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The Year 2014: Governments and Corporations – Are they Fit for Purpose?

Tuesday, December 30th, 2014

This year 2014 has been one of the most difficult years Australians have faced in peacetime. It is a year in which a government showed itself incapable of governing and the citizenry by and large made clear they were not prepared to be a party to an attack on the economy of those less advantaged, especially when they were told the policies would be fair.

So, the following constitutes a kind of end of year rave about Australia and the world at this time. It started out as a commentary on the response to friends about the article of last May by Warwick Smith in The Guardian on the budget: number of economists who agree with government economic policy? Nil.

I am deliberately posting this instead of placing it as an article amongst the pages of this site.

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The Abbott-led Opposition had consistently criticised the Gillard government as illegitimate and non-functional when it was in fact legitimate (as are many coalition governments around the world) and was able to pass substantial amounts of legislation, albeit not all representing the best that could be put in place. In government, Abbott faced trouble from cross bench Senators throughout the year, passing little legislation.

Government claims of a welfare crisis were undermined by a Household, Income and Labour Dynamics in Australia (HILDA) Survey by the Melbourne Institute of Applied Economic and Social Research report that has tracked more than 12,000 people since 2001. The Survey showed working age Australians have become far less reliant on welfare payments since the turn of the century. As Peter Whiteford,Professor in the Crawford School of Public Policy at the Australian National University pointed out, Australia has the most targeted social security system in the OECD and that total social security payments in Australia, at 12 per cent of average household income, are the third-lowest in the OECD. Strategies aimed at getting more people on welfare, including youth and those receiving disability benefits, into work have nothing to say about job creation!

The Prime Minister Tony Abbott ended the year in very bad shape and indeed Treasurer Hockey is said to have failed. Many have been the commentators giving vent to their views on that: I don’t need to here. I have in recent posts. Except it is worth recalling that, on gaining office on September 8 2013, Mr Abbott declared the  Nation “open for business”. Instead business confidence weakened, terms of trade declined and the deficit grew. There are multiple reasons which only shows the folly of making grand predictions about financial outcomes!

I do want to point out that the posts on this site have changed from ones that commented in a perhaps fairly staid manner on various issues to increasingly strident condemnation of trends in Australia and more generally. Apart from failures in education in many places the overwhelming failure has been in respect of climate change, though the outcomes of the meetings in Lima atd the end of 2014  perhaps give some hope.

It is fair to say that Australia is involved in conflicts in the Middle East which probably have nothing to do with Australia, or more correctly are unlikely to solved by our intervention or indeed the intervention of any outside power, hideous as the situation is.

Immigration has become a nightmare which decent Australians find appalling, policies based on lies, as pointed out by many including Julian Burnside, Malcolm Fraser and Sarah Hanson-Young, and a level of meanness which is hard to imagine.

Consider this contrasting decision: “Sweden has become the first European Union country to announce it will give asylum to all Syrian refugees who apply as reported by SBS for instance. “All Syrian asylum seekers who apply for asylum in Sweden will get it,” Annie Hoernblad, the spokeswoman for Sweden’s migration agency, told AFP. The agency made this decision now because it believes the violence in Syria will not end in the near future.” The decision, which will give refugees permanent resident status, is valid until further notice, added Hoernblad.”

The government has pursued energy policies totally at odds with any verifiable facts: carbon emissions were decreasing before the carbon tax was repealed and have increased since then with brown coal being burned in much higher amounts. Declines in household energy consumption and in petrol prices have delivered significantly much more financial gain to people than any action of the government. Energy retailers have been profligate – spending some $40 billions on infrastructure that will never be needed – and the Energy Regulator lacked discipline. The arguments for a reduction of the Renewable Energy Target (RET) are merely a sop to retailers and coal miners. (The actions of the Victorian State government in promoting urban transport infrastructure in a process which concealed the lies underlying the asserted outcome and unnecessary desalination infrastructure are similarly egregious.)

Government policies on health are utterly irrelevant. A co-paymdent has nothing to do with maintaining a healthy citizenry and the proposed $20 billion dollar research fund does not address chronic disease. Anyway the health minister was shoved off to Immigration in the December reshuffle whilst Social Services are to be subject to the discipline up to now imposed on Immigration. No hint there of increasing revenue other than further arguments about the regressive GST bolstered by ongoing assertions from Western Australia.

Proposals for funding education so that the major issue of disparities in advantage would be reduced have been trashed in a welter of lies and misrepresentations. Why hasn’t the media reported these two comments by the chair of the panel, the redoubtable David Gonski in his Jean Blackburn Oration to the Australian College of Educators?

“I found most of the schools happy places – places of potential but where there was disadvantage the problems were clear and marked.

“To this day I remember a principal at a primary school in a very low socioeconomic area in the west of Sydney looking at me when I asked had he had any success in getting parents involved with the school. He noted that 40% of his student roll changed each year and that getting the kids to school within an hour of commencement each morning was his personal goal for the year – involvement of parents he had tried but just at the moment felt it was too hard.

Continuing to talk of what he saw, Gonski noted, “The outstanding professionalism of both the leaders of the commonwealth department involved in school education and a number of the equivalents in states.

“I confess that my un-researched approach was to assume they were the problem and that bureaucracies were crippling getting on with the job. I did not witness that in actuality at all and indeed saw the opposite. The people I met, who dealt with me, were on the whole open to change, experienced, intelligent and well-meaning. In my view we are lucky to have them.

“I should also mention that dealing with the representatives of the various sectors be they from the catholic system, the independent school sector, the education unions and others was a pleasure. All had designated views and agendas but all dealt with us cooperatively and constructively. This I found very reassuring for the future – and I take the opportunity of this “postscript speech” to thank them.”

Despite evidence that universities are vitally important but that there are needs for improvement in teaching and that for reasons not explained large numbers of graduates have difficulty finding jobs, the government adopted policies for higher education that, like those for schools, had no basis whatsoever in evidence, were promoted by focus groups (which are relevant to what?) at great cost and advocated through an advertising program which did not mention the great cuts to research funding.

And the ABC and SBS had their funds further reduced. Like CSIRO, excuses were made and the issues ignored and the blame avoided. That any government concerned for education and an informed citizenry and future prosperity would of necessity generously fund scientific research and public broadcasting escapes these people. The ABC and SBS deliver an extraordinary array of material of extremely high quality. But as ABC’s Mark Scott has said the focus is on some small part of what they do. Skilled and experienced people left. Skilled and experienced scientists continued to leave CSIRO after a plethora of reviews over more than 25 years. In both places corporatisation has delivered exactly what?

The greatest tragedy of the budget, though in this sense the present government is not completely different only much worse, is the way it has ignored the major challenges facing humanity. Those will always be argued about but inequality, addressed by CEO of the IMF, the Governor of the Bank of England and French academic Thomas Piketty as well as a host of others, immediately comes to mind.

Of the many excellent reports of those challenges, the Oxford Martin Commission, “Now for the Long Term”, chaired by former Director-General of the World Trade Organisation Pascal Lamy (and including an astonishing array of internationally respected economists, specialists and political leaders) can be mentioned. And there are several insightful reports from the United Nations and the OECD. When Lamy visited Australia mid-year the Commission’s report received media attention only from the ABC and he met no government Minister! I don’t know if he met any business group. His talks in capital cities were booked out. (The visit was promoted by the Centre for Policy development.)

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Here are three recent tweets of mine, relevant to the above, that those who do not tweet will have missed (no doubt to the relief of some):

Try this. If scientific organisations employed methods of banks & corporates astronomy would hardly have advanced beyond Galileo. More

Try this. If scientific organisations employed methods of banks & corporates we wd b drawing blood 2 cure illness. DNA search wd b 2 risky!

Advances gain f prev unknown knowledge & skills. Instead of colonisation & takeover try join w others 2 leverage knowledge Mkt econ model NO

If the meaning of these ravings are not clear, I can explain. I consider that banks and too many (not all) other corporates are engaged, not in innovative solutions to advance society, but simple behaviours merely to enrich a few people who fund them.

After all banks have gotten into trouble because they did things like decide to reward people for lending money without any regard to whether the loan would likely be repaid; they could have decided to reward only those who had made successful loans. Even better they could have engaged with a multiple of reinforcing goals such as “advance economic performance whilst encouraging innovation in pursuit of improving the health of minorities (or even the middle class)”.

Consider the recent behaviour of the ANZ bank (whose chair is a climate change denier) which bought an investment vehicle at a knock down price and then pursued the debtors, closing their mortgages if they missed one payment. These are farmers: what were National Party politicians like Barnaby Joyce doing? Answer: nothing!

The chair of the National Australia Bank Michael Chaney recently said that banks had a duty to fund the mining of coal! This is even more stupid than Abbott’s comment that coal was good. Banks have no obligation to fund anything other than what is consistent with their goals and prudent. Chaney was once chair of the Business Council and advocated then, as the BCA still does, nonsensical views about financial incentives driving teacher performance and test scores representing teacher competence.

The behaviour of the Commonwealth Bank is well known.

For the rest, consider corporate failings and illegal behaviours. I have a list.

As to colonisation and takeovers. The first thing to recognise is the huge cost over time. Most of these ventures are loss-making.  Consider Vietnam and Algeria, not to mention French and British interests in the Middle East. (The British betrayed those who gave their support to the defeat of the Turkish forces in WW1 and British and French representatives divided up the land as they had in Africa to suit themselves.) The present insurgencies in Syria and Iraq represent the ongoing return on investment by those powers.

All colonised peoples have knowledge and skills of great value which are completely ignored and supressed so that the people can be applied to the simple tasks of working at little or no wages in enterprises which the colonizers have dreamed up as appropriate to achieving their own ends. Such as ground nut farming in East Africa. (See the history of pioneer ANU anthropologist Bill Stanner whose writings were recently edited by Robert Manne, the novel and play “The Secret River”, Bill Gammage’s book, “The Biggest Estate on Earth” and “Into the Heart of Darkness”, etc, etc)

Most company mergers in the end benefit only the lawyers who arrange the mergers and a few people who get “success fees”. What generally follows is downsizing or, in other words in not a few cases, at least temporary unemployment sometimes leading to worse. The simple solution to “wealth generation” is followed: cut the costs by increasing the margins which results in increase in the stock price which, since the “investors” leverage their borrowing against stock, represents a considerable gain for them. When they have made enough they sell on the company which by now is diminished. All a result of companies considering the main role to be generation of wealth for their shareholders rather than providing needed goods and services to a specific market.

The boards of such merged companies often contain no person who actually knows anything about the business; the directors are rewarded with large fees, a process which makes virtually no difference to performance as has been demonstrated by research on behavioural economics. Employees are hired by another company so the principal company doesn’t have to worry about the workplace conditions. And employees are engaged in whatever country pays the lowest wages with little or no regard to conditions of employment or any sense of decency. (See ‘Why Work Is More and More Debased’ by Robert Kuttner in New York Review of Books October 23, 2014 reviewing ‘The Fissured Workplace: Why Work Became So Bad For So Many and What Can Be Done to Improve It’ by David Weil and ‘Private Equity at Work: When Wall Street Manages Main Street’ by Eileen Appelbaum and Rosemary Batt.)

The very much more productive alternative would be for companies to merge when each recognises the other has experience and skills which the principal company, or both, lacks but has identified as critical to its progress. What would follow is not sackings but a period of considerable training and development of all staff in the new company in the areas critical to success. Those asked to leave are only those who reveal that they are not comfortable with the nature of the new business. (IR policies rest on best practice as revealed by best research and law.)

If this seems too much like naïve and ignorant nonsense answer this question: how has the European Space Agency managed to land vehicles on a moon of Jupiter and a comet, a process which in each case involved hundreds of scientists from many different countries over a very long time? And how did they get the Hadron Super Collider to “discover” the Higgs particle? In the latter case the machinery broke down at one point: 3,000 scientists and technicians worked at fixing it! How have the hospitals which are expert at managing the most critical medical problems got to be that way? (This year’s Reith lectures by Michael Gawande give a clue about managing complex problems such as bringing back to life persons severely injured and seemingly dead after accidents. A clue: the answer isn’t money or competition. You guessed it, it is cooperation!)

Compare the ESA achievements with the relatively simple tasks of rolling out the NBN, installing pink bats, putting in place a universal ticketing system for Sydney’s public transport system and – yes I know that is very much more difficult than putting a decent education or health system in place against the wishes of entrenched privilege) – transiting to a low carbon economy!

The fact is that the politicians and the corporate boards we have in place are not fit for purpose, mainly through intellectual laziness and an overwhelming belief that what they have been brought up to believe is the eternal truth. The influence of those in leadership positions is followed almost unquestionably until they are found to be no longer of use! Sensible decision-making requires constant challenge and exposure to alternative views!

Almost none of these people would dare to consider the proposition that we would all be better off if there was a substantial reduction in inequality, if those on the margin, especially indigenous people*, were granted the dignity and recognition to which they are entitled including equitable access to the judicial system, if the poor were adequately housed rather than living on the street and the seriously disadvantaged cared for, if drug addiction were treated as an illness and not a crime, if children were encouraged to play by themselves unsupervised as part of their learning, if test scores at school were abandoned because all that can be measured is of little consequence, if investment in childhood education was considered the key to the future, if health care were paid for through taxes because the net gain to the community at large is positive over the longer term, if public transport, urban planning and health were recognised as fundamental to a just society and to gains in other areas, if industrial relations were recognised as constituting the processes for mutual satisfaction of competing wants in the alternative village that workplaces are, if investment in scientific research, certainly not economic growth or population growth, was recognised as the principal driver of future prosperity broadly defined. And if the military had to run cake stalls to generate the funding for their weapons!

I believe these are amongst the most important and critical issues. The economy is not the principal issue, at individual, family, local or national or international level. Writers like the Australian sociologist Hugh Mackay have been saying this for some time and so have many people who have pointed to the importance of issues beyond the economic.

In his commencement address at American University Jine 10 1963, President John F Kennedy said, “So, let us not be blind to our differences–but let us also direct attention to our common interests and to the means by which those differences can be resolved. And if we cannot end now our differences, at least we can help make the world safe for diversity. For, in the final analysis, our most basic common link is that we all inhabit this small planet. We all breathe the same air. We all cherish our children’s future. And we are all mortal…

I finish with some of my favourite quotes. They come from the 2010 Deakin lecture by Tim Jackson, Professor of Sustainability at the University of Surrey. (Jackson is featured on TED. One of the first actions of the UK government of David Cameron was to dismiss the UK Sustainable Development Commission: the parallels with Australia will be obvious.)

“The concept of prosperity as an ongoing drive for growth is inconsistent with human nature. … prosperity has a meaningful sense that isn’t directly about income growth. It’s about the health of our families. It’s about the trust of our friends. It’s about the security of our communities. It’s about participation in the life of society. It’s about some sense perhaps of having a meaningful life and a hope for the future…

“We evolved as much as social beings as we did as individual beings. We evolved as much in laying down the foundations for a stable society as we did in continually pursuing novelty…”

Some of these ideas are explored in my book “Education: the Unwinding of Intelligence and Creativitiy” (published early this year by Springer) and in other posts on this site.

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A Challenge to our Vision of Humanity

Tuesday, July 8th, 2014

‘Are we all here, Do we really count?’ references a statement Australian sociologist and writer Hugh Mackay made some years ago. In his most recent non-fiction book he points out that The Good Life is not one “lived in isolation or in the pursuit of independent goals; a good life is lived at the heart of a thriving community, among people we trust … It is one in which we treat people the way we would like to be treated… A good life is not measured by security, wealth, status, achievement or levels of happiness. A good life is determined by our capacity for selflessness and our willingness to connect with those around us in a meaningful and useful way.” Mackay has written 14 books including novels, his latest being Infidelity.

Mackay’s lesson is the basis for contrasting statements about humanity with observations of the horrors which ordinary human beings have perpetrated or simply allowed. That humanity has made progress is an arguable statement which is too seldom not seriously thought about or realistically discussed. It is also a view which contrasts with the dominant economic view, one that as Professor Tim Jackson, Professor of Sustainable Development at the University of Surrey and one time Sustainability Commissioner for the UK, has pointed out shows we have evolved as social rather than economic beings.

Two books, Rachel Seiffert’s The Dark Room and Bernard Schlinck’s The Reader are among many scores of books and films which draw out the horrors and the conflicts faced by ordinary human beings, not politicians or generals or soldiers. Do these books and films make any difference to how we run out lives and influence the future of our society? Though there is greater international peace, the horrors continue within national boundaries, sometimes boundaries artificially drawn by colonising powers.

Conflicts continue to generate millions of refugees, deny a future to men, women and children, destroy towns and cities, economies and futures. Yet countries with influence seem unable to agree to stop them. Aid becomes another just another business, another opportunity for colonisation in another guise.

Faced with the need to help those fleeing persecution, arguments are advanced about queue jumping, about illegal asylum seekers, about population growth at the same time as skilled people from poorer countries are recruited to jobs in rich countries so corporations can avoid the costs of  training people already resident in that country. Inequality increases as fewer people gain greater wealth and what should be self evident truths remain denied. And discrimination on the basis of race and more continues, as it has for centuries.

A Prime Minister apologises, people weep, then what?

Continue to essay, “Are we really all here. do we all really count?

School Leadership and School Autonomy

Sunday, September 29th, 2013

One of the several propositions advanced by the advocates of market (or neoclassical) economic solutions to education ‘problems’ is that independent schools achieve superior outcomes. Charter schools in the US and Academies in the UK continue to be supported despite compelling evidence that they do not address the principal drivers of student achievement. The reforms introduced by the Howard Government provided substantial additional support to independent schools. The latest international tests showed Australian student performance declining and inequity increasing!

The goal is to have individual schools take responsibility for staffing and budgets. Simultaneously this is linked to the proposition that community involvement be achieved by setting up school councils. There is a parallel in the health area with arguments that local hospitals be run by hospital boards comprising community representatives. There seems to be no recognition that governing boards are a very fraught area indeed and that school boards and hospital boards are not features of successful schools or hospitals in the countries where educational achievement and hospital outcomes are high!

More.

Go to ‘School Leadership’ and ‘The South Side of Chicago’. The essays are edited versions of chapters in the forthcoming book Education Reform: the Unwinding of Intelligence and Creativity to be published by Springer.

OWL’S HOOTS No 15: RETURNING ACCOUNTABILITY TO THE EMPLOYEES BY BEING PREPARED TO ACT

Saturday, October 30th, 2010

Richard Branson and Vinit Nayer have vitally important lessons for us. Both emphasise trust and openness and take risks, both focus on employees whom they recognise as being the source of a successful future. *

First I have to apologise to the reader. This is the first post since February. I promised that the next post would deal with climate change: I drafted a note but was diverted by numerous other things. However, I expect a number of posts to appear in the next two weeks; one of them will deal with climate change.

Meanwhile back to another of my favourite subjects or more.

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I have written on numerous occasions that organisations depend for their future on the way people work together. I do not hold to the notion that the world has changed so fast that what we have learned about human behaviour is outdated. Equally I reject the vision of humankind forced on everyone by the market economists and their utility maximisation-self interest mantra. (Another post will report concluding comments by Professor Tim Jackson of Surrey University in his Deakin Lecture based on studies in social psychology and behavioural economics.)

At this time here is a quote from Professor Amartya Sen, Noble prizewinner in economics, at a recent seminar about Adam Smith published in the Erasmus Journal:

“While some men are born small and some achieve smallness, it is clear that Adam Smith has had much smallness thrust upon him.”

It is fair to say that the 21st century, or at least the first couple of decades, are years of the brain. The emerging understanding about the flexibility of the brain, brain plasticity, and how different parts of the brain work are truly amazing. There are implications not least for education and learning. (For more on this go to the ABC Radio National’s website for the program “All in the Mind” presented by Natasha Mitchell.)

What has been happening in most organisations is decreasing attention to employees, an ever increasing retreat to routinisation. Even in the medical field – mixed practices – doctors are being told how long they can spend with patients and being sued if they don’t accept the instructions. To an extent this is a further development of the ongoing application of neoclassical economics.

So to encounter examples of this all being put aside, of attention being paid to an employee focused organisation is refreshing. I have previously mentioned one outstanding example of this in the firm Semco and also pointed up a couple of aspects of Southwest Airlines.

Another organisation well known for concern for employees is the Virgin group of companies. The founder, Richard Branson, was in Australia a couple of months ago and was extensively interviewed. At the end of the interview on ABC TVs ‘Talking Heads‘  presenter Peter Thompson asked him about stress.

Here is his response:

PETER THOMPSON: You always seem quite fresh and not very stressed, which is remarkable considering the circumstances of your life.

RICHARD BRANSON: I should be fairly stress-free, in that I have the most incredible life. I’ve got the most incredible group of people around me. And I love learning. Every day I’m learning something new. And I love people. So I love life. So I certainly have no difficulty keeping going and challenging myself.

Earlier in the interview:

PETER THOMPSON: One of your trademarks is a special relationship with the Virgin staff.

RICHARD BRANSON: Yeah, I think a good leader is a good listener. And last night I was at the Holiday Inn in Potts Point, where I’ll stay any time that I come to Sydney, because all our staff stay there. And drinking with them, but most importantly listening, and having pocketfuls of notes by the end of the evening, which I’ve already gone on and dealt with today. So…

PETER THOMPSON: Yes, you’re famous for having an exercise book in which you write things down.

RICHARD BRANSON: Yeah. It’s very important. If you don’t write things down, you don’t remember. And I think an exceptional company is a company where you get all those little details right.

Continue to essay: “Leadership: Vinit Nayer and Employees First, Customers Second

OWL’S HOOTS No. 14: ADVOCACY: GRASP THE POLITICAL

Thursday, February 18th, 2010

Hoots No. 14 – 18 February 2010: Advocacy: Grasp the Political *

Downsizing: another silly idea promoted by advocates for small government and “New Public Management” and should be resisted. *

(The next hoot will deal with global climate change and the fact that evidence for change includes evidence for increasing instability, not only warming: museum scientists should be actively promoting the evidence and not leave it to others.)

Twenty years ago Daniel Thomas, then Director of the Art Gallery of South Australia and President of the Art Museums Association of Australia, wrote an article entitled “Grasp the Political” (Adelaide Review March 1990)

He wrote, “What art museums most need in the 1990s is to become politically and economically conscious.  They must not only equip themselves with arguments as to why they should exist, but also with hard statistical data about their costs and their benefits.

“At the same time they must be very cautious about positioning themselves within the entertainment industry.  There the user-pay principal reigns; the showbiz needs of popular exhibitions can displace special-interest exhibitions, such as scholarly art-history exhibitions or difficult, adventurous contemporary art exhibitions.”

I just wonder how many people took any notice of these important statements.

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This hoot comes from sunny San Francisco – well it was when I started to write this –  with its many museums including the wonderfully redeveloped green California Academy of Sciences and De Young Museum of Art, currently showing the truly astounding exhibition of Tutankhamun (see recent articles on the ABC Science site on this Egyptian Pharaoh who died mysteriously when 19 – younger even than John Keats and Giovanni Battista Pergolesi who both died aged 25) and the always marvellous San Francisco Museum of Contemporary Art.

It is also time to again recommend the Global Museum site managed by Roger Smith, now Director – Online Operations (East Asia) at the British Council. Like the Arts Journal Global Museum gathers together interesting articles focusing on museums all over the world; the site also has sections on travel, jobs, resources and links to various documents as well as links to podcasts, which can be downloaded, from many museums.

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I have argued for years if not decades that museum people need to do a number of things to advance the goals of their museum:

There are a few museums where staff have taken the argument up to the frontlines and tried to convince those in government and the community that a certain approach to a situation is appropriate and that some others are not.

Layoff the Layoffs” is the title of an article in Newsweek for Februrary 5, 2010

Pfeffer’s recent article is a good summary of why the downsizing of organisations, which has been quite a fad for some decades and has been popular in the last couple of years as a device for coping with the GFC, is anything but economically positive quite apart from its often devastating effects on the people involved. Museum executives faced with the demands of downsizing, especially when it is part of “encouraging organisations to be more entrepreneurial” have a responsibility to their museum and their staff to make it clear to those who are promoting the “solution” that they do not agree with it. Unless there are the most convincing and carefully thought through justifications!

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Jeffrey Pfeffer is the Thomas D. Dee II Professor of Organizational Behavior at the Graduate School of Business, Stanford University where he has taught since 1979. He is the author or co-author of thirteen books including The Human Equation: Building Profits by Putting People First, Managing with Power: Politics and Influence in Organizations, and Unconventional Wisdom About Management, a collection of 27 essays about management topics, as well as more than 120 articles and book chapters. Pfeffer’s latest book, tentatively entitled Power: An Organizational Survival Guide is to be published early 2010 by HarperCollins.

These quotes give a sense of where Pfeffer is coming from:

Power centres around scarce and critical resources and in times of uncertainty those with established credibility tend to be favoured as the enlightened. Those in power tend to define problems in ways which institutionalise their power. The more institutionalised the power is the more likely it is that the organization will be out of phase with its environment (from a 1977 paper with Gerald R. Salancik)

Organizational success comes more from managing people effectively than from attaining large size, operating in a high-growth industry, or becoming lean and mean through downsizing – which, after all, puts many of your most important assets on the street for the competition to employ.

Pfeffer opens his Newsweek article by pointing out that when the tragedy of September 12 2001 struck there was vast uncertainty about the future of airline flights. Almost all US airlines, and many other corporations, immediately laid off staff. Southwest Airlines did not. (I have written about this company before in “Lessons from Southwest Airlines” and “A chat with Herb Kelleher“) Southwest, which in fact has never laid off staff in its entire history, is now the biggest domestic carrier with a market capitalisation bigger than all other domestic carriers combined. Southwest’s former head of human resources once told Pfeffer: “If people are your most important assets, why would you get rid of them?”

Layoffs, Pfeffer observes, have become an increasingly common part of corporate life, some firms seemingly in permanent downsizing mode. If an industry is declining downsizing would seem inevitable. But in industries where demand is fluctuating? When a company lays off staff in a downturn, staff  have to be when the upturn comes and demand increases. In the process considerable costs have been incurred!

Here is a quote that will surprise some and anger others even more: “A recent study of 20 Organization for Economic Cooperation and Development economies over a 20-year period by two Dutch economists found that labor-productivity growth was higher in economies having more highly regulated industrial-relations systems – meaning they had more formal prohibitions against the letting go of workers.” So much for the notion of employment flexibility leading to economic growth!

Here are myths dispelled by studies of the effects of downsizing:

The negative consequences of downsizing are particularly evident in R&D-intensive industries and in companies that experienced growth in sales.

Layoffs lead to lower morale leading to employees looking for another job at the first sign of better times, greater distrust of management and greater likelihood of stealing from the firm.

Layoffs also have a significant negative effect on the economy since laid off workers spend less, may demand social services payments from government, their houses may end up having to sold because of mortgage default and so on. The consequences to employees themselves can be devastating! Pfeffer says, “Layoffs literally kill people”.

(In the US those who lose their jobs also often lose their medical insurance which, as well as expected outcomes, can also lead to violent behaviour. Reviewing Michael Moore’s latest film “Capitalism: A Love Story ” Chris McGreal  (The Guardian, 30 January 2010) writes, “Early on, Moore sets out the meaning of “Dead Peasants” insurance. It turns out that Wal-Mart, a company with revenue larger than any other in the world, bets on its workers dying, taking out life insurance policies on its 350,000 shop-floor workers without their knowledge or approval. When one of them dies, Wal-Mart claims on the policy. Not a cent of the payout, which sometimes runs to a $1m (£620,000) or more, goes to the family of the dead worker, often struggling with expensive funeral bills. Wal-Mart keeps the lot. If a worker dies, the company profits.)

Governments around the world have adopted the strategy of downsizing claiming this will lead to working smarter. The consequences of such downsizing have often led, as in business, to poorer service. At the same time as downsizing, outsourcing has also been promoted as allowing the organisation to fous on its core business. But as with downsizing it is now realised this seldom works to benefit the organisation as tasks and skills critical to the enterprise are realised as having to be in-house where they can be influenced appropriately by the culture and the staff involved interact with staff in the “business core”. One of the problems is that the downsized organisation seldom has the skills to develop an appropriate brief and project management regime for the outsourced contractor.

Most importantly, a downsizing operation seldom is accompanied by a clearly explained strategy for the future which will lead to a better company which is clearly explained to employees, those affected and those who are to remain. One of the critical jobs of leadership is not done!

These outcomes have been evident for some time and the failures in museums are the failures in business.

For instance, Right Associates (“Lessons Learned: Dispelling the Myth of Downsizing”, Philadelphia, 1992) found that in 66% to 75% of companies which had downsized neither profitability or [productivity] had increased. They argued that companies must investigate alternatives, define the new organisation, plan the downsizing, develop a communication plan and nurture the survivors. Observing that outplacement assistance fosters positive career growth they emphasised that change has to be embraced: no person or organisation can escape the consequences of downsizing.

In the study of museums around the world it was found that the museum organisations that were perceived by staff to have achieved successful change outcomes, were also perceived to have managed the change process through a strategically linked vision of the future state and communicated in ways which enabled participants to know what would happen and how they would be affected by the change, provided appropriate financial, human resource and training in support of the change the change; executives were prepared to devote the time to meeting with people and created the energy to get the change initiated and sustained by leadership action which emphasised patience and support and leading by example through modelling the appropriate change behaviours. (See Morris Abraham, Des Griffin & John Crawford, “Organisation change and management decision in museums”, Management Decision 37/10, 736-751, 1999.)

Museum executives faced with the demands of downsizing, especially when it is part of “encouraging organisations to be more entrepreneurial” have a responsibility to their museum and their staff to make it clear to those who are promoting the “solution” that they do not agree with it. Unless there are the most convincing and carefully thought through justifications! (Note that the responsibility of boards and executives is in the first place to the future of the organisation.)