‘Fractured Workplace’ Chapter 3: Purposes of the organisation–beyond function to people

Chapter Three

Purposes of the organisation: beyond function to people

In 1886 the founder of the Chesapeake Dry Dock and Construction Company, Collis P. Huntington, gave what he called a ‘motto’ to his new venture:

“We shall build good ships here. At a profit—if we can. At a loss—if we must, but always good ships.”

To most people this is an immediately attractive statement; and it’s worth thinking about why that should be.  It’s not strictly a vision statement, which typically is a kind of ‘foresighting’, in which the form of the organisation at some future point—perhaps ten or twenty years—is envisaged.  Vision statements are important, in being both formative and enabling, but that’s not what this is.  It’s closer, perhaps, to what modern managers would call a ‘mission’ or a ‘purpose’ statement.  It has, in fact, elements of all three; but it goes beyond them, too.  It speaks to the people  who are to work at this place, what kinds of values they hold.  The old craft commitment is clearly evident—pride in the quality of the work itself, on its own ground.  There is a commitment to the customer, to the quality of the product being offered; and this commitment is expressed as non-negotiable, placed even above financial outcomes (difficult to see any modern manager conceding as much).  And that speaks to values, even to character.  It is a statement of integrity in its key relationships.  Everyone knows, from their own experience of life, the value of integrity.

Of course intention is one thing and implementation another; and it may be that in practice this statement has been honoured in the breach rather than the observance.  Still, it’s a vigorous statement of purpose; and at least it seems to have contributed to a successful business, which still thrives, as the Newport News Shipbuilding Company, Newport News, Virginia, 126 years and 800 ships on.

One may contrast this statement with the purpose that has overwhelmingly characterized firms, particularly over the past three decades: shareholder value.  There are debates about how shareholder value can best be measured in both private and listed firms.  But the underlying principle is clear:  the primary purpose—indeed, the only purpose of any real significance— of the firm is to increase the financial wealth of its owners.

Now few will dispute the right of owners of firms (or providers of capital) to a reasonable return on their investment[i].  The difficulties arise when this is asserted to be the sole purpose of the firm, and the sole criteria of successful management.  This is a proposal identified particularly with a famous New York Times Magazine article written in 1970 by Milton Friedman, uncompromisingly entitled “The social responsibility of business is to increase its profits.”  Friedman argued that the managers of a company had no business to be thinking about anything else but the business outcomes: that they were neither qualified nor authorized to do so; and that it was only through profitability that the benefits of businesses flowed to society at large. This, it is worth noting, is a proposition that has been implicitly adopted as a law of economic life in the policies of most modern governments, of whatever political persuasion.  It is also worth noting that it has been trenchantly criticised over the past several decades from such perspectives as corporate social responsibility[ii] and stakeholder theory[iii], and more recently of sustainability[iv].

Stakeholders of firms are held to be owners, managers, employees, suppliers, customers and the community at large.  Stakeholder theory holds that firms (and all organisations) must negotiate the allocation of their resources among the claims of the different stakeholders.  This is not always an easy task: for example, partiality to the interests of customers may impinge upon the interests of suppliers and distributors (think, for example, of supplier strong-arming by Walmart, or, in Australia, by Coles and Woolworths); partiality to the interests of shareholders (through dividend levels, for instance) may impinge upon the interests of all other stakeholders. There are no easy answers to these allocation decisions.  The principal value of stakeholder theory, however, was in insisting that there are other legitimate claims on the firm other than the shareholders.  That, in the context of modern assumptions about business, was a challenge of sufficient force to be regarded as radical.

We may, however, go further.  Among the list of stakeholders I would argue that employees clearly have a special place and a special claim to consideration.  Their lives are bound to the fortunes of the firm.  It is their work which is creating the products and services that are of value to other stakeholders.  They have fully committed their working lives and capabilities to the firm as no other stakeholders have.  They live one third of their lives in the workplace in which these products and services are developed.  I argue, therefore, that along with the purposes of the organisation which are embodied in its services or products are a set of purposes of equal status: the well-being and growth of the organisation’s own people, in their own right.  These are purposes which can’t be ignored, put aside, or diminished.  If the organisation is to flourish in any sense, they must be fully and equally honoured.

This way of thinking arises from a fact which ought to be so obvious as not to need stating at all:  employees are, indeed, people, with all the complex and rich dimensions, and particularly the rights, that are part of any person.  In this I am thinking of the alternative description, in modern management, of people who work in firms and organisations as ‘human resources’.  This, I would suggest, is an insulting term, deeply repugnant, and inherent in the antiquated and damaging model of work that I’ve outlined in chapter 2.  It derives from an old concept in economics, the idea of factors of production: such things as machinery, buildings, raw materials, energy—and labour.  The factors of production are the inputs that are needed to produce any given output.  The economic challenge is one of efficiency, seeking the least waste and the greatest productivity of any combination of production factors.  Labour is like any other factor: it plays its part as an input in generating output, and is to be made as efficient as possible. Among all the factors, or resources, that are brought together to accomplish the firm’s work, human elements are like any other factor, a resource; hence ‘human resources’.  It is precisely this view that is embedded in the Taylorist model of work.

This is clearly nonsense.  Human beings are not raw materials, or machines, or even energy:  they are fundamentally different from all of these, and any attempt to reduce them to a set of production factors—in particular, to units of labour—will fail, just because they are human.  Tony Watson acerbically remarks:

“Many managers would undoubtedly like to be able directly to ‘manage people’ and thus straightforwardly exploit the ‘resources’ which those people bring to the organisation.  It would make life easier for managers if the workforce could be tended like a herd of cattle which, with careful husbandry, produces a regular supply of milk, butter and meat.  The human animal, however, is fundamentally different from all others.  ‘Managing people’ is an impossibility.”[v]

Watson goes on to discuss the ways in which people are active, rather than passive, in their work; an important topic which we will take up later in the book.  Here let us focus on what changes in terms of purposes, once one explicitly insists on the human character of work and the people who do it.

A first, and basic, observation is that as human beings employees have explicit rights at work.  This is given unambiguous expression in the United Nations Universal Declaration of Human Rights: “everyone has the right. . .to just and favourable conditions of work”. Employment (as against unemployment), freedom from discrimination, freedom of association in trade unions, and reasonable working hours and paid holidays are all specified rights under the Declaration.  And it is important to note that underpinning these specific rights are held to be more general human rights, which derive from the concept of the intrinsic dignity and worth of every human being[vi].  Make no mistake, despite the general character of the language, these are powerful statements which carry concrete obligations for governments, in legislating and regulating, and on organisations in structuring and managing work.  They underscore in the most emphatic manner that if you employ people you have real obligations to them as human beings which go well beyond the labour units they provide to the organisation.  I wonder how many employers even know of the existence of these formally stated human rights, let alone systematically embed them in their organisations and regularly audit their consistent application.

The word ‘dignity’ is the most powerful of all the rights terms.  It occurs, in the first sentence of the Preamble of the Declaration, and in the first Article:  “All human beings are born free and equal in dignity and rights.”  Dignity is often associated with Immanuel Kant’s “respect for persons” principle:  always treat humanity in a person as an end, never as a means.  Applied to work, the implication is direct: people are never only units of labour (means to the organisation’s ends, or purposes) but always an end in themselves.

The purposes of firms and organisations thus always include the dignity and well-being of their people.  This purpose—the human purpose—sits alongside the functional purpose represented by the organisation’s products and services.  The human purposes of the organisation can never be subordinated to its functional purposes: that is the whole point of human rights—they are non-negotiable.  They must be explicitly provided for in any work and in any workplace.

Here is one way of drawing the linkages I’m suggesting:

 

Rights are defined both negatively (freedom from discrimination) and positively (just and favourable conditions of work).  On the positive side we can go further. Here are three important areas of obligation over and above the fundamental human rights which, I would argue, also come with the people a firm or organisation employees:

Ethical behaviour:  The firm must act ethically with its own people (and also with its suppliers, customers, and so on).  Francis proposes four ethical principles of corporate behaviour:

  1.  Preserve from harm.
  2. Respect the dignity of all persons.
  3. Be open and honest except in the exceptional cases where privacy and silence are clearly ethically preferable.
  4. Act so as to preserve the equitability of relationships.

These are linked to practical principles such as equitability, honesty, openness, goodwill, and alleviation of suffering[vii].  One doesn’t need the Declaration of Human Rights to see the sense and rightness of these principles: they are part of everybody’s life experience.  All ethical systems are underpinned by common morality.  In the end, it’s usually not the direction of a particular ethical decision that is the quandary, but rather the decision to act ethically at all.  Firms should simply, as Francis suggests, decide always to act ethically, as a basic principle, particularly with their own people.  There should be no recourse to ‘business is business’ or ‘nothing personal, just business’—craven retreats.  If you employ people, or work with them in any way, you should act ethically towards them; no ifs, no buts.  If you can’t make the business work with a commitment to ethical behaviour, then you’re in the wrong business: make a living by working at something else where you can act like a decent human being.

Growth, learning and development:  People have a right to growth.  That is recognised in the Declaration as rights to education; but it doesn’t end with completion of formal education.  Lifelong learning is well known to be a cornerstone of a healthy life, and nowhere is there greater opportunity for continuous learning, growth and development than at work.  Under the standard model describe in chapter 2 this is anathema: people are hired to do the work attached to a specific job, not to grow out of it.  The idea of people growing and moving on or up directly threatens the model, the last thing the manager of modern management theory would want.  The exception is where development is called training; which means, the development of skills and capabilities that are of direct relevance to the work—the shaping of an individual peg to fill the job hole.  One doesn’t want to exclude this kind of learning—it may be that an individual will find it relevant to the things she wants to develop in herself—but relevance to the firm’s work is not the only or even the best criteria for continuing training or education.  People have all kinds of aspirations for growth and achievement, and it’s up to the firm to understand them and support them as far as it can.  People are always employed as whole people, growing and developing and aspiring, never as only units of labour, and firms should work with and support them in their learning and growth.  It comes with the human territory.

Respect:  Respect is one of those overarching principles of living  which really, when you think about it, includes almost everything we know about the right and best way to behave with other people. Respect and dignity go together in the Declaration: to respect someone is to act so as to uphold their human dignity.  Note the word ‘human’.  There are other grounds for respect: you can respect someone for specific knowledge or a specific capability or skill.  Typically, though, that kind of respect doesn’t survive outside the specific context in which it arises.  But respect in terms of human dignity is something altogether different.  Respect here is something that every person as a human being deserves from everyone, and is asked to give to everyone as human beings, regardless of what they know or what they can do.   Respect covers a lot of ground.  It means acting so as to respect basic human rights.  It means acting ethically.  It means not discriminating.  It means treating people as mature, intelligent, creative individuals.  It means assuming that people want to work with you, not that they are waiting to take advantage of you.  It means listening and understanding.  It means supporting and legitimising difference.  Respect is the ground of all living relationships, no more clearly than in the workplace.

My argument, then, is that the purposes of every organisation, including firms, include human purposes that sit alongside, and are equal to, their functional purposes.  The human purposes arise just because the organisation is made of its people, who are not simply units of labour or resources but whole people who must be treated as such.  That treatment rests on fundamental human rights, but extends beyond them, to the ground of common morality, consideration and decency that characterizes all relationships at their best.  These are not optional actions; they are not costs that have to be managed down; they are not impediments to, or distractions from, the organisational tasks.  They are in themselves legitimate and important outcomes sought by the organisation’s work.  The organisation is a primary arena of human life: the life purposes of its people therefore become part of its own purposes.

It should be emphasised that I am not mounting a business case for approaching people in organisations in this way.  That is, I’m not claiming that the justification for treating your people in this way is that they will be more productive, or better able to deliver organisational outcomes in some way, as a result.  My firm position is that people should be treated with respect because that is always the right way to treat people, at any time or in any place.  At the same time, it is clearly true that if people are treated properly they are likely to contribute to better organisational outcomes. In particular, they are more likely to approach their jobs creatively, with greater energy and application.  The standard model applies a metric driven by the job unit mentality to an individual’s work: just that work is demanded, no more, no less.  Where the fundamentals of relationships are routinely damaged—by breaching human rights, by unethical behaviour, by quashing aspiration, or by lack of respect, and the like, all driven by the standard model—the natural response of an employee will be, work to rule, at the minimum level possible.  Organisations don’t thrive on such repression; they thrive when people’s capabilities are freed by respect and decency.

These are not arcane arguments but practical wisdom, the truths that life experience brings to us all.  It’s not hard to make them the truths of our workplaces, too, once the strangely artificial rigidities of modern people management have been, as they should be, let go for good.


[i] This statement brings into play complex matters of social and political philosophy; and there are contrary views, on grounds of fairness and equity which deserve a respectful hearing (see Baran, P and Sweezy, P (1966), Monopoly capital: an essay on the American economic and social order, Monthly Review Press, New York).  However, that is a wider debate I don’t take up here.  I think current Fabian or other left-leaning social philosophies would accept the statement as it stands.

[ii] Carroll, A. (2008), ‘A history of corporate social responsibility’, in A. Crane, A. McWilliams, D. Matten, J. Moon & D. Siegel (eds) The Oxford handbook of corporate social responsibility, Oxford University Press, Oxford.

[iii] Freeman, R. (1984), Strategic management: a stakeholder approach, Pitman, Boston.

[iv] Moscardo, G, Lamberton, G, Wells, G (eds) (2012), Sustainability in Australian business: principles and practice, John Wiley & Sons Australia, Ltd., Milton, Queensland.

[v] Watson, T (2009), ‘Organisations, strategies and human resourcing’ in J Leopold & L Harris (eds.), The strategic managing of human resources, 2nd edn., Pearson Education, Harlow, Essex.

[vii] Francis, R. (2000), Ethics and corporate governance: an Australian handbook, University of New South Wales, Sydney.

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The Fractured Workplace And Its Remedies by Geoffrey Wells is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License.

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