Friday, September 30, 2011

Corporate delusions

I have often wondered how much of all the talk of 'empowerment' , 'democratisation', 'values' and the rest is actually practised by corporations, much as corporate bosses love to expatiate on these. My own sense is that most corporations (and most organisations, in general) are run despotically with the person at the top calling most of the shots.

I learn that my impression is not wide of the mark. The Economist quotes from a survey on corporate culture which says that what employees think of their organisations is at odds with the delusions their bosses harbour. The survey was commissioned by Dov Seidman, author of 'How', a book that emphasises that how businesses are run is as important at what they accomplish.

It(the survey) found that 43% of those surveyed described their company’s culture as based on command-and-control, top-down management or leadership by coercion—what Mr Seidman calls “blind obedience”. The largest category, 54%, saw their employer’s culture as top-down, but with skilled leadership, lots of rules and a mix of carrots and sticks, which Mr Seidman calls “informed acquiescence”. Only 3% fell into the category of “self-governance”, in which everyone is guided by a “set of core principles and values that inspire everyone to align around a company’s mission”
Does it matter how the company is run? Apparently, yes. A high proportion of people in the "self-governance" and "informed acquiescence" categories believe that their firms adopt good ideas; not so in other categories. Equally interesting, the perceptions of bosses are at variance of those of their employees:

Tragicomically, the study found that bosses often believe their own guff, even if their underlings do not. Bosses are eight times more likely than the average to believe that their organisation is self-governing. (The cheery folk in human resources are also much more optimistic than other employees.) Some 27% of bosses believe their employees are inspired by their firm. Alas, only 4% of employees agree. Likewise, 41% of bosses say their firm rewards performance based on values rather than merely on financial results. Only 14% of employees swallow this.
It would be interesting to see whether firms with a superior culture (as perceived by employees, not bosses) perform better. Then, we have a strong case for fostering an open, non-tyrannical culture. This may be achievable in a relatively small organisation. A large organisation that achieves this is truly worthy of praise. I invite readers to name a few.

My own impression is that the atmosphere is most corporations tends to be toxic, if not hellish, and they simply would not perform but for the fact that they are able to dole out large amounts of money. Bosses who think their companies are little paradises are living in one- meant for fools.


Anonymous said...

Hello Professor,

Agree with each word of your post. The edifice of most organization is "Profusion & Greed". And the three biggest corporate lies are - 1. We are for shareholders. 2. Employees are our biggest asset. 3. Customer comes first.

I would like your heed to remark made by Mr Smith in Wealth of Nation, wherein he makes a portent that this model of Corporation will never succeed; where the owner & manager of funds are different, Negligence & Profusion is bound to creep in.

History, has since, proved his prescience right, time and again, and will continue to do so even in future.

This is Kalyug.

Anonymous said...

Out of would you rank the Companies (say GNFC) wherein you're one of the Independent Director...

Do you think despotism prevails in such Companies...?

T T Ram Mohan said...


I would not like to comment on any company that I am involved with. But it would not be much to say that corporate culture is not going to be transformed just because TTR happens to sit on the boards of some companies.

Let me now make a general point. In state-owned or state-controlled companies (in GNFC, the state government's equity is below 51%), norms of the public sector apply. It is difficult to get rid of people. There is a formal grievance redressal mechanism in place. People can write to board members without fear of serious reprisal. I leave it to you to judge whether these norms conduce to making the environment less despotic or more despotic.


Santosh Sali said...

Corporate cultures are not something those are transformed over night (or even as a project running over few month) , Even some so called "successful" attempts of culture change has taken like 7 or 10 years. Basically it is a very slow process. So who will drive such change and with what motivation ?

That is a different question, why there is dominance of command-control and mere 3% of participative structure..

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