Its hard to escape the conclusion that the endless boom in executive pay reflects a basically unhealthy regime. The system is dependent on three pillars:
1. The supreme, overriding strength within top management of the supreme leader - the CEO.
2. The overwhelming enthusiasm of the majority of investors for the pursuit of short-term capital gains.
3. The persistence of hierarchical order-and-obey management among leading employers.
Each of the three pillars is inimical to modern ideas of organising effort to achieve superior results. The events of the Great Crunch clearly show how much danger the tri-pillar system runs.
The most successful companies increasingly operate on a very different management model which is dependent on Five Drivers of the new management.
1. Personal mastery. There is an expectation for people to develop their skills-set to meet their own objectives and those of the company, which in turn is organised to encourage that personal effort.
2. Mental models. Companies actively look to establish the correct mindset to guide actions and decisions - for example, the can-do mentality which believes that all tasks can be achieved.
3. Shared vision. All members of the whole organisation are committed to its aims and its ways of realising an overarching vision.
4. Team training. Very bright people are employed, but teamed together; group thinking has greater value than the sum of individual parts added together.
5. Systems thinking. Actions and reactions, decisions and indecisions, cannot be isolated, because they have ramifications throughout the organisation - so all sections are brought on board.
The Five Drivers are derived from an excellent book, The Fifth Dimension, written by Peter M. Senge. The title refers to systems management.
The Five Drivers are all crucial elements in the quest for optimum profitability. The word 'optimum' is key, because unnatural, excessive drives for profit will burst the system (and any related bubble).
One great asset of the gee-whiz organisations built around the Five Drivers is their natural bias to this style of management for sustainable growth. The competitive need to turn new technology into new products, processes and profits cannot be satisfied without rapid, smart use of the human capital inside the company to satisfy the human needs outside.
Speed is essential in generating the new products required to sustain 'momentum'- a word nowadays used frequently by sportswriters and coaches.
Momentum means development of self-sustaining, increasing progress. Lose that forward drive and you give up the advantage that can create sustained growth in any economy, industry or company.
People often speak or write about opportunity as though it were something you find, searching around until some chance discovery comes your way. That may sometimes be true. But entrepreneurs generally don't just stumble on opportunity. They create the opening by their own positive efforts. Others miss out because they don't have enough creative energy.
An awful economic shock like the Great Crunch gives an easy excuse for inaction to people who wouldn't have shone even in bright times. If you think about it, optimism always triumphs, simply because the pessimist will give up long before the enterprise becomes successful.
Clearly thought out and presented article, Mr Heller, consistent with your usual high standards.
Just one minor error: Senge's book is entitled The Fifth Discipline, rather than Dimension. First published in 1990 and still as valid. I dip in often.