The Crisis of Corporate Leadership_6 docx

142 Business at a CRossRoads
Finally, the stories of both Linux and Wikipedia tell us something
about leadership, for want of a better word, in environments such as
today’s in which self-organization fosters more creativity and produces
generally better results than the CEO system.
Stewards, seeders, guardians
There are protagonists in these stories of new enterprise: Richard
Stallman and Linus Torvalds at GNU/Linux; Larry Wall at Perl; John
Ousterhout at Tcl; Jimmy Wales and Larry Sanger at Wikipedia. But
they are not “leaders” in the normal sense of the word.
Perhaps there was a time when Wales could have established “rights
of sovereignty” over the Wikipedia project, equivalent to those he
already had at Nupedia. But had he done so it is very unlikely, in my
view, that the phenomenon of Wikipedia we know today would have
“snapped into existence.” The lack of a CEO, an agenda, a strategy and
a “business model” was an important part of the attraction for the new
encyclopedists. They could do their own thing, knowing that no
commercial interest mediated their relationships with those who sought
enlightenment from their articles.
But the beginnings of things cast shadows over what happens.
Those who were there at the beginnings, either because they were in
the right places, at the right time, or because things they did or did
not do became initial conditions that generated the positive feedback
loops that drive complex adaptive systems, have authority and influ-
ence. People are interested in beginnings. Although Torvalds and
Wales could not have known how the processes they seeded would
turn out, they’re respected by Linux and Wikipedia devotees as the
creators and patriarchs.
How this patriarchal authority is used is crucial. It will be lost if it
is mistaken for and used as CEO-type control. Nor should it be used
to guide, because no one can know where things are going. The patri-

archs of complex adaptive systems are more like guardians and stew-
ards, than guides. The system is owned by all participants collectively.
The patriarchs cannot tell them where to go, or what to do, but the
regard participants hold them in, and their vantage points above the
system, as benign overseers, give them the power to proscribe; to
suggest to participants that they’re barking up the wrong trees,
re-inventing wheels, or heading down roads others have proved to be
dead ends.
9780230_230941_09_cha07.indd 142 09/09/2009 10:02
7 LeadeRLess CompetitoRs 143
As Piers Ibbotson explains in The Illusion of Leadership,
16
a good
theatre, or film director encourages the emergence of a great perform-
ance from the ensemble, by imposing “creative constraints” that liberate
creative energy. “Creative leadership is a balancing act between the
emergent and the directed … the changes that will happen in spite of,
or without, your interventions and the desired changes that can be
encouraged by your actions and directions.”
This is the role of patriarchs of MaBEs. The rules that led to the
emergence of Linux and the Wikipedia are creative constraints that
liberate energy, which the patriarchs protect thereafter by saying “no”
from to time.
Their model is Holden Caulfield, protagonist and narrator of J. D.
Salinger’s novel, Catcher in the Rye, and his imagined role as the
guardian of young children playing in a rye field on the edge of a cliff.
17
The argument so far
Part I was about how big business has got to where it is today and why
it is not a good place, either for people or big business. It argued that

large, joint stock companies face two main challenges. If they don’t
offer work more in tune with what people want, they will find it hard to
attract and keep good staff and if they don’t rein in executive pay, they
will destroy the political consensus on which their current freedoms
depend. Part II is about where big business goes from here and how it
can reform itself. It begins in this chapter with a warning: if MuBEs
cannot kick their addiction to omnipotent, charismatic leaders they may
find it hard to defend their markets against attacks by more adaptable
MaBEs. In the last three chapters we look at how MuBEs can take up
arms against their sea of troubles.
References
1 The Sunday Times 100 best companies to work for, March 8, 2009.
2 Searching for a Corporate Savior: The Irrational Quest for Charismatic CEOs, Princeton
University Press, 2002.
3 The Visible Hand: The Managerial Revolution in American Business, Harvard University
Press, 1977.
4 Explorations in Economic Sociology, edited by Richard Swedberg, Russell Sage Foundation,
1993.
5 At Home in the Universe: The Search for the Laws of Self-Organization and Complexity,
Oxford University Press, 1995.
9780230_230941_09_cha07.indd 143 09/09/2009 10:02
144 Business at a CRossRoads
6
Competitive
Strategy: Techniques for Analyzing Industries and Competitors, Free Press,
1980.
7
The Fifth Discipline
, Doubleday, 1990.
8

Thriving on Chaos
, Macmillan, 1987.
9
Competing for the Futur
e, Harvard Business School Press, 1994.
10
Chaos,
Management and Economics: The Implications of Non-Linear Thinking, Institute of
Economic Affairs, Hobart Paper 125, 1994. See also: Complexity and Creativity in
Organizations, Ralph Stacey, Berrett-Koehler, 1996.
11
Financial T
imes, December 7, 1998.
12
Is Micr
osoft the Great Satan?, FSF, 2007.
13
IDC pr
ess release, August 27, 2008.
14
Micr
osoft Missing Netbook Growth as Linux Wins Sales, November 6, 2008.
15
“El Aleph,” first published in the Ar
gentine journal, Sur, in 1945.
16
The
Illusion of Leadership: Directing Creativity in Business and the Arts, Palgrave Macmillan,
2008.
17

Catcher in the R
ye, Little, Brown, 1951.
9780230_230941_09_cha07.indd 144 09/09/2009 10:02
145
8 The adaptive challenge
That the distributive injustices it’s creating have contributed to the
erosion of public trust in the liberal capitalist system; that it denies its
employees sufficient bases for self-respect and that its structure is
unsuited to the modern business environment, does not mean the large
joint stock company is doomed. But it does mean it has some adapting
to do if it is not to undermine the liberal capitalist consensus utterly,
and lose the able people it needs to maintain its current position to
other kinds of enterprise, better suited to the modern world.
It has adapted of course, and continues to adapt. Globalization is
an adaptation to improved communications and the removal of trade
barriers. The unilateral repudiation of the “loyalty for security”
psychological contract between companies and their employees was
an adaptation to a more volatile and competitive environment. The
adoption of shareholder value maximization as the listed company’s
primary objective, and the emergence of debt as the main source of
company finance, were both adaptations to the growth and increased
efficiency of capital markets.
But adaptations to environmental pressure in one area often create
new environmental pressures in other areas. This chapter examines two
adaptive approaches that large companies have pursued over the past
two decades with little success, and a third approach that is both more
promising and more challenging.
The question of purpose
A decade ago, before the management discourse came to be dominated
by shareholder value analysis and financial engineering, there was quite

a lively debate about the “purposes” of companies. It seemed a poten-
tially powerful adaptive approach, because it addressed the problems
created by the large company’s perceived detachment from the moral
constraints of civil society. If a company could somehow persuade its
existing and prospective employees and customers that it was moved by
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146 BUSINESS AT A CROSSROADS
a higher purpose than making profits, it could, or so it seemed, become
better adapted to the modern environment.
Some commentators argued that it was the responsibility of CEOs
or “leaders,” as they were coming to be seen, to choose purposes for
their companies, and that they could choose whatever purposes they
liked, subject to the constraints imposed by capital markets.
If it’s true that companies are free to choose whatever purpose or set
of purposes they like, they’re free, it was argued, to be what they like; to
be, for example, “soft,” rather than “hard”; “nice,” rather than “nasty”;
“responsible,” rather than “selfish”; and “cooperative” rather than
“competitive.”
I was associated with this idea, because of a book I had written a few
years before, in which I had argued that companies were coming under
pressure to behave in ways that were seen, by their existing and poten-
tial employees, customers, suppliers, and neighbors (by which I meant
local communities and society at large), to be fair, ethical, responsible,
and responsive, because otherwise they would be unable to attract and
retain able employees and loyal suppliers and customers.
1
I emphasized, however, that what I had called “niceness” was not a
purpose, but an aspect of a new shareholder-value-maximizing (SVM)
strategy more in tune than the traditional “nice guys finish last” philos-
ophy, with the heightened environmental, moral, and community

consciousness of existing and potential employees and customers.
Although I have some sympathy with the thinking behind it, the
idea that a company can choose its purpose is wrong. A company can
have no purpose other than to maximize shareholder value, and that is
not so much a purpose as a raison d’être, or fate bequeathed to it by the
logic of the capitalist system.
Capital moves to its highest value use. If a company declared that (or
behaved as if) it regarded SVM as subordinate to some higher purpose,
such as supplying quality goods and services to customers or quality of
life to employees or other “stakeholders,” it would become less attrac-
tive to investors, which would cause its cost of capital to rise, and its
ability to achieve any purpose to fall.
The debate about the “purposes” of companies and the popularity
of what I’ve always thought was the rather facile idea that investors are
just one among a number of so-called “stakeholder groups” who have
legitimate claims on the company, both stem from the mistaken belief
that SVM is irreconcilable with allegedly nobler aims, such as serving
customers, caring for employees and the environment, or being a
responsible corporate citizen.
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8 THE ADAPTIVE CHALLENGE 147
Companies are not free to choose their purposes, but they are both
free and duty bound to choose ways to maximize shareholder value.
Because SVM is hardly a goal that can stir human blood and inspire
extraordinary effort, other purposes, visions or missions may need to be
invoked. But it is wrong to see a mission as having priority over or being
in some sense “higher” than the goal of SVM. Visions and missions are
marketing; means to the end of creating value for shareholders, not
ends in themselves.
I have never wavered from this position. My view was always that the

“nice” strategy was value maximizing, because it acknowledged the
value of a class of intangible assets that I call “reputational,” the accumu-
lation and preservation of which were in the interests of shareholders.
Although some, including Elaine Sternberg,
2
concurred, others took
serious issue with this view, and some even seemed to find it downright
obnoxious. The quality of giving, in their view, is more to do with the
motives that inspire the giving, than with the gift itself, although what
earthly difference motivation makes to those who receive I have never
been able to fathom.
Those who insist there is something disingenuous and cynical about
companies that give generously to charities, adopt codes of ethics and
promulgate environmentally responsible operational guidelines, not
out of the goodness of their corporate hearts but to maximize value for
shareholders, are effectively arguing that the owners of companies
should subordinate their interests to nobler more caring purposes
chosen by executives. This is absurd. Shareholders choose their own
causes to support. It is not the job of managers to act as the consciences
of their shareholders and nor are they equipped for that role.
But that doesn’t mean appeals to the company’s non-existent better
nature are pointless. Such appeals are messages from outside about the
changing relative value of the various classes of reputational asset, and
thus convey important information to value maximizers. Moreover,
volunteering, company philanthropy, and Corporate Social Responsi-
bility (CSR) projects engage the humanity of employees who do have
“better natures,” and thus add authenticity to the “nice” strategy.
Although sincerity and a genuine wish to do good are not necessary
when hunting for “reputational assets,” they can help to maintain
consistency and reduce the risk of the company’s exposure as a corpo-

rate hypocrite.
There are many genuinely good, even saintly, people working in the
community relations departments of many companies, creating value
for shareholders as well as for the clients of their volunteering, philan-
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148 BUSINESS AT A CROSSROADS
thropic, and community activities. But there’s no denying the conflict
between the company as a value creator and the company as a respon-
sible and generous corporate citizen. To minimize the cost of financial
capital, firms must appear to be “value hunters”; but to minimize the
cost of human capital (and maximize their ability to attract and keep
employees and customers), firms must appear to be “value givers.”
In the past the conflict was resolved by the “security for loyalty
contract” (keep your nose clean and close to the grindstone, and you’ve
got a job for life) before it became a dilemma. When it was “my
company, right or wrong” there was no need for the company to be
responsive to public opinion. Now that companies have forfeited
employee loyalty, by unilaterally repudiating the old security for loyalty
contract, the inherent conflict emerges.
Philanthropy, CSR, volunteering, and commitments to sustainability
or carbon neutrality are all sensible adaptations. Companies can’t disavow
a value-hunting destiny bequeathed by nature, but they can try (and
many are trying), to resolve the value-hunting vs value-giving dilemma
by wearing new clothes, and going about their value-hunting business
with an appearance of niceness and the attributes associated with it.
The problem with this kind of adaptation is cognitive dissonance.
Because it relies on masquerade, on giving the impression that the
company is a value giver, while it remains, by its nature, a value hunter,
there is a constant risk of being unmasked. Reputational assets are hard
to win, but easy to lose. A reputation for being a socially responsible

neighbor, earned, for example, by helping the unemployed in the area
around a company factory, will be destroyed overnight by a value-
hunting decision to close the factory and set up manufacturing overseas
where wage costs are lower.
Moreover, CEO-led companies could find it hard to earn reputa-
tions for being philanthropic, and concerned about the disadvantaged,
if they continue to pay their CEOs huge salaries, contribute enormous
sums to their pension funds, grant them king’s ransoms in bonuses,
stock options, and restricted stock each year, and ferry them about in
executive jets.
Soul and community
Another kind of adaptation some companies tried was to replace the
long-repudiated security for loyalty psychological contract with a new
kind of magnetic glue to attract and keep able employees.
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8 THE ADAPTIVE CHALLENGE 149
It was proposed, for instance, that since the human hunger for the
sacred and profound was no longer satisfied, in this secular age, by non-
work institutions, employee loyalty will be strengthened if the leader
can discover (or “conjure up,” if you’re a skeptic) the company’s “soul,”
articulate it and embed it in the culture.
3
I call this argument “the company as church” and I personally find
it repugnant. But the idea that satisfying a spiritual hunger not being
met by any external institution should make the company more attrac-
tive to employees on whose loyalty it depends, is perfectly sensible.
Corporate soul would probably make a great magnetic glue if it existed
or could be invented, and if employees were moved by it. But although
people certainly do hunger for spiritual meaning, there is no evidence
that they seek it in, or would accept it from corporate churches. It’s

presumptuous and, therefore, foolish for companies to suppose they
can induce people to make such deep personal commitments. They can
have our diligence, professionalism and, sometimes, our friendship, but
they cannot have our souls and most self-respecting employees would
be offended if they asked for them.
A more palatable variation on the theme is the idea that companies
should turn themselves into working “communities” rather than mere
workplaces; that people are starved of a sense of community in the
urban environments in which most companies operate, and are likely to
work hard for, and become committed to, a company that feels as if it’s
a community. CEOs shuttle from site so site, holding “town meetings,”
instead of making monologue presentations, to introduce the latest
strategic initiative.
4
I call this idea “the company as village.” As well as being rather more
appealing than the “the company as church,” it’s more in tune with
human nature and with how people socially construct their own work-
places. But a large company is too big, and its employees are too
dispersed to be one community. Moreover, it is difficult for employees
attending a town meeting to see their superstar CEO, who has many
other meetings scheduled at other sites, as their locally elected mayor.
The town meeting model of CEO–employee interaction invites ques-
tions from the floor and it is, therefore, better than simply issuing
orders. But when all is said and done it’s merely a rallying of the troops,
masquerading as an exercise in democracy. Asking for questions from
the floor is just a courtesy. Everyone knows there can be no debate; that
the CEO system has already made up its mind by then.
The trouble with these assumed qualities and roles is that they’re
hard to reconcile with the qualities expected in “the company as a value
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150 BUSINESS AT A CROSSROADS
creator.” As CSR managers who have to fight with their CFOs to retain
their budgets at the bottom of business cycles know only too well, this
isn’t just a theoretical problem. There’s something about large, modern
companies that makes them look awkward wearing “nice” and “soft”
attributes. It is almost as if they’re the wrong sex for such finery.
Too few women
Efforts to acquire reputations for being soft, nice, sensitive, and caring
amount in my view to the most coherent and, potentially at any rate,
the most promising, of the adaptive strategies currently being deployed
by large companies.
Since soft, nice, sensitive, and caring are adjectives applied more often
to women than to men, the adaptation can be characterized as an attempt
by companies to get in touch with, and project, their feminine sides.
How could companies go about this adaptive change? It seems fairly
obvious that the best way would be to appoint more women to senior
executive positions. I say “more,” because, at present, there are very
few women in powerful positions in large U.S. and U.K. companies.
According to Catalyst, a U.S. non-profit focused on women’s issues,
women accounted for barely 15 percent of board positions in large U.S.
companies (Fortune 500 companies) in 2008. And according to The
Female FTSE Report, published each year by Cranfield University’s
School of Management, women accounted for less than 12 percent of
the directors of large U.K. companies in 2008. The position is worse
than these figures suggest, because of the 131 women on the boards of
FTSE 100 companies in 2008, only 12 were executive directors.
Why so few women at a time when there is supposed to be a “war for
talent,” companies are under pressure to project a more caring and
sensitive image and, as I and my friends and co-authors Peninah
Thomson and Jacey Graham reported in our book, A Woman’s Place is

in the Boardroom: The Business Case,
5
many of the male chairmen and
CEOs of our large companies seem genuinely keen to appoint more
women to their boards?
We related, in the book, what we all felt was a revealing exchange
during a “diversity workshop” at a large U.K. company. A group of 30
or so middle managers, about half women and half men, had gathered
off-site to discuss their company’s new “diversity” program:
“OK!” said the facilitator loudly enough to be heard above the
largely female chatter. “Everyone’s here, so let’s get started. The first
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8 THE ADAPTIVE CHALLENGE 151
thing I want you to do is spend a minute or two jotting down some
thoughts about the company you all work for. Since the subject
today is diversity, it would be good to have diverse perspectives, so I
want women to describe what it’s like being a woman working for
the company, and men to describe what it’s like being a man working
for the company.”
There was silence for a few moments, as the 30 participants collected
their thoughts. Then they started writing furiously. Or, rather the
women started writing furiously. It seemed the men needed longer
to gather their thoughts – so long that, eventually, the facilitator
asked one of them whether there was a problem. He looked around
at the other men and, reassured to see his own puzzlement reflected
on their faces, said: “Yes. I’m sorry, but I’m not sure I understand
the question.”
What struck us most about this exchange was not the hapless male’s
obtuseness, but what his and his fellow males’ confusion revealed about
their company and companies in general. What is it about the modern

company that made the men react to what seemed, on the face of it, a
fairly straightforward question, as fish might react when asked to
describe water?
It is not just that, in the upper echelons of corporate hierarchies at
least, men outnumber women, and that this majority is reflected in
company cultures. There seems to be something more profound and
deep-seated about this maleness of companies than a male numerical
superiority.
We decided that, as the ladybird found in the animated film A Bug’s
Life, with his deep voice and belligerent manner, it is not easy to get in
touch with your feminine side with testosterone coursing through
your veins.
Matt Ridley, former chairman of the state-owned U.K. mortgage
lender Northern Rock (see Chapter 6), supplied a clue to where the
inherent maleness of modern companies might have come from in his
book, The Red Queen.
6
Ridley’s not a banker. He’s a science popularizer
and an evolutionary psychologist. In The Red Queen, he pointed out
that humans are unique among the apes in having developed a sexual
division of labor. In chimpanzee societies females and males seek the
same foods, but in early human societies women and men looked for
different foods. Women gathered, and needed to read the shapes of
trees and plants, the patterns of foliage where edible berries, nuts, and
roots might be growing, and the colors of their ripeness. Men hunted,
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152 BUSINESS AT A CROSSROADS
and needed a sense of direction and location, of where they were, so
they could find their way home after the chase.
These differences in the skills required for gathering and hunting

in the Pleistocene period can be summarized by saying women had to
be good at pattern recognition, which made them better at reading
faces and judging character and mood than men, and that men had to
be good at reading maps. These contrasting aptitudes of gatherers and
hunters survive to the present day. When a couple in a car get lost she
wants to stop and ask someone the way, but he reaches for the map.
Both are playing to their strengths. She’s relying on her pattern recog-
nition ability and associated social skills inherited from her fore-
mothers. He’s relying on his sense of direction and “bump of locality”
inherited from his forefathers, who had to find the way home after
hunting trips. Differences between the minds as well as the bodies of
female and male humans evolved, because they played different roles
in Pleistocene society.
The differences transcend cultures. Men everywhere want to be seen
as “practical,” “shrewd,” “assertive,” “dominant,” “competitive,” “crit-
ical,” and “self-controlled,” and women everywhere want to be seen as
“loving,” “affectionate,” “impulsive,” “sympathetic,” and “generous.”
7

We talk in different ways too, and for different reasons. Male conversa-
tion is public, competitive, status-seeking, factual, and designed to
demonstrate knowledge. Female conversation is private, cooperative,
reassuring, empathetic and enjoyable for its own sake.
8
Ridley says that some of the differences stem from the division of
labor (gathering, hunting); some stem from our ape heritage (adult
females leave their groups and live with strangers, males live among their
kin); and others are attributes of all mammals and many birds (females
raise the young, males compete for females). “It surely cannot be a coin-
cidence” he says “that men are obsessed with status … and that male

chimpanzees compete for status, in strict hierarchies of dominance.”
He suggests that our human and mammalian heritage may also
explain why men and women differ in their ambition. In all early socie-
ties male reproductive success, the only success evolution cares about,
was measured in terms of quantity, and depended on status; how far the
male climbed up the group or tribal hierarchy. Women were less inter-
ested in hierarchy-climbing, because quality was the measure of their
reproductive success, and that depended on the status of their mates.
They had to judge the quality of possible mates, find allies in the tribes
into which they married and improve the well-being of their children by
persuading others to help them. The few women who are ambitious do
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8 THE ADAPTIVE CHALLENGE 153
relatively well, but not, Ridley says, because “male chauvinism” is a
powerful selection mechanism that only exceptional women overcome.
He says ambitious women do better than ambitious men, because they
are more intuitive, better judges of character and less preoccupied with
their own status.
As we pointed out in A Woman’s Place, there are other explanations
for women’s apparent lack of appetite for hierarchy-climbing. The
psychiatrist Anna Fels, for example, suggested women are reluctant to
compete for top jobs in business, because of their deep-seated, largely
unconscious belief that “to be seen as feminine, they must provide or
relinquish resources, including recognition, to others”.
9
To be seen as
masculine imposes no such constraints on male ambition. On the
contrary, that men will compete aggressively for position and recogni-
tion with all comers, is an expectation rooted just as deeply in the
culture’s ideals of masculinity.

Whether the reluctance of women to engage in hierarchy-climbing
is socially conditioned, as Fels has suggested, or innate, as Ridley
believes – it’s probably a bit of both – it seems clear that women have a
problem with hierarchies.
Hierarchy-climbing is a man thing. It is how men attract mates and
increase their chances of passing on their genes. Hierarchy is the crea-
ture of men. All social hierarchies have men climbing up them. The
presence of men is both a necessary and a sufficient condition for the
emergence of a social hierarchy. A social hierarchy can be defined as a
structure with men climbing up it.
Women are not barred from hierarchy-climbing competition, but
they dislike it, they are not well equipped for it psychologically, and the
rules are stacked against them.
This is both a problem and an opportunity for large companies. It is
a problem, because the difficulties women have with hierarchies and
ambition are deep-seated and will be hard to overcome. It’s an oppor-
tunity, because the companies that succeed in overcoming them will
have a competitive advantage.
Feminine management
Some of the benefits companies gain when they’re better than their
competitors at attracting and keeping able women are obvious. They
have access to a larger pool of talent. They are more sensitive to the
concerns of their markets, because most of their customers are women.
They are also likely to be better at acquiring and keeping the “soft,”
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154 BUSINESS AT A CROSSROADS
“nice” reputational assets, and resolving the conflict between the
company as value-hunter and value-giver.
Other benefits are less obvious.
I argued in Chapter 6 that the value of “leadership” in business

has been grossly overrated, but there’s no escaping the fact that
leadership is the leitmotiv of the management discourse. It’s hard to
find studies, books, and articles that don’t take it for granted that
business success nowadays is mostly to do with the quality of the
company’s CEO. This is a problem for ambitious women, because
the qualities most of us, including women, associate with leaders and
leadership are much closer to those we associate with men than those
we associate with women.
Alice Eagly, Mary Johannesen-Schmidt and Marloes van Engen said
in their meta-analysis of 45 studies of different leadership styles:
incongruity between leader roles and the female gender role [makes
it] difficult for women to attain leadership roles, and produce disap-
proval when their behavior in these roles fails to … [conform suffi-
ciently] with the communal requirements of the female gender role.
10
Women who do attain leadership roles, however, make a pretty good
fist of it.
We summarized this research in A Woman’s Place (see Note 5).
Eagly et al. compared the perceived performance of men and women
as “transactional” and “transformational” leaders. (This comparison is
common in leadership studies. “Transactional” leaders reward or punish
appropriate or inappropriate behavior. “Transformational” leaders are
admired, respected and trusted, motivate and inspire, encourage
followers to question assumptions, attempt to understand each follow-
er’s needs and desires, and see it as part of their job to help their followers
realize their potential.)
They found wide agreement among the 45 studies that female
leaders were more transformational than male leaders, transformational
was more effective that transactional leadership, and all aspects of lead-
ership style where women were better, correlated positively to leader

effectiveness, whereas all aspects of style where men were better either
had no impact or a negative impact on effectiveness. In other words,
women are better than men at the things leaders do that have the most
impact on performance.
The American social scientist, Mary Parker Follett (1868–1933), is
periodically rediscovered by management academics, because many of
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8 THE ADAPTIVE CHALLENGE 155
her ideas anticipated those of modern management thinking, such as
total quality management, empowerment, networked organizations,
and corporate social responsibility (CSR). She saw companies as social
institutions; emphasized the importance of group dynamics and what
she called the “law of the situation” according to which conflicts should
be resolved; reconciled competition, with cooperation; and distin-
guished between “power-with” and “power-over”.
11

Although she did not consider the gender issue directly, Follett’s
ideas endorsed the view that, as in other areas of life including child-
rearing, female and male management qualities complement one
another, and companies are better run by men and women than by men
or women.
This belief has shaped the management system at the employee-
owned John Lewis Partnership (JLP), one of the U.K.’s largest, oldest,
and most successful retailing groups. The JLP Constitution established
the position of “registrar” in stores and other functions, which consti-
tutes a separate line of authority. Registrars, according to the Constitu-
tion, “have independent status within the Partnership, and are
responsible for ensuring that the Partnership’s principles and policies
are applied consistently.”

12

An intriguing feature of this office is that it was stipulated, by JLP’s
founder John Spedan Lewis, that registrars should be women. Spedan
Lewis’s gender rule was never part of the Constitution, and is no longer
adhered to, but most JLP registrars are women to this day. Women are
established in the JLP registrar role.
Spedan Lewis saw the JLP as a family. Pauline Graham, a former
JLP store manager, explained his reasoning in her book Integrative
Management:
13
“Just as in the family, the husband was the go-getter
and aggressive breadwinner and the wife the peacemaker and the
upholder of the family’s conscience so, Spedan Lewis deduced, it had
to be in business.” The manager’s responsibility is to make a profit.
The registrar’s responsibility is to ensure that profit was achieved “fairly
and justly.” Graham says her registrar “was a tremendous support and
comfort … Being in a way outside the hurly-burly of the business side,
she was an impartial and disinterested observer … whose business
judgement I valued highly.”
The idea that the combination of male and female management
styles is synergistic – that it creates a hybrid style superior to either – was
explored by Carlotta Tyler, in an article in OD Practitioner (OD –
Organization Development) published in 2002.
14
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156 BUSINESS AT A CROSSROADS
The arrow and the spiral
Tyler concluded, from her research between 1981 and 1997 with over
1,500 senior female managers, that women’s ways of conceptualizing

and managing work were different from but complementary to men’s;
that combining the best of both created “an entirely new paradigm”
that could help organizations achieve “wholeness and balance”; but
that, to achieve such fusion, we must examine “the core beliefs we bring
to … the design and operation of our organizations.”
She found that workplaces designed by women reflected a prefer-
ence for organic structures and collaborative working in which the flow
of work defined the organizational form and information was shared
freely. There was an emphasis on building relationships; as much atten-
tion was paid to processes as outcomes and (echoing Follett’s emphasis
on language) the words, symbols, and metaphors used in the organiza-
tions designed and run by women were often quite different from those
used in organizations designed and run by men.
In one organization run by women, biological and botanic meta-
phors were used, because managers disliked the way traditional business
language distanced people from the system. Strategic planning was
“midwifing” the new organization. Surveying stakeholder inputs was
“tilling the soil.” Effectiveness improvement was “nurturing.” New
investment was “watering.” Marketing was “seeding.” New programs
were “buds.” Existing programs were “flowers.” The components of
existing programs were “petals.”
The traditional business language with its military and mechanical
themes reflects the organizational model the company adopted, when it
emerged in the 19th century. It is the creature of hierarchical structures
in which orders come down from the top and reports move up from the
bottom, information rights attach to position, and the emphasis is on
outcomes, rather than processes.
Tyler says men and women also pursue goals in different ways too.
Citing Business and the Feminine Principle by Carol Frenier,
15

she
says men employ “a focused consciousness, notice content and seek a
finite solution” when solving problems, while “women use a diffuse
lens, notice context and remain open to multiple potential resolutions.”
Their goal isn’t to find the solution, “but to allow a multiplicity of ideas
to emerge and expand.”
Tyler also contrasted the shapes of the two approaches. Men favor
the “arrow” – a linear, sequential progression from conception to
completion, where each step is deliberate and attention is focused on
9780230_230941_10_cha08.indd 156 09/09/2009 10:02
8 THE ADAPTIVE CHALLENGE 157
outcomes. Women favor the “spiral” – a circuitous route, which moves
from idea generation to attracting interest and involvement. Once
attracted those involved can move in and out of collaboration according
to their circumstances and responsibilities.
Both models have strengths and weaknesses. The “arrow” model
keeps the objective in view, but can miss emerging trends that could be
vital (such as an anomalous rise in the rate of mortgage defaults in the
American mid-west in early 2007), and lacks the flexibility required in
times of rapid change and uncertainty. The “spiral” is more flexible, but
less clear. It encourages collaboration, a free flow of information and
experimentation, and tolerates and learns from mistakes. Its weakness is
that its focus on means rather than ends, and its emphasis on inclusion,
can make it indecisive.
Tyler sees “a functional fit” between the two models. They are yin
and yang; two parts of a whole. Combining them completes both. The
spiral generates ideas, the arrow transforms them into products or serv-
ices. Combining the two, she suggests, ensures that ideas “are success-
fully grown and launched into the system.”
Just as there is synergy in the parenting styles of the mother and

father, with one protecting and the other preparing, so there is, in my
view, much for companies to gain from making themselves more attrac-
tive to able women, and somehow or other ensuring that their inherent
maleness doesn’t continue to prevent as many women as men from
reaching positions of power and influence.
The female advantage
Appointing more women to senior positions will change a company in
a number of ways, and mostly for the better. Some of these changes are
hard to predict beforehand, and not all companies will derive the same
benefits to the same degree. But the kinds of benefit it is reasonable to
expect can be summarized as follows:
TALENT
Since talent and ability are distributed equally between the sexes, a
company where the gender split among senior managers is close to
parity should, other things being equal, have a more able senior manage-
ment team than a company where the gender split is far from parity.
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158 BUSINESS AT A CROSSROADS
MODERATING MACHO
Men behave differently when women are present. One of the chairmen
we spoke to while writing A Woman’s Place, recalled that at the board
meeting immediately following the company’s appointment of a woman
director for the first time, “the egos left the room.” All-male meetings
are often treated as opportunities to grandstand and “strut your stuff.”
The rules of dialogue are flouted. There’s too much talk, and not
enough listening. But macho behavior that seems normal to men in
all-male meetings feels over-the-top when a woman is present. As a
result, meetings tend to be more constructive and decisions tend to be
more considered, and sometimes less reckless.
RISK

When reputations and bonuses are at stake there is a temptation to
bend the rules, skimp on due diligence and gamble. Women are more
risk averse than men, partly because they are less hungry for the addi-
tional status that comes with a successful gamble, and partly because
their “gatherer” foremothers had to recognize patterns and shapes in
the forest, and were less inclined to overlook important details.
ETHICS
There is no clear evidence either way, but it’s my impression that
women are more ethical than men. Perhaps it is related to women’s
risk aversion, or perhaps it is that women and men together behave
more ethically than all-male groups. Whatever the basis for such a
prejudice, it seems to me that a company with women on the board
and in other senior management positions is less likely to engage in
the kind of practices that led to the Sarbanes-Oxley Act than a company
with no, or fewer, senior women. In other words, there is likely to be
a positive correlation between the number of women in senior
management positions, and a company’s standard of corporate
governance (see box below).
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8 THE ADAPTIVE CHALLENGE 159
PAY
There are two reasons why it seems likely that the arrival of more women
in the top echelons of company management will moderate the upward
pressure on executive pay. The first is that women are less hungry for
status than men, and it is hunger for the status money brings, rather
than for money itself, that keeps the eyes of executives on the bench-
marks. The second is that, as we have seen, women are more concerned
with relationships and seeking consensus than men, and are generally
better at reading character and mood, and seeing things from the points
of view of others. They have more empathy. They are, therefore, more

likely to be conscious of, and concerned about, the effects on the moti-
vation and self-respect of employees of very high levels of senior execu-
tive pay.
Ethics and gender
Academic research on whether women are more ethical than men isn’t conclusive,
but the balance of results suggests they are.
In
their review of the literature, Ford
and
Ri
chardson found seven studies showing women are likely to act more ethically
than men in certain situations, and seven that found gender had no impact (“
Et
hical
De
cision Making:
A Re
view of the
Em
pirical
Li
terature,” Journal of Business Ethics,
13, 1994.)
It
’s widely believed, however, that men and women approach ethical and
moral dilemmas in different ways.
Ps
ychologist Carol
Gi
lligan suggested in In a

Different Voice (
Ha
rvard
Un
iversity
Pr
ess, 1982) that men are likely to consider
moral issues in terms of rules and individual rights, whereas women tend to
consider the same issues in terms of relationships. For women,
Gi
lligan argued,
“the moral problem arises from conflicting responsibilities, rather than from
competing rights.”
I
t goes back to childhood games. Boys’ games teach respect for the rules and
fairness, while girls’ games teach respect for inclusion and the avoidance of hurt.
S
o-called “gender socialization” theory predicts these lessons will remain with adults.
This is consistent with the research cited above which found the leadership styles of
women tend to be “transformational,” rather than “transactional.”
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160 BUSINESS AT A CROSSROADS
The promise of women
The appointment of more women to senior management positions is
no panacea for the ills that beset big business. The male-dominated
status quo retains a firm grip on the future and it will take time for the
influence of additional women to change large companies in ways that
will improve their adaptation to modern conditions.
Moreover, the qualities women bring to companies, because they
are women, will not survive in isolation. They are predispositions. In

practice, the behavior, attitudes and approaches of women and men
tend to converge on those that already prevail in the situations in which
they find themselves. In male-dominated situations, women will tend to
adopt the male approach, and vice versa. This is why “token” women,
although better than no women at all, can have only a limited impact on
male-dominated cultures.
Some of the chairmen and CEOs we spoke to while we were writing
A Woman’s Place, said the appointment of the first woman to a board
made a difference, but not as much of a difference as the second and
third. The full therapeutic effects of the infusion of women into large
companies won’t be fully realized until women are as firmly established
at the top of large companies as they are in the registrar role at the John
Lewis Partnership.
But there is adaptive potential here. Women will make a difference if
they become established in senior positions at large companies. Their
desire to seek consensus and act on common ground, and their interest
in “power with,” rather than “power over,” as Mary Parker Follett put
it, could even change the shape of companies.
The argument so far
Large companies are threatened, not only by the defection of their
good people and a possible withdrawal of their licenses to operate
following their inadvertent destruction of the liberal capitalist consensus,
but also by a new kind of competitor, better suited to today’s environ-
ment. This chapter has looked at two unsuccessful attempts by compa-
nies to adapt to their changing environment and advocated a third
adaptation, which amounts to “feminization.” The next and penulti-
mate chapter examines another promising adaptation derived from the
growth of business partnerships in recent years.
9780230_230941_10_cha08.indd 160 09/09/2009 10:02
8 THE ADAPTIVE CHALLENGE 161

References
1 The “nice” company, Bloomsbury, 1990.
2 Just Business, Little, Brown, 1994.
3 For example: Awakening Corporate Soul, by Eric Klein, Fairwinds Press, 1999; Saving the
Corporate Soul, by David Batstone, Jossey-Bass, 2003; Corporate Soul: The Monk Within the
Manager, by Moid Siddiqui, Sage, 2005.
4 For example: The Strategy-focused Organization: How Balanced Scorecard Companies Thrive
in the New Business Environment, by Robert Kaplan and David Norton, Harvard Business
Press, 2001.
5 Palgrave Macmillan, 2005. See also A Woman’s Place is in the Boardroom: The Roadmap,
Palgrave Macmillan, 2008.
6 The Red Queen: Sex and the Evolution of Human Nature, Viking, 1993.
7 Sex Differences, K. B. Hoyenga and K. Hoyenga, Little Brown, 1980.
8 You Just Don’t Understand: Women and Men in Conversation, D. Tannen, William Morrow,
1990.
9 “Do Women Lack Ambition?,” Harvard Business Review, April 2004.
10 Transformational, Transactional and Laissez-Faire Leadership Styles: A Meta-Analysis
“Comparing Women and Men,” A. H. Eagly, M. C. Johannesen-Schmidt, M. L. van
Engen, Psychological Bulletin 2003, Vol. 129, No. 4.
11 Mary Parker Follett, Prophet of Management: A Celebration of Writings from the 1920s,
edited by Pauline Graham, Beard Books, 2003.
12 The Constitution of the John Lewis Partnership: Introduction, Principles and Rules, January
2000, 2nd edition, April 2004.
13 Integrative Management: Creating Unity from Diversity, Pauline Graham, Basil Blackwell,
1991.
14 “In the Company of Women: Complementary Ways of Organizing Work,” Carlotta Tyler,
OD Practitioner, Vol. 34, No. 3, 2002.
15 Business and the Feminine Principle, Carol R. Frenier, Butterworth-Heinemann, 1997.
9780230_230941_10_cha08.indd 161 09/09/2009 10:02
162

9 Size and shape
If a company’s management system is a hierarchy with an omnipotent
CEO at the top, and if the CEO’s pay depends in part on the size of
the company, it should come as no surprise if the company grows like
Topsy. Nor should it be surprising if acquisitions loom large in the
company’s growth strategy; or that the company tends to pay over the
odds for them; or that in due course, as the economies of the world
became increasingly integrated, CEOs begin to talk about their
“global strategies.”
This is sociologists’ nonsense, of course. As we all know from our
economics 101 lectures, “economies of scale” explain the emergence of
today’s giant companies. Companies become gigantic, not because
CEOs and their investment banking cronies have personal interests in
size, but because marginal and average costs decline, as volume rises. A
big company can produce widgets at a lower unit cost than a small
company, can charge lower prices and will, therefore, sell more. Volume
will rise further, unit costs will fall further, and, were it not for anti-trust
legislation, which leads to “oligopoly” (a few companies dominating
the market), one company would in due course monopolize the world’s
widget market. The giant company is the creature of economics. It’s
not socially constructed.
Is that clear? Crystal.
It explains everything, like, for example, why Detroit’s big three
(GM, Ford and Chrysler) dominate the world’s mass market for cars,
why “big blue” (IBM) dominates the global personal computer market
and why everyone, everywhere writes letters with Parker pens.
That corporate giantism is socially constructed, by the power, pay,
and status-seeking of CEOs, and their unhealthy alliances with the
leading investment banks, seems much more plausible to me than the
idea that it is the creature of natural economic laws. Sure, there are

economies of scale, and diseconomies too, but only in a closed system
where nothing ever changes. Real business isn’t like that, and in the real
business world, size is not the blessing classical micro-economics
supposed it to be.
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9 SIZE AND SHAPE 163
Real business
The business drama is not, as the conventional wisdom supposes, an
incessant struggle for value between managed organizations, led by
charismatic CEOs with grand plans and strategies.
IBM wasn’t brought to its knees by a better led competitor. It was
humbled by a chain of events triggered by its decision to take on Apple,
and enter the personal computer market. It was “hoist with its own
petard” in a process no one controlled. The epitome of the planned
corporation was brought low by an unplanned and inherently unpre-
dictable sequence of events.
GM, Ford, and Chrysler were similarly humbled by a concatenation
of events on the other side of the Pacific they could not possibly have
foreseen. Their nemesis wasn’t Toyota, Honda, or Nissan, but a new
system of production, often attributed to American consultant, Edwards
Deming, the significance of which was below the threshold of the big
three’s awareness at the time. The Japanese auto makers didn’t set out
to conquer Detroit. They adopted JIT (just-in-time) supply, because
they lacked the capital to invest in stocks, and they embraced TQM
(total quality management) to reduce rework and after-sales costs.
It is not the struggle between giant CEO-led companies that shapes
the business landscape. It is the winds of chance and the restless seas of
technological change.
But chance, technological change, and people hungry for self-esteem
are potential, not direct threats to CEO-led companies. The direct threats

come from agents within the business world, because in the struggle for
value there are no winds so ill they blow no one any good. While IBM
was losing the struggle for value in the PC market others, such as Compaq,
Dell (derided as “hollow corporations” at the time), Microsoft, and Intel,
were winning it. They comprised a powerful business enterprise IBM
failed to spot, because it had no recognizable shape or threatening intent.
I’ve called such quasi-businesses Multi-agent Business Enterprises
(MaBEs), to distinguish them from Chandler’s Multi-unit Business
Enterprises (MuBEs). Linux is an MaBE and, although not strictly
business enterprises, the internet and Wikipedia are MaBE-like. Both
are substantial institutions that have “emerged,” rather than been
created. The former is destroying the conventional telephony business
and the latter has helped to bury commercial encyclopedia publishing
(see Chapter 7).
Among the MaBE’s distinguishing characteristics is that its agency is
distributed among individuals and relatively small firms and it has no
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