I recently came across an interesting article on the forbes.com business and management website. Written by Steve Denning it was a comprehensive review of a book called Fixing the Game by Roger Martin. Martin holds that by concentrating on maximising shareholder value executives have begun managing expectations instead of managing the business. It is clear from Denning's article that he is a fan of Martin's thesis. Indeed, Denning has also written a recent book, The Leader's Guide to Radical Management in which he expounds his own theories of what constitutes good management.
The goal of maximising shareholder value need not be as destructive as Martin and Denning suggest. What is required is an acceptance of two things: that shareholder value can only be maximised by keeping on doing well what the organisation does best and that shareholder value means the long term return in the form of high dividends paid against the value of shares held. Martin and Denning argue that what has been happening is that "shareholder value" has been confused with share price on the stock market.
According to Denning, Martin argues that encouraged by bonuses paid in the form of share options executives have devised and followed strategies that produced increases in share price based on market expectations. The executives have managed those expectations by means of regular announcements and predictions of profitability. So long as the predictions proved to be accurate within narrow margins demand for shares in the company was generated pushing up the price of those shares.
Old Ideas Re-invented Not the Answer
Reading the article I was struck by the similarities between the ideas being put forward in the wake of the financial meltdown of the last few years and ideas that were being widely embraced 30 years ago. In my own article ahead of the 2010 general election in the UK I discussed ways of successfully implementing efficiency savings and referred to a process called Total Quality Management. Almost twenty years ago one of the several roles I undertook in a small engineering company was that of TQM "facilitator" explaining the various techniques and strategies covered by that broad title to fellow employees.
The problem with management theorists is that they base their ideas on the assumption that economic growth is a natural and desirable goal. They are simply seeking and advocating alternative ways of achieving that goal now that the methods of recent decades have been shown to be incapable of doing so. Some of the most prescient of commentators have been advocating for at least the past two decades that this never ending pursuit of growth is killing the planet. Is it not time to take a closer look at sustainable developments of the kind advocated by the late Richard Douthwaite and other members of the organisation FEASTA?