Management - An eye on those who rule the roost

For all the effort that organisations go to in order to convince us that the modern business environment is terribly complex, they tend to put a lot of credence in the notion that success in this challenging world can be put down to simple factors. Depending on who you want to believe, the key is delivering shareholder value, creating satisfied customers or having happy employees.

In fact, experience suggests that relying on any one of these measures over the others might work in the short term but is unlikely to do so over a longer period. So, what is it that drives successful organisations if it is not pleasing those old standbys of shareholders, customers or employees, or the comparatively new one of stakeholders or the community?

Management writer Art Kleiner reckons it is impressing the core group. Though there is the risk that this theory, too, falls into the single simple answer trap, there is something persuasive about the concept. And not just for those cynics convinced that business largely exists to make a few middle-aged men rich.

Kleiner seems ambivalent about whether core groups are a good or a bad thing, appearing to suggest in his new book, Who Really Matters – the Core Group Theory of Power, Privilege and Success (Nicholas Brealey, £19.99), that having one all-powerful group is better than having several groups that feud with each other. But, as you might expect from a former journalist with the counter-culture bible Whole Earth Catalog, he gives plenty of succour to the sceptics.

Early on in the book he recalls the 1970s research around US corporations that had moved their headquarters from New York City to surrounding suburbs.

Though elaborate explanations were given for the selection of each location, the study of 38 such moves found that the average distance from the relevant chief executive’s home was eight miles. Similarly, he points to “mergers and acquisitions with no viable rationale except the aggrandisement of the core group” and numerous perks, such as special parking spaces, tickets to sporting events, even “endowed university chairs in core group members’ names” as evidence of his theory in action.

It is, of course, all a matter of degree. Most of us early on in our careers realise quickly that there are certain people in the organisation who have more clout than others. In some cases, it is obvious who these people are; in more complex organisations it is not necessarily so. But we all make it our business to find out who they are and to do what we think will please them. As we progress, we get used to hearing phrases such as ‘X is really keen on this’, or ‘I don’t want to be the one to tell Y that this cannot be done’.

Nor should we necessarily imply that the members of this group are self-serving. They are generally there because they have been picked out as especially valuable to the organisation because of their intelligence, energy, etc. They may – as in the case of those in large multinationals – just be prepared to commit themselves more fully to the cause than some of their contemporaries. And, generally, their perks are indulged because of the sacrifices they make and the value they supposedly bring.

The problems start when the core group becomes remote from the organisation as a whole. In such circumstances, it is easy to see chief executives becoming like potentates, surrounded by people who tell them only things they want to hear and are rewarded by being invited to share in the spoils of success through after-work drinks and weekend activities.

This can result in the top echelon of the company, those who are supposedly blessed with special knowledge and skills, missing signals about its market, failing to realise that the environment in which it operates has changed and – as we have seen in recent years, particularly in the United States – leading their charges into the abyss.

The fact that these disasters are often accompanied by extraordinary pay deals is further evidence of the danger of the ‘core group’ becoming a ‘personality cult’, especially at a time when so much emphasis is put on the importance and influence of the chief executive.

Time perhaps to remember the old political adage about absolute power corrupting absolutely, and ensure that there are more checks and balances in place rather than just relying on institutional shareholders to come down hard once it is too late.