In the West it has been our enduring crisis: an overleveraged financial economy, huge debts and imbalances, increasing inequalities, and resistant high unemployment rates. At the same time we see stock markets at all-time highs and CEOs earning obscene  amounts of money. This is what Henry Mintzberg is referring to and what is threatening to undermine our basic institutions like democracy, market economy, rule of law, and civil society.

A different global society

Additionally, the crisis in the West together with Asia’s and specifically China’s positive economic track record has led to the replacement of the liberal democratic nation state as the role model for the global society by the state capitalistic system.

In fact, the new model is a combination of state-capitalism – where the state is seen as an important actor in the otherwise corporate world – and shareholder value thinking – where the purpose of a business to make money is seen as an overall good for society – which is highly attractive for elites everywhere in the world. Authoritarian regimes, together with an oligarchic private ownership, patriarchic societies, the rule of elites instead of law, and an oppressed civil society, are again in advance. This has resulted in the rise of an unprecedented rich ruling class from China to Russia, Saudi Arabia to Brazil, and Nigeria to Angola.

Hence, the West’s self-inflicted crisis is also backfiring on it from the outside its boundaries and a different form of global society is emerging.

Economic and social crisis inside, less influence and reduced power in the rest of the world, what can the West do to not destroy its basic institutions?

Assuming that the emerging global society is a self-organizing social system, solutions along the political left-right scheme become meaningless. No single government or multinational corporation has enough power to control the system. It is the interplay of decisions and actions taken by governments, supra-national institutions, civil society organizations, national and multinational companies and the like which is shaping the future of our planet.

Looking for high-level parameters capable of influencing the global society, Peter Drucker has given us a hint. Long ago he realized that knowledge societies are societies of organizations with the single organization as a key element. And behind each of these interdependent organizations are people whose practice is put to work by an “operating system”. And this, of course, is …

… the Art of Management.

While the choice of the management system is independent of the type or the activities of an organization, it is a value-decision that articulates fundamental principles, ideas and values of what we think an organization and hence society is all about.

With the global triumph of mainstream management thinking, principles center almost solely along financial values and financial engineering. To overcome its implicit logic of “winner takes all” we need a managerial operating system, which helps managers to deal with the increasing volatility, uncertainty, complexity and ambiguity of our emerging global society.

We think such a system can only be based on an appreciation of the individual and a sustainable use of our planet.

A European Humanistic Management Movement

Europe has come a long way to arrive at its “humanistic worldview”. From ancient Greece to the Renaissance, the Enlightenment, the Protestant Reformation right up to the modern peace project called the European Union. European Humanism with Kant and Rousseau brought forward the concept of self-responsibility as the human trait that determines motivation and meaning.

The appreciation of the self-responsible individual as a manager, employee, customer or any other stakeholder is the solution for a higher ability of organizations to act in a turbulent environment.

Only a people-centered management based on humanistic values allows drawing on the ingenuity and creativity of the human beings.

In any organization values are articulated as operational principles, which guide its decisions and actions. For a European Humanistic Management Movement we think the following constituting principles can be put forward:

1. The raison-d’être of any organization is value creation for society (public value) and not maximizing the value of the own organization.
2. The operating system and toolbox, guiding decisions and actions, follow systems and design thinking rather than a pre-dominant financial focus.
3. Organizations shall be adapted to people rather than people to organizations.
4. Configuring everyone’s toolbox to cope with the challenges of a dynamic environment is an ongoing management task.

Values, routines and tools constitute the operating system of an organization. As such, the modern toolbox has a design where principles allow for choice, routines raise the awareness for what matters most, tools help people to remain focused on creating public value and leadership interactions build trust. It is this toolbox that simultaneously caters to the humanistic values and at the same time to addresses the challenges of a turbulent environment.

With this, the choice on the right design of the operating system becomes one of the most important leadership decisions and at the same time it is the central “lever” for shaping the global society. The self-responsible individual is incompatible with a pure shareholder-value driven approach, but is needed to cope with challenges of an emerging global society and disruptions of new technologies.

Executives of private and public organizations have the power to transform the operating system of their organizations as a badly needed evolution to prevent yet another revolution. This can help rebalance society in ways to promote value for the common good and not to further undermine the basic institutions of democracy, market economy, rule of law, and civil society.

About the authors: 

Hans Stoisser, entrepreneur, management consultant and author with a longtime experience in emerging countries. His book “Der Schwarze Tiger – was wir von Afrika lernen können” will be published in September (Kösel Verlag).

Lukas Michel, author of the two books The Performance Triangle and Management Design, mentor for executive teams and associate of the European Drucker Society.

 
Economic models during times of transition

 
Developments in the emerging world have to be interpreted in the face of changes in the general set-up of our world order. Firstly, after the rise of the Western world which started in the 15th century, and the rise of the USA  starting in the late 19th century, we are witnessing the third big power shift in modern times-“the rise of the rest” (Fareed Zakaria) and the emergence of a truly globalized world. For the first time in history worldwide economic development is possible. Secondly, knowledge and the productivity of knowledge have become the most important drivers of development. As Peter Drucker said many years ago, in the age of knowledge societies there are no more underdeveloped countries, just “undermanaged” ones.

 
Up to now, the economic success stories of the emerging world have unfolded on the basis of two specific economic and political models. China has changed the course of development with its state-capitalist system. The liberalization and decentralization of unquestionably confined economic activities within an authoritarian political system have successfully embedded archaic rural structures in the globalized economic system.
On the other end the Anglo-Saxon economic model, particularly in its form of the US-American shareholder value capitalism, has been pivotal for many emerging countries. Profit maximizing, or maximizing the shareholder value of a company, is almost everywhere seen as the purpose of an economic activity. In addition, the reckless pursuit of money by the nouveau-riche in many emerging economies gets extra legitimization through shareholder value thinking.

 
In many cases these two economic models with their inherent worldviews together have shaped the course of development: state-capitalist actions of local governments in combination with short-term profit seeking of state-related private actors.

 
Limits of development

 
Recently, the economic success story has faced limits. Social limits, as in many emerging countries only a few people have exploited the new opportunities that came along with a globalizing world. The “Arab spring” brought an awakening and all of a sudden the upper class in most of the emerging world fears possible uprising and upheaval.

 
Political limits, as the new world of social media and other communication networks doesn’t comply with purely authoritarian ruling. The transition from a society based on traditional relationships to a modern state that is integrated into the globalized economic and political system requires much more than simply enacting new regulations.

 
Add to this the economic limits the world is facing as the fossil fuel era has come to an end. – Technical and social innovations are very much required to overcome these challenges.

 
But neither the authoritarian state-capitalist system-whether it involves Chinese-style authoritarian modernizers or Arab-style military dictators-nor finance-driven shareholder value capitalism is capable of creating the necessary supportive environment. The former has demonstrated its social and political limits; the later has created too many global imbalances.

 
Europe’s chance

 
As the changes in the general setup of our world order have led to an increasing level of interdependencies and networked systems, a new type of communication, and a new increase in the division of labor-in short to a “complexification” of almost all spheres of live (Fredmund Malik) –  our newly globalized world requires a qualitatively greater degree of governance for its political, economical and social processes.

 
Up to now, Europe has not contributed substantially to the recent success story of the non-Western world. But it has been Europe’s diversity and variety which forced Europe to experience and form new political and economic systems which now might be part of the solution.

 
One facet of the European system is the Central-European economic model of “hidden champions”. Hermann Simon, a German management thinker, coined the term. He recognized the fact that the German speaking part of Europe has an unusually large share of companies that are world market leaders in a specific market niche. Although the success story for each of these “hidden champions” is very different, they do have two factors in common.

 
Firstly, hidden champions “create the customer”, as Peter Drucker would have said. They focus on solutions for specific problems of specific customers, worldwide. Therewith they have created new and highly innovative products and services. Secondly, hidden champions pursuit system-oriented management approaches. They work with clear values, goals and strategies and with open communication. Often, they base their activities on self-organized units or teams. This allows effective customer feedback, iterative and network-based approaches, and highly sophisticated forms of organization.

 
Hidden champions – Europe’s contribution to globalization

 
The (Central) European customer-oriented model of hidden champions leads the way to a qualitatively greater degree of governance in economic processes because it has its entry point at company level (as opposed to state capitalism) with “customer value” as the main driver (as opposed to shareholder value capitalism). An economy built on hidden champions automatically builds on strong self-organization. As “customer value” is the main driver for a company, customer feedback drives innovation and development. And as customer orientation remains in the focus of economic activities, the management of a greater degree of complexity and long-term-oriented societal value creation is enabled.

 
Currently, China’s state capitalistic activities creates and changes the non-Western world, and US-American shareholder value philosophy dominates the thinking of the new elites. In contrast Europe, while it advocates humanistic, inclusive, sustainable, and environmentally friendly policies, has very limited impact on the real world through its actions. But it is the Central-European customer-oriented model of hidden champions that might change the situation and bring Europe back on stage.

 
The full blog post can be found at: http://www.hansstoisser.eu/en/hidden-champions/

 
AUTHOR:
Hans Stoisser, entrepreneur and management consultant with long-standing experiences in various African countries, has attended all of the previous Global Drucker Forum events.