9/1/2000 | 10 MINUTE READ

Ends & Means: Current Approaches to Businesses, Careers and the Unexamined Life

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Some people work just for money. Some people think that you ought to get more out of life. The choice is yours.


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Jack Welch is a jerk.
When I uttered that observation to a businessman who lives in the Cincinnati area, instead of getting the argument that I was hoping to provoke—after all, isn't the head of the high-flying old economy corporation General Electric held in the highest esteem by all other businesspeople because of his seemingly skillful management abilities?—I heard heated confirmation of my characterization. The businessman in question was incensed by the gutting of the GE Evendale plant, the aircraft engine manufacturing facility just north of downtown Cincy. And that, Alan A. Kennedy explains in The End of Shareholder Value: Corporations at the Crossroads (Perseus Publishing; $26), is only one of the multitudinous things that Welch has done that will, presumably, come home to roost like ravens over the GE headquarters in Fairfield, Connecticut.

First, a word about this whole "shareholder value" approach. Kennedy explains, "This philosophy has come to entail getting as much as you can as fast as you can for shareholders, who almost always include (through options or direct shareholdings) managers of the enterprise itself." While the bulk of the book is spent looking at various aspects of that in some detail, let's just break this down into two pieces, that of the shareholders and that of the managers.

So far as the shareholders—the people who have invested money into an enterprise—seem to be concerned, they're placing bets and want quick returns. It is almost like Vegas: If the slot machine doesn't pay off in comparatively short order, then move to another. In terms of investments in companies, it is essentially the same thing—but in some ways, the move from one company to another can be made even faster, thanks to electronic trading. So if one stock isn't paying right now, then just point and click.

The managers, of course, are interested in being rewarded: companies turning in good earnings reports on a quarterly basis are those that are inclined to pay well; given that many of these managers have stock options, they, too, are interested in the valuation of the stock.

Puffing It Up By Kicking 'Em Out
Here's where the trouble sets in, according to Kennedy: "The real problem is in the details of what companies have done to achieve inflated stock price levels. Across the board, companies have cut back on staffing." Some of this so-called downsizing is understandable because of efficiencies and improvements. But not all. "Others, however," Kennedy observes, "involved reductions in the human capital companies will likely need to build a profitable and sustainable future." As you may have noticed, whenever a company announces layoffs, its stock valuation usually goes up as a result. Which is potentially a bizarre situation, much like rewarding a farmer for turning his seed corn into malt liquor.

More, Kennedy continues, "Along with slashing human capital, companies have cut heavily into their R&D spending in pursuit of higher profits and a higher stock price now. Although difficult to measure directly, reductions in R&D spending in due course restrict the flow of ideas for future products and technologies...Without new products and technologies, any business will eventually stagnate." Swell.

So what about the poster boy for managerial magnificence? According to Kennedy, under Jack Welch's watch some 120,000 people lost their jobs, "savings for the most part extracted from GE's traditional manufacturing businesses." And "While he was extracting costs of all kinds from GE's traditional manufacturing businesses, Welch invested heavily in financial services as a means to induce increased earnings for the company." Instead of making money by making things, the focus on making money by dealing with financial instruments. R&D? Kennedy writes, "GE still spends only about 3.3 percent of its manufacturing revenues on R&D. By contrast, Honda Motor Company of Japan spends 5 percent of its revenue on research, NEC of Japan spends 7 percent of its revenue, and high-tech companies like Microsoft spend as much as 10 percent of revenue on R&D." Perhaps the rationale is that if you are making fewer things, R&D is ancillary. And finally, Kennedy maintains that one of the things that GE has invested in under Welch is GE stock: buying back about $30-billion worth. This can raise the price of the stock. But it doesn't necessarily do anything for, say, improving productivity.

The question becomes: What next? Kennedy, while acknowledging that GE will keep chugging along, warns that things may not look so rosy for the long run, especially as drivers for growth (e.g., intellectual capital in the form of people; R&D) have been trimmed.

One of the consequences of companies relinquishing their own abilities to make things (and to invent things) is that supplier companies have had to come to the fore. And these suppliers have tended to become bigger and bigger in order to do all that is expected of them. Kennedy warns that there is the possibility that these mega-suppliers, which were historically beaten down on price (here the euphemism is "cost down") before they got so big, may get to the point where they are essentially in control of an automaker's fate, and so those companies with good supplier relations may have an easier time of getting innovative, quality products out the door.

Future Wealth

Free Agents or Merely Mercenaries?
There is a lot of talk nowadays in publications including Fast Company that the new form of workers is one of the "free agent." Much of this free agency is driven by the companies that put their stockholders first and employees somewhere else. If you don't have faith that a company's management is going to value what you do for them, then why shouldn't you work with your resume continually posted on Monster.com?

The issue of people as free agents is something that Stan Davis and Christopher Meyer, both of the Ernst & Young Center for Business Innovation, examine in Future Wealth(Harvard Business School Press; $27.50). The two are also the authors of Blur, a book about how the Internet is changing the pace of or-ganizational activities, a book that is commendable. Future Wealth is, in many ways, disturbing.

First of all, to set the context, the authors say that we are in a period characterized by what they call "the connected economy," which they define with three principles:

"Speed: Constant change is healthier than stability.

"Connectivity: Open systems thrive, closed ones wither.

"Intangibles: The virtual trumps the physical."

Which is reasonable. Speed is essential: think fast or don't bother because undue deliberation will only mean that the conditions you're thinking about have changed. Connectivity: according to Metcalfe's Law, the utility of a network is a square of the number of users, so the greater the number of connections you have, the better off you are. And as for intangibles, they emphasize that the real source of value is intellectual—something that the shareholder value people seem to ignore, as they let people go. Davis and Meyer point out: "Competitive advantage depends on attracting and keeping stronger talent better than the other guy." The good ones count.

And they urge that people work their talent: on it and with it. "You must believe that your most valuable assets are your own experience, smarts, and potential. And you must be prepared to risk it. The biggest risk of all? That you play it too safe."

The biggest concern that I have with Future Wealth? That they seem to be arguing for a situation where you take a job more for what it provides you with regard to a return on your investment in more of a financial sense than in the context of fulfillment. Perhaps it is just me, but the term "human capital" sounds a bit too brutal, sort of like "pork belly futures." On page 43 they write, "Take a job for what it teaches you—rather than for what it pays," yet by the time you're at page 105 you'll read, "Usually, when employers think of people as assets, they do so mainly as metaphor. We are suggesting something much more literal..." and they provide an approach to employers and employees that is based on the concept of "human capital-backed securities."

We begin to enter the world of that classic TV show "Paladin," whose business card (imagine a gunslinger of the Old West with one of those—and as I recall, he only had one) read, 
Have Gun Will Travel
Wire Paladin
San Francisco

Paladin, whose brand was a chess piece, a knight, would be contacted. He'd come in, do the job, then ride off for his next gig. And I think that Paladin actually enjoyed what he was doing. On the other hand, work, Davis and Meyer seem to be saying, is all about doing whatever gives you the best return on your investment. Which may make you wealthy. Full stop.

the monk and the riddle

Right Thinking—& Working
The one who has it right, I think, is Randy Komisar, who, with the assistance of Kent Lineback, has written an unusual yet important book, The Monk and the Riddle: The Education of a Silicon Valley Entrepreneur (Harvard Business School Press; $22.50). Komisar has worked in Silicon Valley since the early ‘80s; he's been with companies including Apple and LucasArts Entertainment; he has worked as a lawyer; he is now a "virtual CEO," providing advice to companies like WebTV; he has made an amount of money that would undoubtedly be impressive to all of us who don't live in Silicon Valley. From that description, you might be thinking, "Hey, I work in Detroit [metaphorically, if not actually]. What does this guy have to teach me about anything?" Plenty.

The Monk and the Riddle is all about work, all about doing the things that are necessary to earn one's daily bread. The narrative—and yes, this is set up as a first-person novel of sorts, but done without all of the clanking devices that business writers doing fictional pieces tend to throw in for no apparent purpose beyond making their texts seem, well, "fictional"—is about a man who has an idea for establishing a website—funerals.com—that he is hoping to get funded by a venture capitalist. Komisar is asked to provide insights as to what needs to be said to the VC to secure the financing. Once again, you might think: "Relevance to me, lost."

But regardless of what you're working at, you are still working. And it is in defining what an individual should be doing with his or her life that Komisar is illuminating.

Komisar describes the way most of us go about living our lives, which he calls the "Deferred Life Plan." This has two steps:

  1. Do what you have to do.
  2. Do what you want to do.

He admits, "If I knew anything about the Deferred Life Plan, it was because I, too, had spent years as a fully vested, card-carrying believer." The people following the Future Wealth approach would probably line up for their cards.

Although Komisar does not endorse the idea that all one needs to do is the fun stuff, that work and struggle aren't required—"Sacrifice and compromise are integral parts of any life, even a life well lived"—he asks, "But why not do hard work because it is meaningful, not simply to get it over with in order to move on to the next thing?" That is the question that all of us must ask. And realize that given the unpredictability of life, it just may be that if we follow the Deferred Life Plan we may not get past step one.

So as the shareholder-value based companies continue to push people out the door, as these free agents begin to increase their intellectual capital and begin to parlay what they know in the market, I wonder whether how many will consider the following:

"The Deferred Life Plan...dictates that we divorce who we are and what we care about from what we do in that first step. By distancing the real person from her actions, all manner of bad behavior is justified in the name of business. ‘Sure she's an SOB at work, but that's not who she really is. It's only business, nothing personal.' Fueled by ambition, we hope that in the end we will be judged by our accomplishments, not by who we are."

In the end, all that you are left with is who you are. And it is probably better that you neither start nor end as a jerk.

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