systems force you to choose which attributes a person excels in and which need improvement — because we don’t say bad, right. You cannot choose all good because that is not reality. We all know that. Or do we? Some other evaluation systems even do the same for groups of people which is even worse. Only 5% of your team can receive top scores. Most have to be somewhere in the middle. Again this is clear, right. We know the principle. We even know how it looks as a graph. It’s normal distribution, the bell curve. A lot of data points fall in the middle, only very few at the bottom and at the top. Math proves it, apparently. 

OK, I need to breathe deeply here in order not to scream out loud. First, it’s statistics, not — ah, whatever: IT IS NORMAL DISTRIBUTION as in naturally occurring, not played with. Companies are not the same as the total populations of humans. At least I hope, otherwise I would fire the whole HR department. You have a selection process when you hire, then you train people, these are interventions applied to the population. If your workforce still fits normal distribution after it, forced ranking is proof of your failure dressed as a performance management tool. It’s like when the Total Perspective Vortex forces me into a distribution whether I belong there or not. I am here. Insignificant. Regardless of how many Norwegian fjords I have designed. And yes, my name is Slartibartfast from now on. 

Look, whatever money you throw at people it’s not going to motivate them to work better. And we should know that since the 1950s. This is what Herzberg found after years of research for “The Motivation to Work”. He found out that older studies on motivational factors in the work environment did not provide any conclusive results. They did not make any sense basically. Problem was that people — totally understandably — thought that all factors had to be measured on one single scale. Deeply demotivating to super motivating stuff, more of the bad reduces motivation, more of the good increases it. Simple, like math. It just didn’t work out. 

So he looked at the data and did more studies himself and found that there are actually two separate scales. Certain factors can only demotivate you. Others can only motivate you. That’s the Two Factors Theory. And all the stuff that companies normally do, like wages, bonuses, free coffee, office setup, working conditions are, so-called hygiene factors. They are really important in the sense that if they are missing employees will get demotivated. So companies need to manage them. But they will not earn you a gold star as an employer. The good stuff — your motivators — are a completely different story. They have nothing to do with extrinsic stuff. 

And we should know that. Yet we keep throwing useless stuff at people. All it would take is reading a couple of books on psychology. We even ask people the wrong questions when trying to find out what motivates them and what satisfies and what delights them. If I have to tick one more endless 1-to-10 questionnaires on my engagement as an employee, I will rip that digital form apart. Does anyone actually think you’ll get usable feedback from that. Those are numbers that you get. OK, so my trust index is bad. OK, now what should I do? The next time just ask people when they felt really good about work and when they felt really bad. Critical Incident it’s called, used forever. Gives you usable qualitative feedback. Oh, but we have a 5000 employees, we cannot process all those answers. Man, keep up with the times. This is exactly what large language models are made for, to process language for you, categorize it for you, analyze it. Herzberg’s method has a real weakness: attribution bias. Okay, but even if his two boxes are too neat, that still doesn’t save the bonus logic.

And don’t get me started with employee competency frameworks that some consultant frankensteined together from some YouTube video. If somebody misuses Pestalozzi’s Head, Hand and Heart one more time, I’ll send my wife to rip you a new one. It’s a model for how to teach children not an assessment of people’s competencies. I am the only one who feels like being in the Sirius Cybernetics Corporation — the cheerful company that builds things nobody needs and that drive everyone crazy? Why are we so enthusiastic about being useless. 

Science misunderstood, misapplied, outdated. Herzberg once said that it takes about forty years for scientific insights to become popular. Well, his findings are 70 years old by now and have still not arrived in the board room. Other areas have moved faster: the field of animal training itself has left behaviorism behind. It used to be the big thing for training animals in the second half of the last century. But since then that field has also moved on. Good animal trainers still use reinforcement, of course. But they also read the animal’s emotional state, stress signals and specific behaviours. They work with what is actually going on in those little cute heads. Management is still where dog training was fifty years ago.

And science may have not totally abolished behaviorism — but it has moved on to a more nuanced view of what makes us tick. Or better yet, it found something on the other side and that changes quite a lot about how we think about managing people. 

Herzberg was the beginning and Edward Deci and Richard Ryan provided the detailed mechanism. Actually there are several modern views on the subject of motivation. They all have to do with intrinsic motivation at their core. Similar ways — but different names and scope and traditions — to describe basically the same thing. Gosh, these scientists really need a marketing consultant. 

Let’s look at two. First is the one from Deci & Ryan, Self-Determination Theory. Their research identified three basic psychological needs. Through empirical studies they found that humans need Autonomy — a feeling of choice — Competence — a sense of effectiveness — and Connectedness — a feeling of belonging. So a craftsman standing at the workbench, working at something difficult that results in something meaningful for his customers. He will feel intrinsically motivated because he chose that work. He is both challenged and enabled by it. And he works in direct relation with the people it serves. Deci & Ryan made intrinsic motivation into something that could be measured. 

Now what happens if he needs to meet a quota given by his boss or the company tells him to only make one small part and somebody else will assemble it and another will sell it to the customer. Each one chips away at Autonomy, Competence or Connectedness. These are controlling factors and they lower intrinsic motivation. Even if he gets more money for it or a nice bonus if he meets his quota. The craftsman is still standing at the same bench. But something has left the room. We saw that already by the example of the Kefir experiment. Reward does not enhance motivation, it actually destroys it.

Let’s take out the microscope and look at work even closer. What happens when we do a task. The second intrinsic motivation framework we are looking at is concerned with exactly this.  Mihaly Csikszentmihalyi — yeah I know I also cannot pronounce that correctly but the guy is worth remembering — looked at what happens when tasks flow — and that is also the title of his 1990 book “Flow: The Psychology of Optimal Experience”. 

We all know that tasks can feel like something we just can’t find our way into, like we are watching ourselves doing it not experience it first hand. Like listening to music when the acoustics are really bad and you hear distorted sounds, the beat is slightly off and nothing quite resonates. In those moments you are definitely not in the Flow. 

On the contrary it should be like “being completely involved in an activity for its own sake. The ego falls away. Time flies.” Hopefully you have all experienced that. It is truly bliss. I have this a lot when writing, but also when I do trainings, even when I go running on a trail. Because as Csikszentmihalyi writes the conditions are the right ones: I have a clear goal, get immediate feedback — hard with writing but you learn how to do that —, deep concentration — yes possible even in a busy class room —, a sense of control. Most importantly he found that there needs to be a good balance between the challenge — how difficult a task is— and the skills you have. Then the activity itself becomes satisfying. Groovy! 

But then the bonus enters the room and all of a sudden the ego is back in together with the wants. Time stops flying and starts to be measured. The activity is no longer the most important thing, but the reward is. 

Ah, this whole intrinsic thing sounds kind of neat. How could that work in an organization? Herzberg did the whole analysis for us, he actually used the critical incident method of asking specific questions to workers and found what the good stories and bad stories in their work life really were. The bad stories were always about the Hygiene factors — the surrounding of work, the pay, the free coffee, the bonus. The good stories were the Motivators and they were always relating to the activity of the work itself, the content of work. 

So all the cool stuff management does, can only cause dissatisfaction if missing, but the work itself is the only source of motivation. I, as Slartibartfast, am only motivated because designing Norwegian Fjords is just a wonderful thing, the mice just have to pay me fairly and give me clear goal and hopefully keep the planet from getting destroyed a second time. The funniest thing is not my addiction to Douglas Adams — it’s that organizations invest most heavily in hygiene while the thing that actually matters, the design of work itself, gets the least attention.

And it’s not even that hard. It’s called job enrichment — well vertical job enrichment to be exact. It means workers take more ownership and responsibility, that their skills and judgment visibly impact the work, and that the results carry meaningful connection. That does not mean more tasks but doing their task with more Autonomy, using their Competence in an environment of Connectedness. 

This is really important because if you don’t do that, if you constantly control and micromanage people, you will get people who mirror exactly that. Idleness, indifference and irresponsibility are healthy responses to absurd work. The passive employee is not a flawed person, it is a made person. Made by the organization. And you end up with a staff full of Marvins, super AI robots who are depressed and will eventually not even open doors for you. And that would be really ineffective. 

One step further down the rabbit hole — Philosophy. John Dewey was a psychologist and philosopher who set out to reform the educational system in the first half of the last century. He wasn’t one of the ‘give them all freedom, all experience is good’ kind of people. Actually he criticized both conservative and progressive education. See he said that both a totally controlled education and an unguided education can result in the same result because not all experience is educational. Experience can train stupidity. 

What is needed are not rigid structures nor absolute freedom, but an intelligent structure that enables meaningful experience. You already see where this is going. Of course, you are all intelligent people. This principle of intelligent structure or guided experience is exactly what is needed for the work itself. Autonomy, Competence and Connectedness does not mean some weird hippy commune. It means that work is designed to provide positive experiences. And this might be the hardest thing to do, but hey, we get paid for something, right. And maybe designing meaningful jobs is exactly enough of a challenge to match your skills and send you off flowing.

Of course there might be leaders who think — because nobody says this out loud anymore — that people should just work, just produce. They don’t need to be motivated or have meaningful experiences. They are only there to be part of our big machines. 

In response I have to bring out the heavy guns: Immanuel Kant — I guess you all know the name — the god of ethics and reason. He wrote some pretty intelligent stuff. And you better not try to counter him otherwise the hammer of reason will flatten you. 

The thing is people are not things. Kant would say that you cannot treat them merely as a means because a person is a rational being, capable of reason, moral judgement and self—legislation. A rational person can ask: What should I do? What rules could I honestly accept as valid not just for me but for everyone? That’s the categorical imperative. That’s why a human is more than part of your machine, not just a resource in your value-adding process. Humans can give themselves moral law, therefore they have autonomy, therefore they have dignity. Their value is not bound to their usefulness or efficiency or productivity or market value. They are a ‘Zweck an sich,’ not just a means. They can help you create something with your big machines but you can never reduce them to just being a part of it. Humans are not tools.

Look, in the end it all comes down to this: You cannot treat people as if they were pigeons. Leave aside Kant if you want — it’s a crime but you can try. Managing people like that is just plain ineffective. If companies want more than just a herd of rats they need to stop trying to condition employees with treats. Organizations would benefit much more if they would enable people to do their best by creating meaningful jobs.

I guess there is more to explore. 

Is your job meaningful? Discuss here: LinkedIn

Don’t just take it from me, here is some good stuff to read:

Alfie Kohn, Punished by Rewards, 1993

Frederick Herzberg, Bernard Mausner and Barbara Bloch Snyderman, The Motivation to Work, 1959

Frederick Herzberg, One More Time: How Do You Motivate Employees?, Harvard Business Review, 1968

John Dewey, Experience and Education, 1938

Immanuel Kant, Grundlegung zur Metaphysik der Sitten, 1785

Edward L. Deci and Richard M. Ryan, Intrinsic Motivation and Self-Determination in Human Behavior, 1985

Mihaly Csikszentmihalyi, Flow: The Psychology of Optimal Experience, 1990

W. Edwards Deming, The New Economics, 1993

Douglas Adams, The Hitchhiker’s Guide to the Galaxy, 1979

A few days after my mother died, I went back to work. I was in my early twenties, studying during the day and working nights as a barkeeper in an alternative jazz club. A colleague asked me how I was doing. I gave the answer you give when work is waiting and grief has no official place. “It’s ok.” He looked at me and said, “No, it’s not.” Then he patted me on the back.

I have forgotten a lot of clever things people said to me since. I have never forgotten that. Because he did not try to comfort me. He did not explain grief, manage it, reframe it, or turn it into resilience. He simply refused the lie.

The Board Room Version: Mental Health at work is not just a personal problem. It is also a systemic issue. Maslach & Leiter describe burnout as a result of 6 mismatches between the person and the work environment – not of personal weakness or failure. This is the official WHO description. Karasek & Theorell describe the worst combination — high demand, low control and low support — the iso-strain job. Deci & Ryan name the fundamental needs of humans — autonomy, competence and connectedness — their absence produces measurable harm to mental health. And this often happens at work. The result of all of this is 1 trillion Dollar loss of productivity per year. WHO and ILO published a policy what to do against it: Prevent — Protect and Promote — Support. If any, companies only do the latter two. The first and most important would be to reshape work environments and content. Organisations which do not systemically enable human flourishing do not just produce stressed employees. They produce conditions in which responsibility, creativity and engagement are not possible.

Maybe this is a good starting point for a discussion on mental health at work: not a program or a poster or a study or a clever book, but with the permission to say that something is not okay.

Because it isn’t. Because I have seen too many colleagues disappear some into illness, some simply gone. People I worked with closely. It happens again and again. I feel guilty. I should know better. I know that they are not weak links, I see work breaking them. I also see the despair of mental illness, I see the suffering, the changes. I see my own fear. I see my own powerlessness because I cannot change what is hurting people I care for. And on Monday morning I receive a newsletter at work. It tells me to Stay Balanced. 

And they keep coming, they keep giving me tips and tricks — DIY instructions for building a beautiful mind. Breathing, work—life balance, mindfulness, healthy eating, communication, all wonderful. All insufficient. Then they roll out the big guns. The EAP — yeah, also had to look that up — the Employee Assistance Program. The employer-provided, confidential support service in the form of short-term psychological — sometimes also financial or legal — counseling programs. That’s a good thing, right? Yes, it’s the company saying: “In our last manager training we have learned to detect that you are struggling. Here is a phone number.” 

The issue is that one major contributor to mental health issues is always dropped from the picture. The place where we spend a third of our day, the institution that gives us identity, a place where we belong, a second family, a place where we are managed and controlled. The company. 

And now for my recurring disclaimer and explainer: This is not done by conspiracy or villainous intention. It’s a systemic issue. Scientists have documented this consistently and studied it empirically for more than fifty years. 

Take burnout as the first very apparent example. The psychology researchers Christina Maslach and Michael Leiter explained it in their book “The Truth about Burnout”. Besides the book’s slightly on-the-nose title it gives a good analysis of what burnout is. It manifests in feelings of Exhaustion — emotional and physical — Depersonalization — distancing yourself from work and its environment — and Inefficacy — work does not matter or you cannot be effective in it. This is of course a problem for anyone trying to do good work. Because these things correspond to the main resources we need to work: Energy — depleted causing exhaustion —, Involvement — destroyed by depersonalization — and Efficacy — literally the opposite of inefficacy. 

Those states of mind are not primarily caused by internal factors — you are not weak or have failed somehow. It is a mismatch between you and your work environment and conditions. These mismatches can happen in six different ways. Bear with me, but I need to explain them to you. Workload — too much of it — Control — when you have responsibilities but lack influence — Reward — effort is not recognized or compensated — Community — relationships at work break down — Fairness — decisions feel arbitrary or disrespectful — and Values — the job forces you to act against your beliefs. These mismatches most of the time appear in combinations. You have too much work and are not recognized for doing it. You are constantly controlled and have to act against what you believe in. This will over time erode you and lead to Exhaustion, Depersonalization and Inefficacy. You burn out.

The WHO has included this exact description in its International Classification of Diseases. Note that in the ICD burnout is not categorized as a disease but rather “a phenomenon in the occupational context and should not be applied to describe experiences in other areas of life” and as “a syndrome conceptualized as resulting from chronic workplace stress that has not been successfully managed.” So burnout results from the workplace and it is manageable. The organization has simply not managed it. The WHO does not say: the employee failed to breathe properly. It says: chronic workplace stress was not successfully managed. 

If we look beyond burnout, there is more research, medical research. In the peer—reviewed medical journal The Lancet the occupational health researcher Reiner Rugulies and his colleagues published an umbrella review on the connection between working conditions and Depression and Anxiety. Sorry, short explainer: an umbrella review is when you look at a lot of studies, analyze them and if they are any good and fit the same definitions you combine their results. In 2023 they found that various negative work conditions had differing impacts on the likelihood of depression or anxiety occurring. The factors were between 1.1 to 1.8. That is not a lot but the consistency of the results was proof that there was a clear connection. Additional analysis published in The Lancet confirmed this: Job strain or organizational injustice having a factor of 1.5 and bullying having a 2.58 times increased risk. In the same Lancet series, John Frank and colleagues demonstrated that work is a major social determinant of health.

And it’s not just the researchers, in a survey from Mind Share 84% of workers reported at least one workplace factor negatively impacting mental health. Most common was emotionally draining work — 37% — and challenges with work-life balance — 32%.

This is bad news, but as shown workplace conditions appear to be just one factor in all of this. Isn’t that just always the case? Yes it is, but that doesn’t make it better. Think of what we eat. We know there is bad food for our health. We know that poor nutrition is a major contributor to cardiovascular disease. But not everyone with poor eating habits gets heart disease. When these studies show only “modest” statistical effects between high-strain jobs and mental health outcomes, that does not mean the work environment is only mildly harmful. It means that the data mainly captures outcomes that become measurable — the people, the cases where coping mechanisms, social support, family stability were not enough. The data only shows the ones who break. It does not show all the people who have to bend.

Then there is something called the diathesis—stress model. Sorry, again explainer: In clinical psychology and psychiatry, the diathesis-stress model explains that vulnerabilities or predispositions and stressors work together to cause a mental issue or illness. It also means that sometimes it doesn’t. There is also a similar concept in physiological illnesses: Not everyone gets the flu if it spreads in your family for example. It may only manifest after a week with some people or not at all with others. Stress interacts with vulnerability. But that does not make the stressor harmless. It only means that people arrive with different thresholds, histories, and reserves.

Modest effect sizes in studies do not reflect modest harm, but varied thresholds. They do not fully capture the harm experienced by everyone in negative work conditions.

There are physical effects too, resulting from bad working conditions. Robert Karasek and Töres Theorell described the results of their studies in the book “Healthy Work: Stress, Productivity, and the Reconstruction of Working Life” published in 1990 and demonstrated the link to increased risk for cardiovascular disease. They showed that it is an outcome of higher blood pressure, elevated stress hormones and fatigue over longer periods of time. The health effects of long working hours have also been demonstrated by a joint WHO and ILO report published in 2021 — 745,000 deaths per year from cardiovascular disease can be attributed to working 55 or more hours per week.

All of this points to a clear and consistent connection between working conditions and mental and physical health. But how does this happen? What are the structural conditions that produce the damage?

There have been many studies done in this field. Two of the most substantial bodies of research come from Karasek & Theorell and Deci & Ryan. While both basically come to the same conclusions, it is worth looking at both.

For Karasek & Theorell I would love to show you their famous Demand—Control table but I don’t do excel here, sorry. They have basically mapped jobs on two dimensions: job demands — either high or low —  and decision latitude — how much control do you have also in high or low. That of course gives you five — ha tricked you, no it’s four — combinations or job types. Most interesting are the two where job demands are high and control either high — the active job — or low — the high strain job. That is for example the difference between a doctor and a warehouse worker. Both are very demanding jobs, but one has some authority over how the work gets done — not unlimited of course, just relative — the other has nothing much to say. Karasek & Theorell found that people with high—strain jobs are more likely to suffer from mental health problems.

That brings up an important point. The combination of high demand and low control can often be found in lower status jobs. Therefore mental health becomes a class issue. This has also been confirmed by Rugulies and colleagues in The Lancet. Occupational health problems occur disproportionately in lower status jobs.

Karasek & Theorell added another dimension to their Demand—Control Model: Social support. They then found that the most damaging combination is what they called iso—strain which has high demand, low control and low support. How surprising?!

Then what about the second pair of research buddies Edward Deci and Richard Ryan. They have independently and jointly worked on what is called Self-Determination Theory or SDT for more than 40 years. It’s the study of intrinsic motivation — an expression you may have heard before. In psychology it is quite an important concept of which they are among the leading figures in the field. And believe me that we will hear more from them. Regarding mental health only some of it is relevant. Autonomy — a feeling of choice — Competence — a sense of effectiveness — and Connectedness — a feeling of belonging — are fundamental needs of us humans. The absence of any one of them produces measurable damage to our mental health. Of course it’s not as simple as that, there are a lot of nuances. Like autonomy is not freedom from all constraints. That would be anarchy — sorry, no Chomsky here. Autonomy here is the ability to act with inner consent inside a world full of constraints. So you follow rules because you see the point and not because someone is watching. Another relevant point in SDT is that there is a distinction between controlling and informational input from the outside. The same kind of input can be experienced as controlling — then it undermines intrinsic motivation — or as informational — then it supports it. A company tells you how to lead a mentally balanced lifestyle — you know, just breathe and count — or it addresses the unbalanced workload. Now you guess which is the supporting one. Controlling management is by the way always bad for mental health. We have seen that Theory X leads to passivity and that is the lack of any kind of autonomy, competence or connectedness in employees. On top of that, it will reconfirm the controlling manager who puts even more controls. The Theory X death loop. The Theory X death loop operates at the managerial level. But something similar happens at the organizational level too.

Not a death loop but a cascading effect is what you can see in many companies happening. Staff or other resources get cut. At the same time the expectations expand — all for the customer! This accumulates, more for the customer, more for the shareholder, more engagement, more health. And no matter how many posters you put up, employees see that this does not make sense. You cannot have more for less. All of Maslach’s mismatches happen at the same time: overload, loss of control, reduced reward, broken community, fairness violation, values conflict. Deci & Ryan’s autonomy, competence and connectedness get eroded and more and more jobs become iso-strain jobs: high demand, low control and low support. 

And how do companies respond to this cascade: They send you a newsletter. In which they tell you what you have to do, where your shortcomings are. This makes your mental health, your feelings, your emotions a personal matter. It’s not the organization’s responsibility, you have to manage it. The problem with that is that emotions are produced by social interactions. Organizations are social systems by definition. Ones that we spend a third of our day in. You cannot design a social system, populate it with humans and then say that the emotional consequences of that system are purely private. And that is not psychology or philosophy or whatever. That is just not logical. 

Of course someone will say: Yeah, yeah, man up. Work is just hard. OK, let’s get that comment out of the way once and for all. Legitimizing suffering through work is an old moral assumption not based on any logic, not even any economic principle. It’s just stupid talk. Max Weber analyzed the moral legitimization of work and suffering a hundred years ago and since then nobody has shown otherwise.

So then if not stupid talk, then let’s hear from a CEO. Maslach and Leiter describe a composite figure they call Dave, a CEO whose position on mental health at work is unfortunately all too familiar: “Mental health is a problem of the individual. It’s not the employer’s responsibility. It doesn’t have any real impact on productivity. And there’s not much the organization can do about it.”

These four points are a seemingly airtight logical defense to any liability from the company’s side. In addition they are also all wrong. We have already seen that mental health is not just the problem of the individual but also of the social system the individual operates in, the company. We have looked at studies demonstrating that work conditions are at least a contributing factor to mental health. We have seen the models how this works. And yeah, what about the productivity claim? I wonder. How about 1 trillion dollars. That is the WHO and ILO stated global loss in productivity per year due to just depression and anxiety. Twelve billion working days lost every year. Or the 28% productivity loss that was found in the Mind Share Survey reported across all employees experiencing mental strain in their work. That is quite an impact I would say. As to what companies can do, there is quite a lot they can do. And more and more companies are doing some of them. Just not all and not the important stuff.

In 2022, the WHO, and jointly with the ILO, published clear guidance on what companies should do: an easily explained three-point program. Prevent — Protect and Promote — Support. Companies tend to do the second and third, but usually skip the first and most important. Your manager training and newsletter on mental health are Protect and Promote. The EAP program is Support. Prevent, that would be “Reshape work environments to minimize psychosocial risks and prevent workers from experiencing mental health conditions”. Well, that’s not breathing. 

Dave is not as generic a figure as you might think. I have experienced similar things, when facilitating workshops on ISO 45001. There was this one CEO who brushed off any responsibility concerning mental health of his employees by saying: “Well, I’m not their nanny.” He then put his name on the mental health newsletter anyway. I did not say anything at the time but I should have. The answer is clear: “First — correct, you are not a nanny. Nannies are for children. Adult employees need a leader who creates conditions for good work. Second — does anyone actually believe that newsletter came from your desk and not some communications consultant? Your employees certainly don’t.” In the APA 2022 Work and Well-being Survey 47% of workers said their company’s wellbeing and culture initiatives are mostly for show. Nearly half. The audience knows it’s a performance.

Since I mentioned ISO 45001, the management system standard for occupational health and safety, I have to stress here that it requires companies to evaluate their health and safety risks and address them. This currently already includes mental health risks but in its next revision — to be published in 2027 — is expected to further strengthen this aspect, which will align exactly with the WHO/ILO policy advice to Prevent. And with risk management in ISO 45001 we have an established process for it, even the excel templates are already made. The framework exists. The tools exist. The question is whether organizations choose to use them for what they were designed for.

This whole discussion always comes back to a simple point. Why should companies do something about work conditions which are obviously harmful to employees? There are some like me who say it’s foremost an ethical question. No economic activity should generate bodily or mental harm, because the worth of the human being is higher than the shareholder value. But even if we put ethics aside, doing nothing is strategically stupid. Even within the system of companies it does not make sense.

Reiner Rugulies did another study regarding leadership and mental health. Changes toward a more positive — supporting, less controlling — leadership style led to a decrease in depressive symptoms with employees. That demonstrates that organizational change produces measurable health outcomes. The WHO and ILO confirmed that organizational interventions — changing working conditions — reduce emotional distress and improve work outcomes. The same cannot be said if only individual stress management is implemented. Deci showed in a study he did at Xerox that autonomy-supportive management produces measurably better levels of satisfaction, lower stress levels and even reduced compensation demands — I can see the CFOs suddenly paying attention. He also demonstrated that managers can be trained in this, it’s not wishful thinking. A Lancet study showed that between 17% and 35% of depressive disorders in Europe would be preventable by just eliminating negative psychosocial working conditions. Controlling compliance systems are expensive to maintain. A method based on intrinsic motivation is self-sustaining. And for all you money-obsessed: 1 trillion dollars lost per year. 

Organizations that systematically prevent the conditions for human flourishing are not just producing stressed workers. They are producing the conditions in which genuine responsibility, creativity, and engagement become impossible.

Bing, another newsletter lands in my inbox. I think of the colleagues who disappeared. I think of what the evidence says about why that happens. I think of what it would actually take to change it. Then I delete the email.

I guess there is more to explore — just not in this newsletter. 

What would it actually take to change this where you work? Your thoughts: LinkedIn

Don’t just take it from me, here is some good stuff to read:

Christina Maslach and Michael P. Leiter, The Truth About Burnout, 1997

Edward L. Deci with Richard Flaste, Why We Do What We Do, 1995

Robert Karasek and Töres Theorell, Healthy Work, 1990

Reiner Rugulies et al., Work-related causes of mental health conditions and interventions for their improvement in workplaces, The Lancet, 2023

John Frank et al., Work as a social determinant of health in high-income countries, The Lancet, 2023

World Health Organization, WHO Guidelines on Mental Health at Work, 2022

World Health Organization and International Labour Organization, Mental Health at Work: Policy Brief, 2022

And the Data:

Mind Share Partners, 2021 Mental Health at Work Report, in partnership with Qualtrics and ServiceNow, 2021

American Psychological Association, 2022 Work and Well—being Survey, conducted by The Harris Poll, 2022

World Health Organization and International Labour Organization, Joint Estimates of the Work-related Burden of Disease and Injury, 2021 

Kathrine Sørensen, Johan Simonsen Abildgaard et al., Changes in exposure to positive leadership behaviours and subsequent changes in workers’ depressive symptoms, National Research Centre for the Working Environment, Copenhagen

The images invade my mind, in faded color, another time. English policemen in groups of three with bulletproof vests and submachine guns. Multi-lens security cameras in huge black domes attached to the asbestos-lined ceilings staring at me like an army of HAL 9000. The cameras make an eerie buzzing noise when they rotate and follow me, at least I think they do. Hard to tell because I have trouble breathing. My chest feels too heavy, like somebody is pinning me down. I had my first panic attack in the spring of 1989 – at Heathrow airport. That’s post Lockerbie UK airport security – still pre 9/11 tough. But for a thirteen year old Swiss teen coming from the vast openness of glass-walled airports that was enough. I didn’t feel guilty, I was not afraid of being captured like a criminal. I just felt watched.

Some years later – my first serious job – I was trained as an Internal Auditor and experienced the other side. “What do you do if you find any non-conformity?” The elderly professor does not get an answer from the rows of mid 20s professionals in what they think is business casual. “You put it into your audit report. Do not enter into any discussion with the auditee. They will only try to justify.” First I was watched. Then I was trained to watch.

The Board Room Version: Control in the office is a topic since Taylorism. RTO is only the newest version of a game that is based on the same unverified assumptions. McGregor’s Theory X shows us that controlling management isn’t a way to deal with passive employees — it produces them. Foucault describes the perfect prison, the Panopticon and we see that offices have become exactly that — visibility as management tool, internalized controls. 42% only come to the office to be seen. Bernstein & Turban study open offices — face-to-face interactions get reduced by 70% — the opposite of the intention. Mintzberg would describe RTO as administration, not strategy. Office or home is the wrong question. The right question is for which kind of work are we designing.

Control is not my favorite topic, nevertheless an important one, in view of the history of work. Since industrialization the company has given the worker – especially the office worker – an identity in the form of status and title, a biography of self realization in the company, in the work. A great part of our lives is the career within the company, by the company. Then we have to swipe a badge each morning at the entrance. 

The most persistent control mechanisms in modern business start well-intentioned, dressed as science. F.W. Taylor at the beginning of the last century started to meticulously analyze office workers’ tasks. Just as he had done on the shop floor decades before, office work was now considered inefficient and ripe for optimization. Everybody was doing it in their own methods, with their own knowledge. Taylor studied it and extracted the most efficient version from what he saw workers doing. Sounds familiar? The special sauce of Taylorism – because at the time the thing caught on like wildfire and became a movement – is that he took the knowledge he gained and created instructions for management. This was intentional and part of the approach: Knowledge had to move away from workers to management, and with that the control over the work. I see myself so much in this. In my early work I would constantly find faster and easier ways to do work, first my own, then other people’s. Seemed logical or I always said, I’m just too lazy to do it inefficiently. The idea was the same. The difference is how he used the knowledge afterwards.

Taylorism took on some bizarre forms. System, a 1900 magazine inspired by the movement had articles on how to lick envelopes and stamps most efficiently. But besides the bizarre, the ideas were not villainous. They were based on a mindset we still recognize today. 

It comes down to how you see the people doing work – both administrative and operational – in a company. You can either think that people cannot take responsibility for company goals, need to be managed in what they achieve and how they work. Or you believe workers can orient themselves towards a clear goal. On their own, because they are intelligent beings.

Now, I’m going to use a term a lot of you already know – but keep your hands off the LinkedIn post creation button because it is more nuanced than you think. In 1960 Douglas McGregor wrote the “Human Side of Enterprise” coming up with the famous Theory X/Theory Y concept that explained the mentioned mindsets. People need to be taken by the hand – Theory X – or people just need to be pointed towards the finishing line – Theory Y. Sounds easy, right? Well the labels are simple, the assumption underneath is not. For management that means that Theory X is about control, and Theory Y is about enabling. And everybody thinks they are enablers, right? We are nice managers after all. Point is that the basic assumption is much more important than whether you are nice or mean. See you can be really nice and still think that you need to hold people’s hand constantly. I certainly did that a lot in my managerial roles – and with my kids too. Handholding remains a controlling management style — just the soft version. 

At least we are not the hard version. They use pressure, punishment and command. So that would be really bad. Well eventually it doesn’t matter, both produce the same end result with people. The hard version can produce compliance outwards, but inwards it will create resistance that will lead to avoidance, defensive behaviour and eventually passivity. Same for the soft version of Theory X. People who are constantly being guided and steered eventually will only work if you tell them to. Again passivity.

It is the method producing passivity or even resistance. That is not something like human nature. But management will then read it as such. The method is working in a loop. Management is reaffirmed of their belief that people need to be controlled because they are passive. And so the system reproduces itself, another self-confirming death loop. Theory X does not merely describe passive employees. It produces them.

We assume and get confirmed people cannot be trusted to work on their own. So we start to design systems to control their work. Knowledge as we saw with Taylorism is one form of control, where people work is another. We enter the world of the office. Offices had many forms since they existed. From the smallish counting houses of the 1800s as described in Melville’s Bartleby or Dickens’ Scrooge, where everybody was together but status was in the space and the furniture they got, to the bullpen of the office factories of the early 1900s mixed with private offices only for the executive class. 

There were many experiments. Robert L. Propst genuinely studied how people worked in the 1960s and created the Action Office, a line of office furniture meant to liberate the office worker from sitting and being constricted to one fixed workstation. Unfortunately that was too costly and when value-engineered became what we today know as the cubicle, the cage of the office worker. There was Jack Nilles’ telecommuting experience in an insurance company in the 70s. Telecommuting was the idea to take workplaces closer to home, into smaller office spaces to avoid commuting – remember 70s first oil crisis. The concept worked but was cancelled promptly because managers were uneasy about work they could not see. There were non-territorial offices, the Chiat/Day experiment, nobody had a fixed workplace in the office building, you even got your laptop and cellphone only in the morning when you arrived at work. It failed of course too, imagine the effort and chaos of finding equipment and room each day. And then we had Covid. The largest – unplanned – experiment regarding workplaces. All office workers suddenly had their office at home. And that ended with RTO – the return to office mandate. There were many more. You can read about them in Nikil Saval’s “Cubed: A Secret History of the Workplace”. But the thread running through all of them is the same.

It always comes back to visibility. The counting house was the same room, the bullpen was one big office space, the cubicle was an easily observable prison cell. Whenever visibility was broken up as in the remoteness of the telecommuting, the chaos of the non-territorial office and the absolute disconnect in the home office, management always pushed back. 

The French philosopher Michel Foucault wrote a great book about the general topic of control – I had to read it years back for seminars on the philosophy of law – called “Discipline and Punish: The Birth of the Prison” in 1975. Interesting for us is his analysis of the Panopticon. In the 18^th century an English legal reformer – Jeremy Bentham – wanted to make the prison system more efficient and humane. He proposed a circular prison where one central guard could potentially observe all prisoners while the prisoners could never know whether they were actually being watched. If you are not picturing Guardians of the Galaxy then you are probably thinking of your own glass-walled offices or your open office spaces. Everybody is visible, everybody can be watched. Because this is not just a prison design. It is also a management philosophy.

Visibility and knowledge are the most prominent opportunities for control. Now, who does the controlling. We already said this is not per se villainous. If we look at Theory X we can identify three different types of management. We have what I like to call the clueless manager. He is the one who genuinely believes that people need to be directed and work needs to be visible. That is probably the norm. It is just an assumption — but an assumption never verified and with consequences. 

Then there is the signal manager. He is very well intentioned, probably thinks of himself as a Theory Y kinda guy, but he communicates still in Theory X. He is the one who says – and believes – he wants to help you but still will enforce control policies like RTO. But there is a gap between message and system. Remember Schein’s espoused values, the values somebody tells you and the basic assumption that you experience in a company. That’s exactly this at the individual manager level. And I guess you also remember what is more important to employees’ perception. It’s the basic assumptions. I used to belong to that group for a very long time during my career. 

Finally the third type of management is the deliberate actor. These are the people who exactly know what they are doing – controlling, pressuring – and think that’s exactly what is needed. We don’t like these, but they are real. It’s the 25% – or more since who likes to identify themselves as a bad actor – of executives in a 2024 BambooHR survey who said they’d hoped for voluntary turnover coming with their RTO mandate. So we still have these kinds of managers – sucks I know – but as said the other Theory Xers are also bad news.

The signal managers by the way were created by something called the Human Relations Movement. Interesting story, please bear with me: It started with the Hawthorne studies in the 1920s. Western Electric, a large electrical manufacturing company, funded a study at their Hawthorne Works plant trying to find a connection between light levels and productivity of factory workers. Well turned out there was none. But they found that being watched – by the researchers – actually had a positive impact on productivity. It was then coined as the Hawthorne Effect. Out of this the psychologist and management theorist Elton Mayo developed that social factors — attention, belonging, being seen as a person — matter more than physical conditions. Born was the Human Relations Movement. Sounds humanist, right? Not if you then use the workers’ humanity as a management tool. Then it just becomes a soft control mechanism. It’s the carrot, not the stick. Actually the basis for the whole thing is anyway shaky because a study in 2009 found that the original Hawthorne Effect was likely overstated. 

Another reason why brute force is not really required anymore for Theory X is something Foucault described as internalization of control. See, in the Panopticon the really devilish thing is not that the prisoners are watched all the time. But that there is a possibility that they are watched and they don’t know when. This constant uncertainty causes them to behave as if they were watched constantly even if they are not. The control gets internalized. Same thing is happening to you in your open space office or at least 42% of you. Remember the BambooHR survey on RTO mentioned before? 42% of employees said they show up to the office only to be seen. Panopticism makes behaviour visible. Bad management mistakes visible behaviour for real performance.

I know BambooHR is not the most scientific source for a study, let me redeem myself by telling you about one published in the oldest scientific journal: The Philosophical Transactions of the Royal Society, first published in 1665. Ethan S. Bernstein and Stephen Turban studied employees transitioning to more open office architecture. I think you have all heard that the main reason management gives for open offices is to increase collaboration between employees. Well guess what. The study showed face-to-face interaction decreased by 70% while digital interaction increased. It had the opposite effect of what was intended. People did not collaborate more when made visible. They withdrew. Headset on, email sent, privacy found in their laptop. 

Out of my own experience I see two problems here. Genuine collaborative thinking requires a quiet space, not open-space noise and chaos. In addition we who facilitate workshops and meetings have experienced that a clear time frame is also required. Nobody can continuously collaborate for eight hours, we just don’t have the cognitive capacity for that. This also applies to coaching and mentoring. The cardinal rule among professional coaches is that sessions need to be purposefully planned. Unplanned, they either don’t happen or happen badly. Companies also bring up informal exchange — the coffee corner conversation, the chance encounter — as reasons for presence. Planned, purposeful exchange serves those goals better than hoping that proximity produces them spontaneously. Because we are professionals, we want to do better than hoping. 

To make this a hundred percent clear — presence is not the enemy. Some work requires a room, a table, and people in it. And remote work does not automatically solve this. Plus surveillance software can turn the home office into a digital panopticon the same way as open offices can. Onboarding, learning and culture are always important topics to be considered. But what is important to remember is that the issue is not the building. The issue is the assumption underneath. The question is not office or home. The question is what kind of work we are designing for. And more importantly — what kind of humans we are designing it for. And who gets to decide.

This comes down to something fundamental and I am happy to introduce one of the brightest and at the same time hardest – at least for me – management theorist to read: Henry Mintzberg. In his book “The Rise and Fall of Strategic Planning” he explains, well, that. Strategy and Planning, how people have done it, that it is not the same and how it should be done properly – at least the strategy part. Essentially, planning is administration projected into the future. Strategy is not the plan itself, but the pattern that emerges from decisions, learning, adaptation, and action.

What’s interesting for us is how he would analyze this situation: A policy – like RTO or moving to open offices – can look like strategy because it is formal and measurable and enforceable – but it may only be the planning machinery based on an untested assumption. A policy can formalize office attendance. But it cannot formalize trust, culture, creativity or useful collaboration. And you cannot call badge swipes culture. You see that very well if you compare the planner voice and the strategy voice.

P: “How many days do people need to be in the office? Who will track it? What are the rules?”

S: “What kind of work requires presence, and how do we design for it?”

Planning turns strategy into administration. That can be done after we have the insight. But it’s dangerous instead of insight.

And it’s not like we don’t have insight. We don’t need to rely on untested assumptions. We have more than a century of experience with office work. Taylor studied work excessively. OK, he screwed up what he did with the knowledge, nevertheless it’s there. Mayo observed how workers tick. Propst was obsessed with office furniture and setup, tried out stuff, failed, tried again, failed harder and left us the cubicle. Nilles proved that telecommuting worked, the grandfather of Remote Work. We have the European Bürolandschaft. Chiat/Day made two attempts, beside the chaos office, they also built a kind of work village. We have at least two years of Home Office experience gained with lots of pain and sorrow. Technology practically adapted in weeks, not months or years it usually takes.

All this knowledge, this experience is available. None of it is consulted to learn what could be done. How work could work better. Why is that? Some of these experiences were too expensive, yes. And the environment is changing so fast, that some evolutions are hard to endure. But these are only Sachzwänge. They are hurdles to be overcome, not show stoppers. 

Yet we are still sitting in office factories that are worse than actual factories nowadays. 

Control has become that important to business — important enough to prohibit us from finding a way of working that is actually humane. All of it based on an unverified assumption.

Sometimes I think we should maybe be a bit more like Bartleby: “I would prefer not to.”

I think there is more to explore — and perhaps more to refuse.

You should have an opinion on this one: LinkedIn

Don’t just take it from me, here is some good stuff to read:

F.W. Taylor, The Principles of Scientific Management, 1911

Elton Mayo, The Human Problems of an Industrial Civilization, 1933

Douglas McGregor, The Human Side of Enterprise, 1960

Michel Foucault, Discipline and Punish, 1975

Henry Mintzberg, The Rise and Fall of Strategic Planning, 1994

Nikil Saval, Cubed: A Secret History of the Workplace, 2014

Herman Melville, Bartleby the Scrivener, 1853

And the data:

BambooHR, The New Surveillance Era: Visibility Beats Productivity for RTO & Remote, 2024

Ethan S. Bernstein & Stephen Turban, Philosophical Transactions of the Royal Society B, 2018

I feel like the mad hatter, not because I don’t like to waste time – who would want to offend that guy – time I mean. Also not because I have too many hats in a literal sense – only have two – the proper ones: fedoras – but because I have to wear too many of them at the same time. Well, I choose it to a certain extent. I am a caregiver – a household man -, a writer, a thinker and a consultant – a craftsman – plus an employee – a salaryman. I wear three hats and yet none at all. The household hat often disappears like the Cheshire Cat, grinning me down with dirty socks and another meal to prep. The craftsman hat is never quite sure if he needs to be good or be paid — or if he even exists. And the salary hat is the maddest of all. He was made to earn a living but gets tossed around by an unpredictable weather system in which he is constantly changing colors. And all of this is just work. 

The Board Room Version: Work has developed over 700’000 years — and with it who we are. From hunter/gatherer to farmer to craftsman to factory worker to salary man: Work was gradually separated from life and became a biography. Keynes’ 15-hours-week has not become reality — not because it would not have been possible, but because we need work as moral duty and as an identity. Today we have multiple work identities — Gig Work, part-time, changing jobs every three years — the identity dissolves. The deal between company and employee has been broken. What remains when work does not give us identity anymore?

Doesn’t matter if you think of work as abstractly as the use of energy with a purpose or closer to us as socially organized human activity. All is work. We feel it when we do it. We recognize it when we see it. Or do we?

A small group of humans are moving through the landscape. They are small and old, tall and young, female and male. When they are hungry, they look for food, gathering and hunting. When they need shelter, they build it, they cook and clean. They care for the small ones and teach the young. They have households without houses. They are equal and everybody contributes. What they do is live. If I would tell them that I write about the history of work, they would not understand. Because it’s life for them, there is no separation. 

One day – nobody knows exactly why – they stop moving. Probably they just find nice plants to eat. They make the land their own and the land provides them food. They plant more, but have to wait until the plants have grown. So they need to plan ahead and store food. Time becomes tangible. Households become a farm, then a village.

They become more. And they own, then own more. Small villages become small cities. They become so many that they start to do different things. And since they don’t know each other, they need to know, who does what. I’m making pots, I’m a potter, I make swords, I’m a blacksmith. The profession becomes a standing in the group. Once there are enough of one kind, they form groups themselves called guilds to protect the quality. The individual becomes legible through a craft.

Cities become bigger, more craftsman need to produce more and therefor new entities form. The factory becomes the place of work. So many working people need to be organized. Work gets counted and recorded. Time becomes a clock. Seasons become days then hours. Work and the household get separated for the first time. A man leaves. A woman stays. She becomes invisible because she has no factory and no clock.

The factory worker becomes the office worker becomes the salaryman. Work becomes a sequence, a title and a story to tell, not a product you make. Factories and offices multiply into enterprises. Payment, status, stories replace the physical. The worker is an idea, a biography tied to an enterprise. 

Then the company fires him.

 Cute story, isn’t it? And it’s essentially how work has developed in the last 700’000 years. Just not quite as neat. 350 words cannot give justice to all that time. Jan Lucassen’s 200’000 words in “The Story of Work: A New History of Humankind” does a better job. Besides being much more accurate and less touchy-feely, he manages to cure some of my misconceptions. I – being brought up in an old-fashioned social democratic household – always believed that industrialization was the big evil turning point for the people, the worker. You know, early industry-fed capitalist villains hijacking the poor worker from the homestead, jailing him in the factory, cutting all ties to the man’s family and his home. Inventing the whip of the factory whistle. For me it was like the smoke filled, human flattening factory in Dickens “Hard Times” – don’t be scared to read it, it’s a really short novel. 

But as often when you look at historical development on a large scale, villains lose their faces and events become development. Control, discipline and hierarchy were no inventions of the industrialist. They were caused by the focus on time and surplus. When farming gradually replaced hunting and gathering the perception of work and life changed as well. And gradual here means 10’000 years and more in some regions. Just imagine that, that sounds more like evolution, less like history.

See, humans did not just stop working one day – hunting food – for today’s hunger and started planning for tomorrow’s – or better next year’s – harvest – farming, it was a long transition. You gathered some berries, ate them and at the same time planted some wheat that you could eat next year. Work slowly became something that was perceived as time bound. In addition – probably because planning was more demanding – the future harvest mattered more than today’s berries. With that development the need for surplus was created. You had to bridge the time between two harvests — your family has to eat daily, not just seasonally.

Surplus creates a resource. A stock of food. The person who cut the wheat does not have to be the same person who stores it. Somebody can control the wheat. The wheat that many harvested. That opens the door to inequality. Humans are no longer equal. 

The city is just the next natural step: more stock, more people. This enables specialization. First someone harvests the wheat – the farmer -, someone grinds it – the miller -, someone bakes the bread – the baker. But it goes further — not everyone needs to produce food anymore, there is a stock of it. So someone only makes pots – the potter -, someone only forges tools – the blacksmith. In the cities people who do the same form groups: the guilds. They organize the work, create a standard.

As there are more and more people doing the same things, they need bigger places. The household workplace becomes the workshop, becomes the factory. Factories need owners, factories need supervision, more control. That is where my union inherited heart starts to bleed. The worker is away from home, under control, working not for himself, but for others. And all of this before industrialization really took off.

The second big misconception I illogically always believed in is that some activities simply died out. We don’t have hunter/gatherers anymore, the subsistence farmer has been killed by big corporations, there are no guild members in today’s society. But history is not as clear-cut. Lucassen shows that all forms of work survive in one form or the other. Again I thought too much in sudden change. All of these developments were slow and gradual and mixed with the old remaining. We still have guilds today. We have builders, mechanics, carpenters, electricians. They have licenses and have standards. The subsistence farmer is found in many forms, from remote location farming to families planting in their gardens to this day. And the hunter/gatherer household? What happened to that? It still exists in our modern household. The preparation of food, the providing of shelter, the care for young and old ones. That is all still here and it is still one of the largest groups of workers. She – yes, still is mostly a woman – used to be so visible that she was the center of the life-work-household. In today’s work we simply don’t see her, because we don’t count her activities. 

Counting had become important. Large surpluses needed to be counted and recorded. More people in cities made counting and recording more important. Ownership cannot exist without record, otherwise it is just possession – shout out to my private law professor. The factory needed to pay wages and order resources. All needed to be counted. But see, what happened with all that counting, we mistook the count for the whole picture. We counted only what needed to be counted, not all there is. There was no need to count household activities, so we stopped seeing them. But that work still existed, still does to this day.

This has a connection with how we define work and what work has become after industrialization. Before we were mainly creating with our hands and later with the help of machines. That is where value was created. The result was what defined us. Then the thing we produced wasn’t our own anymore. The act of making, the production became the value. We identified with the working, not the result. We became the worker. With that we also became part of production. We were as much a resource as a machine was. But work started to move to the office, away from production. Because someone needs to plan, coordinate, file, schedule, invoice, sell, ensure, analyze, control and manage. We were no longer producing, but still belonged to the larger system. We were no longer part of production but still part of the system, part of the company. The company has departments and positions and titles. Gradually these replace the void of non-production. We are not what we create, nor how we do it, but where we are in an organization. The organizations become larger and we changed positions within them. There is a path, a narrative, a progression. First intern, then office worker, then manager. It becomes our biography.

The biographical identity —work as a story told — was never for all. It was only for the ones that left production behind. The craftsman still had an anchor in his craft. It was the salaryman’s journey. 

The company had signed off on this, not because anybody wanted to do harm, but because it was the natural next step. There is no villain here. Work had fully become our identity and we could not let go of it, not just the office worker, also not the company, at least in the beginning.

The economist John Maynard Keynes wrote in 1930 that technological progress would eventually reduce work to a three-hour shift or a fifteen-hour week to satisfy our needs. Sounds wonderful. And yet there is a strange feeling reading it. Can you pin it down? But Keynes’ prediction never materialized. He was not wrong because it would not have been economically possible. There were productivity gains, there was technological advance. He was right to a certain extent. What he didn’t see at the time is what we can see today. James Suzman described this in his “Work: A History of How We Spend Our Time” in 2021. The productivity gains of the last 90 years were not shared equally. Capital has gained disproportionately compared to what workers were paid. We all know that, no secret there. Wants were expanded in that time, we expect more of life than in the 1930s. Organizations function because they organize work, need the attention and commitment of the worker. If they have the worker for less time, they cannot achieve that. But there are outer restraints. The most damning reason is probably that the worker himself needs the work to define himself. On one hand they need to write their biography, their career in order to have an identity. This takes time, sometimes a lifetime, certainly not a 15-hours week. On the other hand because of the moral obligation we have towards society and ourselves, we feel that we have to work, that we should not be lazy. Max Weber gave it a name, but most of us can feel it without footnotes. Just observe what your reaction was when you read Keynes’ prediction. The prediction feels wrong, not because it’s impossible, or even because it wouldn’t be a nice thing to have. It feels wrong because it threatens something we didn’t even know we were protecting. Our identity. Our biography. Our answer to the moral test. Are we good humans?

Well, we are not at the end of the story. One last shift is happening and we are still in the middle of it. We have become what we work for, what we produce, where we do it and eventually what our job title says we are. But what happens if all this changes? What if you are suddenly expected to change your identity every three years? Refreshing? Or is it unstable and maddening? This is where we are today. The exact number of career changes doesn’t matter – three, five, a dozen depending on the last advice on LinkedIn. And that is not always in sequence. Involuntary low-wage part-time jobs, gig work, on-call work, dependent self-employment, labour leasing have created simultaneous multiple work biographies. The worker has become a human with multiple personalities. Suddenly we do not just feel like a mad hatter, we have become one.

Mad and homeless. What has happened is not just that we have several identities. We have none. Or worse. The household had become invisible, the fruit of labour had moved ownership, the craft dissolved into a deal with a company for title and standing, for identity. Now, as work diversifies, even that identity is disappearing. That deal has been broken. The system has broken it. The actual systemic error is that companies still need what only an intact identity produces. They split the workforce but still need the engagement. They removed the conditions for identity but still need the effort. The hatter is not just mad, he has also lost his hats. What has he left?

I guess there is more to explore.  

How many hats do you wear? – LinkedIn

Don’t just take it from me, here is some good stuff to read:

Jan Lucassen, The Story of Work: A New History of Humankind, 2021

James Suzman, Work: A History of How We Spend Our Time, 2021

John Maynard Keynes, Economic Possibilities for our Grandchildren, 1930

Lewis Carroll, Alice’s Adventures in Wonderland, 1865

Charles Dickens, Hard Times, 1854

I have this T-shirt – well you saw the picture. D&D – Drucker & Deming. 

Always makes me laugh – me and the very, very few people who get it. Still I love to wear it to expert exchanges, knowledge sharing events where I think I meet the three other people in the world who both know the game and the wizards of management theory. They could summon ideas like a level 20 – well let’s say at least 18 – wizard with 20 INT and spell save DC 19plus with slight frame and a bit of a belly. Too much? I know. I turn them into wizards, while they are just great thinkers. And I make their methods look like magic.

The Board Room Version: We confuse the Image of methods with the methods themselves. Boorstin tells us that the Ideal is replaced by the Image. We are only interested in how we are seen, not in what we must do. Similar Goffman, describes the Frontstage vs. the Backstage — the show becomes the only important thing, forgotten is, how and by whom it is created. RCA, PDCA, ISO, Continuous Improvement become brands instead of tools — we like the sticker but ignore the uncomfortable truth they can show us. Who does not face the mistake cannot solve it. Don Quixote saw giants where there were only windmills. The Image eats the reality.

I can be a horrible fan-boy at times. I always revered Steve Jobs for his visionary genius to use unix as a base for MacOS and nearly hyperventilated whenever he showed off the beautiful, minimalist industrial design of Apple’s latest gadget in the early 2000s. See, doing it again. I think nobody comes close to Immanuel Kant’s mind-blowing thought constructs and getting through these mazes always filled me with joy. Tolkien is king, because he wrote the best book on the planet: The Lord of the Rings. And Neil Gaiman’s stories always feel excitingly eerie and comfortably warm, like a fireplace in a haunted house. 

But let’s face it, Steve was just a great businessman who had always assembled great but less visible people around him. He was a visionary because — by combining the arts and technology — he created his own reality, a wonderful theater production — first colorful, then white, finally metallic silver — nevertheless it was a production. Kant was a genius thinker but a shitty writer, and he is to blame that I still think it is ok to form sentences that span entire book pages. Tolkien wrote a masterpiece but could have taken an introduction to modern dramaturgy course because 10 pages of walking is not interesting and don’t create one of the best character in literature – Tom, of course – just to abandon him after a chapter. And Neil, well, Neil is genuinely awesome, but he used to write  comic books. That’s why he is so cool. 

But all of this is triggering something more personal somehow. Hard to explain. Let me try. I wrote a short story once about a guy struggling not to become like Don Quixote, not fighting windmills and losing the connection to reality. I understand now why I was struggling with writing it. Same reason I am troubled with this here.

Why is this a topic I’m bothering you with? Why is there a problem with Drucker and Deming being called upon whenever we talk about management? Why is it an issue that they were just normal people who studied their stuff extensively, experienced a ton of companies, refined their ideas and what came out is quite neat? Yes, they are only humans. The problem is that we turn them into something easier to carry. A name, a quote, an image. That is the sin.

In tons of speeches I heard Deming quoted: If you can’t measure it, you can’t manage it. I’ve seen it on LinkedIn and Instagram — underneath an elderly gentleman in shades of grey and always with black background. Charming. The real issue is not even that the quote is wrongly attributed to Deming. What is really problematic is that it is absolutely wrong and the exact opposite of what Deming said: “It is wrong to suppose that if you can’t measure it, you can’t manage it – a costly myth.” The argument was about how damaging management by numbers is. While data is important it is certainly not the only thing and has to be used very carefully in analyzing problems, not in managing organizations. Two separate things, please always remember that, and I also say that to myself, because I did commit that sin, too, in lectures, in trainings with that exact quote. And there are more examples of this – and it happens in other fields, too. Friends confirmed this to me. My wife told me it even happens in pedagogy. Misquoting Montessori. How can they?! Wait, who is… 

Why am I so shocked about this? Well, I studied Literature first and there, something like this – alongside plagiarism – is like the worst crime you could commit. Now, in other examples it is a little more subtle. Sometimes it’s just making a quote a bit punchier. OK, neither Drucker nor Edgar Schein ever said “Culture eats strategy for breakfast.” But Schein said that “… culture determines and limits strategy …” and that was in a paragraph about conflicts in merging companies. But ok, that’s not that bad. The meaning is still there, somehow, somewhere.

The somehow is the issue. Time for Daniel J. Boorstin’s “The Image”. Written in 1962, Boorstin was describing how journalism shifted from reporting on events to helping create them. The emerging mass media of the time had created a huge demand for the stuff they wanted to sell: News. But it does not come in a regular constant stream, like for example oil, oh, wait… Well think of something else. So news is created — by the media, by governments, by companies staging events the media can then report on. Think that is terrible, immoral, totally utterly false. Actually, a press conference, a product presentation, the safety message you receive in your inbox on Monday morning, would fit the bill perfectly. These pseudo-events as Boorstin calls them, a relatively fresh concept in the middle of the last century, are the norm nowadays. 

From events he goes to people. Individuals known purely for being known are basically the human equivalent of pseudo-events. Oh, wait I know that… Ah, celebrities. Yes, Boorstin makes a separation between heroes or anybody known for their achievements or courage or moral actions and the people who are just visible. I have to steady myself a bit here. This is all too familiar. And I don’t mean the instagram celebrities and YouTubers. The real impact lies in the more subtle forms of this phenomenon, where it is more a shift: the politician who is more a media personality, the CEO who seems to be more on stage and social media. I spare you Boorstin’s whole riff that no-one is a traveler anymore and we have all become tourists. And by the way pseudo-events are not untrue by definition, neither are celebrities nor tourism.

Then what is the problem with that pseudo-thing. OK, we don’t like some of these staged events or these used-to-be-the-real-deal-celebrities, but they don’t hurt anybody, right. The problem is not with anybody or anything in particular. It’s what happened to the relationship between the two. The ideal — what the event, the hero or the travel actually means — has been separated from the image – the fabricated event, the celebrity, the well organized packaged trip to Asia for just 999.-, airport and tourism taxes not included. And the ideal is something demanding. It judges reality. It costs effort, discipline and change. 

Think of improvement actions in companies for example. The time it takes to keep at it, hours of boring data analysis, process analysis, trying never to skip a step, endless concentrated discussions working with the needs and wants of stakeholders to get buy-in and then another dozen rounds to get them to pay the costs. 

Images are comfort food. The whole point of them, their intention are to be consumed. They are made to be attractive, easy and useful. They do not challenge anything. “We are trying to become the best quality provider of smartphones and we are not there yet.” That is an organization speaking in ideals. An image company will just say we are the best. But we all have heard that, right. It’s like good advertising, actually. It is Apple’s creative and rebellious Think Different. It’s Nike’s Just Do It. Or one of my favorite Patagonia slogans, Don’t Buy This Jacket creating a flair of ethical anti-consumerism. What worries me is not so much that I or we – all of us poor consumers – would be fooled by these phrases. Because we are not, right. We know that Apple must be a tightly organized tech company and very few of its employees can actually be really creative and individualistic. Nike is just trying to motivate you, because “Just Do It” doesn’t even tell me anything about the product. It’s a message to me as a sports person. And Patagonia is literally trying to sell me a jacket by saying not to buy one. But all of this is just background noise, right? No, it is much more than that. 

The slogans are not false in the crude sense. They are even worse than false: frictionless. They remove the limits, the conflict, the actual work. And on top of that, they — the slogans, the images — work against the ideal.

See, at least according to Boorstin, organizations are increasingly replacing ideal with images. Less “what must we do?”. More “How should we be seen?”. The showing drains energy from the doing. Read him. The analysis is more than half a century old and more relevant today than when it was published. Because we see that today, right, we do that today, I do that today. No safety effort without a campaign. No customer presentation without meaningless slogans in front of a multicolored AI generated picture. No trip without an Instagram post.

And Boorstin is not alone, take Erving Goffman’s The Presentation of Self in Everyday Life, published in 1959. Social interaction can be imagined like a play being performed. There is a frontstage and a backstage. They are separated on purpose. You cannot let the audience see what is happening in the back. There would be no play otherwise. You don’t see the kitchen in a restaurant. Customers don’t see what is happening inside an organization. Sometimes I like him better than Boorstin because although they describe more or less the same thing, Goffman is clinically analyzing, no judgement, that is just how social interactions work. Makes me feel a bit better whenever I step on a stage and perform the latest production of “Hail to PDCA and RCA” or “Waiting for WIIFM”.

We even created acronyms to create these acronyms. KISS, BLUF, SCQA, ELI5 and one that I actually use SUCCESs – no typo: the method is Simple, Unexpected, Concrete, Credible, Emotional, Stories, so no second s. Aside from that acronym-crime, this approach by the Heath brothers is very good, it’s sound, doesn’t oversimplify, because even the Simple is more about getting to the core of an idea and not just dumbing it down to easy digestible slogans. Unexpected is a neat trick to get attention. Being Concrete is always important because it often makes your messages clearer. And who can argue about the importance of Credibility? I’m not so much a fan of Emotional and Stories, but I use them sometimes, although carefully, because I am very aware of the danger of it all. Simple can very rapidly lead to amputation of an idea. Concrete, Emotional and Stories often turn out to be anecdotal, manipulative ways to replace analysis rather than carrying it. 

What really worries me is the poster that shows a hungry little kid asking you to donate: I hate that. It’s not how I would do it. I would put together some information on the region facing famine, trying to make you understand why help is needed. I can tell you what the region looks like, who lives there, the historical and economical development, what is actually happening. If that doesn’t land I haven’t educated anyone, I have made no sustainable impact. I’ve lost to a better image. And this will always happen because the little kid will always get more donations. So I revert to SUCCESs.

But it puts me in difficult situations of making the right judgement call. That is always the danger with these pseudo-things. And these acronyms are just another pseudo-thing. 

And all these tools which are so useful and essentially important for an organization’s wellbeing become brands, a shiny and simple reflection of the method. But why, why do we do this pseudo-stuff. Take Root Cause Analysis – RCA, yes, again. It’s the shit everybody always says that is needed. Auditors expect it when people have to fill out these damn audit follow up reports. Quality people say it makes improvement sustainable, because not the tree is the real problem, the root is. Actually neither are the problem – trees and roots are solutions not problems. And that guy, yeah look at him, that auditor-quality-trainer-mismatch is me, exactly what I do. The thing is that we like the brand, what it tells us, the image. The truth is what we don’t want to see. Because the uncomfortable truth about root causes is they show us that we often have fundamental or systemic issues in organizations. Stuff that is really big, really costly, would require significant changes. So often, we do not like what we see when we dig deeper. We prefer to cover up the hole with a nice sticker RCA or Continuous Improvement Champion, rather than fixing it. 

If you cannot face the error, meet it eye to eye, and stare it down with improvement, you will fail. If you are not curious enough to go down that root cause hole you’re less capable for management than a little girl called Alice. Schönreden does not help anybody, not you, your organization, your customers or your market value. I am pointing at you but thinking of me. 

Don Quixote kept losing the connection back to reality. He couldn’t stop seeing giants where there were only windmills. The image consumed the reality. I am not sure I always avoid that myself.

Because right now, I’m sitting at my desk, feverishly hacking on my keyboard, hoping that all of you love me. In the end, I do this not for you but mainly for myself and that is probably the uncomfortable truth behind both Goffman and Boorstin. Not that we cover up something with images, not that we hide behind the curtain. We are afraid of the ideals behind them. 

Is your job just for show? Is the organization you work for just about shareholder value? Am I good enough for this world?

I try, I truly try, believe me. But how can I ensure that I am worthy of your trust? 

I guess there is more to explore. Worse: it includes myself.

Your thoughts: LinkedIn

Don’t just take it from me, here is some good stuff to read:

Daniel J. Boorstin, The Image, 1962

Erving Goffman, The Presentation of Self in Everyday Life, 1959

W. Edwards Deming, The New Economics, 1993

Chip Heath & Dan Heath, Made to Stick, 2007

Miguel de Cervantes, Don Quixote, 1605

Hallucinogenic colors are all I can see. I almost hit a wall – no not the exhaustion kind during a long run. It’s an actual wall, a huge one in a shabby-looking warehouse. The washed out gray base color is almost completely covered by corporate posters – sorry no nudes here. This is the 2020s. And these posters are screaming at me with their messages in phrases – whatever happened to full sentences? Are they the new forgotten art in writing? And I’m an auditor today. Trying to make sense of it all.

“ZERO DEFECTS”

“FIRST TIME RIGHT”

“PEOPLE FIRST”

“UNSAFE? SPEAK UP”

“WORK SMARTER, NOT HARDER”

My first thought: please, stop shouting at me! Immediately my child brain tries to find connections between them, then to the different departments of the company: Which one was put up by Operations, which by Finance and which by Quality? But honestly I am not sure. Finally I realize these refer to the different change initiatives of the company. They should know better, but what can you do if some fancy consultant/PR/design mix-up firm assures you, that’s what you need first and foremost. Shouting at employees is an old trick.

The Board Room Version: Change management fails because it confuses culture with communication. Kahneman explains that when confronted with change people don’t hear what they can gain but what they lose. And Hannan & Freeman show us that organisations are systemically built to resist change. Schein shows that culture happens on three levels — artifacts, espoused values and basic assumptions. Posters and slogans only reach the first two. But what really needs to change are basic assumptions and they can only be experienced. Organizational Culture cannot be changed from the top. It needs to grow from within. But this requires leaders who first abandon their own basic assumptions.

I guess they read Kotter’s “Leading Change”. It’s a workable approach for small stuff, 8-steps, I use them myself whenever I do DMAIC initiatives. And it is widely known, relatively easy to use.

Create urgency, basically scream, the house is on fire – or just show endless PowerPoint slides with red numbers and scare them with negative trend lines. 

Build a guiding coalition — find the people open to change. Your followers, your early adopters, your sponsors.

Form your vision. Communicate it. That’s two steps, apparently. The idea of whatever you want to change and then — shout it out.

Now you are almost done. You just need to remove obstacles, generate short term wins, sustain acceleration (keep the foot on the gas) and institutionalize the change, meaning make it part of the culture of the organization. Easy, right. 

Well, if the change is something small and also very rationally sound, then it is. Changing how to submit ideas to senior management, yes. Having a new expense report system, sure. Wearing safety equipment, maybe also ok. If you go into more complex structures and processes you will hit a wall. Kotter himself had doubts about using it in complex situations. I would say most companies are very complex situations. The problem is that the model only scratches the surface of what organizations are at their core.

Edgar Schein was a Swiss-born American – we don’t hold that against him – business theorist and, more importantly, psychologist who studied change in organizations extensively. Schein argued that an organization doesn’t just have a culture — it is one. We will hear more of him and his work later. I could have also brought up Peter Drucker’s quote “Culture eats strategy for breakfast” but it would be wrong because he actually never wrote that. It just sounds cool and everybody reproduces it, but come on, Peter Drucker would never say something Gen X style like that, he is far too sophisticated. Not that I have anything against Gen X, of which I am a proud member.

So if we are talking about organizational culture, we are playing a different ball game and Kotter’s 8-step model cannot be applied. And the problem starts at step one — because for Kotter, creating urgency is purely a communication task. But it isn’t — it’s a psychological one. Remember Daniel Kahneman, the man who explained decision making to us. He brings in the concept of loss aversion. OK, we tell people to change and as a result all numbers and performance and quality and revenue will become pink and fluffy. But according to Kahneman what employees will hear is that you are taking away something, their old routines, their accumulated expertise, social or actual standing in a company. In that case, you just need to offer the same value to them in positive change to compensate the negative impact, right? Two problems with that. Firstly you would need to offer twice as much positive outcome to compensate for the negative impact. 

There is an easy and fun experiment to prove that. I tried it myself with numerous people because I didn’t believe it. I ask you to play a game of coin flipping with me. If you win you get 100 CHF from me, if I win I get 100 CHF from you. Do you want to play? On average you will say no. If I asked you to play the game and I give you 200 and you can only lose 100, then on average you will say yes. That’s what is called Loss Aversion. 

The second problem with bargaining for change is that we are operating on completely different levels. I propose a change that brings quality, performance, money — you are afraid of losing status and familiar routines. Two different accounting systems, business and emotion. Very hard to reach a good deal when two people do not speak the same language. 

Kahneman has one more observation worth noting. In uncertain situations, people systematically favor non-action. I’m not sure, I’m not going to do anything. That feels like the safest way. This might be heuristically reasonable in a lot of cases. But when organizations do this, it is often their end.

This is what the study of organizational inertia is about. Organizations that do nothing? Kind of, but more like in physics (Newton’s First law of Motion to be exact) when an object stays still unless you push it hard enough. Exactly that, applied to organizations. Oh, this has to be Sociology, only these people come up with nifty ideas about people stuff and can prove it with formulas. I will spare you the math but I have to take you for a quick mental rollercoaster ride for this one. Hold on to your synapses!  

The people who came up with that model are Michael Hannan and John Freeman, who looked at organizations as populations meaning companies are like all the humans on earth. Their model goes like this: So what drives change in organizations? It is selection – fit companies live, unfit ones die off. Darwin just on another level. Now in selection reliability and accountability are preferred – stakeholders reward consistent and good performance. Reliability and accountability require reproducibility – standardized, repeatable processes. Shout out to the ISO people! Reproducibility produces strong inertia – standardization makes change harder. So logical deduction is that selection favors strong inertia. Wait, I’m not finished: Reproducibility increases with age – older companies can and will standardize more. Size also increases inertia – more complex structure means more interdependency leads to harder change. Reorganization – or cultural change in companies increase their death rate because stakeholders depend on reliability. In a nutshell: the market builds organizations that cannot change, rewards them for not changing and occasionally kills them when conditions shift and the organization needs to change. Sounds strange, but Hannan & Freeman have the math to prove it, but you can also think of examples. All these big companies failures that were caused because of changing customer demand and different environments. Some tried to react and failed, others did not or not fast enough and failed. IBM is an almost case (change from transistor to microchip technology only worked with many losses), Blackberry (not getting the 2C market for smartphones), Kodak (had the technology but failed organizationally), Nokia, Blockbuster, Pan Am. All are change victims.

So I can do something and the probability of failure is high and I can do nothing and the probability is high?! But it gets even worse. You know who the stakeholders in this model are. It is usually big companies and organizations – like banks, regulators, large customers – that are also suffering from high inertia. So the whole double death loop is even self-reinforcing. 

There is the startup counter argument. Startups get financed by venture capital which is geared towards taking a risk and going for agile companies. And it is true, as long as the companies are startups. Once they become grown up companies they will need regular funding, operate under normal regulation and need more standards and accountability. Yes and then they are in the death trap, too.

Besides being absurdly and morbidly funny, this shows one more thing: Change is not just hard. Change is supposed to be hard. Resistance to change is not just an upsy, it is the system. A feature, not a bug.

I could just leave you here with all of that and turn off all the lights. But let’s dig a bit deeper into change and culture in organizations to understand what exactly is so hard to change. The best analysis comes from Schein in his book “Organizational Culture and Leadership”. When management tries to change something they mostly use Kotter’s 8-Step and do a lot of communication of urgency and vision and then you just need to remove some obstacles. That would work if organizations were a straight road with obstacles to remove. They are not.

Now Schein actually found that organizations have three different levels where culture happens. First, the Artifacts — the stuff we can easily see: Offices, dress code, meetings, language. Although easy to see, it is hard to interpret correctly. If I see silk ties and Oxford shirts, does that mean that this is a conservative company or are they into fashion and luxury? The second level helps here — it’s what the organization says it believes. The Espoused Values. The visions, the mission statement, the strategy. “We are a Robin Hood anti-capitalist record company. We steal from the rich. Therefore we stole all the ties and shirts from the bankers around the corner.” Ah, very cool idea. But is that really true? Because culture is always true (for good or bad). That’s where the third level comes into play: The Basic assumptions. This is the operating system, what is never said out loud but practiced on a daily basis. Often unconscious, it can only be surfaced through careful analysis — yet everyone inside the organization experiences it daily.

This can be in line with artifacts and espoused values. When the head of the record company steals a Porsche each week and hands it to one of their staff. Then everything is really groovy. But what if the head rewards the best financial results from their direct reports each month and fires the worst performer. Then we have a dangerous contradiction between edgy anti-capitalism communicated values – that they may absolutely believe – and the real basic assumptions. Basic assumptions are foundational — that is the level on which culture actually forms. Schein describes it as a shared experience of solving problems together. If you constantly do anarchistic, cool stuff to solve your problems, that will become your basic assumption. If you solve every hurdle with firing people, that will also become your basic assumption and the foundation of your organization’s culture. So culture is not given by somebody, it is learned. 

Therefore change initiatives which work with communication – speeches, posters and social media posts – don’t work because they are purely on the artifacts and espoused value level. What employees do experience is the important part. That is what the management does. Schein actually has a list of what leaders do that actually shapes culture – what they pay attention to, what they control, how they react in certain situations, how they allocate resources, how they allocate status, how they recruit.

Since we are on the topic of posters and slogans, I have to mention my favorite management thinker W. Edwards Deming. He had these 14 action points for good management and number 10 was: Eliminate slogans – and exhortations and targets. Slogans, he says, tell people they are doing something wrong, that they don’t work hard enough. That creates resentment because people know that real problems in companies are systemic in nature and they cannot change them. The slogan is the espoused value and the systemic failure is the basic assumption. The gap is a killer for trust in management. 

(One caveat – basic assumptions are not necessarily the truth, the “my precious” of an organization. They are what people learned from experience, and Deming said we can learn wrongly. Learning without a theoretical frame leads to conclusions from misunderstood data or experience, a distortion. But distorted culture is still culture, just one that makes it even harder to change.)

Let’s follow Schein down the rabbit hole a bit further. It is actually quite brutal. He describes two competing forces: Survival anxiety – we need to change to survive and Learning anxiety – change is uncomfortable and unsafe. You can make the learning more comfortable, make it a safe experience with lots of training, involvement and honest conversation. But in my experience that is too much work and time and cost for most companies. Or you can change an organization by making the status quo so painful that it is greater than the expected pain of change. So management basically needs to threaten people in the organization. One way of doing this would be to threaten to fire people who don’t want to change. That works in the short term but will not change the basic assumptions unless it is done over a very long time period. Elimination is another way culture change can happen. Management picks the employees they see as carriers of culture and removes them. Those can be long-time employees or very prominent, outspoken employees. The problem there is that while it might remove some basic assumptions, management would have to build new basic assumptions with success at the same time. Try doing that in a period of restructuring, good luck. 

With this model of coercion which is used more often than you think, you cannot create real cultural change easily. You will also create a culture of resentment in an organization. Employees have experienced that management has achieved what they want with coercion. That becomes the new basic assumption. This IS the new culture. What a wonderful place to work at?! 

So all dark and gloomy? Are all the posters and slogans and management efforts really for nothing? Is there no way to lead change? Certainly not with posters. But if leaders are willing to take a more uncomfortable road there is one. We said that company culture forms by shared learning of employees. They are the agents of the system we call a company. So change can only happen from the agents within that system. Change cannot be installed into people. It has to grow from within them, through new shared experiences that teach new assumptions. Not with them, not through them, not via — but from them. 

The best management can do is to show what the organization needs to do to be successful. If employees believe the goal, management can help them learn how to achieve it. Management cannot do the learning. The people have to do it. But that requires very humble leaders who are willing to examine and give up their own basic assumptions first. These are leaders willing to give up what got them to where they are. The hardest culture change is not getting employees to let go of old assumptions. It is getting leaders to let go of the assumptions that made them successful. So they have to overcome their own sources of resistance – organizational inertia, loss aversion, and status protection. This is all they themselves have been taught by experience, therefore going against what they are, what history has made them. And that is almost impossible.

Back in the warehouse I keep staring at the last poster in this death row of absurd phrases. I kind of like the sound of that one, though. Something still looks wrong. Better: “MANAGE SMARTER, NOT LOUDER”. But that would be just another poster, right? I guess there is more to explore.

How many of those posters are on your walls? Share and discuss — LinkedIn

Don’t just take it from me, here is some good stuff to read:

Daniel Kahneman, Thinking, Fast and Slow, 2011

John P. Kotter, Leading Change, 1996

Edgar H. Schein, Organizational Culture and Leadership, 1985

Michael T. Hannan & John Freeman, Structural Inertia and Organizational Change, American Sociological Review, 1984

J.R.R. Tolkien, The Hobbit, 1937