MANAGING Charles Handy Revisits – His flea market economics

Irish-born Charles Handy is both business thinker and social philosopher. He studied the classics, history and philosophy at Oxford, an interest that found expression in his book Gods of Management in which he equates Greek gods Apollo, Zeus, Athena and Dionysus with management styles. After distinguished business career with Shell International, Handy joined MIT’s Sloan School faculty where he worked with pioneers in leadership and organisational theory including Chris Argyris, Edgar Schein and Warren Bennis. He then became founding professor at London Business School.
Handy’s more recent writings focus on the concept of businesses as communities. Knowledge, he says, is the lifeblood of those communities, and “the new alchemists” (the title of one of his books) are the magicians who overcome the inertia of traditional organisations to make “great things happen” and “sow the seeds of the future”. He discusses the changing corporate world and what it means for society and for individuals with Georgia Peters for Management and elaborates on his theory of marketplace of “elephants” and “fleas”.

You define company as community in which workers are, in effect, “citizens”. What does that mean?
If businesses no longer “own” the people they employ, it follows that they must have different kind of relationship with them. The relationship is like that of country and its citizens. Citizens have certain rights: residency, justice, free speech, share in the society’s wealth and some say in how it is governed. Translated into corporate terms, citizen’s right to reside means some guarantee of employment. That doesn’t mean job for life anymore, but I can envisage employees making contracts that will last for an agreed period of time, much as members of the British armed forces bind themselves to three- and five-year service contracts.

How can organisations work more efficiently?
I´m not sure the term “efficiency” applies in the new economy. Speed, flexibility and transparency of communications have effectively divided the business world into what I call “elephants” and “fleas”. As opposed to old-style corporations (ele-phants), fleas are small, agile, creative, unpredictable, and above all adaptable.
The growing numbers of contractors, freelancers, independent consultants and small specialised suppliers on which the elephants increasingly depend are examples. Fleas must deliver on time, to cost, and to specification. But they are effective rather than efficient. What matters is not doing things right but rather doing the right things.

What does that mean for management?
If you are asking how the flea model operates and how it can be managed effectively, take look at the film industry. There are no big studios any more, just few elephants, which comprise director, producers and money men. They get an idea and assemble team of fleas – actors and technicians – to make the film, collect the money from distributors and then they dissolve the partnership. Woody Allen’s film company and Steven Spielberg’s Dreamworks are examples of this type of enterprise: without permanent, money-draining investment in people and plant, these companies thrive in good times and bad.
A crucial skill is to find where the fleas are and then assemble the right team of fleas for the job. They will often work remotely, from home or from some office of their own, so trust is an important part of the relationship. But how can we trust people we can’t see and who aren’t around? Good communication helps and, you can’t have too much of it. And business travel is continuing to increase alongside the varieties of electronic communication. So too are conferences in which leaders from all sections of business and the community meet and share their ideas.

How is this changing the way companies manage people?
The relationship has changed. In the loyalty and job-security-based organisation, employees unconditionally handed over the ownership of their ideas. That is no longer the case. They know that the organisation’s assets mainly comprise what is in the heads of the people it employs. So the fleas are striking new deals with the elephants. Again, look at the film world. When the titles roll at the end, we see the fleas being given visibility and credit for their contribution. That makes them employable in the next job that comes up. They also expect greater share of the fruits of success than the arbitrary reward structure offered by the old economy organisation. This is reflected in the huge sums of money that go to the stars who bring in the audiences.

If the classical organisation model is no longer valid, what is coming?
The organisation of the future will be federal. Federalism is means of linking independent bodies together in common cause. Unilever and Nike are just two examples. They operate what are in effect independent companies. Unilever doesn’t even have any brands under its name. Federal companies have centre but no headquarters. The centre does not direct or command but simply coordinates and operates on the basis of subsidiarity by which responsibility and decisions are pushed as far out and down the organisation as possible. Federal firms bring their brains together from around the world to agree strategy and aims. And they don’t issue edicts from the top.

What, then, are the main effects of capitalism on society?
Capitalism now is widening the gap between those at the top and those at the bottom. CEOs in some companies are earning 500 times more than the lowest-paid worker. This is creating ghettos of resentment and poverty which, I think, capitalism will have to address because society – and customers – are beginning to demand it.
There is growing demand for companies to behave in socially acceptable way: look back at what happened to Shell in Germany over the protests of the company’s policy in Nigeria. We are, I think, moving towards new, more complex bottom line in which profit, environmental concern, and social responsibility will have to be in balance. These forces will shape the new society.
This requires new mindset from corporations, but there are benefits in it for them. Consider the effect of the internet. It poses real threat to traditional organisations. Intermediaries of every kind are disappearing from the scene as their role is questioned. So how do you create value when so many goods and services are commoditised? One way is to turn to new markets or think differently about markets. case in point is Lever Hindustan. It has found profitable Asian market for cosmetics in sachets costing few cents and distributed through village traders, because its customers could not afford couple of dollars for the same product in bottle.
We are managing in times that require new, flea-like mindset. It is the reason why big elephant companies are developing activities as venture capitalists in order to keep the fleas who come up with the ideas. The new model for growth creates business opportunities by which the fleas can flourish and develop their management skills.

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