From Flannel To Armani

Paul Krugman wrote this today in a thoughtful essay on his blog that discussed how our notions of corporations have changed over the years:

These days, we’re living in the world of the imperial, very self-interested individual; the man in the gray flannel suit has been replaced by the man in the very expensive Armani suit. Look at the protagonists in the global financial meltdown, and you won’t see faceless corporations subverting individual will; you’ll see avaricious individuals exploiting corporate forms to enrich themselves, often bringing the corporations down in the process. Lehman, AIG, Anglo-Irish, etc. were not cases of immortal hive-minds at work; they were cases of kleptocrats run wild.

Hive-minds and Kleptocrats

Down at the worker level, I suspect that the "gray flannel suit" concept still has some validity. Corporate leaders these days, though, are anything but products of a hive mind. The standard idea seems to be that the person running the corporation should get as much out of that entity for his own purposes, and leave nothing behind if at all possible.

One of the ironies of this is that it wasn't all that long ago that Jim Collins wrote Good to Great: Why Some Companies Make the Leap...and Others Don't, which had as its basic premise that truly effective leaders created organizations that could function without them. From the Amazon review of the book:

Five years ago, Jim Collins asked the question, "Can a good company become a great company and if so, how?" In Good to Great Collins, the author of Built to Last, concludes that it is possible, but finds there are no silver bullets. Collins and his team of researchers began their quest by sorting through a list of 1,435 companies, looking for those that made substantial improvements in their performance over time. They finally settled on 11--including Fannie Mae, Gillette, Walgreens, and Wells Fargo--and discovered common traits that challenged many of the conventional notions of corporate success. Making the transition from good to great doesn't require a high-profile CEO, the latest technology, innovative change management, or even a fine-tuned business strategy. At the heart of those rare and truly great companies was a corporate culture that rigorously found and promoted disciplined people to think and act in a disciplined manner.

Amazon.com: Good to Great: Why Some Companies Make the Leap...and Others Don't

Department heads, or whoever it was who ran individual parts of the organization, and the people overseeing and working with them would all know what they had to do to meet whatever the organization's goals were, and that those people would be effective leaders in their own right.

Yet the idea remains rooted in corporate culture that to be successful, a corporation must pay phenomenal amounts of money to someone to run it, and that this person is the one who can make or break the company. I can tell you that from an engineer's perspective, that doesn't sound even close to right. To us, the best designed products are easy to maintain, and need less maintenance than badly designed ones. While no organization can run itself by itself forever, the complete dependence on having a "star" CEO is one that I can't fathom.

Plus, ironically, while we celebrate the individual at the leadership level, this attitude often devalues individuals at every other level. "Star" leaders will make the decisions, not their subordinates. In a sense, an organization that is completely dependent on its leader is not so much an organization as a guided crowd.

Here's what the U.S. Army has to say about what an effective leader is, as discussed in Army Regulation 600-100, Army Leadership:

(1) Leads others: Leaders motivate, inspire, and influence others to take the initiative, work toward a common purpose, accomplish tasks, and achieve organizational objectives.
...
(5) Creates a positive organizational climate: Leaders are responsible for establishing and maintaining positive expectations and attitudes, which produce the setting for positive attitudes and effective work behaviors.
...
(7) Develops others: Leaders encourage and support the growth of individuals and teams to facilitate the achievement of organizational goals. Leaders prepare others to assume positions within the organization, ensuring a more versatile and productive organization.

AR 600-100 (8 March 2007) Page 3 (PDF)

Naturally, these are excerpts, but even the Army, which probably takes the autocratic leadership role about as far as any organization does in our society, recognizes that an effective leader builds an organization, not a cult of personality.

There are many reasons for the decline of American business in the last few decades, but I think this transformation in leadership philosophy has to rank as one of the primary ones. Let's hope its days are numbered.