“Hey!  Management is about nothing but the human dimension!” was the response of a friend when I told him that I was writing an article on this subject.

From one point of view, that is true.

Yet we all know that most discussion of “real management” – e.g. in a Board or business meeting, in an MBA or in Executive Education – focuses rather on finance, supply chains, and all sorts of other things.

Clearly, the human dimension is only one dimension of management.

In fact, it is usually considered a less important dimension than finance: isn’t finance the only thing that companies are required to report on, in most of the world?

So perhaps we need to take a wider view of the human dimension alongside other dimensions of management.

In order to identify the different aspects that are encompassed by the term “management”, what is the most comprehensive approach that exists at present”?

In my assessment, that is the approach of the International Integrated Reporting Council (IIRC), which encourages all organisations to report not just on financial capital, but also on all the other major sorts of capital:

• Natural Capital. not only resources such as timber, fish, and minerals which can be used by humans but also resources provided by nature (which some people call “ecosystem services”) such as air, water, and the symbiotic processes that enable all life and all organisations to survive.

• Manufactured Capital: physical objects such as buildings, equipment, infrastructure (e.g. roads, ports, bridges and waste and water treatment plants) available to an organization for producing goods or providing services.

• Intellectual Capital:
  • Intellectual property – e.g. patents, copyrights, software, rights and licences
  • “organizational capital” – e.g. tacit knowledge, systems, procedures and protocols
  • Intangibles associated with the brand and the reputation that have been developed and which have accrued to an organization.

• Human Capital: the skills, competencies, capabilities and experience of the human beings involved in an organisation, as well as their motivations to go beyond their job descriptions to innovate, including their:
  • Alignment with and support for an organization’s governance framework, risk management, and ethics
  • Ability and willingness to understand, develop and implement an organization’s strategy
  • Loyalty and willingness to improve processes, goods and services, including the ability to lead, manage and collaborate.

• Social Capital: an organization’s social licence to operate, shared norms, values and behaviours that enhance individual and collective well-being.

• Relationship Capital: the quality of internal and external relationships – e.g. in relation to hierarchy, location, or function; and with direct stakeholders, with individuals, groups, associations, networks, organisations, institutions, regulatory bodies, governmental agencies, and so on.

In fact, the IIRC lumps the last two forms of capital together.

That, and many other things above can be, are debated.

For example, some people object to calling anything to do with humans “capital” or “resources”.  Others object to measuring anything to do with humans.

Those who object, claim that any such nomenclature or measurement demeans humans.

Perhaps.

But naming and categorising the humans involved, and making some attempt to measure organisational relationships, is surely better than ignoring them entirely, as the dominant practice is at present?

Moreover, it is not only the last two capitals, but all the capitals, that have consequences for humans.

So here are some questions (not in any exclusive sense) to get the discussion going on our GPDF theme for this year:

• Can an approach such as that of IIRC clarify the discussion, and enable it to move forward?
• In what areas or aspects is business – as a whole, around the world – improving the lives of humans, and in what areas or aspects is it causing a deterioration in the quality of life for humans?
• How can we encourage the positive contributions of business to be better recognised?
• What steps could be taken to meliorate the negative impacts of business?
• What contexts/structures/ processes/ incentives, discourage managements from recognising human considerations?
• What steps could transform those contexts/ structures/ processes/ incentives, so that managements take human considerations more seriously?
• Are publicly quoted companies less humane than privately owned companies? If so, what differences contribute to the end effect?
• The latest technological advances – e.g. AI, robotics – hold enormous potential for improving the quality of human life. How can we develop more reliable models for assessing the impact of technologies from the perspective of human welfare – at the levels of the workplace, the organisation, and society – and that we see these three simultaneously and in relation to each other?

That range of questions is an invitation for you to put your thoughts, your questions and your answers to everyone involved with GPDF by getting your fingers dancing on your computer or smartphone.

About the author:

Prabhu helps Boards with issues of governance, strategy and performance. He is Distinguished Professor of Global Business, Management and Public Policy, at William Carey University, India; and a Member of the Board, Institute of Management, University of St Gallen, Switzerland.

This article is one in a series related to the 10th Global Peter Drucker Forum, with the theme management. the human dimension, taking place on November 29 & 30, 2018 in Vienna, Austria #GPDF18

This article was first published on Linkedin.

Photo by: Global Peter Drucker Forum

Your experience will be different from mine in terms of details. But I’m sure it will have included “privately-owned companies” that are mind-bogglingly philanthropic (and therefore very concerned about inclusive prosperity), as well as “charities” that are run mainly in the interests of the current trustees and/ or managers – and therefore not primarily concerned about inclusive prosperity at all!

There are even “co-operatives” that have no sense of responsibility beyond enriching their own members; being a “co-operative” sounds good – but, in principle, every clique and mafia is a “co-operative”.

Every organisation is caught in a struggle between prospering itself and what it does for others.  Generally, there is a bias towards the gain of those who are in power. In any case, we all struggle with profound and fundamental questions regarding how an organisation is to run itself.

What bothers me is *not* when an organisation arrives at an answer that I consider wrong (we are all free to choose whatever course of action we like – although we cannot escape the consequences of the choices).

What bothers me is when organisations do not even consider the crucial questions. There are various reasons why organisations don’t do so: the decision may be quite consciously taken for good reasons or bad; but often it may be because the organisation is “too busy” (which means that the matter may never become a conscious decision).

So, what are the sorts of things that might be considered consciously if an organisation is to model inclusive prosperity?:

1. Inclusive of whom?

Some organisations focus on questions of inclusivity in terms or race, gender, or sexual orientation.  Here, the question is whether our prosperity reaches those who are least prosperous.

So, the first thing to clarify is the level at which we are defining inclusivity of the poorest. In other words: do we include those who are the least prosperous in the world, or those who are the least prosperous in the communities immediately around the locations where our organisation is active, or those who are least prosperous in our country or geographical region?  And do we include them only in our deliberations, or also among our deliberators?

2. Vision or Whitewash?

What is the gap between what we claim to be our vision, and the way we are going about accomplishing it?  Since the two cannot be divorced – since the means determine the ends – we need to consider how we arrived at our vision (inclusively or by diktat?).  We also need to consider how we continue to refresh our vision – in other words, whether the poorest are represented in our Board and in our governance committees, and whether our governance processes and values focus explicitly on the poorest.

2. Mission – versus mere Mirage

Are the processes for determining our organisation’s mission inclusive? What about the processes for determining the success/ failure?  For arriving at new goals?  Who does the organisation include in the decision process as against the consultation process?

3. Culture and Values

Since “values determine everything” and since “culture eats strategy”, what values and what cultural characteristics are exhibited by each major policy as well as by “how things are done around here”?

4. Strategy

Since “strategy” means “the way we are going to accomplish our mission”, does the strategy explicitly address those who are economically disadvantaged?

5. Structure

An organisation can be pyramidal, cellular, or anything in between:  what values are reflected by our degree of centralisation/decentralisation, and by whether our organisational structures are entrepreneurial or more command-oriented?

6. Operations

If we were to explain any of the following to outsiders, what would be their perception of our inclusiveness?:

 – recruitment processes and decisions; as well as how clearly we articulate, and whether (from Board level to entry level) our selection criteria prioritise, inclusiveness of the poor among the ethics and values of the individuals we recruit;

 – the process for decisions about which employees or others get training, and about the content of the training; indeed, the values displayed by our training processes themselves;

– the processes for decisions about salary levels, and about increases/ decreases in them, as well as the brutal fact regarding how large or small is the gap in total compensation between the poorest-paid and best-paid in our organisation;

 – the processes for determining who is assigned what responsibilities, or promoted to what level;

 – the processes for organisational renewal;

 – the processes for determining product portfolios, geographic range, and so on (for example, what proportion of our product range is for the “bottom of the pyramid”?

7. Profit-sharing

What is the right amount of profit to make?

How much do we reinvest in our company, and how much do we distribute to shareholders as against how much we pay workers?

8. Evaluation and Reporting

How do our criteria for evaluating our performance measure up on inclusivity?

Do our reporting practices focus only on financials, or do we have more holistic reporting practices – for example, those that are being pioneered by the International Integrated Reporting Council?

9. Lobbying

What is the right amount of money to devote to lobbying, and what are the objectives for which we lobby?

10. Philanthropy

How much do we give away, as an organisation, to the poorest, and for what purposes?

About the author:

Prabhu is an independent Board Member, Keynote Speaker & Conference Chair; he is Executive Director, Relational Analytics Ltd., Cambridge, UK; Honorary Chairman, Career Innovation Company, Oxford, UK; Distinguished Professor of Global Business, Management & Public Policy, William Carey University, India; and Member of the Board, Institute of Management, University of St Gallen, Switzerland.

That question has two most likely alternative answers, dependent on whether the respondent likes to the look at the top of society or at the bottom of society.

“Yes, prosperity is becoming more inclusive”

Those who like to make that response like to look at the bottom of society, and point out that our global system has reduced absolute poverty by half since the year 2000. But if a human being who couldn’t have even one square meal a day earlier now has that one meal, is it right to describe that as “inclusive prosperity”?  Today, three billion people survive on less than US$2 per day (that includes any housing, transport, clothing and food); and $2 is less than the price of one cup of coffee in any coffee shop in London, Tokyo or New York. As much as eighty per cent of the world lives on less than $10 a day.  They would all laugh at the notion that they share in “inclusive prosperity” when they compare their lives to ours.

Rich, me?

You may not consider yourself “rich” but, to be in the top 1% of the world, you need to have an yearly income of only $32,400 or its equivalent.  Alternatively, if you want to look at the matter in terms of wealth rather than income, you need to have a net worth of only $770,000 (including everything from the equity in your home, to your automobile(s) and other possessions, your retirement accounts, bonds, stocks, bank accounts, and cash).

Corporate “initiatives”

A related issue is that we in the 1% are widely misled by the idea that lack of knowledge, information and technology are the main barriers to inclusiveness. We are therefore taken in by examples of worthwhile and indeed impressive corporate initiatives – which are however hyped as if corporate or technological initiatives are going to make prosperity globally inclusive.

Even a moment’s analysis will reveal that is not the case.  Consider the following, which are touted as examples of the sorts of things that are going to make for inclusiveness, when they clearly aren’t:

• Biotech efforts to increase food production in order “to cheaply feed hungry populations”, as if cost or overall availability of food are the problem, when it is clear that the most food-deprived countries of the world are in that situation because these countries are led by people who are addicted to power, and more greedy for selfish gain than they are for the good of the people of their country
• Impulsive or systematic Corporate Social Responsibility initiatives, such as FedEx’s utilisation of its logistical expertise and capabilities to deliver, to the victims of Hurricane Sandy, four million pounds of relief aid from agencies such as American Red Cross, Direct Relief, and The Salvation Army;
• Adidas Group’s partnership with Grameen Bank to manufacture low-cost shoes for the poor in Bangladesh;
• Financial technology initiatives such as M-Pesa, a mobile phone-based money transfer, financing and microfinancing service, launched in 2007 by Vodafone for Safaricom and Vodacom, the largest mobile network operators in Kenya and Tanzania.

From the perspective of inclusiveness, the key issue with all technology is not what it may or may not be able to do, but rather who owns it and for what purpose.

“No; prosperity is actually becoming less inclusive!”,

That is the answer given by people who are probably focusing on wealth concentration at the top of society: only 8 people now command as many resources as 50% of the world’s population; last year the number of people who commanded that proportion of the world’s resources was 62.  In 2014, that number was 80. In 2010, it was 388.  The trend goes back to the 1980s, highlighted by successive annual reports by Oxfam, Christian Aid and other NGOS. The reason for that trend is the rise in the popularity, among the elite, of philosophies such as those of Any Rand which resulted in Thatcherism, Reaganism and the disastrous actions of Greenspan.

Is the main obstacle resources, knowledge OR will?

The principal challenges are:

• In the “developing world”, cultures of apathy towards, and cultures of collusion with, exclusionary social practices in most countries (e.g. casteism, as in India; tribalism, as in Africa; cliques, as in North Korea)
• In the “developed world”, the adoption, since the 1970s of philosophies which idolise greed and selfishness, such as those of Ayn Rand, resulting in statutory rules and regulations not being implemented or even eroded – think of the decline of anti-monopoly implementation, especially in the the US; or the non-implementation of existing financial rules from the 1980s, leading directly to our current crisis which started in 2007. The non-implementation of those laws ended up in the change of those laws for the worse, at least in the view of many scholars – e.g. the substitution of the 1930s Glass Steagall Act by the 1999 Gramm-Leach-Bliley Act.

Genuine steps to make prosperity inclusive

There are “only” two things we need to do if we are to genuinely make prosperity inclusive:

• Challenge the roots of the national cultures which produce apathy, fatalism, casteism, tribalism and cliquism, resulting in the greatest mass of people around the world being excluded from prosperity
• Challenge philosophies which idolise selfishness and individualism, and reverse the practical consequences of such philosophies[i]. Ideological steps towards inclusive prosperity would include prioritizing and embedding philosophies such as Relational Thinking.  And on the practical front, there are many steps that could be taken – such as:
• Close offshore tax havens and loopholes in tax codes so that the wealthy can’t exploit those to hide their wealth
• Break up the concentration of wealth by a Wealth Tax, if you are on the Left – or, if you are on the Right, by a market-based alternative, such as requiring the wealthiest families to invest a proportion of their wealth/ income in the Least Developed Countries and/ or in the smallest companies.
• Reduce pay ratios so that the highest earners stay within some reasonable limit (say, 20-to-1 compared to median earners)
• Incentivise pharmaceutical companies to broaden the focus of their R&D, so as to prioritise the health challenges of the poor.
• Invest more in education, public services, social protections – and, in view of the continuing impact of technology on jobs, proceed systematically towards a Universal Basic Income.

The second blog describes how organizations might model inclusive prosperity

About the author:

Prabhu Guptara is an independent Board Member, Keynote Speaker & Conference Chair; he is Executive Director, Relational Analytics Ltd., Cambridge, UK; Honorary Chairman, Career Innovation Company, Oxford, UK; Distinguished Professor of Global Business, Management & Public Policy, William Carey University, India; and Member of the Board, Institute of Management, University of St Gallen, Switzerland.

First, most countries around the world are not committed to supporting entrepreneurship[i]. Such support requires alignment between politics, law, the monetary system, economics, education, finance, and the whole national culture. The USA, historically one of the friendliest to entrepreneurs, is rapidly becoming frostier for them[ii].  In many countries, entrepreneurs are regarded as a threat to the governing elite, being dispatched to prison if they are “too successful”.  In other countries, such as China, any entrepreneur has to toe the line of the ruling party.  Even then, an entrepreneur’s success may be ephemeral.  This has been seen not only since China became a Communist country in 1949 but specifically over the last few years.

Second, in some cultures, the system supports certain groups or cliques but not the citizenry as a whole. An example of this is my own country of origin, India, where the culture historically supported entrepreneurialism only from one caste: every other caste was penalised for even thinking of any entrepreneurial activity. Officially, an interest rate of between 80% a month and 24% a year[iii] was allowed, depending on the caste of the person to whom money was loaned.  Unofficially, the culture endorsed unthinkable interest rates, within living memory rising as high as 3600% per year, leading to millions of people being reduced to virtual slavery or “bonded labour”.  Clearly, such a culture won’t allow the average citizen to flourish. No wonder limits were set on usury, and bonded labour abolished, after democracy was established in India – though the reach of the law there is neither wide nor consistent. By contrast, the country with the fairest and most extensive system of support for entrepreneurs is Israel[iv].

The two kinds of breaks mentioned above, and related varieties of “crony capitalism”, were quite common historically, but began to decline with the separation of entrepreneurs from the state, which started as a result of the 16^th century Protestant Reformation. This instituted “the rule of law” and popularised Judeo-Christian thinking on morality, creativity, hard work, honest trade, a modest lifestyle, public responsibility and societal good. It resulted in what we call the modern world, impacting not only countries in Northern Europe and North America but most countries round the world[v].  However, as the influence of the Reformation has declined since the 1980s, entrepreneurs and politicians seem to be increasingly arriving again at an entente cordiale to benefit themselves and to disadvantage most citizens.

The third break in the bond between entrepreneurs and society is when entrepreneurs don’t support their own country as much as they should.  Indeed, many entrepreneurs abandon their country of origin and move to countries which provide better opportunities or lower tax rates.  Economic migration is understandable where the entrepreneurs are poor, or are just starting.  But worldwide acceptability of entrepreneurship decreases if established or highly successful entrepreneurs are too greedy[vi].

Such overreach has at least four symptoms:

• Economic blackmail (threatening to move business out of an area if a particular political vote does not go their way – as Marc Benioff, the CEO of Salesforce, did recently);
• Lobbying to tilt the subsidy and tax systems in their own favour (as many significant companies have done for some decades, and as smaller entrepreneurs seem to be doing increasingly);
• Unwillingness to contribute a fair share of taxes for the common benefit (apparently, only a few months ago, HSBC threatened to move out of the U.K., while IKEA and other companies have actually moved out of their countries of origin for those reasons); and
• Reduced, negligible, or little commitment to philanthropy.

In such matters, Western countries had made enviable progress since the 16^th century but, even there, progress has reversed noticeably since the 1980s[vii].  The Netherlands, one of the main beneficiaries of the Reformation, now has over a hundred large companies which seem to pay hardly any tax[viii].

By contrast, the Dutch Societal Alliance (MA) and the Healthy-Life-Alliance (HLA) are examples of initiatives being taken by numerous people – including entrepreneurs – who are trying to repair the breaks in the relational circle between entrepreneurship and society.

Entrepreneurial drive toward mutually-beneficial goals is the only way of addressing today’s global “wicked problems”. Relational business models based on stakeholder[ix] value and impact arise from the circle between people, public bodies and private companies – that is, from coherence in society.

About the author:

Prabhu Guptara is Executive Director, Relational Analytics, Cambridge, UK; Member of the Board, Institute of Management, University of St Gallen, Switzerland; and Distinguished Professor of Global Business, Management and Public Policy, William Carey University, India.

[i] For one ranking regarding this, see the World Bank’s “Ease of Doing Business Index” http://www.doingbusiness.org/rankings

[ii]  See http://www.kauffman.org/microsites/kauffman-index/rankings/national?Report=StartupActivity;  see also http://www.inc.com/magazine/201505/leigh-buchanan/the-vanishing-startups-in-decline.html

[iii] Those rates are from one ancient religious text; other texts prescribe various other rates, in every case dependent on the caste of the borrower: The Manusmriti, translated by George Buhler, Chapter VII, verses 140-142, accessible e.g. at http://hinduwebsite.com/sacredscripts/hinduism/dharma/manusmriti_2.asp

[iv] For a brief discussion of this, see the text of my presentation in Israel on the 18^th of February 2016: “http://www.alphamedicus.com/documents/mHealth_Israel_Conference_2016%20_Text_of_Prof_Guptara’s_speech_18February2016.pdf   For a longer paper on Israel’s entrepreneur support system, see: http://www.alphamedicus.com/documents/Israel’s_Entrepreneurs_Support_System.pdf

[v] See my chapter, “Towards Creating the Right Kind of Globalisation – Why it does not happen, and what to do about it” in Joseph Straus (Ed.), The Role of Law and Ethics in the Globalized Economy, Max Planck Institute Studies on Intellectual Property, Competition and Tax Law, Volume 10, 2009, Springer Verlag, Berlin, Germany, pages  61-82.  For a different but very much fuller view, see Vishal Mangalwadi, The Book That Made Your World, Thomas Nelson, USA, 2011.

[vi] For the latest howl of rage, see http://www.scmp.com/comment/blogs/article/1929324/study-reveals-awfulness-canadian-investor-immigration-income-tax

[vii] The evidence for this is exhaustively documented in Thomas Piketty, Capital in the Twenty-First Century, Harvard University Press, 2014.

[viii] Tax avoidance is of course not limited to the Netherlands: http://www.corporateknights.com/voices/bernard-simon/12331-14592312

and http://www.corporateknights.com/channels/leadership/filing-deadline-14593140

[ix] See Michael Schluter et al, The Relational Lens: Understanding, Measuring and Managing Stakeholder Relationships, due out soon from Cambridge University Press.

But let’s start by reminding ourselves that robots are already found in every conceivable area of life – from what is domestic (mowing grass, cleaning swimming pools), through sports and entertainment (car racing, playing music, producing artistic material), to the care sector (medical operations, looking after the elderly) … all the way to the military (drones, robot soldiers, autonomous weapons).

Moreover, the exciting possibilities of a robot-driven future are equally clear: since the 1980s, Japan has had “dark factories” (fully automated, no humans on site) for electronic products. Since 2001, the Japanese company FANUC has been operating a dark factory where robots build other robots, now at a rate of about 300,000 each year. For most agricultural activities, we now have digitally-controlled farm implements. GPS, aerial survey maps and digital data guide tractor routes. So we can produce most things needed by humanity, whether industrial or agricultural, with minimal human intervention.

As super-abundance becomes possible, poverty could be entirely abolished, leaving us to tackle the remaining challenges around climate change and employment [ii].

The first still seems insuperable, though we do at least give some thought to it.

The second depends, in the short term, on whether humanity can counterbalance and outpace the introduction of robots by becoming ever more creative and productive. For that, humans need to have not merely computer skills but advanced digital literacy which will enable critical and creative human-computer interaction. But which government is doing anything substantial about providing that?

In the ultimate analysis, however, whether or not humanity flourishes as a result of robotics is a question of who will own the robots, and of whether these owners will focus on the flourishing of all of humanity, or only on self-indulgence.

That is a large question. Here are smaller questions we can focus on to enable robots to be an unprecedented blessing to humanity rather than a disaster[ii]:

• Could we pace the introduction of robots to prevent their creating so much unemployment at one time as to trigger social unrest?[iii]
• Could a Robotics Research Charge go to an independently-run global fund for formulating a new economics of super-abundance?
• Could a Robot Introduction Charge finance the retraining of each person whose job is lost?
• Could intellectual property in robotics be put in the public realm to encourage even stronger product competition, as well as to encourage social uses of robots?

The elites of our time promise utopia as a result of the latest advances of our time. Why is it then that we have the reality of much greater violence, from the USA to China?

Such questions are articulated far more powerfully by artists than by bloggers. Have you seen the TV series, Continuum, which starts in the year 2077 where everything is technologically controlled by corporations? A subversive group, Liber-8, are thrown back in time to 2012, and the series plays out alternative futures depending on whether certain technologies are developed or not. Interestingly, there is a “no robots” scenario which has freedom but no peace, while the “with robots” scenario has peace but no freedom.

So can we have freedom, peace and human flourishing? That is the challenge I am raising by the questions above.

About the author: 

Prabhu Guptara is a keynote speaker, independent Board Member, and strategy consultant who was, for 15 years, responsible for running Think Tanks for one of the largest banks in the world

[i] If agricultural production is robotised, what are we to offer the currently 5 billion out of the world’s 7 billion who are dependent on agricultural labour? Most jobs (doctors, nurses, teachers, street cleaners, gardeners, police) can be done more cheaply and efficiently by robots. Even robot-maintenance is now robotized. Given quantum computers, it is unclear whether we will need humans as therapists, family support workers, counselors, advisors, or mentors. In the past 30 years, two-thirds of all manufacturing jobs have disappeared in the UK; since 2001, half of all PA/ secretarial jobs, and 65% of librarians’ jobs, have disappeared. The impact of such massive job-losses has been meliorated by the UK’s national unemployment insurance system – whose future in uncertain, given a Deloitte report prediction that 10 million jobs will be taken by robots in the next few years. That’s one job in every three (the UK’s labour force is only 32.7 million, while the total population is 64 million – each job supports roughly two British citizens). So 33% of the current workforce will be made newly-dependent on a National Insurance System that is barely keeping up even with the currently-dependent, and these 33% more will have to be supported on a tax base reduced by income from 33% of current wage-earners! The USA will be even worse hit than the UK, because it has no national unemployment insurance, and because (according to research at Oxford University) one out of every two jobs there will be robotised. So how is half of the USA going to survive?

[ii] Originally raised in 2006 at: http://www.theglobalist.com/will-japanese-robots-rule-world-2020

[iii] Only the totalitarian government of China could organise, as it is now doing in Guangdong, a project to “replace humans with robots”. The excuse is that China (China!) doesn’t have enough skilled people – though it has 2.3 million people in its prisons who are put to unproductive labour. We live in a strange world where it is a Communist government (which is supposed to prioritise people over capital) that leads the first attempt in the world to uncompromisingly prioritise capital over people. “Cheap” Chinese labour has become more expensive each year, and now costs US$6000 a year – which is more than it costs to buy a replacement robot. Sophisticated robots will cost only US$20,000 by 2020 – a sixth of what it costs to have an average employee in an advanced country like Switzerland, and only half of what it costs to employ an illiterate temporary farm-hand.