REVIEW ARTICLE GLOBAL STRATEGY AND ETHICS: MANAGING HUMAN SYSTEMS AND ADVANCING HUMANE IDEALS Alan E. Singer Human Systems Management: Integrating Knowledge, Management and Systems Milan Zeleny Singapore: World Scientific Publishing, 2005; hardback, 459 pages; ISBN 9810249136 [1 ] Introduction T o its critics, the field of business ethics often seems heavy on ethics, but Ught on business. For example, it is rare to find an article that informs managers about incorporating ethics into leading edge business practices such as pro-suming, blog-searching, tele-working and customer-integradon. Accordingly, this latest book by Milan Zeleny (a professor of Management-Systems in New York, the Czech Republic, and China) is important not only for its role in advancing and upgrad ing business pracdces and principles, as was intended, but it also has considerable potential for informing and in some ways challenging the field of business ethics. Human Systems Management (HSM) offers many prescriptions for running contemporary state-of-the-art compedtive enterprises in service of society: the normadve principles of meso-level business strategy and ethics. However, it also provides a very distincdve viewpoint on micro-level managerial ethics, as well as macro-level social and poUdcal systems. In the following secdon of this review, some of the main principles and tenets of HSM are described and briefiy critiqued. Then (in secdon 3) an augmentadon of HSM is outlined. At that point, additional prescripdons for enterprise strategy are indicated in order to more fuUy accom © 2007. Business Ethics Quarterly, Volume 17. Issue 2. ISSN 1052-150X. pp. 341-363 BUSINESS ETHICS QUARTERLY modate the several known limitadons of market based systems. The final secdon of the article then traces the historical context of the HSM thesis, seeing that if it is indeed "not an ideology," as is claimed, it is certainly an informed and persuasive view—from somewhere. [2] HSM Principles HSM advances disdnctive ways of thinking about several familiar philosophical and social science constructs, by placing them squarely within the context of contemporary technological enterprise. These constructs include knowledge, wisdom, purposes, ethics, capital, and synthesis (where contribudons by Zeleny to the theory of tradeoffs are well-known) as well as culture and ideology. The HSM contributions in these areas are summarized in Table I. In many instances, a distinctive posidon is staked out in the book that quickly invites philosophical challenge. However, before taking that up, it definitely pays to remember that this is a thesis with a mission: to equip business managers with mental models and a lexicon that is appropriate to pracdcal action within a culture of enterprise. Where similar constructs have been considered elsewhere within the spectrum of the social and managerial sciences, somewhat different purposes and epistemologies have usually been adopted. Table 1 Selected constructs with HSM contnbutions Constroct HSM contributions Knowledge coordination of aclion Wisdom explication of purpose Purpose of enterprise self-prodtjction, service lo society Ethics mastery of micro-conlexts Synthesis de novo programs, cognitive-equilibrium Capital mulii-form, live and dead Organisation auWpoeisis. organism, boundaries Culture productive practices, convergence Ideology Capilalism with HSM is not an iilenlogy 2.1 Knowledge Taking its cue from F. A. Hayek (1945). HSM starts by identifying the central problem of contemporary management as the division and re-integradon of knowledge; or more precisely, the "co-ordinadon of complementary complexes of specific skills." In this context, knowledge should be thought of, indeed is the coordinadon of action. Backing off only slightly, Zeleny subsequently describes knowledge as "the abiUty to coordinate acdon" and as "an embodied complex of action-enabling structures, externalized through purposeful coordination of action." Put simply, knowledge equals know-how. It is not... a justified beUef, or knowing-that. Accordingly, managers of productive enterprises should now think REVIEW ARTICLE , 343 of all knowledge as tacit knowledge, the rest (encoded, expUcit, externalized etc.) is simply information, or data; yet "it is the greatest truth of our age: information is not knowledge." Indeed, as a society we have far too much data and informadon (see section 3.5) but not enough "knowledge"; that is. not enough coordinated producdve activity. • " 2.2 Wisdom This acdon-emphasis in HSM is extended to a disdnctive notion of management wisdom. It is "knowing-w/jy" things are so. impliciUy adopting a Buddhist tenet, "know-why" is idendfied as a component of a larger wisdom of enterprise. In Buddhist wridng (e.g., Dhammananda 1999) it is said that "the knowledge of how things work is quite different from . .. wisdom, which is insight as to why it works, or why it is done." Similarly, in HSM, the wisdom of enterprise refers to management understandings of why things work (the science), why particular activities are being carried out (the strategy) and especially, why particular purpo.ses or missions have been adopted.' Traditionally. Buddhist philosophy has been criticized as non-producdve economically: more to do with nothing than with bringing forth into the World something worthwhile. Somewhat paradoxically, HSM revitalizes this ancient philosophy of wisdom, conferring a completely new role for it in a predicted era of wise enterprise. The other component of wisdom is "the expUcation of purpose." The wise entity fully communicates all its "know-why," but it does this primarily through its actions. Elsewhere. Zeleny quotes Sir Fletcher Jones: "what a man says whispers, what he does thunders." If we are wise, our actions will automadcally communicate and explicate our purposes, although Zeleny appears to concede that the natural language of ethics and polidcs might also be deployed in order to refine clarify and reinforce this expUcadon. To be self sustaining in the current environment, an entity's purposes must be socially accepted and "vaUdated by experience"; they must be credible and aligned with enterprise actions.' Corporations can be informed, they can be knowledgeable; but in the global era they must also become wise. Although the trend from information-based to knowledge-based strategies stiU has some way to go. the next transidon will be from knowledge to wisdom. Indeed "it is already taking shape." 2.3 Purposes HSM endorses the established idea in the field of strategic management (and long before that, in philosophy, cf. Burrell 1989) that an entity is not completely free to select or compose its purposes and goals. To some extent these emerge from its current circumstances and activities, so they refiect its capabilities. Accordingly, the logic of business strategy includes not only the tradidonal (ends —> ways —> means) BUSINESS ETHICS QUARTERLY sequence, but also its reversal (means -> ways -> ends) and one has to search for the right goals or ends to "validate and enhance" the exisdng means. To the extent that an enterprise can still freely choose its purposes, these should not be looked for in the financial markets. HSM impUcitly rejects the Milton Friedman maxim that the social responsibility of business is to increase its profits. On the contrary, managers of productive enterprises should not concem themselves with share prices that are based upon speculadve trades and deals, nor the influence of quarterly financial reports on this type of speculadon. Economic insdtudons should absolutely not encourage such a focus. Many prominent Western industrialists and entrepreneurs who have shared this rather negadve view of financial markets are quoted in the book: "a business that exists to feed profits to people who are not engaged in it stands on a false basis" (Thomas Bata, a Czech entrepreneur); "the stock market is just a little show on the side" and it "has nothing to do with business" (Henry Ford), whilst according to J. F. Lincoln, "the stockholder should have the lowest priority." According to HSM. monetary rewards should be earned exclusively by those who are actually engaged in production and coordinadon. The reward should go to the industriaUst or entrepreneur who brings forth a Uving enterprise. As demonstrated by Bata Enterprises in the Czech Republic, not to mendon much of Japanese industry in the 1980s and 1990s, business is all about earning money through the producdve coordinadon of action. The mere trading of property rights, whether in shares or used cars, all too often involves dubious deals and swindles, so it just does not count as "earning," in any upright or ethical sense. In nature, it is argued, such "deals" do not sustain productive networks, so for HSM they do not count as "earnings" and should be discouraged accordingly. (In financial reporting such trades and deals are of course a major component of profit, income and earnings.) It thus becomes apparent quite early on that HSM is siding firmly with the stakeholder model of enterprise, or stakeholder capitaUsm. The purpose of enterprise is to serve customers, employees, and society, certainly not to facilitate the accumuladon of financial capital from a distance, through speculative trades. With regard to customers as stakeholders, HSM quotes J. F. Lincoln that "The proper responsibility of business is to build a better and better product at lower and lower price." This point is frequendy reinforced in HSM by demonstradons of how enterprises can eUminate cost-quality tradeoffs and respond "kinedcally" to individual customer-related events. Modern enterprises (do and should) strive to be agile and kinedc. They should strive to deal with "markets of one" (one customer, that is, not one stock-trader) just as medical doctors have always tried to revSpond to each individual padent and each episode. With regard to employees as stakeholders, the doctrine of Thomas Bata is further endorsed. It is to "provide a sadsfying environment, now and in future" whilst empowering employees. Long ago, Bata introduced the idea of employee share ownership (ESOPs) in his companies in the Czech Republic. He claimed at that REVIEW ARTICLE dme that this was a "simple" idea that "immobiUzes defenders of the ideological struggle between capitalists and workers." As if to pre-empt howls of outrage due to Enron-style vanishing-ESOPs, J. F. Lincoln is also quoted at this point regarding the "injusdce" that takes place whenever "a worker loses his job and the manager is unpunished." Finally, with regard to society as a whole, HSM invokes the "wisdom" of Sir Fletcher Jones, that "every business enterprise should have as its very basic policy .. . to benefit society" and that "the aim of enterprise is .. . better life for air (emphasis added). By way of expUcation, Jones claimed that "only under such conditions can enterprise condnue." However. HSM cruciaUy stops short of working through the full impUcations of its view of business purpose as service to society, especially as it relates to the fuU set of limitadons of market based systems (see section 3 of this article). ... . 2.4 Ethics Since the book was written, Zeleny has also proposed a "4E spine" of enterprise, in somewhat similar vein tothecUched4P'sof marketing and 5P's of strategy. The "spine" is: "efficiency, effecdveness, fxpIicabiUty (as mentioned).. . and ethics." Modem managerial acdon should possess all four qualities. The ethics component of the 4E spine is now Ukely to prove of particular interest to philosophers. It is a mixture of virtue ethics, pragmadsm and egoism, in which ethics in business is held to be observable only at the micro-level. In general, ethical behaviour is a spontaneous inclination (rather than a planned response) and it stems "naturally" from a desire for gain. Ethics should not be thought of as a social imposidon. On the contrary, it is part of the tacit knowledge of individuals, so that to be ethical, one simply "acts good." Accordingly, business ethics is expressed by individuals as they strive for "mastery of the micro-context" and by "human coping with immediate circumstances." It is a property of micro-level human behaviour and it operates in real dme (or "online," to quote Ken Goodpaster circa 1983). By implicadon, one need not attempt to obey explicit encoded (and imposed) ethics rules. Ethics committees that struggle to compose even a few good principles (cf. Soule 2002) are really not needed. They are barking up the wrong tree. SdU more controversially, Zeleny argues that to be "truly" ethical (i.e., act good) one cannot be intentionally "ethical" (i.e., obey official rules). One should simply act out of an "infomied sense of the good." Significantly, however, there is no discussion in HSM of how weUinformed this particular sense needs to be. Another tenet of HSM that will catch the attendon of moral philosophers is its indicadon that meso-level stakeholder integration strategies do not really need an independent jusdficadon, whether normative, instrumental or literary: these strategies are just plain "natural." Philosophical arguments concerning the NaturaUstic Fallacy are not entertained. The thesis just states (or persuasively claims) the sciendfic facts: enterprises are autopoietic systems, so they (do/should/must) act in ways that sustain and co-produce their own support network. The stakeholder model of strategy is BUSINESS ETHICS QUARTERLY thus literally alive and well, unlike the shareholder model (see secdon 2.5, "Capital." below). Finally, at the level of macro-ethics and polidcs, HSM simply issues an appeal for a "funcdoning democracy that is based on respect, with free market behaviour (i.e., exchanges between HSM-type enterprises and their customers)... that is based on tmst." Although Milan Zeleny has been personally acdve in nadonal polidcs in the Czech RepubUc and in the USA, the HSM thesis does not really consider the possible ways of bringing about this necessary macro-environmental state of tmst and respect. It simply implies that more and more HSM-type enterprise will be enough to do the trick, but it neglects to explore the possibility that businesses might be able to infiuence govemments (heteropoietically) to also pursue that end more acdvely. Strikingly, governments in general are dismissed as being "least equipped" to promulgate morality in business and in society. 2.5 Capital Given Zeleny's seminal contributions in the 1970s and 1980s to the theory of muid-criteria decision making (MCDM), it comes as no surprize that HSM also endorses a muld-dimensional view of the concept of capital. There "are" several distinct forms of capital, including human, social and ecological as well as manufactured and financial (which in tum has many sub-forms). To create prosperity at the nadonal level, Zeleny believes that social capital is usually the most cridcal, although in reality it has often been the most neglected and ignored. Social capital is "the enabling infrastructure of institudons and values" in a society. In line with Sen (1996). Zeleny also notes that Japan's wealth is primarily due to its human and social capital investments and that "strong cultures with high levels of civic trust tend to produce higher economic performance .. . not the other way around." Social capital cannot be engineered, but it can be deUberately culdvated. Once again, however, the possible ways of doing this are not very fully explained. According to HSM, trade-offs in which the level of social capital is reduced in a system in order to maximize the manufactured form of capital "are rarely sustainable." Instead, enterprise strategies and nadonal poUcies should both aim to achieve a balance or a harmony between the four forms, essentially by creating the right amounts of each one, rather than destroying one in order to create the other. This approach has been pursued in recent times by several well-known ecological thinkers (e.g., Hawkens, Lovins, and Lovins, 1999; Porritt. 2005) as well as some World Bank studies that are discussed in the book. In contrast, financial-economic models routinely incorporate or subsume the disdnctive fomis of capital into a single overarching formal utiUty (wealth or profit) funcdon. Although this is done stricdy for the purposes of formal analysis, Zeleny wrote that the different forms of capital "cannot" be subsumed into a single measure in this way, by which he meant that such models mislead managers and policy makers.' Although the disdnction between the "manufactured" and "financial" forms of capital was glossed over in the above discussion, it is really quite central to the REVIEW ARTICLE I 34? HSM thesis. It re-emerges later when a distincdon is drawn between "live capital," which is the re-invested monetary eamings of a productive enterprise, vs. "dead" capital, which is the accumulated financial profit gained from speculative trades and deals."* Put simply, live capital is a very good thing: it refers to the assets used by an enterprise to produce its valued market offerings and future-self. It takes its place within a natural productive cycle: Production -> Capital -> more Production "Dead" capital is not good. It "has as its main purpose the production of payments for owners" and it can be represented as: Capital —> Production -> more Capital Although it may be obvious that both of these sequences are embedded in a recurring means-ends chain (and are modeled in financial-economics as dynamic dividend and investment decisions) the "accent" and impUcadons for business strategy differ, under the two different representations, or frames. The first sequence coheres with the Japanese management tradition in which manufacturing and marketing are accorded a much higher priority than financial-market deals. On the other hand, within Anglo-US cridcal scholarship, one can find plenty of references to the nodon of "dead" capital, or similar. For example. Manning (1988) noted that under the assumption of corporate moral agency, acquisition becomes the moral equivalent of murder (although she finds this "counterintuitive"); whilst at about the same time Burrell (1989) wrote trenchantly on "linearity and death" in his broad critiques of the engineering view of economics. All such references tend to reinforce the underlying point in HSM: the first "Uve" acdon-sequence is good and we need more of it, the second sequence is Ufeless and should not be encouraged. 2.6 Synthesis The development of all four forms of capital (social, human etc.) in harmony exemplifies an ethos of "management without tradeoffs" (MWT), which is in tum a component of a larger Global Management Paradigm (GMP) that is discussed in the book. GMP combines ideas such as open-books, customer and supplier integration, mass-customizadon, horizontal (flat) organisadon, within a mindset that continually focuses upon the elimination of tradeoffs. In managerial decision making, nothing should be thought of as fixed or given (like the "given" constraints in mathemadcal programming problems). AU tradeoffs are "perceived" or "apparent" and everything can be reframed and potentially redesigned. Put differently, when trying to opdmize a system, one should also take some time to explore possible ways of re-designing it. One should be similarly cautious about formal solutions to problems that locate an optimal point within a given set of constraints (remember this is from a well-known mathematician), instead one should try to "dissolve" the original problem, through innovadon. BUSINESS ETHICS QUARTERLY About twenty-five years ago, the de novo Unear programming method (e.g., Zeleny 1981) gave formal expression to this entire idea and it has since been widely reported and discussed in Management Science and Engineering journals. In de novo programming, the estimated costs of incrementaUy re-designing the system are esdmated ex ante and become part of the calculadon of an optimum. In the new book, the discussion of the de novo method is confined mainly to cost- quality problems. Elsewhere it has been applied to perceived environmental costs. However no-one has yet taken the opportunity to apply the de novo method to the Global social and moral problem of distribudve jusdce: the "apparent" nature of all equity-efficiency tradeoffs, together with the associated "false choices" between profit and fairness (e.g., Kuttner 1984). The concept of synthesis re-appears in another disdnctive theory of decision- making that is set out in the book: the theory of Cognitive Equilibrium (CE). This expands the de novo method at the conceptual-modelling level, but it also admits a formal representadon in terms of fuzzy-sets (e.g.. Zeleny 1991). Both the conceptual and formal versions of CE express the core idea that none of the components of a structured decision-making problem is really a "given," or an exogenous condidon. Instead, the various criteria, values, alternadves and their representadons are all products of the mind: furthermore, they are all inter-dependent. When pardcular alternatives are under consideradon. for example, selected criteria and constraints then tend to become reladvely more apparent, and so on. Accordingly, decision- making should be depicted as a circular equiUbrium-seeking (dissonance-reducdon, coherence-seeking) process in which descriptions, representations and frames are iteradvely re-considered, alongside the relevant criteria and values. Although Zeleny's CE theory was first set out in 1991, it retains some potendal to contribute to several streams of philosophical thought. In rational choice theory, for example. Schick (1991) wrote that "we value things under the descripdons we put on them." In CE, we also tend to create things "under" the values we adopt, and so on. In business ethics, those who are interested in the theory of moral imaginadon and the effects of framing on decision making (e.g., Werhane 1999). or the notion of a reflective equiUbrium within Contractarian ethics, might all find this theory of cognidve equiUbrium to be relevant to their endeavours. As Sen (1996) once mentioned, the same applies to the "promising" field of MCDM as a whole, within which the theory of CE was developed. 2.7 Organization The term "synthesis" is also of course suggestive of dialecdcs. Ever since that latter nodon was first articulated (by Plato) it has been associated with the sciences of Ufe and mind. HSM treads that ancient pathway, but without mentioning dialectics per .se. It not only develops synthesis as a theme within general management, but it also sets out a lengthy and persuasive thesis on Uving organisation. It is first noted that the modem business involves "adaptation, creadyity. innovadon and trust. REVIEW ARTICLE none of which are particularly machine Uke," but it is also claimed that producdve enterprises answer direcUy to a pardcular description of living: one that involves the biological concepts of autopoiesis and a "natural" life-cycle of production, bonding and degradadon. The idea of organisadon-as-organism is thus held to be much more than a metaphor. In order to bring forth a product (a market-offering) an enterprise also has to "produce its future-self; that is, it must sustain and adapt itself over time intervals. Indeed, the latter type of producdon is "more important" than the former. The Amoeba system of Kyocera corporation is used to illustrate and affirm this notion. The corporate entity consists of autonomous agents (associates) and teams (amoebae), linked by intra-company markets. The "amoebae" are embedded within inter-company networks of suppliers and communities of customers who are integrated into the production process and thereby extend the intemal network into a functional and compeddve whole, or a compedtive complex. According to Zeleny (who is now working on a new book: Organisation as Organism), this "whole" is alive. It follows the cycle of production, bonding and degradation; it re.sponds to action in its environment with action-feedback (kinetics). Its overall organization (amoeba, network) is conserved over dme, whilst its detailed stmcture always remains open and changing. Its boundary is not legislated; it is instead a manifestadon of the underlying organization and the networked structure. Within each "amoeba," age, training and formal qualifications are irrelevant. The only essential qualificadon for moving to the head of an amoeba (be it an organizadon or a cellular slime mould) is the action-based know-how or competence to do the necessary job. The challenge for managers (if any) is therefore not "how can we sustain the system" but how we can help it to sustain itself, with its sub-systems (i.e., like a good doctor helping a patient). This challenge was well understood in the 1930s by Thomas Bata, who observed that "all ranks .. . realize personal growth and social development through (this) self-renewing corporate organism." In the contemporary context. Zeleny beUeves that these biological principles condnue to yield a natural, spontaneous and gainful way to arrange human affairs. He notes that "humans Uke change .. . so long as it preserves the support network that they are part of." In contrast, the radical dismpdons of producdve organizadon that can occur under the dictates of bureaucradc (e.g., socialist) hierarchies and under financial market capitaUsm (by virtue of M&A activity) are unnatural, unde.sirable and unnecessary. Whilst this critique may be rather famiUar, it has always been evaded or suppressed by power seekers and ideologues. 2.8 Culture Zeleny really dislikes ideology (see below) but he is also very cridcal of what he sees as an overemphasis on culture in academic studies of global business. He begins the assault on the burgeoning scholarship of culture by quodng Tolstoy: "happy families are all alike, every unhappy family is unhappy in its own way." 350 BUSINESS ETHICS QUARTERLY Likewise, "good management is good management, anywhere in the worid." whilst "bad management has many forms but it is remarkably recognizable." Furthermore, HSM presents modern knowledge-based business enterprise as the quintessential "cultural" insdtudon. Economic organizadon and quality of production should never be thought of as something separate from culture; indeed, in many ways they are its most reliable and expressive manifestadon. Surely, he argues, we should now think of a weU-run enterprise as "a more potent and expressive cultural achievement than a hand-made mug or self-absorbed painting." In any case, there is plenty of casual and formal evidence that the "cultures" of business enterprise and management are everywhere converging.'' There is an obvious tension between this viewpoint and the more common understanding of an endty's culture as its rituals, symbols and mental states (e.g., Doktor 1990). However, in recent dme. many of those symbols (including nadonal identities) have been recast by entrepreneurs as dot.com markedng tools. Meanwhile, according to HSM, the only relevant "mental state" in a society is to be found in the know-how and know-why of its productive enterprises.'^ So far as growing a vibrant global enterprise or network is concemed, local "cultural" products such as handicraft and assorted mugs are now just another sideshow. Indeed, they tend to "bring misery." On a much happier note, Zeleny predicts that modem market- driven work pracdces such as tele-working and work-cloning will continue to create new communities of geographically dispersed peers; a development, he says, that is "sorely needed." 2.9 Ideology What is definitely not needed any more is hierarchical management: it is ideological, "hopeless" and its consequences are decline and corruption. HSM is particularly critical of top-down state involvement in enterprise operations and ownership, as well as the historically related nodon of social class. On the first of these, Bata is once again quoted with approval: "It is enterprises (i.e., the HSM- type, not the state, not unions) that are .. . bringing quality of life and possibilides of educadon to the nation." With regard to "social class," Zeleny argues that each employee or cidzen should be thought of as a repository of know-how and certainly not as a representadve of a class that is in need of solidarity. By impUcadon, trades- unions are no longer necessary (but see next section). It is perhaps worth recalling at this point that HSM has also objected strongly to the mainstream Anglo-US variant of financial-market capitalism (FMC). where there are too many "swindles" and too much dead capital. Accordingly, it is essendally advocadng a variant of capitalism, a kind of Third Way, in which (i) enterprises are structured and viewed as self-sustaining and leaming enddes, (ii) stakeholders and "Uve capital" are fully integrated into the network, and (iii) educadon is for enterprise but with substance. A startUng claim is then made that. unUke both Socialism and FMC, such a system "is not an ideology." Zeleny insists that HSM has simply REVIEW ARTICLE described and depicted a natural and spontaneous system: one that "comes to Ufe when ideological pressures and limitadons cease." [3J Humane Ideals Despite that insistence, HSM often reads more Uke poUtical manifesto (e.g.. Zeleny 1988). Indeed, it moves unambiguously into the poUdcal arena when it argues against state ownership and suggests that "the state is least equipped to promulgate moraUty" (for an opposing view on that see for example Casson 1998). On such a reading, there is a risk that the thesis might then become fuel for the polidcal far right: the modem day Spencer or Hegel. Not only are enterprises modelled as social and biological systems, but their core dynamic is "human striving" to become a valued member, or a "master." The domain of HSM is effort, earning and the struggle to achieve. The problem with all of these, when viewed as core components of a political doctrine, is that only those individuals who can "earn" (or who can pay) will be able to sustain. This ethic of care come under pressure and the idea of moral minima applied to Global society as a whole is implicitly challenged, or at best neglected. Accordingly, there remains another question for contemporary managers, conceming humane ideals. It is as follows: can enterprises also play a role in infiuencing govemments so that they jointly promote all aspects of morality more effecdvely? Put differently, enterprises might be able to act autopoietically and heteropoietically. co-producing not only the future enterprise and it market offerings, as is specified in HSM. but also fostering moral progress in a much wider sense. To do this credibly and effectively, it is surely not sufficient (as HSM implies) to aim only for a culture of enterprise. It is also necessary to (a) know (i.e.. know-that) all market- based systems confront specific limitations regarding the ways in which they can "serve society" and "benefit all," and then (b) to try to compensate systemadcally for those known limitadons. 3.1 Market Limitations LJ ,>.There is a standard set of known limitations of market-based systems (KLMBS) and these can be considered one at a time in reladon to the HSM prescripdons, as weU as FMC-type business strategies (i.e.. business as usual). The limitadons include inter alia the monopolistic tendencies of producers, distributive jusdce concems. the inability to pay, the availability and credibility of market information, the difference between consumers' revealed preferences and their well-being, together with various forms of social alienation (Table 2. column 1). As a matter of strategy, most FMC-type companies roudnely try to exploit all of these limitadons. They not only attempt to maximize their market power (see below), but they also try to create desire (e.g.. Crisp, 1987). to conceal information, to glamorize social alienadon, and so on. HSM has set out several elements of a more enUghtened strategy that BUSINESS ETHICS QUARTERLY have the effect of overcoming particular Umitations (e.g., by catering honesdy to markets-of-one, by re-integradng price and value, etc.). However, it has remained silent on several other important Umitadons of markets: especially those where the compensatory strategies of enterprise would involve an ethic of care, the protecdon of rights, or an assurance that all peoples' needs for income and opportunity are met to a reasonable leyel (refer to Table 2, columns 3 and 4). . LimitatJoos of Market Ba.sed Systems and Compensatory Strategies in Variant of Capitalism The Known Financial Market Human Systems Humane Ideals Limitiitions of Capitalism Management Management Market-Based Systems Monopolistic tendencies Anti-tnisl Knowledge as power, Rights and empower- hyper-competition ment through unions Distributive justice and Goveramenl policy Individual conlributiun Individual needs, public faimess and community needs, goods, educate to help educate lo self-sustain Ability to pay Government policy No handouts. Paying-Expand the network, cusiomer is king Keynesian approaches Information Speculative trades Authentic conversalions. Same Positioning, PR open books Preference vs. Creation of desire, Products incorporate Same wellbeing framing human goods Alienation Production for market Re-integration of labour, Integrate non-valued knowledge and price members Associations Democracy and markets, Democracy and markets, Care, rights, mechanislic biological moral-minima It has often been noted that businesses are able to exploit some of the market limitations, as a matter of strategy. However, what has hardly ever been stated clearly and explicidy is the simple idea that all types of enterprise might now be able to serve society much better by strategically compensating for all of these Umitations, especially if they are wilUng and able to act jointly in partnership with govemments, to this end.^ Accordingly, an altemadve system of enterprise (//umane /deals Management, or HIM) can now be more clearly envisaged, in which this type of "compensadon" strategy becomes the norm for ethical business. HIM is a hypothetical (but arguably achievable) way to arrange human affairs and it can be thought of as a potential augmentadon or adaptadon of HSM (Figure 1). Its elements are briefly outlined in the remainder of this ardcle. 3.2 Monopolistic Tendencies In FMC-type companies, it is standard pracdce to consider the strategic uses of market power that knowingly deny benefits to others (e.g., Boddewyn and Brewer 1994). As Quinn and Jones (1995) and Prakash Sethi (2003) have all noted, this impUes that there is litde concem for others'rights."* To compensate for this (refer to Table 2, row 1) ideals-based HIM strategies would work within the spirit of antitrust laws, but they would also work with govemments to help ensure (for reasons REVIEW ARTICLE Figure 1. Variants of capitalism and enterprise service to society FMC Enterprise actions HSM Enterprise actions L HIM Enterprise AM KLMBS overcome actions or compensated of social .service) that there is an adequate dispersion of market opportunides. The mainstream strategy literature has notably shied away from considering this type of "ideal" approach, but it has also neglected another obvious way of counterbalancing excessive corporate power; that is, partnerships with trades unions. On this point. HSM has sided strongly with FMC: trades unions are seen as the dysfuncdonal embodiment of a social class, rather than a way of building social capital. Zeleny curtly dismissed "the unreaUstic dreams of the working class," nodng that "the power is not in the class, but in the knowledge." He then added that "autonomous, independent and self-motivated workers or citizens have never been good material for unionisadon.'"' In contrast, HlM-enterprise would encourage a legidmate role for trades unions: the upholding of rights and the provision of security for those who are not yet valued members of any productive complex, or who lack the capacity to attain autonomy, or who need care. 3.3 Distributive Justice According to HSM. modem businesses must strive to become valued members of a producdve complex, whilst individuals who do not add value "should not take part." However, we don't find out what they should do instead. According to Bata, people "must be taught to help themselves"; that is, they must find ways of qualifying for network membership. This imperadve is endorsed by Sir Fletcher Jones: We shall succeed "when we educate people to manage and direct their own work." Indeed, one hears this message again and again—particularly from those who have already succeeded in business, but much less from medics, social entrepreneurs and BUSINESS ETHICS QUARTERLY those on the front Une of global social welfare. Accordingly, ideals-based HIM-type enterprises would work with govemments and NGOs to ensure that immediate survival needs everywhere are met to a reasonable level and that public goods are weU-funded, whilst people are generally encouraged and educated to help each other directly. 3.4 Ability to Pay There have always been a variety of reasons why some individuals lack the "ability to pay" for a dignified standard of Uving. HSM makes no recommendadon on overcoming this particular Umitation (Table 2, row 3). However, it does quote successful entrepreneurs about what not to do: "By dispensing gifts of money .. . people become dependent on handouts and ignore their abilides of self reliance." "Charity does not help people .. . the goal of philanthropy is to foster self-help," and so on. On the other hand, FMC and HSM both appear to accept the proposidon that when a dollar is spent on market offerings, the paying customer is king: "The customer is always right, even when he is wrong," said Bata. At this juncture (i.e., when referring to consumpdon, rather than producdon) HSM is notably silent as to whether a regal customer's dollars were earned, endowed, inherited, the fruits of speculadve trades, or simply "swindled." HIM in contrast sees that there are certain types of charitable acdons that are not only consistent with many of the core principles of HSM, but also endow more people with an abiUty to pay and participate. Just as HSM has self-sustaining enterprises integrating their customers into the producdon cycle, HlM-enterprises would integrate their employees more fuUy into the consumpdon cycle. They would take direct and indirect action (through stakeholder strategies, poUdcal lobbying and partnership) aimed at sustaining and growing the network of customers that have the abiUty to pay. The most obvious direct acdon of this type is simply to lobby to increase wages, across a broad front. Recently, a senior executive of the (much criticized) Wal-Mart corporadon mentioned this very nodon. He said on TV that he was in favour of raising the national minimum wage "because minimum wage eamers are our customers." A second approach to pro-acdvely expanding the customer network involves infiuencing govemments to have more tax revenues channelled into poverty alleviation programs. These include social safety nets (charitable social welfare) as well as bottom-of-pyramid micro-credit programs for enterprise. HSM indirectly and unintentionally invites further consideradon of such approaches in an intriguing secdon that discusses birth and death processes in nature, with particular reference to the works of a Russian systems theorist, A. A. Bogdanov (1984, 2002). In his theory of Tectology (a precursor to the Italian theory of autopoiesis) the decUne and death of a biological species was interpreted as a signal or affirmation of the persistence of all other species. The event of death was thus described as "the most exquisite assurance of Ufe yet to come." One cannot help but wonder how Bogdanov would REVIEW ARTICLE 355 see, in today's world, the linkage between the death of an individual human being and the best way of "affirming" or assuring the "persistence" of the remainder. The death of a multi-billionaire, for example, releases a pool of (dead?) financial capital that can directly assist with the survival of a great many others. It is only necessary to re-distribute the wealth. Although it seems inconsistent with HSM, a properly thought-through (Global) estate tax might thus become an "exquisite assurance" to many and a very effective way to "meet community needs," weU beyond the level that is achievable through autopoiedc enterprise combined with voluntary philanthropy."^ 3.5 Information ., , In HSM (and in HIM) "speculative trades" and "un-eamed gains" are associated with dead capital and they are discouraged accordingly. This includes gains from playing the market from a distance, as well as the exploitation of insider informadon (Table 2, row 4). Instead, people everywhere should be encouraged to implement their tacit knowledge: the type that brings forth effective coordinated actions in the service of society. For example, human-systems accountants would ensure that the internal management accounts and external financial reports are as open and clear as possible, so that everyone can understand them and see how they relate to the explicated strategy of the enterprise. Similarly, human-systems marketers would ensure that "the product speaks for itself (again, action, not encoded information). They would engage in authendc conversadons with stakeholders and see to it that the company acts quickly (kinedcs) in response any to revealed product weaknesses. 3.6 Preferences and Well-Being Within FMC consumer markets, encoded informadon is roudnely used to create desires, manipulate frames and obscure any known product weaknesses. "Industrialera" public-relations "PR" departments roudnely provide spin that, according to HSM "no longer relates" to the public. Coupled with shock-transidons from Socialism to CapitaUsm (in Eastern Europe) this type of abuse has already misled many young people into "fiying around the flashing lights of empty promises of hope, until they end up totally exhausted with their wings already burned." In contrast, HSM (and HIM) enterprises do not try to trick people. Like Bata enterprises, they "endeavour to fulfil even the unexpressed wishes" of their customers. They produce artefacts (e.g., cars, cameras, clothing, etc.) that are infused with the human goods (beauty, quality, hannony, etc.) and that will immediately be recognized by customers as fostering their genuine well-being. 3.7 Alienation Whilst they strive to meet their paying customers' authendc requirements, HSM- type enterprises are also collectively laying to rest the nineteenth-century Marxist BUSINESS ETHICS QUARTERLY idea of the aUenation of the worker-producer. Under the condidons that prevailed when Marx was whdng, factory workers might have been mentally numbed (made stupid) by the mechanical division of labor, whilst craftsmen might have experienced a sense of aUenation as a result of having their expressive values and identides subsumed into a singular monetary measure (price). However, in contemporary producdon we observe instead a re-integration of labour, task and knowledge. Labour is once again becoming a craft, a profession and a skiU. Furthermore, HSM-type enterprises have always thought of price as an expression of their collective integrity. In a spectacular inversion of Marxist thought, price becomes an integral part of the muld-attribute market offering. That is why Bata declared that "bargaining does not exist" and "our first word is our last." Put simply, in HSM (and HIM) the product is good and so the price is correct. Figure 2. Aframework Tor enterprise strategies that compensate for market limitations KLMBS overcome HIM or compensated Enterprise i^ ' Service to society, actions V Common good Enterprise encouraged, markets regulated, ethics promoted 3.8 Political Associations Finally, at the polidcal level, all these variants of capitalism (FMC, HSM, HIM, etc.) have at times been linked with democracy and individual freedom. In comparison with other systems (or ideologies), they are held to foster a negative freedom from state oppression, as well as the posidve freedom associated with individual achievement. For FMC, such claims often confront documented episodes that attest to the contrary, involving extractor corporadons and the tacit acceptance of human rights abuses. HSM joins FMC in making the strongest possible case for freedom, but it sees it as dependent upon producdve enterprises adopting integra REVIEW ARTICLE tor stakeholder strategies. HSM also appeals for a macro-level "democracy based on respect" (i.e., respect for every cidzen, certainly not for authority derived from hierarchy and positional power), yet it dismisses govemments as being "least equipped" to help bring about such social conditions. In contrast (Figure 2) HIM enterprises attempt to influence govemments to this end, directly through lobbying, as well as indirectly through their communicadons. This is in accordance with (a) their expUcated mission of service to society and (b) their sense of the good that is fully informed of the limitadons of markets. 3.9 An Illustration The principles of HIM can be illustrated from a distance with reference to Canon Corporadon. That company already follows many tenets of HSM. For example, in 1984, Canon's Japanese chairman Mr. Mitarai (like Bata in Czechoslovakia before him) advanced the idea that "profitability alone is not enough" and that a company also had an obligadon to lend its strength "to society's betterment" (Sandoz 1997: 25). Canon then explained its corporate philosophy of Kyosie. or Uving and working together for the common good. Currently, the company remains profit-focused, yet its website also states that "it is the presence of imbalance in our World . .. (that) hinders the achievement of Kyosie." •fable 3. Elements of HSM strategy Human Systems Humane Ideals Explicate purpose Promote the re-balancing of wealth Just ireatmeni of workers Partnership with unions Philanthropy for self-help Political support for public goods Ciislomer is right Guidance on common-good applications Knowledge as capital lPR-free race-to-the-top (hyper-competitive) Environmental engineering Partnership against root causes However, Canon's weU-documented history appears to indicate some wavering in its emphasis on Kyosie with an HSM-endorsed "service to society" versus FMC- type profitability and shareholder wealth-creadon (e.g., Kaku 1996; Sandoz 1997; Granstrand 1999; www.Canon.com). An HIM ideals-based strategy would not only have Canon shift its strategic orientadon firmly towards Kyosie. but would also have it act (i.e., explicate) to try to correct that observed "imbalance." There are several possibilides. With regard to the re-balancing of wealth, for example, the company might take a lead in moderadng its pay scales whilst also recognizing and supporting properiy-modvated unions. Then (Table 3, rows 2 and 3) its corporate philanthropy program could be augmented with poUdcal acdon aimed at promoting the funding of public goods by the state, or by trans-govemmental bodies. FMC and HSM companies generally adopt quite the opposite stance, with executives arguing at every tum for lower taxes and less govemment. Other possibiUdes for BUSINESS ETHICS QUARTERLY ideals-based strategy include (i) cridcizing product applicadons that obviously do not serve the "common good" (as opposed to accepdng that "the customer is always right"), (ii) explaining the ambivalent reladonship between strong IPR regimes and social benefits, whilst adjusting IPR management strategies accordingly" and (iii) supplementing environmental engineering programs with partnerships aimed at tackling the root causes of polludon. [4] A View from Somewhere Canon's expressed mission, Uke the endre HSM thesis, has been shaped by the disdncdve personal experiences of its author. At Canon, it was a single executive who proposed the Kyosie mission. Mr. Kaku's views were no doubt influenced by the fact that he was a survivor of the Nagasaki atomic bomb (Sandoz 1997) and spent his childhood in "straightened circumstances" in China. In HSM one can observe quite different influences: the formadve effects of F. A. Hayek's tutelage, the history of the Czech nadon, visits to the Asian "Tiger" nations and an immersion in the financial-market culture of the USA. The remarkable claim that HSM "is not an ideology" can then be re-assessed in the Ught of an awareness that Bata's human-oriented businesses were severely damaged by Nazis in 1939 and viUfied after 1948 by the Communist party. Reading HSM (indeed, all of management theory) in Ught of its author's personal background thus helps us to see its Umitadons more clearly. It also confirms the relevance lo Business Ethics of the philosophical concept of positional reladvity (and the corresponding nodon of sd-ategy-as-perspecdve). Mr. Kaku's view of business purposes was shaped in Japan and China in the 1940s. Zeleny has been "posidoned" in the USA, the Czech Republic. Beijing and Taipei. His downbeat view of govemment capabilides contrasts with that of Casson (1998), an EngUsh Economist, who has suggested that govemments are "we/Z-equipped" to promote moraUty (emphasis added) at least for the purpo.se of improving corporate governance within FMC. More generally, it seems that ethicists and managers should be cautious about prescripdons that look universal and insightful, since these are evidently influenced by the Ufe experiences and the consequent poUdcal stance of their authors. Given the forceful tone of HSM, it is reassuring to find out that Zeleny is indeed very well aware of this precise point. More than once in the book he has quoted the Spani.sh poet Manuel Y Ortega: "lam myself and my circumstances." 4.1 Lacunae Even though we do tend to "see the world .. . as we are" (Koehn 2006: 395, cidng Anais Nin). we can also endeavour to detect and compensate for our own blind spots. In HSM, unfortunately, there are quite a few. The failure to "see" and consider the full set of limitadons of market-based systems has already been noted REVIEW ARTICLE (Table 2). In addition, HSM has also passed over several clear opportunides to acknowledge and engage with well-known counter-claims (Table 4). isMs 4. HSM daims and onacknowle^ed couoter-claims Hcme HSM Oaim Counter-Claim Class struggle Dream Valid dictum Benevolence Restrict Stretch .lustice Implicit Impcralivi,'. Standard Serving shareholder False baiiis Financial-Economics For example, the assertion that Marx's working class has been awakened from its "dreams" by the current re-integradon of labour with knowledge finds a perfect counter-point in Rorty's sustained views on that very same quesdon: Nothing that has happened iti the last hundred years would lead Marx to revise his dictum that the history of the human race is the history of the class struggle. (Rorty 2006: 379) It thus seems that the reader of HSM has at the very least been deprived of a spectacular critique. Part of the problem here (as indicated at the outset) is that HSM focuses throughout upon the management of modem enterprise, white Rorty and many companion thinkers are gazing steadily at the condnuing worldwide social injusdces. As a result, HSM lacks precisely those exercises in "imaginative sympathy" and "stretching of benevolence" that many see as essential to general moral progress. In particular, HSM endorses only a restricted form of charity (cf. secdon 3.4) along with a sdict subset of the human goods (e.g., beauty, quality and harmony). The words "jusdce" and "faimess" do not appear often enough in the book.'' Many business managers wiU be quite unconcemed about this blind-spot, but they will be highly troubled by another omission in the thesis. There is a failure to mendon or acknowledge that the proper functioning of capital markets confers disdncdve benefits to society, despite any "swindling." Capital accumulated by disengaged investors might well be "dead." in a sense, but it can quickly be resurrected and revitaUzed. So long as the institudons of FMC funcdon properiy, it is redeployed into other enterprises (including HSM-type companies) and productive individuals. This rather basic principle of financial economics is not mentioned in HSM. but it is also "remarkably recognizable" and has recently expanded its institutional expression, almost everywhere in the world. 4.2 Reinforcements There is much else in HSM that qualifies as independent discovery and reinforcement of current trends in philosophy (Table 5). This aspect of HSM is indeed rather striking and it accords fully with Rorty's view that disciplines other than philosophy can now contribute to applied ethics. In a sense, therefore. HSM can BUSINESS ETHICS QUARTERLY be regarded as an inteUectual parallel universe; one that business ethicists probably ought to visit. Table 5. Consensu.s in Philosophy and HSM Philosophy Theme Consensns HSM Narratives Exemplary figures Bata and others Imagination Envision new possibilities Designing new alternatives, de novo Contingent beliefs Historical, similar packages Remarkable recognizability Coherence Important, but limited Cognitive equilibrium, poetic license Such visits wiU quickly reveal that Zeleny has been narradng and re-telUng the story of Thomas Bata and other exemplary entrepreneurs, exactly as several philosophers (e.g., Rorty, Duska, Freeman) have been urging business ethicists to do. Also, in respect of the view of imagination as a primary instrument of moral progress, Zeleny's twenty-five-year-old de novo method with its accompanying meta-mathemadcal assertions ("everything can be re-designed to achieve human purposes") seem impressively prescient. On the other hand, many philosophers now accept the historical condngency of human beUefs, yet Zeleny just plain knows that we Uve in a world of universally legidmate disdnctions (e.g., good vs. bad management; market vs. hierarchy). For him, there is no need to mendon others' discoveries that "the same packages are recognized by independent cultures" (S. J. Gould; cited in Koehn 2006: 395). Furthermore, because social systems "are" biological systems, this type of universality extends naturally to categories within management and polidcs. Finally, Zeleny might have infomied us more fully of his views on the importance of "coherence" in prescripdve works involving social systems. In the formal mathematics of HSM, non-coherence (contradiction) is of course accepted as proof of an error or of false fonnal proposition. In addition, the conceptual model of cognitive equiUbrium. which is presented as having normadve force, is essentially a depicdon of coherence-creation. On the other hand, when one considers the book as a whole, a few latent inconsistencies do seem quite apparent (e.g., the one about "alwaysright" customers). It seems that the reader is supposed to accept such things as the product of "circumstance" and hence to grant a Whitman-like poedc license (cf. Koehn 2006: 393). This is, after aU, the work of a prolific and innovadve scholar. [5] Conclusion From its incepdon, Zeleny has sustained major contribudons to the mathemadcal field of MCDM. About ten years ago, Amartya Sen (1996) described that field as a "promising approach" to linking business ethics with economics. Meanwhile, Zeleny was setdng out his integradve and conceptual HSM thesis (the bibUography REVIEW ARTICLE cites over sixty of more than 350 joumal articles). The fact that he was recendy ranked #1 among Czech economists suggests that this work will be recognized quickly and widely. The principles of humane ideals management (section 3) might take a Uttle longer, although there are some signs that they too are "already taking shape." In any case, HSM together with its Umitations and augmentations can immediately be viewed from anywhere as a kind of re-integration of knowledge within the ethical, economic and polidcal domains, following an historical division along quite different Unes. Notes 1. Several other components of wisdom have been identified elsewhere (e.g., Kekes 1983), including the selection of suitable purposes. 2. The wise organisation in "totally-aligned," in the sense used by Rossouw and Van Vuuren(2003). 3. As with Game Theory (e.g.. Solomon 1999; Binmore 1999) tbe concem is wilh tbe effects of applying mathematical models. In this HSM multi-capital case, however, the user- warning comes from the mathematician, rather tban the ethicist. 4. Under generally accepted accounting principles, tbe item retained-eamings combines tbese "live" and "dead" forms. Human capital is reflected to some extent in tbe judgemental valuation of intangibles, whilst triple bottom line reporting also incorporates tbe social and ecological forms. 5. A recent statistical study (Munusuamy et al. 2006) has indicated tbat national cultures of business management bave indeed converged. 6. This HSM thesis on culture could be invoked in support of tbe pbarmaceutical industry practice of paying for knowledge of the medicinal properties of local fauna. According to this tbesis. tbey are not disrupting culture; they are expressing tbe local and tbe enterprise-based forms in ways tbat are "recognizable" and "potent." 7. Strategies tbat compensate for market limitations implicitly recognize the moral duty for a company to act "wben it co-creates bad conditions, or when tbere exists unjust conditions from which the company benefits" (Margolis and Walsb 2003). 8. Like Quinn and Jones, HSM also challenges the I/0-Economic framework for business strategy, but in a different way. HSM invokes elements of the byper-conipetition framework (D'Aveni, 1994) such as agility, technical know-bow and minimal govemment intervention. Unlike Quinn and Jones, neitber D'Aveni. nor HSM, nor Boddewyn and Brewer considered tbe social and moral significance of the market power wielded by global hypercompetitive entities. Prakash Sethi (2003) argued for an accountability-based approach to tbis problem, suggesting that corporations should be "beld accountable for a more equitable distribution" whenever groups "were deprived .. . because of market imperfections and corporate power." 9. Zeleny bas also suggested that objections to tele-working migbt be motivated by union leaders' concems about tbeir own "loss of influence" over tbe remote workers. Tbey migbt instead be concemed that bosses would not care for invisible workers, in tbe good way tbat Bata cared for his employees, who were all on-site. BUSINESS ETHICS QUARTERLY 10. HSM does not discuss political proposals of tbis sort. Tbe only exception is its endorsement of merit-based (ratber than kinsbip-based) job-recruitment (cf. section 2.7). 11. Canon has bad many victories in tbe corporate-initiated patent wars. An altemative "race to tbe top" strategy would have it (a) lobbying for weaker IPR regimes (because tbese are often asscK;iated witb injustices, e.g.. Collier 2000), whilst (b) reducing dependence upon IP law (e.g., through hypercompetitive moves). 12. 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