The New Look in Business Management: Ironic Management

This is the last piece I will be posting from home for awhile. I’m off to Portugal with my wife Linda for a combined speaking and vacation tour. I will be keynoting an international marketing congress in Lisbon Nov. 24. I will be back in my office, Nov. 28. I will try to get a posting or two in from abroad. Meanwhile -- Happy Thanksgiving, all!

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We delivered the manuscript for Firms of Endearment last Friday. It will be released in April under the Wharton Business School Press imprint. We think it is a signal event that Wharton bought a book with such a “mushy” title. But it is a sign of the times. We are living in the dawning light of the biggest ideological change in the history of capitalism. Firms of Endearment is about this change.

FoEs are remarkable companies that do not submit to the short-term myopia that so deeply afflicts Wall Street. In fact, FoEs are so much outside the mainstream that we have dubbed their style of management, ironic management.

Because “ironic” is so often misused, let me make it clear what we mean by it. We mean an incongruous or unexpected result. Some might use the term counterintuitive management. In any event, FoEs frequently take actions that produce results quite different from what conventional management logic would indicate. Here is a sampling:

• FoEs decentralize decision making, but do so in ways that increase rather than decrease top executive influence at all levels of a company.
• FoEs pay frontline staff above norms in their category. Rather than increasing cost of sales, this reduces the percentage of a revenue dollar that goes to employee-related costs.
• FoEs typically depend little or not at all on conventional marketing practices, yet often experience explosive growth due to the affectionate regard stakeholders hhave for them and the word-of-mouth promotion that results.
• Publicly traded FoEs tend to be less influenced by expectations of Wall Street analysts but typically achieve higher price/earnings ratios.
• FoEs operate with greater transparency than most companies do but get sued less often.

We might also aptly deem as ironic the FoE belief that dedicating company resources to making the world a better place is an effective wealth-building strategy.

Of course there still are many antagonists to the idea of corporate social responsibility (CSR). A recent article in The Economist argued “… corporate philanthropy is charity with other people’s money.” But we can only feel charity for executives like T. J. Rodgers, CEO of Cypress Semiconductor who sees corporate good works in that light. We also feel sympathetic for shareholders in companies headed by executives with such a narrow view. They generally don’t earn as much as FoE shareholders do.

Rodgers recently issued an astonishingly scornful rebuke of John Mackey’s commitment to use FoE Whole Foods as a vehicle for making the world a better place. Writing in a point-counterpoint debate on CSR in Reason magazine, Rodgers said, “Mackey’s subordination of his profession to altruistic ideals shows up as he attempts to negate the empirically demonstrated social benefit of ‘self interest’ by defining it narrowly as ‘increasing short-term profits.” That is a perversion of Mackey’s perspective as it showed up in his part of the debate. After charging Mackey with harboring Marxist beliefs, Rodgers pitifully complains, “I resent the fact that Mackey’s philosophy demeans me as an egocentric child because I have refused on moral grounds to embrace the philosophies of collectivism and altruism that have caused so much human misery, however tempting the sales pitch sounds.” Rogers sounds pretty childish to me.

Meanwhile, while Whole Foods stock has risen more than 1800 percent over the past 10 years, Rogers’ company over a 23-year period has a net loss for the investor stakeholder group.

I’ll say more about FoEs in the weeks ahead.

Comments

[Jerry Michalski]

Congratulations on getting the book to press!

No surprise at all that some see CSR as outside the bounds of good management. In 1970, Milton Friedman published a very influential article in the New York Times Magazine that helped ignite the Reagan Revolution. See it here: http://www-rohan.sdsu.edu/faculty/dunnweb/rprnts.friedman.html

It's a shocking read. No wonder some people don't understand or agree with the connection some leaders make between purpose, the social good and commercial profit.

Their loss.