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A self-regulating world

04 May 2016 by Alexandra Jones

A self-regulating world - read more

Charles Handy, author, philosopher and management guru, shares his views on the future of society, business and governance

Your new book, The Second Curve, suggests that we are on the cusp of change and businesses need to evolve to work better for society. Can you describe this change?

The world of work is changing and most organisations are struggling to keep up. This is happening because technology has made information incredibly easy to access. That is combined with a new generation who are more footloose and fancy free than they used to be – it is so expensive for young people to own houses or cars, so a lot of them decide not to.

So we now have a ‘gig economy’, in the sense that you sign on with a company to do a ‘gig’, but not long term. Some organisations try to lock people in because the cost of finding new workers is high, but the best people do not want to be.

I recently spoke with a recruiter from an international consulting firm based in New York. She said: ‘We have had a successful recruitment round at the university – the only problem is that none of them want to work for us’. She found this extraordinary because she recruits for a very famous company.

I said: ‘I am surprised that you are surprised. These people have skills that are very marketable. You are quite sensible in trying to capture them, but they do not want to be part of some big organisation because they feel that they would lose themselves in the bureaucracy. You are offering them a lot of money and a promise of future security, but they do not value that as much anymore.’

Technology can remove some of the bureaucracy that goes with organisations – what I call the ‘Uberisation’ of corporations. Uber is a platform which connects customers and service providers with no intervening person. More organisations will become like that in future, in which the suppliers and the end user will connect directly with each other without the middlemen.

Will these companies have less responsibility to behave ethically as they have less control over their suppliers and users?

This is a huge problem – the company ceases to have much control because its operations are outsourced. It is difficult to hold these kinds of companies to account for issues such as sustainability. For example, Uber cannot do much about its drivers polluting the environment. Contravening the European rules of working hours is also difficult for Uber to monitor.

It extraordinarily hard for the management of Alibaba [the online Chinese marketplace] to control its sellers – it just coins a percentage of everything they do. Without an awful lot of work, they get very rich. In terms of governance, this is significant because companies are losing control – they will still be held accountable, but they cannot exercise that accountability as easily as they once could.

How amazing is it that you can put a platform up in cyber space and its users generate a self-organising system. This model is tempting because it is cheap and leads to disintermediation – the disappearing middle. All sorts of industries are losing their middles as more people go online to make their purchases.

Will the current system of regulation and legislation be able to effectively monitor this future?

Few companies really get to grips with ethical issues. They often say: we do not take bribes – and that is as far as it goes. But, do they treat their suppliers or customers properly? Some large retailers have unfair payment terms and artificially reduce the price of products. Big businesses may be smart but many are unethical. Companies rarely think about ethical issues when they are starting up – they just try to make money.

Most people are not overly worried about the new world of business as it is not going to blow up immediately. The Oxford Martin School estimates that around 47% of white-collar jobs will go by 2030. We will still have lawyers, but there will not be lawyers’ clerks, or not very many of them. Research will be done through the internet; all the lovely books in their offices will be quite unnecessary.

One of the jobs that may go is manager. In the past, middle managers have passed down information from one layer to another. They then check the layer below is doing what they are supposed to do, so that they can report back to the layer above. That will go and people will be responsible for monitoring themselves. The company will occasionally spot check, which is easy to do with technology.

If someone on the front line has the same information as his manager three levels above, he can make the decisions himself. If companies give employees that freedom and they do not do what is right, how accountable is the company for that? It is tough to exercise accountability when you have given freedom away.

What effect will this new era of work have on society more generally?

This is the big thing: governments have relied on corporations to be their principal delivery agents for society. They collect the taxes; they provide decent conditions of employment; they look after the health of their workers; they make sure that women have the same pay as men, or they should do. The state uses organisations to deliver their laws and monitor the country. But if these organisations begin to dismantle themselves, what control does government have?

The government is surprised because we have more people in work than ever before yet income tax receipts have gone down. A lot of those extra people working are self-employed or part time. They are either not earning enough to pay tax or they are not telling anybody what they are earning.

I am self-employed; I fill in my tax return. For some reason there is no space in the tax return for that case of wine somebody gave me for giving an after dinner talk. We have a lot of barter trade coming in – and government is relying on people to be honest about what they earn.

This sparks another debate associated with money, which you explore in your book. Is money the right reward for success?

A lot of people think that money buys them freedom – it does not. You meet people who are earning £300,000 a year and they are a bit pinched. By the time they have paid the school fees, the nanny, the driver, the gardener and so on; my God, there is not much left. They do not have to live like that, but they cannot conceive it.

There is nothing so risky as a ‘secure’ job – often whole parts of organisations are closed down and sold off, and you go with it. That is scary. Where is the accountability for the organisation?

I started life working for Shell and they guaranteed me a career until the age of 62, on condition that I went where they asked me to go and did the sort of jobs they wanted me to do. However, I read recently that Shell is getting rid of 5,000 people. Organisations close entire departments no matter how good their people they are. There is no such thing as a secure job anymore.

I write books for a living. I could not sell them or produce them without the help of the publisher, Random House. I am really part of the intellectual property of Random House, along with all the other authors. But they do not employ any of us. We are independent. More and more people will choose to go that route because it gives them the freedom they want and a contractual arrangement linked to that.

Will the individual become more accountable than companies or the state for society?

Individuals will be more responsible because the whole notion of the state and the organisation looking after your life is collapsing. People will go free because they want choice, or they are forced to because the organisation cannot afford to employ them. However, a lot of people will not know how to look after themselves – by saving for a pension, for example. The state will try to find ways of compelling people to do sensible things, but I do not know how effective that will be.

There is the parable of the caterpillar. A caterpillar starts off as a tiny little seed and its job is to grow as fast as it possibly can, until it is full size. At which point he creates a shell around himself, which disintegrates and he turns into a butterfly. We know that a caterpillar becomes a butterfly but the caterpillar does not know that; all it knows is that his world is disintegrating around him.

That is happening to organisations, they are caterpillars in a stage of dismembering themselves. The ‘butterfly economy’ will come out of that. When you have got a lot of rather fragile things, floating around, they are all free as air. But butterflies do not live long. It is worrying because the accountability and responsibility, in the end, comes right back to the individual.

ICSA has done some research into business schools and found that corporate governance features rarely in their prospectuses. Why do you think that is?

I recently gave a talk to the deans of European business schools. I told them they would not exist in about 15 years’ time; not their MBA programmes, anyway. The problem is that they have turned themselves into businesses, rather than educational institutions.

These schools are producing people that the businesses want to employ, but who cannot challenge them. They are teaching their students for the skills they need today, not for tomorrow. They do not talk about sustainable futures or governance – at least it is not a core part of their instruction.

They are schools for the caterpillar world and they do not notice that most of their students actually want to be free. A typical business school student will work for a big corporation for 10 years, and then go off and be a butterfly. In this sense, business schools have failed us – I am sorry about that because I started at London Business School many years ago.

What do you think the future of governance looks like?

Most organisations consider regulations as a fence beyond which they should not go. My worry is that the fence only applies to a small bit of the organisation. In terms of outsourcing, this is a problem. Take Nike, for example. Most of its products are made in China and elsewhere but Nike does not directly employ these workers. It has limited control over the conditions of work in these places, so how can Nike have proper oversight? It is supposed to, but it is difficult.

I read of one closed circuit television company, which is operated from Ghana, that provides security monitoring for an English supermarket, because they are in the same time zone. The employee is watching the camera in the supermarket but he is sitting in Accra. He is probably working long hours, but how can the supermarket control that? How can any government enforce the supermarket to control what the chap in Ghana is doing? So the control of outsourcing and the monitoring and regulation of it is already very difficult.

This gets back to a philosophical problem: why should government worry? Why not let people exploit themselves if they want to? Do we have to make sure you save for your pension? Have we assumed this welfare state philosophy, one that has too much responsibility over the individuals? The alternative to this is many more strong trade unions for the self-employed.

The government should support unions to support people, because one day it is going to be beyond the reach of government to do it. I do not see how you can regulate or control this kind of free-fall world that is emerging.

The move to a self-regulating world is really what I am talking about. That self-regulation is based on constant feedback. Many people said the idea for eBay was crazy. How can people trust people they have never met? But it worked. Now it is commonplace; we trust people because of feedback.

What does this new world of business mean for governance professionals?

There has got to be a lot more individual entrepreneurship, not building big businesses. You may not have a career set out before you; you will have to build your own. If your career has been built on company secretarial work, you have skills that can be used – but they may not be used by companies. Instead, advise individuals how they should look after their own affairs.

My worry is that many people in work have a corporate mind set; coming to work and being told what to do. When I moved from being in an organisation to a self-employed writer, I set up my study. I had, like when I was employed by a company, an in-tray and an out-tray, and nothing ever came into the in-tray. I realised that hitherto, my life had been dominated by what was coming in; lists of things, requests for this, going to meetings. My day was full responding to other things, but suddenly there was nothing. It was frightening.

I had to start making calls and generating my own to do list. I was naïve, I just thought life would go on and things would come into my in tray. But they didn’t. Young people will have to ask themselves whether they can survive outside the organisation, because they are going to have to eventually.

Interview by Alexandra Jones, Editor of Governance and Compliance


Celebrating governance

Visit the ICSA 125 page for a full list of articles and blogs celebrating 125 years of history of ICSA and looking to the future of governance.

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