VBM Thought Leader:
Art Kleiner biography
Core Group
Theory of Power, Privilege and Success
 About Art Kleiner: : biography / resume / curriculum vitae
Art Kleiner is the
editorial director of the Fifth Discipline series of management books and
columnist for Strategy+Business magazine
and a writer, lecturer and editorial consultant with a background in
management, interactive media, corporate environmentalism, scenario
planning, and organizational learning.
Art Kleiner published an earlier book called "The Age of Heretics",
a history of the thinkers and practitioners who sparked the modern
organizational change movement; it was a finalist for the Edgar G. Booz
award for most innovative business book of 1996.
He is a co-author
(with Peter Senge et al) of the bestselling Fifth Discipline Fieldbook
(1994), The Dance of Change (1999), and Schools That Learn (2000) -- a
multiple-author trilogy published by Doubleday, focusing, respectively, on
organizational learning, sustaining change in business, and the education
system. He is
the Director of research and reflection at Dialogos, a consulting firm based
in Cambridge, Massachusetts, and a faculty member at New York University's
Interactive Telecommunications Program.
Art
lives outside New York City.
Who Really Matters: The Core Group Theory of Power, Privilege and Success
starts with a hilarious anecdote
about an Exxon Oil employee conference to
announce their new "core values". Enshrined as number one on their list of
core values was this simple sentence: "The customer comes first".
That night there was an executive dinner, and after a few drinks a brash
young rising star named Monty proposed a toast. "I just want you to know,"
he said, "that the customer does not come first." Then Monty named
the president of the division, "He comes first." He named the
European president. "He comes second." And the North American president. "He
comes third." The Far Eastern president "comes fourth." And so on for the
fifth, sixth and seventh senior executives of that division, all of whom
were in the room. "The customer," concluded Monty, "comes eight." An Exxon
retiree who told me this story said: "There was an agonized silence for
about ten seconds. I thought Monty would get fired on the spot. Then one of
the top people smiled, and the place fell apart in hysterical laughter. It
was the first truth spoken all day."
According to Art
Kleiner, "The customer comes first" is one of the three great lies
of the modern corporation. The other two being: "We make our
decisions on behalf of the shareholders" and "Employees are our most
important asset."
In
Who Really Matters: The Core Group Theory of Power, Privilege and Success
Art Kleiner tries to answer the question
what is the
actual objective of the modern corporation, making the bold statement
that what comes first in every organization is keeping the Core Group
(normally most of the top executives) satisfied. And yet, according to Kleiner Core Groups are not inherently bad or dysfunctional, but rather
necessary and even the best hope we have for ennobling humanity, since
organizations are natural amplifiers of human capability. An organization's
Core Group is also the source of its energy, drive and direction. or more
accurately, any organization goes wherever its people perceive that the Core
Group needs and wants to go. Non-members depend upon the Core Group for
direction, The Core Group and its members depend upon the non-members for
their legitimacy.
You will not often
find Core Groups mentioned in any organization chart. They exist in people's
hearts and minds only. After some time, organizations will resemble how
their Group act and looks like and automatically pivot and twist to give the
members of the Core Group what they think they want and need, without even
asking them. Great Core Groups hold an essential form of knowledge. They set
the context that establishes this knowledge as significant. (Compare:
Intellectual Capital).
How do Core Groups
become so powerful? Kleiner explains the mechanism is based on guesswork
and amplification. People who are not in the Core Group try to guess
as good as they can what it is the Core Group wants. So even a casual remark
in passing by a Core Group member can be amplified to a shift of direction
of an entire division. As a consequence, Top Managers need to be very
cautious in what they say. According to Kleiner, concepts like the
Balanced Scorecard do not
really change this. Although more objective measurements may be used and
there is better strategic communication top-down, still a lot of guesswork
remains: people assume that they should interpret the numbers according to
what they perceive the Core Group really wants, and also people assume they
should interpret the Core Group according to the numbers: if the
measurements send a clear signal, then people assume that is where the Core
Group wants the organization to go. Core Group dynamics also prevent
organizations from changing easily according to Kleiner. Both the Core Group
and the non-Core Group employees have an interest in maintaining the status
quo.
Who Really Matters: The Core Group Theory of Power, Privilege and Success
also gives interesting examples of Core Groups: Enron (...), HP, Government
Agencies, and includes special chapters on the role labor unions, management
consultants and schools play. Kleiner ends the book with reflections on
Making a Better World, giving important tips and clues on what not to
do and what should be done if one wants to influence or even change a
Core Group and discussing Corporate Governance, Corporate Purpose and how
Core Groups thinking relates to the world we and our children live in.
Are Core Groups
and Core Group theory relevant within Value Based
Management? Of course they are.
Managing for Value
(the second of the three components of VBM) should be seen in another
perspective if Kleiner is right. Perhaps the "managing" in corporations
often is indeed primarily aimed at satisfying the needs of the Core Group. Also executive
compensation and corporate governance regulation become even more important
then than they already are.
Kleiner suggests
that is it is possible to create "Expanded-Core-Group Organizations". To do
this, the following elements are suggested:
- employee
stock-ownership plans
- financial literacy
- non-hierarchical
decision-making
- comprehensive
(financial and strategy) training programs
This is were Core
Group theory is very much like Value Based Management thinking.
As far as the Value Creation
part of VBM is concerned it is important whether one should aim
primarily at
maximizing shareholder value or stakeholder value or that in reality the
Core Group comes first, principally a form of stakeholder value. Core Group
dynamics can indeed explain how it is possible that companies adopting the
maximizing shareholder philosophy often end up in becoming less responsive
to shareholders in a meaningful way. If Core Group members lack adequate
knowledge or experience or mistakenly(!) decide that the
organization's first job is to keep up the stock price, the easiest way of
doing that is the presentation of slowly but steadily growing positive
quarterly figures. Through guesswork and amplification the entire
organization will follow a Core Group that makes this severe mistake and
will support the Core Group in providing a manipulated and wrong picture of
the reality instead of what really should be done: taking decisions that
maximize shareholder (or stakeholders) value.
Kleiner goes one
step further saying: "we need a model that recognizes the primacy of the
Core Groups while constraining them from abuses of power" and suggests we
need a third model (besides stakeholder value and shareholder value): a
model that recognizes the primacy of Core Groups while constraining them
from abuses of power.
This is where we
would slightly disagree with Kleiner: Core Groups are a mechanism, a
model that explains who really matters, but not an end.
Through writing
Who Really Matters: The Core Group Theory of Power, Privilege and Success
Art Kleiner has given us a brilliant insight in the dynamics why
organizations often fail to implement Value Based Management or their
corporate purpose. But Core Groups
should not be what really matters. In other words: what
really matters for organizations is whether they do what they were created
and exist for: taking care of the desired value creation for its
shareholders and/or stakeholders (Value Based Management).
For its
description and analysis of how Core Groups work, this
book should become a management classic and Kleiner's book is highly recommended for any top manager, strategy
consultant or corporate governance specialist acting in the field of Value
Based Management.
Also compare:
Groupthink
|
Maximizing shareholder value
| Organic
Organization |
Bases of Social Power
| Levels of Culture
|
Changing Organization Cultures |
Contingency Theory |
Framing
Art Kleiner's website is here
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