Profit – an end to a means?

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In 2011, Bob Diamond laid out his view of what organisational culture means, and what it should look like at Barclays:

“Our culture must be one where the interests of customers and clients are at the very heart of every decision we make; where we all act with trust and integrity.”

Much has been made of these comments over the last couple of days, and how the LIBOR-fixing scandal has made a mockery of his words.

While there can be no doubt that Barclay’s behaviour in fixing LIBOR rates has not put their customers and their clients at the heart of their decision making, I find myself more depressed at the limited scope for good – even in this, what should have been Diamond’s most aspirational address. Diamond gave plenty of good examples of CSR, and ways that Barclays could contribute to society while also continuing a relentless drive for its own profitability; but surely there must be a real debate at this stage about the viability of organising society around businesses driven primarily by profit.

It’s a concern that is not limited to Barclay’s by any means – indeed most blue chip companies would take a similar view of their purpose: Delighting customers and producing value for shareholders. The traditional argument says that the role of business to fuel economic growth, and this helps society by creating jobs and wealth.

There is truth to this – and it is not surprising that the financial system has produced hermeneutic knowledge to justify its behaviour. What is left out of this narrative however is that in pursuit of growth, this capitalist system has also produced a range of negative unintended side-effects whose consequences now significantly outweigh the positives produced by economic growth.

Klaas Van Egmond has articulated the obvious, in highlighting capitalism’s “tendency to reverse ends and means”. He suggests the financial system has become an end in itself, rather than being the means it should be to further human happiness and social value.

What is truly frightening is how embedded this topsy-turvy capitalist narrative is. Even this week Bob Diamond has been praised for masterminding a “British corporate success story”. National newspapers are peddling the argument that he should stay because he would be too difficult to replace.

Just why are we putting such value on his job?

Barclays exists today, to enrich itself, and by so doing (it would say), improve society. We need to re-imaging Barclays, and every major business so that they exist to improve society, and in so doing enrich themselves in a sustainable way.

If Diamond was leading on organisation that thought and acted in that way; then maybe, just maybe you could begin to fathom his £17 million annual pay packet. As it stands, I find myself slack-jawed as people formulate arguments for continuing to pay a man 649 times the average wage in Britain so that he can continue to increase the profitiability of an investment bank without thinking beyond his immediate “customers and clients”.

Habermas, Knowledge and Resistance to Change

One of the things I’d like to do with this blog is to try to build a bridge between dense and complicated academic theory, and the real world – where some of these dense and brilliant ideas might be put to use. Today’s focus is Jurgen Habermas – and what his theory of knowledge interests can tell us about organisational change and resistance.

In his theory of knowledge, Habermas identifies three “knowledge interests” – three motivations people seek and create knowledge:

Rational/Empirical: Knowledge that is created with the aim of better predicting and controlling our environment

Historical/Hermeneutic: Knowledge that is created to establish reliable inter-subjective meaning – ie knowledge that allows people to establish a common frame of reference, a common understanding and co-ordinate around it

Critical/Emancipatory: Knowledge that is created to challenge the status quo, and to make the invisible constraints of language visible and thus changeable.

(For a good academic overview, see Bauer &Gaskell (2000): p 12-15)

Where this becomes relevant for organisational change is when you consider knowledge interests in an organisation. While there is undoubtedly a need for rational/empirical knowledge of the outside world, any organisation is only permitted to exist if its members find an ability to co-ordinate some of their personal motivations. In other words, the creation of historical/hermeneutic knowledge is necessary for the existence of an organisation.

All too often, change is approached by managers from an empirical perspective. The only knowledge required is that there is a change in circumstance which logically implies a need to change something within the organisation.

While the logic for change may be sound and irrefutable, if the change implied is not consonant with the hermeneutic knowledge that lives within the system, people will be unwilling to accept it. People need to create new hermeneutic knowledge, to re-affirm how their personal motivations and their identity relate to this changed environment.

Resistance, in this framework is not employees being lazy, or irrational; it is the conflict between a new way of doing things and an existing consensus on the identity, goals and meaning of the organisation. Resistance in this sense should not be crushed, but engaged with, understood and included.