Organizational Philosophy

Key factor to maintain successHeikki Hirvonen

Will Hutton, The Observer: Modern Capitalism is at moral dead end..

• Chief executives make too much money– 47 times avg. worker pay in 2000, 81 times in 2010– And have lost sight of what’s important

• Ove Arup: excessive personal pay divide rather than unite companies – divided org. Collapse

• John Lewis: Differences of reward must be large enough to encourage to perform, but present differences are too great (in 1957)

• Arup, Lewis: Firms are moral enterprises, point of profit serves the business purpose of the firm

Professor Jeffrey Pfeffer (Stanford)in Newsweek

• American business practices are going to the wrong directions– Companies weaken themselves by firing people as

problem solving– Work morale goes down, harder to hire new people

• After 9/11 american airlines fired a lot of people– Except Southwest - no people fired in 40 years*– Now biggest airline in U.S. and does well unlike others– Employees well motivated, strong company spirit

* due to productivity or efficiency reasons

John Hagel III, John Brown, Lang Davison: Are all employees Knowledge Workers?

• Executives identify the talent in their firm– Top tiers of management and knowledge workers

• When the focus is in knowledge workers, the sight in rutinized job improvization is lost

• Fast talent and performance improvement has been measured in outsourced jobs – Call centers and manufacturing in India and China– When workers are part of firms that view them as

core to create value, very creating problem solving• Japanese Auto manufacturers see employees as

knowledge workers and problem solvers

Jim Collins: How the might fall: And Why Some Companies Never Give In

• The fall of most succesful companies starts from the success and escalates in five steps

• Step 1: arrogance in top management• Step 2: trying to grow to areas where there’s no

competence and forgetting the core business • Step 3: bad signals, but company still does OK– Top management blames the environment

• Step 4: problems arise - new management– change managers try to find a ”silver bullet”

• Step 5: Managers and employees lose fate– Company is ruined

• According to Collins, this is what happened to GM

Resilient Philosophy

• Waseda University lecturer Naoshi Takatsu had a course named creating value in business

• Some main points from the course– Only companies with resilient philosphy prevail in

the long run (Check forture 500 from the 70’s)– Philosophy has to be higher goal than profits– Philosophy and its purpose has to be actively

strengthened and communicated– Philosophy will unite the company, and keep it in

the right tracks

Conclusion• I do not know – the right level of compensation for top executives– when it is the right decision to fire people– when classification of employees is beneficial– How to recognize a downfall for a company has started

• But I do believe– That organization has huge problems if its divided– That best results are achieved when everybody in the

organization is trying to achieve a common goal– That this can be achieved by strong organizational

philosophy– And that this applies also to other organizations than just

companies, i.e. Universities

Its not about the What, its about the Why and How!

Thank you!