Category Archives: The CEO

Arendt on Enlightened Self-Interest

From the essay “On Violence” in Crises of the Republic (1972):

Nothing, unfortunately, has so constantly been refuted by reality as the credo of “enlightened self-interest,” in its literal version as well as in its more sophisticated Marxian variant. Some experience plus a little reflection teach, on the contrary, that it goes against the very nature of self-interest to be enlightened. To take as an example from everyday life the current interest conflict between tenant and landlord: enlightened interest would focus on a building fit for human habitation, but this interest is quite different from, and in most cases opposed to, the landlord’s self-interest in high profit and the tenant’s in low rent. The common answer of an arbiter, supposedly the spokesman of “enlightenment,” namely, that in the long run the interest of the building is the true interest of both landlord and tenant, leaves out of account the time factor, which is of paramount importance for all concerned. Self-interest is interested in the self, and the self dies or moves out or sells the house; because of its changing condition, that self cannot reckon in terms of long-range interest, i.e., the interest of a world that survives its inhabitants…. Self-interest, when asked to yield to true interest — that is, the interest of the world as distinguished from the self — will always reply, Near is my shirt, but nearer is my skin. That may not be particularly reasonable, but it is quite realistic; it is the not very noble but adequate response to the time discrepancy between men’s private lives and the altogether different life expectancy of the public world. To expect people, who have not the slightest notion of what the res publica, the public thing, is, to behave nonviolently and argue rationally in matters of interest is neither realistic nor reasonable.

A Quibble Over Robert Reich’s “CEO” Statesman

JDZellerbach

J.D. Zellerbach

One of the posts on this blog with consistently high traffic is The First CEO, which was my first attempt to track down the earliest instances of the acronym “CEO.” With a little help from the people at Webster’s Dictionary and the Harvard Business Review, I found that those came in the 1970s. In subsequent posts on this theme, I tried to make some historical sense of the literary evidence I’d uncovered.

So I have a quibble with Robert Reich’s polemic in The American Prospect (and elsewhere; he’s syndicated), comparing the CEOs of today and their “shameful,” self-serving silence in the face of Trumpian authoritarianism to the “CEOs” of the 1950s:

I’m old enough to recall a time when CEOs were thought of as “corporate statesman” [sic] with duties to the nation. As one prominent executive told Time Magazine in the 1950s, Americans “regard business management as a stewardship,” acting “for the benefit of all the people.”

That prominent executive, held up here as a model corporate statesman, was pulp and paper executive J. D. Zellerbach. Zellberbach was not a CEO — he could not have been in the 1950s — but the President of Crown Zellerbach. Reich is using the term “CEO” loosely, then, but in this piece that seems to prevent him from thinking historically about the CEO as an institution.

Perhaps he should have instead asked whether the institution of the CEO in the 1970s represented a rejection of “socially-conscious” business leadership for which he’s calling.

Remarkably enough, in Saving Capitalism, Reich himself quotes Zellerbach’s statement to Time Magazine just before he discusses the shift from the benevolent managerialism advocated by industrialists like Zellerbach to “a radically different vision of corporate ownership” that set in during the 1970s (and brought with it, among other things, the institution of the CEO). It’s worth reading this passage to the bitter end:

In the early 1950s, Fortune magazine urged CEOs to become “industrial statesmen,” which in many respects they did—helping to pilot an economy generating broad-based prosperity. In November 1956, Time magazine noted that business leaders were willing to “judge their actions, not only from the standpoint of profit and loss” in their financial results “but of profit and loss to the community.” General Electric, noted the magazine, famously sought to serve the “balanced best interests” of all its stakeholders. Pulp and paper executive J. D. Zellerbach told Time that “the majority of Americans support private enterprise, not as a God-given right but as the best practical means of conducting business in a free society….They regard business management as a stewardship, and they expect it to operate the economy as a public trust for the benefit of all the people.”

But a radically different vision of corporate ownership erupted in the late 1970s and early 1980s. It came with corporate raiders who mounted hostile takeovers, wielding high-yield junk bonds to tempt shareholders to sell their shares. They used leveraged buyouts and undertook proxy fights against the industrial statesmen who, in their view, were depriving shareholders of the wealth that properly belonged to them. The raiders assumed that shareholders were the only legitimate owners of the corporation and that the only valid purpose of the corporation was to maximize shareholder returns.

This transformation did not happen by accident. It was a product of changes in the legal and institutional organization of corporations and of financial markets—changes that were promoted by corporate interests and Wall Street. In 1974, at the urging of pension funds, insurance companies, and the Street, Congress enacted the Employee Retirement Income Security Act. Before then, pension funds and insurance companies could only invest in high-grade corporate and government bonds—a fiduciary obligation under their contracts with beneficiaries of pensions and insurance policies. The 1974 act changed that, allowing pension funds and insurance companies to invest their portfolios in the stock market and thereby making a huge pool of capital available to Wall Street. In 1982, another large pool of capital became available when Congress gave savings and loan banks, the bedrocks of local home mortgage markets, permission to invest their deposits in a wide range of financial products, including junk bonds and other risky ventures promising high returns. The convenient fact that the government insured savings and loan deposits against losses made these investments all the more tempting (and ultimately cost taxpayers some $124 billion when many of the banks went bust). Meanwhile, the Reagan administration loosened other banking and financial regulations and simultaneously cut the enforcement staff at the Securities and Exchange Commission.

All this made it possible for corporate raiders to get the capital and the regulatory approvals necessary to mount unfriendly takeovers. During the whole of the 1970s there had been only 13 hostile takeovers of companies valued at $1 billion or more. During the 1980s, there were 150. Between 1979 and 1989, financial entrepreneurs mounted more than 2,000 leveraged buyouts, each over $250 million. (The party was temporarily halted only when raider Ivan Boesky agreed to be a government informer as part of his plea bargain on charges of insider trading and market manipulation. Boesky implicated Michael Milken and Milken’s junk bond powerhouse, Drexel Burnham Lambert, in a scheme to manipulate stock prices and defraud clients. Drexel pleaded guilty. Milken was indicted on ninety-eight counts, including insider trading and racketeering, and went to jail.)

Even where raids did not occur, CEOs nonetheless felt pressured to maximize shareholder returns for fear their firms might otherwise be targeted. Hence, they began to see their primary role as driving up share prices.

Varoufakis on Bankruptocracy

At an anti-austerity event at the Emmanuel Centre in London yesterday evening, former Greek Minister of Finance Yanis Varoufakis offered a few remarks on the period in which we are now living. Here is my transcript of the part of his talk describing the zombie state of “bankruptocracy” that arose after “capitalism died” in 2008.

When the bank of England prints billions and billions and billions to buy these paper assets — which are mortgages, which are private debts of the banks, which are public debts and so on and so forth —  what happens is two things.

Firstly, house prices increase, in the parts of the country where wealth is concentrated, the wealthy people spend more, their income increases, so there is this sensation among the ruling class that they’ve stabilized the economy because their bottom line has been stabilized.

At the very same time, you have a situation where companies have access to cheap money, courtesy of QE. The tragedy however is, what do they do with this money? Now they’re not dumb. They know that the rest of you cannot afford their goods and services, so they’re not going to invest in productive activity, in order to produce more of them. So what do they do?

They borrow the money that the QE program is producing, giving it to the banks; the banks pass it on to the corporations; and what do the corporates do? They buy back their own shares. They borrow money to buy back their own shares because that way, they push the share price up, and guess what the bonuses of the CEOs are connected to? The share price. So they have more income, and all this money creation, liquidity creation, does not find itself not only in the pockets of working men and women; but it doesn’t even find itself into productive investment into capital.

So we have a capitalism without capital. We have a capitalism with financial capital.

We don’t live in capitalism.

In 1991 socialism collapsed; and the socialist camp and the left worldwide suffered a major defeat, both a political and a moral defeat. And we’re culpable for that, but that’s another story.

In 2008, capitalism died. I describe the new system we live in as “bankruptocracy”: the rule by bankrupt banks that have the political power to effect a transfer — a constant tsunami of money coming from the financial sector and from working people into the bankrupt banks, which remain bankrupt even though they are profitable, because the black holes created during the years of Ponzi growth prior to 2008 remain.

You can watch the whole speech here, on Varoufakis’ site.

The First CEO: A Political Revolution?

I’ve been associating the cultural icon of the CEO with big changes in America, most of which were well underway in the 1970s, when the acronym “CEO” first comes into wide use: the collapse of manufacturing, the financialization of the economy, the emergence of the neoliberal order. David Graeber offers yet another way to characterize these changes: “total bureaucratization.”

An excerpt from Graeber’s new book in the latest issue of Harpers lands us in familiar territory:

What began to happen in the Seventies, which paved the way for what we see today, was a strategic turn, as the upper echelons of U.S. corporate bureaucracy moved away from workers and toward shareholders. There was a double movement: corporate management became more financialized and the financial sector became more corporatized, with investment banks and hedge funds largely replacing individual investors. As a result, the investor class and the executive class became almost indistinguishable. By the Nineties, lifetime employment, even for white-collar workers, had become a thing of the past. When corporations needed loyalty, they increasingly secured it by paying their employees in stock options.

What Graeber at first characterizes as “a strategic turn” and the merging of the corporate and financial sectors, he then goes on to call “a political revolution”:

At the same time, everyone was encouraged to look at the world through the eyes of an investor — which is one reason why, in the Eighties, newspapers continued laying off their labor reporters, while ordinary TV news reports began featuring stock-quote crawls at the bottom of the screen. By participating in personal-retirement and investment funds, the argument went, everyone would come to own a piece of capitalism. In reality, the magic circle only widened to include higher-paid professionals and corporate bureaucrats. Still, the perceived extension was extremely important. No political revolution (for that’s what this was) can succeed without allies, and bringing along the middle class — and, crucially, convincing them that they had a stake in finance-driven capitalism — was critical.

The parenthetical affirmation — “(for that’s what this was)” — asks us to pause and really take the point. Having read only this excerpt, I don’t know whether Graeber goes on to explain why what he elsewhere calls a “shift” or “turn” counts as a “political revolution,” or how exactly he thinks this overturning of the political order was brought about. No doubt there was fraud, collusion and conspiracy, and “everyone was encouraged” to believe they were included; but the passive verb here leaves way too much unsaid. For one thing, the triumph and establishment of  the new order at home and abroad was really not so bloodless as Graeber (here, at least) makes it out to be.

The celebration and glamorization of the CEO — as a leader, a rule-maker and a rule-breaker, the agent and steward of shareholder value — was one of the things that duped ordinary, middle-class Americans into thinking “they had a stake in finance-driven capitalism.” It deserves a chapter in the story Graeber’s out to tell. The acronym “CEO” itself belongs to what Graeber calls the “peculiar idiom” of “bureaucratic techniques” and meritocratic myths — a language with origins in self-actualization movements of the 1970s, “full of bright, empty terms like ‘vision,’ ‘quality,’ ‘stakeholder,’ ‘leadership,’ ‘excellence,’ ‘innovation,’ ‘strategic goals,’ and ‘best practices.’” It’s good to see this language held up for scrutiny, especially since, as Graeber rightly points out, it still “[engulfs] any meeting where any number of people gather to discuss the allocation of any kind of resources.” To the victors go the spoils, and that’s not likely to change as long as we are speaking their language and playing by their rules.

To the Edge of the Gap with Satya Nadella

It’s hard to believe that the people around Microsoft CEO Satya Nadella did not prepare him for a question about the pay gap at the Grace Hopper Celebration of Women in Computing conference, and even harder to believe that they would advise him to tell women to stop asking for a raise and place their “faith,” instead, in “karma.” Nadella must have gone off script, or lost his talking points on the way to Phoenix. He tried to backpedal on Twitter later in the day, but by then the damage was done.

There is a transcript of the mess here. Nadella starts by talking about the inefficiencies of “HR systems” and ends up endorsing a corporate caste system, in which karma determines station. He advises talented women that the arc of Microsoft universe is long, but bends toward justice: they should keep the faith, keep working and just keep quiet about the whole equal pay thing.

Today, he’s repented, in an email to Microsoft employees: “if you think you deserve a raise, just ask for it.” He’s also committed, he says, to closing the pay gap at Microsoft. The trouble is, telling women they should “just ask” for raises may indicate that the CEO has found a formula that will allow him to remove his foot from his mouth, but it isn’t going to solve the problem.

In fact, research by the organization Catalyst — which I’ve written about in another post — shows that while the system may reward men in roughly the way Nadella describes, giving them “the right raises as [they] go along,” it does not so reward women; and when women ask for raises, their requests go unmet. It’s hard to have faith in a system like that.

The whole incident brings me back, of course, to my ongoing interest in the power of asking, which is the power in question here.

“Just ask” sounds like permission; but permission does not necessarily entail power. What’s fascinating about the Catalyst research on what happens when women ask for raises is that it clearly shows that the power of asking is a power we have to confer on others: it’s the power we give the other to make claims (or demands) on us.

We confer that power when we recognize the other’s status as a second person, or — to put it another way — when we recognize in them an authority equal to our own.

Respect that authority, and we are mutually accountable to each other. Disrespect or disregard it, and we deny others the status of persons, make them instruments of our will or means to our ends. We dehumanize them, or fail to acknowledge them as fully human.

Of course, respect of this fundamental order is not something Nadella can institute at Microsoft by tweeting about “bias,” emailing his apologies or by executive fiat. But a good place to start the broader conversation about closing the pay gap (at Microsoft, in the tech industry or throughout the business world) might be to see it, and approach it and address it as a basic power gap that only true respect for persons can bridge.

A Fifth Note on the First CEO: The Postwar Fad

We don’t usually think of corporate boardrooms as places where fads start or take hold. But that’s probably the the best way to account for the adoption of the CEO title by American corporations in the postwar period. Or at least that’s the view urged in this 1999 paper by Allison and Potts, which a reader shared in a comment on my post about the postwar provenance of the term CEO: from the mid 1950s to the mid 1970s, the adoption of the Chief Executive Officer title spread, primarily through “board interlocks” — or through individuals serving on multiple corporate boards.

Allison and Potts present the title’s diffusion through corporate networks as a “no brainer,” “an innovation largely without consequence to adopters.” It was a case, they say, of “contact-only diffusion” or “diffusion with contagion,” in which no serious choices or business decisions had to be made; the title may have helped clarify the difference between President and Chairman, but for the companies Allison and Potts study there was no “non-trivial economic benefit or cost” involved. Companies adopted the title Chief Executive Officer largely because they were emulating other companies: “diffusion of the CEO title was strictly mimetic, a true fad.”

cumulativeCEO
Everybody was doing it. Container Corporation of America started the trend in the late 1940s: why, Allison and Potts don’t explain, but I hope to make some sense of that at some point in the future; it’s intriguing, to say the least, that the company led by Walter Paepcke — Aspen booster, patron of the arts, and promoter of big ideas — led the way. In 1955, CCA was the only one of the largest 200 industrial companies in the United States that had a Chief Executive Officer. By 1975, all but one of the bunch had adopted the title.

CEO Titles

The fad takes hold in four stages: an early period, from 1955-1961;1962-1965, when adoption rates climb dramatically; a late middle period, from 66-71; and a final period where we see adoption rates drop off, mainly due to the remaining number of small adopters.

Though Allison and Potts don’t distinguish the adoption of the Chief Executive Officer title from the use of the acronym CEO, it’s in that late middle period, which they call the “inflection point” of the fad, where we start to see the first traces of the acronym “CEO” in the Harvard Business Review and other business publications. Shareholder value theory makes its debut in 1970. By the time the fad has run its course, in 1976, Jensen and Meckling have published their theory of the firm: the CEO has been identified as the primary “agent” of the firm’s success. He has also begun to enjoy unprecedented political influence, social prestige and cultural celebrity. What began as a boardroom fad has produced a new icon of American power.

A Fourth Note on the First CEO: The Postwar Provenance

A reader of my posts about the acronym CEO suggests I have a look at the organizational chart for the Manhattan Project to gain a better appreciation for the “American and military” provenance of the term. “I believe during a period of intense collaboration between the military and private sector after WWII,” he writes, “it somehow permeated to corporate use.”

I have wondered about that “somehow,” and wondered, too, if I could be a little more specific about the course this permeation took. Is the acronym CEO — and the idea of the CEO — an outgrowth of the military industrial complex? Does the rise of the CEO to a position of cultural celebrity in the 1970s and 1980s tell us something (we don’t already know) about how the postwar environment shaped American ideas of command, power and leadership, in the private sector and in the public sector?

These are questions worth asking, I think, though I’m not sure the organizational chart for the Manhattan Project is the best place to start. Or at least that chart doesn’t include the term “CEO.” There is an “OCE” — an Office of the Chief of Engineers; the role of “Executive Officer” was assigned to J.B. Lampert. That title was also used in the appointment of Leslie R. Groves (of Now It Can Be Told fame), who in the org chart has the title of Commanding General.

The larger point here still merits consideration: just follow the careers of the engineers and military commanders identified in the Manhattan Project org chart, consider the military industrial development of the 1950s and the American business environment in which COs and XOs and members of the OCE worked closely with the private sector, and in many cases left the military to join the private sector: it’s easy to see how a new vocabulary of command might have emerged during that period, and eventually found its way into ordinary usage.

Still, I want specifics and cases I can point to. To that end, I’ve written to the company historian at General Electric, to ask whether the term CEO was in general use before the era of Jack Welch (who for a variety of reasons — not least for his cultural celebrity — probably deserves the title “The First CEO”). I’m looking for some examples of usage from the days of Ralph J. Cordiner (Chief Executive Officer from 1950-1963), Fred J. Borch (Chief Executive Officer 1963-1972) or Reginald H. Jones, who served from 1972-1981.

ReaganProgressGE seems like an obvious place to start looking. The company that brought us both Jack Welch and Ronald Reagan was, during the war and then in the postwar period, at the very center of military-industrial development; and big American companies like General Electric were never just manufacturing products — or even “progress,” which Reagan used to tout on TV as GE’s “most important product.” They were also designing models of power that persist to this day.

Has Management Become Significantly More Incompetent?

I don’t really have a dog in the Lepore-Christensen fight. Lepore’s strongest point, that Christensen’s theory of “disruption” is both a flawed theory of history and itself an artifact of history, seems to have gotten lost in the fray. Lepore overreached in her New Yorker piece, and now Christensen’s adherents and acolytes have come out in full force. There hasn’t been much room for careful discussion of Christensen’s theory as a discourse or artifact of post-industrial social collapse — which is, I suppose, what interests me most about it.

Still, I’m following the controversy, and yesterday, John Hagel offered a welcome, level-headed contribution to the discussion. Here, I simply want to paraphrase the comment I left on his post, because it touches on some themes I’ve written about in connection with the rise of the CEO (notably here, here and here.)

Hagel wants to move the discussion of Lepore-Christensen away from intramural antagonism and the clash of personalities and disciplines to look at “fundamental and systemic trends.” Clearly, he says, “something very profound is happening — and it’s largely escaped notice.” One measure of this bigger shift: “the topple rate at which US public companies in the top quartile of return on assets performance fall out of… leadership position.” That rate, he notes, increased 40 percent between 1965 and 2012.

There are lots of possible explanations for that wild increase. It seems safe to say there must be some great historical forces at work. Otherwise, Hagel writes, “one would have to believe that management is becoming significantly more incompetent over time”; and I guess nobody would seriously believe that. Here, at least, we’re meant to pass over the thought with a knowing smile: of course management has not become significantly more incompetent over time. Right?

I didn’t seriously entertain the thought of growing managerial incompetence again until I arrived at Hagel’s concluding paragraph. There, he offers a few suggestions on how incumbent players might “more effectively respond to these disruptive approaches (short of resorting to regulation and other public policy measures).” One suggestion is that management find ways to take the long view: incumbent players need “to find ways to expand the horizons of their leadership team beyond the next quarter or next year.” Myopia is always dangerous, and more dangerous now than ever before.

At the same time, short-sighted management has a history, and as I’ve suggested in my posts on the rise of the CEO, the most interesting chapter of that history starts right around the time the topple rate increases, in the 60s and 70s.

Around 1965, as profit rates in manufacturing fall and as the postwar boom yields to post-industrial reality, new ideas of management take hold. One of them is what Jack Welch once called “the dumbest idea in the world”: the doctrine of shareholder value. As this doctrine becomes boardroom religion, we see the rise of the “CEO” as corporate savior (in Rakesh Khurana’s phrase) and cultural celebrity.

Short-termism and, in some cases, risky financial manipulation become the name of the game. Compensation packages reinforce bad habits. Strategists and management consultants take their cues from the C-Suite, and tailor their offerings accordingly.

I’m not saying the rise of the CEO, the doctrine of shareholder value, or the promise of sustainable competitive advantage in the 70s and 80s explain the increase in the topple rate, but clearly they should be taken into account here; and we should give growing managerial incompetence its due. Bad ideas about what counts as business success — and misguided actions by business (and political) leaders — certainly make businesses more vulnerable to the kind of disruption that interests Hagel: the loss of leadership position.

Big scary historical forces may be overtaking us, but if competence in the face of those forces is what we’re after, then failed ideas of corporate purpose and failed models of corporate leadership ought to be called out, questioned, and radically altered or just dropped.

A Third Note on The First CEO

In a comment on one of my posts about the rise of the acronym “CEO,” a reader named Hugo reports some early Australian illustrations. I thought I’d lift Hugo’s notes from the comments and share them here, because the examples he’s found all pre-date the 1970 illustration of the acronym from the Harvard Business Review, which up until now I had taken to be the earliest. One dates back to 1914.

Time, again, to notify the dictionaries.

I found some earlier 1968 and 1950 examples in Australian newspapers, where chief executive officers were found at hospitals. I also found a 1917 [sic, but the source is from 1914] from a story about a town hall.

The Canberra Times, 27 July 1968, page 22:
[Begin]
Applications are invited for the above positions at the Hillston District Hospital.

Applications and enquiries to the undersigned or Matron Fairchild, Box 1, PO, Hillson, NSW, 2675.
R. I. Cross,
C.E.O.
[End]

The Sydney Morning Herald, 29 March 1950, page 30:
[Begin]
PARRAMATTA DISTRICT HOSPITAL.
Wanted. Experienced Sister to take
charge of the Out Patient Department
at this hospital.

N. B. FILBY,
Secretary and C.E.O.
[End]

Independent, 7 November 1914, page 3:
[Begin]
BEHIND THE SCENES
BY A TOWN HALL FLY

Of course I am the chief executive officer but I only execute by instructions.

“What a pity,” said the M.M., the C.E.O.

“Not at all, my dear young lady.” the C.E.O.’s voice was tear laden too.
[End]

Also uses G.H.U. a few times for Great High Understrapper.

I don’t think these earlier Australian instances should invalidate what I’ve said previously about the widespread use of the acronym CEO in the 1970s and 1980s. Those observations concern the use of “CEO” as an important marker of corporate power, social status and cultural celebrity in America, from roughly 1970-2010.

Still, it’s interesting to consider these early examples. The first two are abbreviations used in newspaper advertisements (maybe just to save money) for positions at hospitals, where the CEOs are clearly in charge of correspondence if not of hiring. Nothing too glamorous. [Update: And one reader, in a comment on this post, suggests that CEO in this context may mean “Catholic Education Officer,” adding that at this time in Australia, “nurses and religious orders go together.”]

The illustration from 1914 offers a satirical, behind-the-scenes account of a municipal office thrown into bureaucratic confusion by a report of 24 cows eating all the flowers and shrubs in the park. Underlings and citizens address the Chief Executive Officer by such honorifics as “Your Chief Executiveness” and “Most Magnificent” and, then, “CEO.” It is an empty title; he seems unable to execute anything at all: “Of course I am the chief executive officer,” he insists, “but I only execute by instructions.” When he finally understands the gravity of the situation, he acts: “I will tell somebody to tell somebody else to tell the inspector as soon as he comes in the morning at nine. I’m sure 24 cows won’t eat all the shrubs in that time.” He is very much the Chief, very much an Officer, but not much when it comes to Execution.

Denning and the Death of Hierarchies

Steve Denning, the “radical management” and leadership guru, published a post at Forbes.com yesterday about the shift taking place within many organizations, away from hierarchical models of command and toward more fluid, flexible and agile setups. Drawing on Fairtlough’s The Three Ways of Getting Things Done — which argues that the only “effective” organizational models are hierarchy, heterarchy and responsible autonomy — Denning argues that hierarchies “must sign their own death warrants to survive” in what he likes to call the Creative Economy.

In this post, Denning’s interested in why business leaders cling to hierarchy even in the face of evidence that it’s no longer the most effective way of getting stuff done (if it ever was), and in the paradox that in all the examples he can find, “it’s the hierarchical management itself that has led the shift away from hierarchy. The shift didn’t occur as a kind of bottom-up movement. It was the top that saw that there was a better way to make decisions and went for it.” Flatter organizations tend to cleave to the status quo and work within established frameworks, he observes.

Of course plenty of other people within an organization might see that there is a better way. Those atop the organizational hierarchy are the ones permitted or entitled to say it aloud or do something about it. Hierarchy isn’t just a way to get things done; it’s also a way of distributing power, and the power relations hierarchy maintains are a daily fact of life for subordinates. They usually don’t have a place at the table when the organizational models are being drawn up or redrawn. In order to effect change within a hierarchy, those at the bottom – and the middle – would need to be enlisted as stakeholders, entrusted with real power and respected as equals (which would itself require some undoing of the organizational hierarchy).

I am a little puzzled why Denning here doesn’t present a more considered and nuanced view of the way power actually works within organizations – and the way in which concentrated power can actually hamper performance and kill ideas or even the motivation to present ideas about how to do things better.

That aside, and no matter how or why or by whom “the shift away from hierarchy” is brought about, Denning’s article is a good place to start talking about what this shift will really entail and require of people at every level of a hierarchical organization. It seems fair to say that as organizations get flatter and try to operate with more creativity and agility, the way things are coordinated – the way we use language to order the world, get things done and coordinate action — will itself have to undergo a radical change. The way I’d put it is that coordination will have to shift from the power of command to the power of asking.

Indeed, how we use language – how we make claims and demands on others, how we talk and listen to others about what to do — can itself help effect a shift from hierarchical command structures to the more fluid structure associated with the give and take of serious conversation (the rough equivalent, to my mind, of what philosopher T.M. Scanlon calls “co-deliberation”). I’ll have more to say about what constitutes a serious conversation in a future post.