What is the nature of business and leadership?

Based on years of research, we have identified four distinct paradigms about the nature of business, and business leadership, that have emerged around the world over the last 125 years: rationalist, humanistic, wholistic, and spiritual-based. (A “paradigm” is the organizing principle for an activity, like a hive is the organizing principle for the life of wasps or bees.)

This was a key message that my wife Debra and I gave in a keynote presentation at the prestigious Indian School of Business in Hyderabad. The occasion was the opening conclave of its new Centre for Leadership, Innovation and Change (CLIC). View white paper - "Evolving Corporate Innovation"

Each paradigm – or “context” – represents a fundamental change in how we view the nature of business, how we organize an enterprise, and how we lead its people. Each context is present in the business world today, sometimes harmoniously and sometimes not. Understanding these contexts helps to clarify where we’ve come from and where we’re going in the global economy today. Learn more about this research

We received a great deal of excited feedback about how this model helped explain some of the most convoluted conversations managers have today when making their investment,  operational and human resource decisions.

I’ll discuss the most dominant 3 of these contexts in this blog, and save the fourth – spiritual-based, which emerged in the 1990s – for another blog...

The Rationalist Context first emerged in the early 1900s. In this view, the purpose of business is wealth and power for owners and shareholders. The organization is conceived as a “well oiled machine” run by Frederick Taylor’s “scientific management” and a military-based “command and convince” leadership style. Motivation is through extrinsic carrot-and-stick methods, and employees are considered as “inter-changeable parts” with assigned roles. Only specialists are given innovative work to do.

Frederick Taylor exemplified this context by writing:

The principle object of management should be to secure the maximum prosperity for the owners [and] for the employee… [which] means the development of each man to his state of maximum efficiency [and] productivity.

The Humanistic Context first emerged in the 1950s-60s through the writings of Douglas MacGregor and J. Edward Deming, among others. Here, the purpose of business is still wealth creation, but in a way that self-actualizes employees, who also share in some of the new wealth. Leadership is through situational, participative empowerment. Motivation is by helping them fulfil a personal hierarchy of needs. Jobs are built around talent as much as having talent fit jobs. People at all levels can contribute to innovative work, such as quality process improvement.

Typical of this context, William Hewlett[i], co-founder of Hewlett Packard, said in “The HP Way”:

Men and women want to do a good, a creative job, and if they are provided with the proper environment they will do so.

The Wholistic Context first emerged in the 1970s-80s, spurred in part by the writings of Peter Senge and Stephen Covey. The purpose of business is wealth and prosperity with accountability to all stakeholders. Success is measured in terms of “Triple Bottom Line” accounting (financial, social, environmental) with the notion of leaders as “stewards” of their resources. People are seen as inter-dependent and self-organizing, motivated by wholistic principles for the good of self and society. Employees are can self-define their roles. Every person is considered able to “think globally and act locally” to foster innovation.

Hazel Henderson, noted global economist, embodied this context in saying:

The planet's current problems… cannot be solved by any nation or even groups of nations.
The planet is holding up a mirror to humanity. We are slowly learning that our values must change to reflect planetary realities.

Until the Humanist context emerged, the Rationalist view was the only game in town. Since then, it has declined in its total dominance, while the Humanist has come into its own, in part through the TQM and “Intrapreneur” movements of the 1980s. Today, the Wholistic context is gaining strength in business thought-leadership and practice, while the Spiritual-Based context is still in its early stages of maturity, but is growing steadily.

As I noted before, understanding these 3 contexts for business leadership helps make sense out of the discussions and debates that often go on. On the surface, they are seemingly about the merits of one option vs. another. In reality, they are about which foundational paradigm should be governing any decision.